Independent Auditor’s Report
The Board of Directors
JALUX Inc.
We have audited the accompanying consolidated financial statements of JALUX Inc. and its consolidated
subsidiaries, which comprise the consolidated balance sheet as at March 31, 2013, and the consolidated
statements of income, comprehensive income, changes in net assets, and cash flows for the year thenended and a summary of significant accounting policies and other explanatory information, all expressedin Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to
express an opinion on the effectiveness of the entity’s internal control, but in making these risk
assessments the auditor considers internal controls relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of JALUX Inc. and its consolidated subsidiaries as at March
31, 2013, and their consolidated financial performance and cash flows for the year then ended inconformity with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented
for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements
have been properly translated on the basis described in Note 3.

June 24, 2013
Tokyo, Japan

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31,2013
2012
(Thousands of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 15 and 19)
Notes and accounts receivable (Notes 15 and 21):Trade
Affiliates
Other
Allowance for doubtful accounts
Inventories (Note 4)
Deferred income taxes (Note 11)
Other (Note 21)
Total current assets

2013(Thousands of
U.S. dollars)(Note 3)

¥ 5,219,694¥ 5,391,474$ 55,529

8,023,113
11,3001,406,250(76,035)
5,502,201
304,790
1,020,583
21,411,898

9,597,134
18,124
1,483,330(68,984)
5,919,467
380,574
1,285,025
24,006,148

85,352120
14,960(809)
58,534
3,242
10,857
227,786

1,225,640
290,666
1,516,306

1,273,530
279,453
1,552,983

13,039
3,092
16,131

Accumulated depreciation
Property and equipment, net

2,099,940
3,713,481
205,297
647,061
4,550
1,256,748
7,927,080(2,592,265)
5,334,815

1,748,449
3,646,893
186,243909,727
2,704
1,197,373
7,691,392(2,573,031)
5,118,360

22,34039,505
2,184
6,884
48
13,37084,331(27,577)
56,753

Intangible assets (Note 10):
Software
Other
Total intangible assets

376,546
30,960407,506

373,965
31,393405,358

4,006
329
4,335

104,2442,073,691
266,566
64,991
61,570¥31,241,592

170,795
2,044,277
265,691
81,69857,615¥33,702,929

1,109
22,061
2,836
691
655
$332,357

Investments and advances:
Unconsolidated subsidiaries and affiliates (Note 15)
Other (Notes 15 and 16)
Total investments and advances
Property and equipment (Notes 5, 10 and 18):
Land
Buildings and structures
Machinery and vehicles
Flight equipment
Construction in process
Other

Long-term loans
Deposits for business space (Note 15)
Deferred income taxes (Note 11)
Business commencement expenses
Other assets, net

2

March 31,
2013
2012
(Thousands of yen)

Liabilities and net assets
Current liabilities:
Short-term borrowings (Notes 5 and 15)
Current portion of long-term debt (Notes 5 and 15)
Notes and accounts payable (Notes 15 and 21):Trade
Affiliates
Accrued expenses
Accrued income taxes (Note 11)
Other
Total current liabilities

2013(Thousands of
U.S. dollars)(Note 3)

¥ 1,271,757
842,812¥ 1,957,249
1,135,766$ 13,529
8,966

6,694,188
96,291
2,164,214
396,301
2,290,468
13,756,034

8,452,289
120,439
1,796,380
286,3902,978,743
16,727,258

71,215
1,024
23,024
4,216
24,367
146,341

1,512,412

1,299,251

16,089529,783

411,248

5,636

Directors’ and statutory auditors’ retirement benefits

9,200

33,22598

Deferred income taxes (Note 11)

36,860201,864

392

Other

574,557

654,2766,112

2,558,550
711,250
11,400,172(147,089)

2,558,550
711,250
10,811,239(68,191)

27,2197,566
121,278(1,565)(1,870)(7,685)(20)

53,458(716,881)
9,882
955,271
14,822,743¥31,241,592

27,730(919,112)
9,882
1,252,141
14,375,804¥33,702,929

569(7,626)105
10,162
157,689$332,357

Long-term debt (Notes 5 and 15)
Accrued pension and severance costs (Note 6)

Commitments and contingent liabilities (Notes 5 and 13)
Net assets (Note 7):
Common stock, without par value:
Authorized: 20,000,000 shares
Issued: 12,775,000 shares in 2013 and 2012
Capital surplus
Retained earnings
Common stock in treasury
Net unrealized loss on other securities, net of taxes(Note 16)
Net unrealized gain on hedging instruments, net of taxes(Note 17)
Translation adjustments
Subscription rights to shares (Note 8)
Minority interests
Total net assets

The accompanying notes are an integral part of these statements.
3

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Income
Year ended March 31,
2012
2013
2013
(Thousands of yen)(Thousands of
U.S. dollars)(Note 3)Operating revenues (Notes 20 and 21)
Operating expenses (Notes 20 and 21):
Cost of sales
Selling, general and administrative expenses (Note 8)
Operating income¥85,937,397¥89,082,950$914,228

66,944,669
17,601,138
84,545,808
1,391,589

70,263,898
17,198,037
87,461,936
1,621,014

712,177
187,246
899,423
14,804

10,181(46,343)
109,330(184,502)(111,334)
1,280,254

10,869(104,938)(81,404)(41,654)(217,128)
1,403,885

108
(493)
1,163
(1,963)(1,184)
13,620666,998
82,362
749,360
530,893248,966
779,860

379,198
287,388666,586
737,298(43,981)
693,317

7,096
876
7,972
5,648
2,649
8,296

Non-operating income (expenses):
Interest income
Interest expense
Equity in earnings (losses) of affiliates
Other, net (Note 9)
Income before income taxes and minority interests
Income taxes (Note 11):
Current
Deferred
Net income before minority interests
Minority loss (interests)
Net income

¥

¥

$

The accompanying notes are an integral part of these statements.

4

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
March 31,2013
2012
(Thousands of yen)

Income before minority interests
Other comprehensive income:Net unrealized gain (loss) on other securities, net of taxes
Net unrealized gain on hedging instruments, net of taxes
Translation adjustments
Share of other comprehensive income of companies
accounted for by the equity method
Total other comprehensive income (Note 12)
Comprehensive income
Comprehensive income attributable to:
Stockholders of JALUX Inc.
Minority interests

2013(Thousands of
U.S. dollars)(Note 3)¥ 530,893¥737,298$ 5,648

7,331
25,728
186,502

8,549
9,968
(96,107)

78
274
1,984

21,090240,653¥ 771,547

6,461(71,127)¥666,171224
2,560$ 8,208¥1,013,634¥ (242,087)¥621,879¥ 44,292$10,783$ (2,575)

5

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

Net unrealized Net unrealized
loss on other gain on hedging
Subscription
securities,
instruments,rights to
net of taxes
net of taxes
Translation
shares(Note 15)
(Note 16)
adjustments(Note 8)

Minority
interests

Total
net assets¥1,113,367¥13,975,444(Thousands of yen)
Balance at March 31, 2011
Cash dividends(¥5 per share)
Net income for the year
ended March 31, 2012
Change in scope ofequity method
Purchases of common
stock in treasury
Disposal of common
stock in treasury
Other

12,775,000

Balance at March 31, 2012
Cash dividends(¥15 per share)
Net income for the year
ended March 31, 2013
Purchases of common
stock in treasury
Other

12,775,000

Balance at March 31, 2013

12,775,000¥2,558,550¥711,250¥10,482,317¥17,761¥(823,396)¥13,276(63,620)

693,317693,317(2,273)
711,250¥(21,994)(63,620)(298,501)

2,558,550¥ (75,687)

10,811,239

1,407(297,093)

(139)

(139)

6,227
(68,191)

14,309

9,968(95,715)(3,394)

138,774

3,954
63,942(7,685)27,730(919,112)

9,882

1,252,141

14,375,804(190,926)(190,926)

779,860

779,860(78,897)

Number ofshares ofcommonstock¥2,558,550

Commonstock¥711,250

Capitalsurplus¥11,400,172

Retainedearnings¥(147,089)

Commonstock intreasury

5,814

25,728202,230¥ (1,870)¥53,458¥(716,881)¥ 9,882

Net unrealized Net unrealized
loss on other gain on hedging
Subscription
securities,
instruments,rights to
net of taxes
net of taxes
Translation
shares(Note 15)
(Note 16)
adjustments(Note 8)(296,870)(78,897)(63,096)¥ 955,271¥14,822,743

Minority
interests

Total
net assets$13,321$152,934(Thousands of U.S. dollars) (Note 3)
Balance at March 31, 2012
Cash dividends($0.16 per share)
Net income for the year
ended March 31, 2013
Purchases of common
stock in treasury
Other

12,775,000

Balance at March 31, 2013

12,775,000$27,219$7,566$115,013$ (725)

$(82)

$295

$(9,778)$105(2,031)(2,031)

8,296

8,296
(839)

$27,219$7,566$121,278$(1,565)

62

274

2,151

$(20)

$569

$(7,626)$105(3,158)

(839)
(671)

$10,162$157,689

The accompanying notes are an integral part of these statements.

6

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 31,

2013
2012
(Thousands of yen)
Operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization
Decrease in provision for allowance for doubtful accounts
Increase in net provision for accrued pension and severance costs
Interest and dividend income
Interest expense
Exchange loss, net
Equity in (earnings) losses of affiliates
Loss on sales of, and loss on disposal of property and equipment
Impairment losses on fixed assets
Loss (gain) on sales of investments in securities
Loss on revaluation of investments in securities
Decrease (increase) in notes and accounts receivable
Decrease in inventories(Decrease) increase in notes and accounts payable
Decrease (increase) in advance payment(Decrease) increase in advance received
Decrease in bad debts on receivables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

2013(Thousands of
U.S. dollars)(Note 3)

¥ 1,280,254¥ 1,403,885$ 13,620

633,691(4,844)
118,194(34,706)
46,343688(109,330)
44,978
536
481
7,308
1,784,680
500,674(1,882,060)
315,851(121,136)
7,830
46,1582,635,594
95,436(50,533)(577,801)
2,102,696

728,340(55,270)
118,878(15,543)
104,938
4,596
81,40463,01658,80842,073
11,028(677,659)
571,082
86,050(438,580)
312,944
11,499(261,394)
2,150,100
52,366(124,322)(238,680)
1,839,462

6,741
(52)
1,257
(369)
493
7
(1,163)478
6
578
18,986
5,326(20,022)
3,360(1,289)83491
28,038
1,015(538)(6,147)22,369Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Long-term loans receivable madeCollection of long-term loans
Purchases of time deposits
Proceeds from maturity of time deposits
Increase in deposits for business space
Decrease in deposits for business space
Other, net
Net cash used in investing activities(1,225,420)
4,732(95,495)(8,263)
117,734(156)
64,015(5,707)
9,596(153,615)
106,362(10,552)(1,196,769)(273,121)
6,172(128,004)(2,253)5,522(431)
129,646(17,990)
17,430(140,189)
279,893
49,524(73,799)(13,036)50(1,016)
(88)
1,252
(2)
681
(61)
102
(1,634)
1,132(112)(12,732)

Financing activities(Decrease) increase in short-term borrowings, net
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from minority stockholders
Dividends paid to stockholders
Dividends paid to minority stockholders
Other, net
Net cash used in financing activities(702,092)
1,032,000(1,074,652)–(191,122)(60,000)(148,827)(1,144,694)

1,747,278
610,000(4,687,110)
98,000(64,172)–(62,524)(2,358,529)(7,469)10,979(11,432)–(2,033)(638)(1,583)(12,178)

Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 19)

70,842(167,925)
5,384,667¥ 5,216,742(21,782)(614,648)
5,999,315¥ 5,384,667

754(1,786)57,284$ 55,497

The accompanying notes are an integral part of these statements.
7

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2013

1.

Summary of Significant Accounting Policiesa.

Basis of preparation
JALUX Inc. (the “Company”) and its consolidated domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial
Reporting Standards. The accompanying consolidated financial statements have been
compiled from the consolidated financial statements filed with the Financial Services
Agency as required by the Financial Instruments and Exchange Law of Japan, certain
modifications and inclusion of certain additional financial information are made for theconvenience of readers outside Japan.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts ofless than one thousand yen have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S. dollars) do notnecessarily agree with the sum of the individual amounts.
Certain amounts previously reported have been reclassified to conform to the current
year’s classification except for the effects with respect to the adoption of new
accounting standards.

b.

Principles of consolidation and accounting for investments in unconsolidated
subsidiaries and affiliates
The consolidated financial statements include the accounts of the Company andsignificant companies controlled directly or indirectly by the Company. Companies
over which the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis.
The balance sheet date of seven of the consolidated subsidiaries is December 31. Any
significant differences in intercompany accounts and transactions arising fromintervening intercompany transactions during the period from January 1 throughMarch 31 have been adjusted, if necessary, for the respective years.
All significant intercompany accounts and transactions and unrealized gain or loss onintercompany accounts and transactions have been eliminated.

8

1.

Summary of Significant Accounting Policies (continued)c.

Securities
Securities except for investments in an unconsolidated subsidiaries and affiliates areclassified as trading securities, held-to-maturity securities or other securities. Trading
securities are carried at fair value. Held-to-maturity securities are carried at amortizedcost. Marketable securities classified as other securities are carried at fair value withany unrealized gain or loss reported as a separate component of net assets, net of taxes.
Non-marketable securities classified as other securities are carried at cost. Cost of
securities sold is determined principally by the average method.

d.

Derivatives
Derivatives positions are stated at fair value.
Gain or loss on derivatives designated as hedging instruments is deferred until the loss
or gain on the underlying hedged items is recognized. Foreign receivables andpayables are translated at the applicable forward foreign exchange rates if certain
conditions are met. In addition, the related interest differential paid or received underinterest-rate swaps utilized as hedging instruments is recognized over the terms of theswap agreements as an adjustment of interest expense on the hedged items if certain
conditions are met.

e.

Inventories
Inventories are stated at the lower of cost or net selling value, cost being determined asfollows:
Merchandise:
The Company
Subsidiaries– by the moving average method– principally by the first-in, first-out method

Real estate for sale – by the specific identification method
Leasing real estates for sale are depreciated by applying
the method of tangible fixed assets.
f.

Property and equipment
For the Company and the consolidated domestic subsidiaries, depreciation of the shops
in airports and the buildings for rent is computed principally by the straight-line
method and depreciation of other property and equipment is computed principally by
the declining-balance method. The consolidated foreign subsidiaries principally adopt
the straight-line method. The estimated useful lives of the assets are as follows:
Buildings and structures:
Machinery and vehicles:

8 to 47 years
4 to 10 years

91.

Summary of Significant Accounting Policies (continued)g.

Software
Computer software intended for internal use is amortized by the straight-line method
based on their estimated useful life.

h.

Leased assets
Leased assets arising from transactions under finance lease agreements which do nottransfer the ownership to the lessee is depreciated to residual value of zero by thestraight-line method over the terms of the agreements.

i.

Deferred charges
Business commencement expenses are amortized using the straight-line method over 5
years or less.

j.

Allowance for doubtful accounts
The allowance for doubtful accounts on specific receivables is provided at the estimateof the unrecoverable amounts. The allowance for doubtful accounts on otherreceivables is provided based on the historical rate of losses on receivables.

k.

Reserve for bonuses to officers
Reserve for bonuses to officers is provided for at the necessary amounts based on theestimated amounts payable at the date of the balance sheet.

l.

Accrued pension and severance costs
To provide for employees’ severance indemnities and pension payments, net periodic
pension and severance costs are computed based on the projected benefit obligationand the pension plan assets.
Past service cost is being amortized by the straight-line method over a period of 5
years.
The adjustment incurred during this fiscal year arising from revisions to the actuarial
assumptions (the “actuarial assumption adjustment”) is to be amortized by thestraight-line method beginning the following fiscal year over a period of 5 years.

m. Directors’ and statutory auditors’ retirement benefits
Reserve for directors’, statutory auditors’ and operating officers’ retirement benefits isprovided at the amount which would have been paid had all directors and statutory
auditors resigned at the year end.

10

1.

Summary of Significant Accounting Policies (continued)n.

Cash equivalents
The Company and its consolidated subsidiaries define cash equivalents as highly liquid,
short-term investments with an original maturity of three months or less.

o.

Standards issued but not yet effective
Accounting Standard for Retirement Benefits (Accounting Standard Board of Japan(ASBJ) Statement No. 26 issued on May 17, 2012)
Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25
issued on May 17, 2012)
The accounting standard and related guidance were amended from the viewpoint of
improvements to financial reporting and international convergence, mainly focusing on
how actuarial assumption adjustment and past service cost should be accounted for,how retirement benefit obligation and current service cost should be determined, andenhancement of disclosure.
The Company will adopt the accounting standard and related guidance from the end of
the fiscal year ending March 31, 2014. However, the Company will adopt amendments
relating to determination of retirement benefit obligation and current service cost fromthe beginning of the fiscal year ending March 31, 2015.
The Company is currently evaluating the effect these modifications will have on its
consolidated results of operations and financial position.

2.

Accounting Changes

In accordance with an amendment to the Corporation Tax Law effective April 1, 2012, theCompany and its domestic consolidated subsidiaries have changed their depreciation
method for property and equipment acquired on or after April 1, 2012 to reflect themethods prescribed in the amended Corporation Tax Law. The impact on operating income
and income before income taxes and minority interests for the year ended March 31, 2013is immaterial.

3.

U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥94.00 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2013, has beenused. The inclusion of such amounts is not intended to imply that yen have been or could
be readily converted, realized or settled in U.S. dollars at that or any other rate.

11

4.

Inventories

Inventories at March 31, 2013 and 2012 were as follows:
March 31,
2012
2013
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies¥4,677,034
773,438
51,729¥5,502,201¥4,163,630
1,690,464
65,372¥5,919,467$49,756
8,228
550$58,534

Revaluation loss included in “Cost of sales” amounted to ¥17,957 thousand ($191
thousand) and ¥71,668 thousand for the years ended March 31, 2013 and 2012.

5.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2013 and 2012 consisted of thefollowing:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Short-term Borrowings:
Short-term Borrowings with collateral,
at rates 0.98%
Short-term Borrowings without collateral,
at rates ranging from 0.88% to 1.88%
Long-term debt:
Loans with collateral, due 2011 to 2016,
at rates ranging from 1.65% to 1.85%
Loans without collateral, due 2011 to 2016,
at rates ranging from 1.59% to 4.32%
Other
Less current portion of long-term debt

¥

–

¥

840,000$–

1,271,757¥1,271,757

1,117,249¥ 1,957,249

13,529$13,529

¥

¥

$

–

–

2,237,299
2,270,774
117,926
164,2422,355,225
2,435,017(842,812) (1,135,766)¥1,512,412 ¥ 1,299,251–

23,801
1,255
25,056(8,966)$16,08912

5.

Short-Term Borrowings and Long-Term Debt (continued)

The aggregate annual maturities of long-term debt subsequent to March 31, 2013 aresummarized as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)$ 842,812
427,887
438,261434,649
205,425
6,188¥2,355,225$ 8,966
4,552
4,662
4,624
2,185
66
$25,056

2014
2015
2016
2017
2018
2019 and thereafter

Assets pledged as collateral at March 31, 2013 and 2012 are summarized as follows:
March 31,2013
2012
(Thousands of yen)Land
Buildings and structures, net ofaccumulated depreciation
Inventories

2013(Thousands of
U.S. dollars)¥ –¥1,710,059

$ –

–
–
¥ –

1,482,483
715,024¥3,907,568

–
–
$ –

The Company has entered into loan commitment agreements with banks in order to source
funds for its operations smoothly.
The outstanding balance of loan commitment as of March 31, 2013 and 2012 were as
follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Total commitment available
Less amount utilized
Balance available¥7,000,000(500,000)¥6,500,000¥ 7,000,000(1,650,000)¥ 5,350,000$74,468(5,319)$69,149

13

6.

Accrued Pension and Severance Costs

An employee whose employment is terminated is entitled, in most cases, to pension
payments or lump-sum severance indemnities, the amounts of which are determined byreference to the basic rate of pay, length of service and the conditions under which thetermination occurs.
The Company, three domestic consolidated subsidiaries and an overseas consolidated
subsidiary adopt lump-sum retirement plans and defined benefit pension plans. And theCompany and consolidated subsidiaries adopt defined contribution pension plans.
The projected benefit obligation and the funded status of the plans were as follows:
March 31,2013
2012
(Thousands of yen)
Projected benefit obligation
Plan assets
Accrued pension and severance costs
Net unrecognized amount¥(2,854,663) ¥(2,790,332)
2,317,883
2,117,423
411,248529,783¥(6,995) ¥ (261,659)

2013(Thousands of
U.S. dollars)$(30,369)
24,658
5,636
$
(74)

In computing the projected benefit obligation, several simplified methods are permitted forsmall companies, and certain consolidated subsidiaries have adopted such methods.
The net unrecognized amount was as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Actuarial assumption adjustment
Post service cost
Net unrecognized amount¥(6,995)–¥(6,995)¥(201,315)(60,343)¥(261,659)

$(74)
–
$(74)

The components of net periodic pension and severance costs excluding the employees’
contributory portion were as follows:Year ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial assumption
adjustment
Amortization of past service cost
Contribution to defined contribution
pension plans
Net periodic pension and severance costs¥165,379
45,409(48,473)¥171,738
45,310(46,585)$1,759483(516)

137,262
60,343

150,310
60,343

1,460
642

85,786¥445,708

89,605¥470,722

913$4,74214

6.

Accrued Pension and Severance Costs (continued)

The assumptions used were as follows:

Discount rate
Expected rate of return on plan assets
7.

2013

2012

1.8%
2.5%

1.8%
2.5%

Net Assets

The Corporation Law of Japan provides that an amount equal to at least 10% of the amountto be disbursed as distributions of capital surplus (except for distributions from additional
paid-in capital) and retained earnings (except for distributions from the legal reserve) be
appropriated to additional paid-in capital and the legal reserve, respectively, until the sumof additional paid-in capital and the legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the stockholders, or by the
Board of Directors if certain conditions are met, but neither additional paid-in capital nor
the legal reserve is available for distribution by resolution of the Board of Directors.
The total number and periodic changes in the number of shares of stock in issue and thetotal number and periodic changes in the number of shares of common stock in treasury forthe years ended March 31, 2013 and 2012 were as follows:Year ended March 31, 2013
At
March 31,
2012
Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2013

12,775––

12,775

54

89

–

143

The increase in common stock in treasury of 89 thousand shares resulted from theCompany’s purchase of 89 thousand shares based on the resolution of the board of
directors and purchase of 0 thousand odd-lot shares of less than one unit at the request of
the stockholders.
Year ended March 31, 2012At
March 31,
2011
Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2012

12,775––

12,775

61

0

6

54

15

7.

Net Assets (continued)

The increase in common stock in treasury of 0 thousand shares resulted from theCompany’s purchase of 0 thousand odd-lot shares of less than one unit at the request of thestockholders.
The decrease in common stock in treasury of 4 thousand shares resulted from exercise ofsubscription rights as stock options, and 2 thousand shares resulted from change in scope ofequity method.
Dividends
Dividends paid
Resolution

General meeting ofstockholders heldon June 15, 2012

Type ofsharesCommonstock

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥190,926$2,031Dividends per share(Yen)(U.S. dollars)
¥15.0

$0.16

Cut off
date

Effective
date

March 31, June 18,
2012
2012

Dividends with the cut off date in the year ended March 31, 2013 and effective date in theyear ended March 31, 2014
Resolution

General meeting ofstockholders heldon June 21, 2013

Type ofsharesCommonstock

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥189,591$2,017

Dividends per share(Yen)(U.S. dollars)
¥15.0

$0.16

Cut off
date

Effective
date

March 31, June 24,
2013
2013

16

8.

Stock Options

The Company adopted the stock option plan under which share subscription rights are
granted to directors and operating officers of the Company in accordance with the
Corporation Law.
The description of stock options for the year ended March 31, 2013 are as follows:2010 Stock Option Plan

2009 Stock Option Plan

Individuals covered by the plan

4 directors of theCompany

Type and number of shares to be issued
upon the exercise of the share subscription
rightsGranted date
Vesting conditions
Vesting period
Exercise period

15,000 shares ofcommon stock

7 directors of theCompany
6 operating officers of
the Company
23,600 shares ofcommon stock

September 24, 2010
No provisions
No provisions
September 25, 2010 –September 24, 2040

October 29, 2009
No provisions
No provisions
October 30, 2009 –October 29, 2039

The changes in the size of stock options for the year ended March 31, 2013 are as follows:2010 Stock Option Plan
Share subscription rights which are not yet
vested (Number of shares)
Outstanding as of March 31, 2012
GrantedForfeited
VestedOutstanding as of March 31, 2013
Share subscription rights which havealready been vested (Number of shares)
Outstanding as of March 31, 2012
VestedExercised
Forfeited
Outstanding as of March 31, 2013
Exercise price (yen)Weighted average fair value per stock at
the exercising date (yen)Fair value per stock option at the granted
date (yen)Exercise price (U.S. dollars)
Weighted average fair value per stock at
the exercising date (U.S. dollars)
Fair value per stock option at the granted
date (U.S. dollars)¥$

2009 Stock Option Plan

–
–
–
–
–

–
–
–
–
–

9,200
–
–
–
9,200

3,200
–
–
–
3,200

1

¥

1

–

–

654

1,208

0.01

$

0.01

–

–

6.96

12.85

Stock option expense included in “Selling, general and administrative expenses” amounted
to none for the year ended March 31, 2013 and ¥555 thousand for the year ended March 31,
2012.
17

9.

Other Income (Expenses)

The components of “Other, net” in “Non-operating income (expenses)” for each of thethree years in the period ended March 31, 2013 and 2012 were as follows:Year ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Dividends received
Exchange gain (loss), net
Brokerage commission received
Gain on sales of property and equipment
Gain on liquidation of investment securities
Settlement received
Gain on reversal of translation adjustments
Commission paid
Loss on sales and disposal of property and equipment
Impairment losses on fixed assets
Loss on sales of investments in securities
Loss on revaluation of investments in securities
Special termination benefits
Other, net¥ 24,525(252,965)–
1,608–
10,00080,102(42,280)(46,586)
(536)
(481)
(7,308)–49,419¥(184,502)

¥

4,674
157,664
32,2894,061
16,754––(45,726)(67,077)(58,808)(42,073)(11,028)(88,886)
56,501¥ (41,654)$ 261(2,691)
–
17
–
106
852
(450)
(496)
(6)
(5)
(78)
–
526
$(1,963)

10. Impairment of Fixed Assets
For the year ended March 31, 2013, the Company recognized impairment losses on fixed
assets of ¥536 thousand ($6 thousand), and for the year ended March 31, 2012 theCompany and a consolidated subsidiary recognized impairment losses on fixed asset of¥58,808 thousand which consisted of the following:
Location

Use

Classification

Hakodate-shi, Hokkaido Airport shops
Sennan-gun, Osaka
Shinagawa-ku, Tokyo

Buildings, furnitureand other
Airport shops
Buildings, furnitureand otherBusiness assets Buildings, furniture,
software and otherYear ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
¥536

¥

–

$6

–

5,514

–

–

53,294–The Company and its consolidated subsidiaries base its grouping for assessing theimpairment loss on fixed assets on the smallest identifiable groups of assets which generatecash inflows and which are largely independent of the cash inflows from other assets orgroups of assets.
Impairment losses on Business assets including airport shops were recognized due tosignificant decrease in expected future cash flows on the strategy plan for the years ended
March 31, 2013 and 2012.
The recoverable amount of each group of assets was measured by their usage value andfuture cash flows at discount rates of 3.3% and 3.1% for the years ended March 31, 2013
and 2012.
18

11.

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2013 and2012 were as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued bonuses
Allowance for doubtful accounts
Accrued pension and severance costs
Impairment losses on fixed assets
Accrued enterprise tax
Elimination of unrecognized gain on
intercompany accounts and transactions
Directors’ and statutory auditors’
retirement benefits
Loss on revaluation of inventories
Loss on revaluation of investments insecurities
Tax loss carryforwards
Other¥ 181,496
14,935
194,893
42,70837,925¥ 186,093
19,034
154,840
122,035
23,522$ 1,931
159
2,073
454
403

72,767

72,331774

11,024
20,117

11,97894,780117
214

Valuation allowance
Total deferred tax assets

6,180
318,125
122,669
1,022,843(340,131)
682,712

3,575
142,614
195,646
1,026,453(126,503)
899,950

66
3,384
1,305
10,881(3,618)
7,263

Deferred tax liabilities:
Accumulated retained earnings ofconsolidated subsidiaries
Depreciation
Other
Total deferred tax liabilities
Net deferred tax assets(45,602)(48,712)(53,900)(148,215)¥ 534,497(58,397)(243,844)(153,307)(455,549)¥ 444,401

(485)
(518)
(573)
(1,577)$ 5,686

Reconciliations between the statutory tax rate and the effective tax rates for the years ended
March 31, 2013 and 2012 were presented as follows:Year ended March 31,
2013
2012
Statutory tax rate
Disallowed expenses, including entertainment expenses
Non-taxable income, including dividends received
Inhabitants’ per capita taxes
Changes in valuation allowance
Equity in earnings of affiliates
Decrease in deferred tax assets due to tax rate change
Other
Effective tax rate

38.01%
2.74(0.64)
1.21
18.10(3.25)–
2.36
58.53%

40.69%
2.46(0.19)
1.07(1.49)
2.36
3.37(0.79)
47.48%

19

12.

Other Comprehensive Income

The following table presents reclassifications adjustments and tax effects allocated to eachcomponent of other comprehensive income for the years ended March 31, 2013 and 2012:
March 31,
2012
2013
2013
(Thousands of yen)(Thousands of
U.S. dollars)(Note 3)Net unrealized loss on other securities:
Amount arising during the year
Reclassification adjustments for gains andlosses included in net income
Amount before tax effectTax effectNet unrealized gain on hedging instruments:
Amount arising during the year
Tax effectTranslation adjustments:
Amount arising during the year
Reclassification adjustments for gains andlosses included in net income
Amount before tax effectTax effect
Share of other comprehensive income ofcompanies accounted for by the equity
method:Amount arising during the year
Total other comprehensive income
13.

¥ 10,243¥ 6,482$

109–
10,243(2,912)
7,331

9,814
16,296(7,746)
8,549

–
109
(31)
78

41,503(15,775)
25,72814,786(4,817)
9,968

442
(168)
274

236,649(98,568)

2,518(80,102)
156,546
29,956
186,502–(98,568)2,460(96,107)

(852)
1,665
319
1,984

21,090¥ 240,653

6,461¥(71,127)224$ 2,560

LeasesAs lessee under operating leases
Future rental expenses under operating leases outstanding at March 31, 2013 and 2012 aresummarized as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥38,224
12,179¥50,403¥39,997
56,231¥96,229

$407
130
$536

20

13.

Leases (continued)

As lessor under financing leases
The annual collections of lease receivables subsequent to March 31, 2013 are summarized
as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)¥8,703
5,700
2,582
1,000

$93
61
27
11

2014
2015
2016
2017

The annual collections of lease receivables subsequent to March 31, 2012 weresummarized as follows:(Thousands ofyen)Year ending March 31,
2013
2014
2015
2016
2017

¥11,936
7,816
5,119
2,319
1,015

As lessor under operating leases
Future rental revenues under operating leases outstanding at March 31, 2013 and 2012 aresummarized as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 177,674
1,712,457¥1,890,132¥ 177,674
1,890,132¥2,067,806$ 1,890
18,218$20,108

21

13.

Leases (continued)

As lessee and lessor under subleases
The Company subleases equipment to a third party, and the lease agreements between thetwo original parties remain in effect. The original and the sublease agreements areoperating leases.
Future rental revenues as lessor under the sublease agreements outstanding at March 31,
2013 and 2012 are summarized as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥1,630,890
3,372,376¥5,003,267¥1,592,742
4,536,253¥6,128,996$17,350
35,876$53,226

Future rental expenses as lessee under the original lease agreements outstanding at March
31, 2013 and 2012 are summarized as follows:
March 31,2013
2012
(Thousands of yen)
Within 1 year
Over 1 year14.

¥1,587,741
4,606,247¥6,193,989¥1,577,967
5,487,372¥7,065,340

2013(Thousands of
U.S. dollars)$16,891
49,003$65,894

Amounts Per Share

Net income per share is computed based on the weighted average number of shares ofcommon stock outstanding during each year. Diluted net income per share is computed
based on the weighted average number of shares of common stock outstanding during eachyear after giving effect to the potentially dilutive securities to be issued upon the exerciseof subscription rights as stock options.
Year ended March 31,
2013
2012
2013
(Yen)
(U.S. dollars)
Net income per share of common
stock:
Basic
Diluted¥61.70¥61.64¥54.51¥54.45$0.656$0.65622

14.

Amounts Per Share (continued)

The following table sets forth the basis of the computation of net income per share anddiluted net income per share of common stock for the years ended March 31, 2013 and2012:
Year ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Net income
Net income available to stockholdersof shares of common stock¥779,860¥693,317$8,296¥779,860¥693,317$8,296

Year ended March 31,
2013
2012
(Thousands of shares)
Weighted-average number of shares ofcommon stock outstanding
Effect of dilutive securities:
Subscription rights to shares

12,63812,71912

13

Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.
2013
Net assets per share15.

¥1,097.06

March 31,
2012
(Yen)
¥1,030.90

2013(U.S. dollars)$11.671

Financial Instruments

Policy for financial instruments
The Company and its consolidated subsidiaries (the “Group”) manage temporary cash
surpluses mainly through short-term deposits. Further, the Group raises short-term capitalthrough bank borrowings.
Types of financial instruments and related risk
Notes and accounts receivable are exposed to credit risk in relation to customers. In
addition, the Company is exposed to foreign currency exchange risk arising fromreceivables denominated in foreign currencies. In principle, the foreign currency exchangerisks deriving from the trade receivables denominated in foreign currencies are hedged byforward foreign exchange contracts.
Marketable securities and investment securities are composed of mainly stocks. Those
securities are exposed to market risk.
Deposits for business space are composed of mainly deposits for rental spaces of the airport
buildings. Those deposits are exposed to credit risk in relation to counterparties.
23

15.

Financial Instruments (continued)

Types of financial instruments and related risk (continued)
All notes and accounts payable have payment due dates within one year. Although theCompany is exposed to foreign currency exchange risk arising from those payables
denominated in foreign currencies, foreign exchange contracts are arranged to reduce therisk.
Short-term borrowings are raised mainly in connection with business activities, andlong-term debt is taken out principally for the purpose of making capital investments.
Long-term debt with variable interest rates is exposed to interest rate fluctuation risk.
However, to reduce such risk and fix interest expense for long-term debt bearing interest at
variable rates, the Company utilizes interest rate swap transactions as a hedging instrument.
A certain subsidiary has the hybrid financial instrument (bond) with embedded derivative.
Risk management for financial instrumentsa.

Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arisingfrom receivables and deposits for business space, each related division monitors credit
worthiness of their main customers periodically, and monitors due dates andoutstanding balances by individual customer. In addition, the Group is making efforts
to identify and mitigate risks of bad debts from customers who are having financial
difficulties.
The Group believes that the credit risk of derivatives is insignificant as it enters into
derivative transactions only with financial institutions which have the highcredit-rating.

b.

Monitoring of market risks (the risks arising from fluctuations in foreign exchange
rates, interest rates and others)
For accounts receivables and payables denominated in foreign currencies, theCompany enters into forward foreign exchange contracts to hedge such risk. In orderto mitigate the interest rate risk for loans payable bearing interest at variable rates, theCompany may also enter into interest rate swap transactions if certain conditions aremet.
For marketable securities and investment securities, the Group periodically reviews
the fair values of such financial instruments and the financial position of the issuers.
In addition, the Group continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with the issuers.
In conducting derivative transactions, the division in charge of each derivativetransaction follows the internal policies, which set forth delegation of authority andmaximum upper limit on positions.

c.

Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flowplans on a timely basis to manage liquidity risk.
24

15.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments and estimated fair value on the consolidatedbalance sheet as of March 31, 2013 and 2012 are shown in the following table. The
following table does not include financial instruments for which it is extremely difficult todetermine the fair value.
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.

Carrying
value

March 31, 2013
Estimated
fair value
Difference(Thousands of yen)

AssetsCash and time deposits¥ 5,219,694
8,034,413
Trade notes and accounts receivable
Investment securities
121,167
Total assets¥13,375,276¥ 5,219,694
8,034,413
121,167¥13,375,276¥

Liabilities
Trade notes and accounts payable
Short-term borrowings
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 6,790,479
1,271,757
2,164,214
2,234,937¥12,461,389¥
86,237¥¥ 6,790,479
1,271,757
2,164,214
2,237,299¥12,463,751¥
86,237

–
–
–
–

¥

–
–
–
(2,361)¥(2,361)¥–

March 31, 2013
Estimated
Carrying
value
fair value
Difference(Thousands of U.S. dollars)
AssetsCash and time deposits
Trade notes and accounts receivable
Investment securities
Total assets$ 55,529
85,472
1,289$142,290$ 55,529
85,472
1,289$142,290

$ –
–
–
$ –

Liabilities
Trade notes and accounts payable
Short-term borrowings
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

$ 72,239
13,52923,02423,801$132,593$
917$ 72,239
13,52923,024
23,776$132,568
$
917

$ –
–
–
(25)
$(25)
$ –

25

15.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Carrying
value

March 31, 2012
Estimated
fair value
Difference(Thousands of yen)

AssetsCash and time deposits¥ 5,391,474
Trade notes and accounts receivable
9,615,259
Investment securities
111,065
Total assets¥15,117,800¥ 5,391,474
9,615,259
111,065¥15,117,800¥

Liabilities
Trade notes and accounts payable
Short-term borrowings
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 8,572,728
1,957,249
1796,380
2,277,215¥14,603,573¥
15,608¥¥ 8,572,728
1,957,249
1,796,380
2,270,774¥14,597,133¥
15,608

¥

–
–
–
–

–
–
–
6,440
¥6,440¥–*1. Long-term debt includes current portion of long-term debt.
*2. The value of assets and liabilities arising from derivatives is shown at net value,
and with the amount in parentheses representing net liability position.
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactionsa.

Cash and time deposits, Trade notes and accounts receivable and Other notes andaccounts receivable
Since these items are settled in a short period of time, their carrying value
approximates fair value.

b.

Investment securities
The fair value of stocks is based on quoted market prices. The fair value of investment
trusts and debt securities is based on either quoted market prices or prices provided by
the financial institutions making markets in these securities.

c.

Trade notes and accounts payable, short-term borrowings and accrued expenses
Since these items are settled in a short period of time, their carrying value
approximates fair value.

26

15. Financial Instruments (continued)
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions (continued)d.

Long-term debt
The fair value of long-term debt is based on the present value of the total of principal
and interest discounted by the interest rate to be applied if similar new debt
agreements were entered into.

e.

Derivative transactions
Refer to Note 17 Derivative Transactions of the notes to the consolidated financial
statements. The fair value information of embedded derivative of the hybrid financial
instrument is included in Note 16 Securities.

Financial instruments for which it is extremely difficult to determine the fair value
March 31,2012
2013
(Thousands of yen)
Unlisted stocks
Deposits for business space¥1,390,138
2,073,691

2013(Thousands of
U.S. dollars)¥1,436,917
2,044,277$14,789
22,061

Because no quoted market price is available and it is extremely difficult to determine thefair value, the above financial instruments are not included in the above table.
Redemption schedule for receivables and marketable securities with maturities

Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

March 31, 2013
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)

Due after
ten years¥ 5,175,413

¥ –

¥ –

¥

–

8,034,413

–

–

–

–
–
¥13,209,827

–
–
¥ –

–
–
¥ –

100,000–¥100,00027

15. Financial Instruments (continued)
Redemption schedule for receivables and marketable securities with maturities (continued)

Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

Due after
ten years$ 55,058$ –$ –85,472

–

–

–

–
–
$140,530

–
–
$ –

–
–
$ –

1,064
–
$1,064Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

March 31, 2013
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of U.S. dollars)

March 31, 2012
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)$–

Due after
ten years¥ 5,346,330

¥ –

¥ –

9,615,259

–

–

–

–
–
¥14,961,590

–
–
¥ –

–
–
¥ –

100,000–¥100,000

¥

–

28

16.

Securities

The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2013 and 2012 are summarized as follows:
March 31, 2013
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

¥ 17,540
17,540¥ 11,585
11,585¥ 5,954
5,954

885

980

(94)

87,05015,692
103,627¥121,167

100,000
20,000120,980$132,565(12,950)(4,307)(17,352)¥(11,397)

March 31, 2013
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

$ 187
187

$ 123
123

$ 63
63

9

10

(1)

926
167
1,102
$1,289

1,064
213
1,287
$1,410

(138)
(46)
(185)
$(121)March 31, 2012
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

¥

1,313
1,313

¥

1,116
1,116

¥

197
197

11,006

11,186(179)

85,02013,726
109,752¥111,065

100,000
20,000131,186¥132,302(14,980)(6,273)(21,433)¥(21,236)
29

16.

Securities (continued)

Non-marketable securities classified as other securities at March 31, 2013 and 2012amounted to ¥164,498 thousand ($1,750 thousand) and ¥163,387 thousand, respectively.
The Company recognized ¥9,814 thousand of impairment losses on other securities for theyear ended March 31, 2012.

17.

Derivative Transactions

The Company utilizes forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies.
As of March 31, 2013, there were no derivative transactions outstanding for which hedged
accounting has not been applied.
The notional amounts and the estimated fair value of the forward foreign exchange
contracts outstanding at March 31, 2012 for which hedged accounting has not been applied,
are summarized as follows:

Maturing within one year
Sell:
USD

March 31, 2012
Notional
Fair
Unrealized
amountvalue
gain (loss)(Thousands of yen)
¥536,094¥(29,125)¥(29,125)

The notional amounts and the estimated fair value of the forward foreign exchange
contracts outstanding at March 31, 2013 and 2012, for which hedged accounting has been
applied, are summarized as follows:

Maturing within one year
Sell:
USD
EUR
Buy:
USD
EUR
OthersTotal

March 31, 2013
Fair value
Notional amount(Thousands of yen)¥

26,693499

1,912,169
139,549
78,749¥2,157,659

¥

33
17

81,221
5,672(707)¥86,23730

17.

Derivative Transactions (continued)
March 31, 2013
Notional amount
Fair value(Thousands of U.S. dollars)

Maturing within one year
Sell:
USD
EUR
Buy:
USD
EUR
Others
Total

$

284
5

$

20,342
1,485
838$22,954

0
0

864
60
(8)
$917

March 31, 2012
Notional amount
Fair value(Thousands of yen)

Maturing within one year
Sell:
USD
Buy:
USD
EUR
Others
Total

¥

5,332

1,146,615
80,252
16,904¥1,249,103¥(3)

41,3163,159
260¥44,732

Foreign receivables and payables are translated at the applicable forward foreign exchange
rates if certain conditions are met. The notional amounts of the forward foreign exchange
contracts accounted for as part of accounts receivable or payable outstanding at March 31,
2013 and 2012, are summarized as follows:
March 31,
2012
2013
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Sell:
USD
EUR
Other
Buy:
USD
EUR
Others
Total

¥

4,781
51,03236,287¥143,172
–
–

$

51
543
386

354,561
30,3409,092¥486,094

322,432
69,9172,017¥537,538

3,772
323
97
$5,17131

17.

Derivative Transactions (continued)

The Company also utilizes interest rate swap transactions to reduce fluctuation risk
deriving from interest payable for long-term debt bearing interest at variable rates. The
related interest differential paid or received under interest-rate swaps utilized as hedging
instruments is recognized over the terms of the swap agreements as an adjustment ofinterest expense on the hedged items if certain conditions are met. The notional amounts of
the interest-rate swaps hedging long-term debt outstanding at March 31, 2013 and 2012,
are summarized as follows:
March 31,
2012
2013
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Maturing within one year
Maturing after one year
Total

¥ 80,000
240,000¥320,000¥200,000
20,000¥220,000

$ 851
2,553
$3,404

The notional amounts of derivatives are not necessarily indicative of the actual market risk
involved in derivative transactions.

18.

Investment and Rental Properties

The Company and a certain consolidated subsidiary own buildings and lands for leasemainly in Tokyo and other areas.
The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2013 are as follows:

March 31, 2013
¥3,499,049

March 31, 2013$37,224

Carrying ValueNet change
March 31, 2012
(Thousands of yen)
¥292,440¥3,206,608

Carrying ValueNet change
March 31, 2012
(Thousands of U.S. dollars)$3,111$34,113

Fair Value
March 31, 2013
¥2,793,852
Fair Value
March 31, 2013$29,722

The components of net change in carrying value include increases mainly due toacquisitions of real estate in the amount of ¥352,470 thousand ($3,750 thousand).

32

18.

Investment and Rental Properties (continued)

The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2012 were as follows:

March 31, 2012

Carrying ValueNet change
March 31, 2011
(Thousands of yen)

¥3,206,608¥(783,029)¥3,989,638

Fair Value
March 31, 2012
¥2,544,295

The components of net change in carrying value include decreases mainly due to transfer toreal estate held for sale in the amount of ¥719,303 thousand.
The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss. The fair value is mainly estimated in accordance withappraisal standards for valuing real estate. However, if no material change has occurred incertain values or indices, the fair values are determined by adjusting such appraised values
and indices.
19.

Cash Flow Information

The components of cash and cash equivalents are summarized as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Time deposits with maturities of more than
three months

20.

¥5,219,694¥5,391,474$55,529(2,952)¥5,216,742(6,807)¥5,384,667(31)$55,497

Segment Information

The reportable segments of the Company and its consolidated subsidiaries are components
for which discrete financial information is available and whose operating results are
regularly reviewed by the Board of Directors to make decisions about resource allocationand to assess performance.
Aviation-related business segment includes aircraft components and aviation-related
business. Media & life service business segment includes printing, insurance and real estatebusiness. Retail business segment includes cabin service supply, mail-order sales, airport
shops and gift item business. Food & beverage business segment includes agriculture &marine products, processed foods and wine sales business.
The accounting policies of the segments are substantially the same as those described in thesignificant accounting policies in Note 1. Segment performance is evaluated based on
operating income or loss. Intersegment sales are recorded at the same price used intransactions with third parties.
33

20.

Segment Information (continued)

The reportable segments information of the Company and its consolidated subsidiaries forthe years ended March 31, 2013 and 2012 are summarized as follows:Year ended March 31, 2013
Reportable segments
Media & life
Food &
service
RetailbeveragebusinessbusinessTotalbusiness(Thousands of yen)

Adjustments
andeliminations

Consolidated¥17,182,600¥10,617,953¥44,476,019¥13,660,824¥85,937,397¥–¥85,937,397

135,782
17,318,382¥ 963,971¥ 4,394,111

172,154
10,790,107¥ 1,062,330¥ 7,746,895

23,54544,499,565¥ 1,217,552¥10,720,615

420,721
14,081,546¥
44,445¥ 5,978,164

752,204
86,689,601¥ 3,288,299¥28,839,787(752,204)(752,204)¥ (1,896,710)¥ 2,401,805–
85,937,397¥ 1,391,589¥31,241,592¥

57,992¥

70,113¥

304,624¥

103,061¥535,790¥

97,901¥¥¥

94,92814,196¥¥

307,141
371,174¥¥–
341,973¥¥–
37,645¥¥402,070
764,990¥¥806,728
177,921¥ 1,208,798¥ 942,912

Year ended March 31, 2013
Reportable segments
Media & life
Food &
service
RetailbeveragebusinessTotalbusinessbusiness(Thousands of U.S. dollars)

Adjustments
andeliminations

Consolidated$ 182,794$ 112,957$ 473,149$ 145,328$ 914,228$–$ 914,228

1,444
184,238$ 10,255$ 46,746

1,831
114,788$ 11,301$ 82,414250
473,400$ 12,953$ 114,049

4,476
149,804$473$ 63,597

8,002
922,230$ 34,982$ 306,806(8,002)(8,002)$(20,178)$ 25,551–
914,228$ 14,804$ 332,357

$

617

$

746

$

3,241

$

1,096

$

5,700

$ 1,042

$

6,741

$
$

1,010
151

$
$

3,267
3,949

$
$

–
3,638

$
$

–
400

$
$

4,277
8,138

$ 8,582$ 1,893$$

12,86010,031

Aviationrelated
business
Sales, profits and assets
by reportable segments:
Sales to outside parties
Inter-segment sales
and transfers
Total
Segment profits
Segment assets
Other items:
Depreciation andamortization
Investment in affiliates
accounted for by theequity method
Capital expenditures

Aviationrelated
business
Sales, profits and assets
by reportable segments:
Sales to outside parties
Inter-segment sales
and transfers
Total
Segment profits
Segment assets
Other items:
Depreciation andamortization
Investment in affiliates
accounted for by theequity method
Capital expenditures

Adjustments and eliminations for segment profits and losses include ¥1,432 thousand ($15
thousand) of elimination of inter-segment profit and minus ¥1,898,143 thousand ($20,193
thousand) of corporate general administration expenses which are not allocable to thereportable segments.
Adjustments and eliminations for segment assets include minus ¥97,875 thousand ($1,041
thousand) of elimination of accounts inter-segment receivable and ¥2,499,680 thousand($26,592 thousand) of corporate assets which are not allocable to the reportable segments.
Corporate assets consist primarily of investments in securities and assets belonging to theadministrative part of the Company.
Adjustments and eliminations for capital expenditures consist primarily of investments in
the head office software.
34

633,69120.

Segment Information (continued)

Segment profits are adjusted with operating income reported in the consolidated statements
of income.
Year ended March 31, 2012
Reportable segments
Media & life
Food &
service
RetailbeveragebusinessbusinessTotalbusiness(Thousands of yen)

Adjustments
andeliminations

Consolidated¥20,241,549¥10,282,926¥41,772,318¥16,786,155¥89,082,950¥–¥89,082,950

19,04020,260,590¥ 775,905¥ 7,314,064

197,961
10,480,888¥ 1,178,373¥ 7,268,621

26,254
41,798,573¥ 791,991¥10,473,429

277,657
17,063,813¥ 898,940¥ 6,283,795

520,91489,603,865¥ 3,645,210¥31,339,909(520,914)(520,914)¥ (2,024,196)¥ 2,363,019–
89,082,950¥ 1,621,014¥33,702,929¥

69,745¥67,482¥

319,421

¥

7,297

¥

463,946¥

264,394¥¥¥

75,33733,183¥¥

284,538
2,092

¥
¥

–
248,741¥¥–
633,884¥¥

359,875
917,901¥¥

897,504
46,668¥ 1,257,380¥ 964,569

Aviationrelated
business
Sales, profits and assets
by reportable segments:
Sales to outside parties
Inter-segment sales
and transfers
Total
Segment profits
Segment assets
Other items:
Depreciation andamortization
Investment in affiliates
accounted for by theequity method
Capital expenditures

Adjustments and eliminations for segment profits and losses include minus ¥5,025
thousand of elimination of inter-segment profit and minus ¥2,019,171 thousand of
corporate general administration expenses which are not allocable to the reportablesegments.
Adjustments and eliminations for segment assets include minus ¥97,827 thousand ofelimination of accounts inter-segment receivable and ¥2,460,846 thousand of corporate
assets which are not allocable to the reportable segments. Corporate assets consist
primarily of investments in securities and assets belonging to the administrative part of theCompany.
Adjustments and eliminations for capital expenditures consist primarily of investments in
the head office software.
Segment profits are adjusted with operating income reported in the consolidated statements
of income.
For the years ended March 31, 2013 and 2012, net sales to outside parties in Japan
represent more than 90% of consolidated operating revenues. As a result, net sales tooutside parties by countries or areas grouped according to geographical classification are
not required to be disclosed.
For the years ended March 31, 2013 and 2012, property and equipment in Japan represent
more than 90% of consolidated property and equipment. As a result, property andequipment by geographical countries or areas is not required to be disclosed.

35

728,340

20.

Segment Information (continued)

Impairment loss on fixed assets by reportable segments for the years ended March 31, 2013
and 2012 is summarized as follows:
March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Aviation-related businessMedia & life service business
Retail business
Food & beverage business
Reportable segments total
Adjustments and eliminations

21.

¥

–
–
536
–
536
–
¥536

¥

–
–
58,808–58,808–¥58,808

$–
–
6
–
6
–
$6

Related Party Transactions

The significant transactions between the Company and Japan Airline Co., Ltd., for theyears ended March 31, 2013 and 2012 are summarized as follows:Year ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment
Purchases of merchandise¥6,649,003
900,803¥6,924,543
651,852

March 31,2013
2012
(Thousands of yen)Accounts receivable
Advance payment
Accounts payable¥739,762
62
60,515¥933,277
15,566
68,340$70,734
9,583

2013(Thousands of
U.S. dollars)$7,8701644

36

21. Related Party Transactions (continued)
The significant transactions between certain consolidated subsidiaries of the Company andJapan Airlines Co., Ltd. for the years ended March 31, 2013 and 2012 are summarized asfollows:

Sales of flight equipment

Year ended March 31,
2013
2012
2013
(Thousands of yen)(Thousands of
U.S. dollars)¥278,039¥364,784$2,958March 31,2013
2012
(Thousands of yen)Accounts receivable¥49,872¥70,026

2013(Thousands of
U.S. dollars)$531

22. Subsequent Events
The Company has decided at its Board of Directors meeting on May 22, 2013 to conclude abusiness transfer agreement with Agri-Sun Co., Ltd. (“AgriSun”), and concluded theagreement on May 23, 2013. This business transfer agreement includes the acquisition of
trade rights of AgriSun, and the acquisition of all shares of two overseas group subsidiaries
owned by AgriSun in order to convert them into subsidiaries.
a.

Overview of acquisition(1) Names and business of acquired companies
Name of companies
Acquisition of trade rights:

AgriSunAcquisition of shares:

Taniyama Siam Co., Ltd. (“Taniyama Siam)
Advance Agriculture Co., Ltd. (“Advance
Agriculture”)

Business of acquired companies:

Produce, process, export and sell agricultural
products(2) Reason for acquisition
The Company has defined “Aviation, Airports and Foods” as three core businessdomains in the new JALUX Group Mid-Term Management Plan “Innovate2014” (announced on May 23, 2012), and will expand its business under the plan.
In the agricultural business in the foods business domain, the Group imports
fresh vegetables and fruits, etc. from overseas, with paprika as the maincommodity, and sells them wholesale to businesses, such as large retail stores,
markets, and the food restaurant industry.

37

22. Subsequent Events (continued)a.

Overview of acquisition (continued)
AgriSun owns two overseas group subsidiaries, Taniyama Siam in Thailand, andAdvance Agriculture in Laos. It produces, processes, and exports local asparagus,
okra, etc., and holds a large share in the imported asparagus and okra markets inJapan.
To expand the Group’s agricultural business on the whole, the Company has
concluded a business transfer agreement with AgriSun to acquire trade rightsfrom AgriSun, and to acquire all shares of the above mentioned two AgriSun
overseas subsidiaries to convert them into subsidiaries of the Company. The plan
is to implement the acquisition of trade rights through the establishment of awholly-owned consolidated subsidiary (sales company).
As a result of the acquisition of trade rights and acquisition of shares, the Groupwill expand its fresh vegetable commodities in the agricultural business byintroducing asparagus and okra of AgriSun as its second and third key
commodities, in addition to its main commodity paprika. The Group will use its
respective sales channels and seek synergistic effects to improve earning power.
(3) Date of acquisition
July 1, 2013(4) Legal form of acquisition
Acquisition of trade rights and acquisition of shares(5) Name of combined company
The name of the combined company has not yet been determined.
(6) Ratio of acquired voting rights
Taniyama Siam:
Advance Agriculture:

b.

100%
100%

Details of acquisition cost
Acquisition cost:
million)From ¥138 million to ¥168 million (from $1.5 million to $1.8

Direct costs related to the acquisition, including advisory fee:million)c.

¥20 million ($0.2

Amount of goodwill, basis for recognition, and method and period for amortization of
goodwill
Amount of goodwill, basis for recognition, and method and period for amortization of
goodwill have not yet been determined.

d.

Assets acquired and liabilities assumed on the date of acquisition
Assets acquired and liabilities assumed have not yet been determined.

38