Consolidated Balance Sheets
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
March 31, 2003 and 2002

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2003

2002

2003

Property, plant and equipment (Notes 3 and 6):
Production facilities.....................................................................................
Distribution facilities ...................................................................................

688,339
1,952,210¥

686,997$ 5,736,161

1,889,145

16,268,415

Service and maintenance facilities.............................................................

194,047

197,532

1,617,060

Other ............................................................................................................

591,542588,0714,929,520

Construction in progress .............................................................................

75,44359,200628,689

3,501,581

3,420,945

29,179,845(2,284,116)(2,171,009)(19,034,302)

1,217,465

1,249,936

10,145,543

20,61019,197

171,750

and affiliated companies .........................................................................

20,271

17,867

168,927

Investment securities (Notes 4 and 6) ........................................................

51,274

74,846427,280

Deferred income taxes (Note 9) .................................................................

44,30730,083369,224

Other investments and non-current assets ...............................................

59,83060,546

498,584

Allowance for doubtful accounts ..............................................................

(2,244)(1,660)(18,697)

173,438

181,682

1,445,318

Cash and cash equivalents ..........................................................................

52,13027,261

434,416

Marketable securities (Note 4) ...................................................................

1

21

11

132,235

128,550

1,101,960

Accumulated depreciation .........................................................................

Intangibles ........................................................................................................
Tokyo Gas Co., Ltd.

32¥

Investments and other non-current assets:
Investments in unconsolidated subsidiaries

Annual Report 2003

Current assets:

Notes and accounts receivables:
Trade........................................................................................................
Allowance for doubtful accounts..........................................................

(1,448)(932)(12,067)

Inventories (Note 5).....................................................................................

21,12528,759176,045

Deferred income taxes (Note 9) .................................................................

11,481

10,04995,673

Other current assets ....................................................................................

49,02758,190408,555

Total current assets.................................................................................

264,551

251,898

2,204,593¥ 1,676,064¥1,702,713$13,967,204

Note: See accompanying notes.

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND STOCKHOLDERS’ EQUITY

2003

2002

2003

Long-term debt due after one year (Note 6).................................................

¥ 598,322¥ 680,887$ 4,986,017

Employees’ severance and retirement benefits (Note 8)..............................

120,896

125,554

1,007,467

Allowance for repairs of gas holders..............................................................

3,457

3,520

28,808Other non-current liabilities............................................................................

28,89727,016

240,808

Bank loans (Note 6) .....................................................................................

41,90042,709349,167

Long-term debt due within one year (Note 6) .........................................

91,07940,298758,992

Trade........................................................................................................

37,67738,055313,971

Other........................................................................................................

43,486

40,216362,382

Income taxes payable (Note 9) ...................................................................

35,05827,941

292,153

Accrued expenses ........................................................................................

45,12245,276

376,020

Other current liabilities...............................................................................

46,42563,366

386,873

Total current liabilities ...........................................................................

340,747

297,8612,839,558

Current liabilities:

Notes and accounts payable:

4,039

3,797

33,660Issued – 2,810,165,397 shares in 2002 ...................................................

141,844

141,843

1,182,037

Capital surplus .............................................................................................

2,065

2,064

17,208Retained earnings .......................................................................................

429,653

387,315

3,580,438

Net unrealized holding gains on securities...............................................

17,003

32,836

141,692

Foreign currency translation adjustments.................................................

4

115

36

590,569

564,173

4,921,411

Treasury stock, at cost .................................................................................

(10,863)(95)(90,525)

Total stockholders’ equity......................................................................

579,706

564,078

4,830,886¥1,676,064¥1,702,713$13,967,204

Stockholders’ equity (Note 10):
Common stock:
Authorized – 6,500,000,000 shares
Issued – 2,810,171,295 shares in 2003

Annual Report 2003

Minority interest ..............................................................................................

Tokyo Gas Co., Ltd.

33

Commitment and contingent liabilities (Note 13)

Consolidated Statements of Income
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002

Thousands of
U.S. dollars (Note 1)

Millions of yen

2003

2002

2003

¥1,127,634¥1,097,589$9,396,950

Cost of sales..................................................................................................

571,930

561,989

4,766,082

Selling, general and administrative ...........................................................

432,410

424,992

3,603,415

1,004,340

986,9818,369,497

123,294

110,608

1,027,453

Net sales (Note 11) ...........................................................................................
Costs and expenses (Notes 8 and 11):

Operating income (Note 11) ...........................................................................
Other income (expenses):

Tokyo Gas Co., Ltd.

34
Annual Report 2003

Interest and dividend income.....................................................................

1,089

1,021

9,071

Interest expense...........................................................................................

(17,472)(19,275)(145,603)

of distribution facilities............................................................................

(4,649)(6,827)(38,740)

Losses on unsecured notes redemption ....................................................

(6,328)(4,618)(52,732)

Gains from disposal of securities................................................................

3,196

3,455

26,634

Exchange gains (losses) ...............................................................................

737

(615)

6,139

Equity in net income of an affiliated company ........................................

220

311

1,835

Losses on compensation for malfunctioned finished goods ...................

–(1,300)–

Other, net.....................................................................................................

(4,204)101(35,033)(27,411)(27,747)(228,429)

95,88382,861

799,024

43,62231,507363,514

Adjustments of charges for construction

Income before income taxes and minority interest in net incomeof consolidated subsidiaries .........................................................................
Income taxes (Note 9):
Current .........................................................................................................
Deferred .......................................................................................................
Minority interest in net income of consolidated subsidiaries ......................
Net income........................................................................................................

¥(7,245)(742)(60,371)

59,50652,096495,881

(305)

(184)

(2,538)59,201¥ 51,912$ 493,343

Yen

U.S. dollars (Note 1)

2003

2002

2003

Net income...................................................................................................

¥21.18¥18.47$0.18

Diluted net income......................................................................................

19.11

16.66

0.16

Cash dividends applicable to the year .......................................................

6.00

6.00

0.05

Amounts per share of common stock (Note 2):

Note: See accompanying notes.

Consolidated Statements of Stockholders’ Equity
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002

Millions of yen

Balance at March 31, 2001 .................................

Number of sharesof common stock Common(Thousands)
stock

CapitalsurplusRetainedearnings

2,810,012¥2,038¥353,794¥141,817

Net income .....................................................

Foreign
Net unrealized currency
holding gains translation
on securities adjustments¥ 55,140¥

Treasury
stock

4

¥ (3)

51,912Net unrealized holding losses
on securities.................................................

(22,304)

Foreign currencytranslation adjustments..............................

111

Treasury stock.................................................

(92)

Cash dividends paid (¥6.50 per share)..........

(18,265)

Bonuses to directors ......................................

(126)

Shares issued upon conversion
153

26

26

Balance at March 31, 2002 .................................

2,810,165¥141,843¥2,064

Net income .....................................................

¥387,315¥ 32,836

¥115

¥(95)

59,201

Net unrealized holding losses
on securities.................................................

(15,833)

Foreign currency

35

(111)

Treasury stock.................................................

(10,768)

Cash dividends paid (¥6.00 per share)..........

(16,768)

Bonuses to directors ......................................

(95)

Shares issued upon conversionof convertible bonds...................................

6

1

1

Balance at March 31, 2003 .................................

2,810,171¥141,844¥2,065¥429,653¥ 17,003¥

4¥(10,863)

Foreign
Net unrealized currency
holding gains translation
on securities adjustments

Treasurystock

Thousands of U.S. dollars (Note 1)

Commonstock

Balance at March 31, 2002....................................................

$1,182,029

CapitalsurplusRetainedearnings$17,200 $3,227,624 $ 273,637

Net income........................................................................

$ 957

$

(794)

493,343

Net unrealized holding losses on securities ...................

(131,945)

Foreign currency translation adjustments......................

(921)

Treasury stock ...................................................................

(89,731)

Cash dividends paid ($0.05 per share) ............................

(139,736)

Bonuses to directors .........................................................

(793)

Shares issued upon conversion of convertible bonds....

8

Balance at March 31, 2003....................................................

$1,182,037

8$17,208 $3,580,438 $ 141,692$ 36$(90,525)

Annual Report 2003

translation adjustments..............................

Note: See accompanying notes.

Tokyo Gas Co., Ltd.

of convertible bonds...................................

Consolidated Statements of Cash Flows
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002

Thousands of
U.S. dollars (Note 1)

Millions of yen

2003

Tokyo Gas Co., Ltd.

36
Annual Report 2003

Cash flows from operating activities:
Income before income taxes and minority interest in net income of
consolidated subsidiaries...........................................................................
Adjustments to reconcile income before income taxes and minority
interest in net income of consolidated subsidiaries to net cash
provided by operating activities:
Depreciation (Note 11) ..........................................................................
Amortization of long-term prepayments ............................................
Loss on disposal of property, plant and equipment............................
Gains from disposal of property, plant and equipment .....................
Loss on reduction of acquisition costs of property, plant andequipment for tax purposes...............................................................
Gains from sales of securities ................................................................
Loss on bond redemption .....................................................................
Decrease in employees’ severance and retirement benefits ..............
Interest and dividend income ...............................................................
Interest expense .....................................................................................
Changes in operating assets and liabilities:
Increase in notes and accounts receivable ......................................
Decrease (Increase) in inventories....................................................
Decrease in notes and accounts payable.........................................
Increase (Decrease) in consumption taxes payable ........................
Bonuses paid to directors ......................................................................
Other.......................................................................................................

¥

2002

2003

95,883¥ 82,861

137,300
3,728
2,482(5,380)141,646
3,918
3,577
(491)

1,144,165
31,065
20,682(44,831)

4,416(3,196)
6,328(4,658)(1,089)17,472424(3,457)
4,618(8,661)(1,021)
19,27536,799(26,633)
52,733(38,818)(9,071)
145,603(6,777)
7,634(1,785)(219)(95)
14,897(217)(1,340)(3,674)
2,748(127)(4,592)(56,478)
63,617(14,872)(1,826)(795)
124,143

266,941
1,166(18,069)(36,505)

235,487
1,089(19,325)(25,575)

2,224,507
9,718(150,578)(304,205)

Net cash provided by operating activities .......................................
Cash flows from investing activities:
Purchases of investment securities...............................................................
Proceeds from sales of securities..................................................................
Purchases of property, plant and equipment .............................................
Purchases of intangible fixed assets ............................................................
Expenditure of long-term prepayment .......................................................
Proceeds from sale of tangible and intangible fixed assets ......................
Expenditure of long-term loans receivable.................................................
Increase in other investments andother non-current assets — net ................................................................

213,533

191,676

1,779,442(7,297)
5,861(98,149)(9,015)(1,800)
6,888(4,256)(3,712)
5,005(104,884)(7,791)(1,006)
2,528(1,694)(60,811)
48,843(817,905)(75,123)(14,999)
57,401(35,470)(2,376)(267)(19,800)

Net cash used in investing activities .....................................................
Cash flows from financing activities:
Proceeds from (Repayments of) short-term bank loans.............................
Proceeds from (Repayments of) commercial paper....................................
Proceeds from long-term debt.....................................................................
Repayments of long-term debt....................................................................
Cash dividends paid ......................................................................................
Other ..............................................................................................................

(110,144)(111,821)(917,864)(809)(12,000)
37,341(75,450)(16,831)(10,768)

2,788
12,00045,486(159,070)(18,288)(92)(6,743)(100,000)
311,172(628,754)(140,256)(89,731)

Net cash used in financing activities.....................................................
Effect of exchange rate changes on cash and cash equivalents.....................

(78,517)(3)(117,176)
7(654,312)(22)

Net increase (decrease) in cash and cash equivalents .....................................
Cash and cash equivalents at beginning of year .............................................

24,86927,261(37,314)64,575207,244
227,172

52,130¥ 27,261

Cash received for interest and dividends .............................................
Cash paid for interest ............................................................................
Cash paid for income taxes ...................................................................

Cash and cash equivalents at end of year........................................................
Note: See accompanying notes.

¥

$

$

799,024

434,416

Notes to Consolidated Financial Statements
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002

1. Basis of consolidated financial statements

Property, plant and equipment – Property, plant and equipment isTokyo Gas Co., Ltd. (the “Company”) and its consolidated domestic

generally stated at cost. Depreciation is determined mainly by thesubsidiaries maintain their accounts and records in accordance withdeclining-balance method based on estimated useful lives, except

the provisions set forth in the Japanese Commercial Code and thethat buildings acquired after March 31, 1998 are depreciated using

Securities and Exchange Law and in conformity with accounting prin-

the straight-line method.

ciples and practices generally accepted in Japan (“Japanese GAAP”).

Software costs – The Company and its consolidated subsidiaries

The Company, as a regulated company, also follows Gas Business Law

include software in intangible assets and depreciate it using theand other related accounting regulations for preparing such financial

straight-line method over the estimated useful lives.

statements.

Cash and cash equivalents – Cash and cash equivalents include cash

Certain accounting principles and practices generally accepted inon hand, readily-available deposits and short-term highly liquidJapan are different from International Accounting Standards andinvestments with maturities not exceeding three months at the timestandards in other countries in certain respects as to application andof purchase.

disclosure requirements. Accordingly, the accompanying consolidated

Securities – The Company and its consolidated subsidiaries classify

financial statements are intended for use by those who are informed

their debt and equity securities in one of the following threeabout Japanese accounting principles and practices.

categories, in accordance with the Japanese Accounting Standard for

The accompanying consolidated financial statements are a

Financial Instruments.
(a) Debt securities intended to be held to maturity (hereafter, “held-

Company which were prepared in accordance with Japanese GAAP

to-maturity debt securities”) are stated at amortized cost.

from the accounts and records maintained by the Company and its(b) Equity securities issued by unconsolidated subsidiaries andconsolidated subsidiaries and were filed with the appropriate Local

affiliated companies which are not accounted for using the equity

Finance Bureau of the Ministry of Finance as required by themethod are stated at moving-average cost.

Securities and Exchange Law.

(c) Available-for-sale securities, which are defined as securities otherIn preparing the accompanying consolidated financial statements,

than held-to-maturity debt securities, equity securities issued byunconsolidated subsidiaries and affiliated companies, and securities

statements issued domestically in order to present them in a form

held for trading purposes, are stated at fair market value, if their fairwhich is more familiar to readers outside Japan. The consolidated

market values are readily available. Unrealized gains and unrealizedstatements of stockholders’ equity have been prepared for thelosses on these securities are reported, net of applicable income

purpose of inclusion in the accompanying consolidated financial

taxes, as a separate component of stockholders’ equity. Available-for-statements, although such statements are not customarily prepared insale securities with no available fair market values are stated at

Japan and are not required to be filed with the regulatory authorities.

moving-average cost.

The financial statements are stated in Japanese yen. The

If the market value of held-to-maturity debt securities, equity

translation of the Japanese yen amounts into U.S. dollars are

securities issued by unconsolidated subsidiaries and affiliatedincluded solely for the convenience of the reader, using thecompanies, and available-for-sale securities, declines significantly,

prevailing exchange rate at March 31, 2003, which was ¥120 to U.S.

such securities are stated at fair market value and the difference$1. The convenience translations should not be construed as

between fair market value and the carrying amount is recognized as

representations that the Japanese yen amounts have been, could

loss in the period of the decline.

have been, or could in the future be, converted into U.S. dollars at

Derivative financial instruments – The Company and its consolidated

this or any other rate of exchange.

subsidiaries use interest rate swap and foreign exchange forward
contracts only for the purpose of mitigating the risk of fluctuations

2. Significant accounting policies

in interest rates and foreign exchange rates. The Company and its

Consolidation – The consolidated financial statements include theconsolidated subsidiaries do not use derivative financial instruments

accounts of the Company and all of its significant subsidiaries. Allfor speculative trading purposes. The derivative financial instruments

significant intercompany transactions and account balances areare executed with creditworthy financial institutions, and theeliminated in consolidation.

Company’s management believes there is little risk of default by

Equity method – Investments in unconsolidated subsidiaries andcounterparties.

affiliates over which the Company has the ability to exercise

Inventories – Inventories are stated at cost, cost being determined bysignificant influence over operating and financial policies of thethe moving-average method.

investees, are accounted for by the equity method.

37
Annual Report 2003

certain reclassifications have been made in the consolidated financial

Tokyo Gas Co., Ltd.

translation of the audited consolidated financial statements of theAllowance for doubtful accounts – The Company and its

the financial statement basis and the tax basis of assets and liabilities.

consolidated subsidiaries provide for doubtful accounts at an

Enterprise tax – Enterprise tax normally constitutes income taxes.

estimated amount of probable bad debts.

However, in the case of companies engaged in gas businesses,

Employees’ severance and retirement benefits – The Company andenterprise tax is levied on net sales. In the accompanying

its consolidated subsidiaries provide two post-employment benefit

consolidated statements of income, enterprise tax levied on net sales

plans, an unfunded lump-sum payment plan and a funded non-is accounted for in “Selling, general and administrative” expenses incontributory pension plan, under which all eligible employees are

the amount of ¥10,633 million ($88,612 thousand) and ¥10,070

entitled to benefits based on the level of wages and salaries at themillion for the years ended March 31, 2003 and 2002, respectively.

time of retirement or termination, length of service and certain

Enterprise taxes calculated based on taxable income of the Company

other factors.

and certain consolidated subsidiaries are included in income taxes.

The Company and its consolidated subsidiaries determine

Foreign currency translation – Short-term receivables and payables

allowance and expenses for employees’ severance and retirement

denominated in foreign currencies are translated into Japanese yen

benefits based on the amounts actuarially calculated using certain

at the year-end rates.

assumptions.

Amounts per share of common stock – Effective April 1, 2002, theAllowance for employees’ severance and retirement benefits are

Company and its consolidated subsidiaries adopted the newprovided based on the estimated amounts of projected benefit

accounting standard for earnings per share and related guidance

obligation and the fair value of the plan assets.

(Accounting Standards Board Statement No. 2, “Accounting Standard

The estimated amount of all retirement benefits to be paid at thefor Earnings Per Share” and Financial Standards Implementation

Tokyo Gas Co., Ltd.

future retirement date is allocated equally to each service year using

Guidance No. 4, “Implementation Guidance for Accounting Standard

the estimated number of total service years. Past service costs arefor Earnings Per Share”, issued by the Accounting Standards Board of

charged to income when incurred, and actuarial gains and losses are

Japan on September 25, 2002). Earnings per share for the year ended

recognized as income and expense using the straight-line method

March 31, 2002 would have been ¥18.44, if this new accounting

over approximately 10 years commencing with the next year.

standard were applied retroactively.

Allowance for repairs of gas holders – The Company and certain

Cash dividends per share have been presented on an accrual basis

38

number of its consolidated subsidiaries provide for future repairs ofand include dividends approved or to be approved after the balance

Annual Report 2003

gas holders, which occur approximately once every ten years, by

sheet dates, but applicable to the year then ended.

estimating future expenditures and charging them to income inequal annual amounts. The difference between the actual

3. Property, plant and equipment

expenditure and the amount provided is charged to income in theProperty, plant and equipment is generally recorded at cost.

year repairs are completed.

However, in cases where the Company receives contributions toward

Accounting for certain lease transactions – Finance leases which do

the cost of construction from customers, such contributed amount is

not transfer ownership to lessees are accounted for in the sameoffset against the acquisition cost of the subject asset. Such offset

manner as operating leases under accounting principles generally

recorded in the years ended March 31, 2003 and 2002 were ¥236,141

accepted in Japan.

million ($1,967,842 thousand) and ¥228,023 million, respectively.

Income taxes – Income taxes comprise corporation tax, inhabitants’taxes and enterprise tax. The Company and its consolidated
subsidiaries recognize tax effects of temporary differences between

4. Securities
The following tables summarize acquisition costs, book values and fair values of securities with fair value as of March 31, 2003 and 2002:(a) Held-to-maturity debt securities:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Book value.....................................................................................................................................

¥34

¥29

$283

Fair value .......................................................................................................................................

37

31

308

Difference......................................................................................................................................

¥ 3

¥ 2

$ 25

Securities with fair value exceeding book value:(b) Available-for-sale securities:
Millions of yen

For 2003:

Acquisition cost

Book value

Difference¥10,692¥37,910¥27,218

Securities with fair value exceeding book value:
Equity securities ............................................................................................................................
Bonds .............................................................................................................................................

5

6

1

Subtotal .........................................................................................................................................

10,69737,91627,219Equity securities ............................................................................................................................

1,523

1,151

(372)

Total ....................................................................................................................................................

¥12,220¥39,067¥26,847

Other securities:

Millions of yen

For 2002:

Acquisition cost

Book value

Difference

Equity securities ............................................................................................................................

¥12,706¥64,868¥52,162

Bonds .............................................................................................................................................

5

6

1

Subtotal .........................................................................................................................................

12,71164,874

52,163

Securities with fair value exceeding book value:

Other securities:
1,376

1,107

(269)

¥14,087¥65,981¥51,894

Thousands of U.S. dollars

Acquisition cost

Book value

Difference$ 89,100$315,917$226,817

39
Annual Report 2003

For 2003:

Tokyo Gas Co., Ltd.

Equity securities ............................................................................................................................
Total ....................................................................................................................................................

Securities with fair value exceeding book value:
Equity securities ............................................................................................................................
Bonds .............................................................................................................................................

42

50

8

Subtotal .........................................................................................................................................

89,142315,967

226,825

Equity securities ............................................................................................................................

12,692

9,592(3,100)Total ....................................................................................................................................................

$101,834$325,559$223,725

Other securities:

Available-for-sale securities with no available fair values, which were stated at moving-average costs, amounted to ¥11,840 million ($98,667
thousand) and ¥8,503 million at March 31, 2003 and 2002, respectively.

5. Inventories
Inventories at March 31, 2003 and 2002 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Finished products ...............................................................................................................................

¥ 2,391¥ 2,584$ 19,924

Raw materials .....................................................................................................................................

9,762

18,51381,354

Supplies ...............................................................................................................................................

7,745

7,489

64,543Work in process ..................................................................................................................................

1,227

173

10,224¥21,125¥28,759$176,045

6. Bank loans and long-term debt
At March 31, 2003 and 2002, bank loans consisted of short-term notes, bearing interest at an average annual rate of 0.33% and 0.36%,
respectively.
Long-term debt at March 31, 2003 and 2002 comprised the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

Domestic unsecured notes due 2014 at a rate of 5.1%...................................................................

¥ 10,000¥ 20,000

Domestic unsecured notes due 2015 at a rate of 4.1%...................................................................

23,30027,9002003$

83,333
194,167

Domestic unsecured notes due 2016 at a rate of 4.0%...................................................................

29,00030,000241,667

Domestic unsecured notes due 2018 at a rate of 2.625%...............................................................

40,00040,000333,333

Domestic unsecured notes due 2009 at a rate of 1.68%.................................................................

30,00030,000250,000

Domestic unsecured notes due 2009 at a rate of 1.73%.................................................................

30,00030,000250,000

Domestic unsecured notes due 2010 at a rate of 2.01%.................................................................

20,00020,000166,667

Domestic unsecured notes due 2011 at a rate of 1.39%.................................................................

30,00030,000250,000

Domestic unsecured notes due 2012 at a rate of 1.35%.................................................................

20,000–166,667

Domestic unsecured notes due 2004 at a rate of 1.03%.................................................................

3,000

3,000

25,000

Domestic unsecured notes due 2009 at a rate of 1.18%.................................................................

4,000

4,000

33,333

Domestic unsecured convertible bonds:
51,43951,439428,658

82,87784,315

690,642

5th issue due 2009 at a rate of 1.2%...........................................................................................

49,96949,971

416,408

6th issue due 2007 at a rate of 1.1%...........................................................................................

49,96849,968416,400

Swiss franc notes due 2002 at a rate of 4.5% ..................................................................................

–

14,810–40

DM bearer bonds due 2005 at a rate of 7.0% .................................................................................

18,333

18,333

152,775

Annual Report 2003

Tokyo Gas Co., Ltd.

1st issue due 2003 at a rate of 1.5% ...........................................................................................
3rd issue due 2005 at a rate of 1.5%...........................................................................................

Domestic secured notes due 2003 at a rate of 2.0% .......................................................................

–

800

–

6,373

6,884

53,108Loans from banks, insurance companies and government agencies due
through 2028 at rates of 0.35% to 6.40%:
Secured ..........................................................................................................................................
Unsecured......................................................................................................................................
Less – Amounts due within one year ................................................................................................

191,142

209,765

1,592,851

689,401

721,185

5,745,009

91,07940,298758,992¥598,322¥680,887$4,986,017

The indentures covering the first, third, fifth and sixth domestic

As is customary in Japan, a lending bank has the right to offset

convertible bonds provide, among other conditions, for (1) conversion

cash deposited with it against any debt or obligation that becomes

into shares of common stock at the current conversion prices per sharedue and, in the case of default or certain other specified events,of ¥1,267.90 ($10.57), ¥1,105.70 ($9.21), ¥339.00 ($2.83) and ¥339.00

against all debt payable to the bank. To date no such offset request($2.83), respectively (subject to adjustment in certain circumstances), (2)has been made to the Company and its consolidated subsidiaries.

conversion periods through September 2003, March 2005, March 2009

Certain number of the loan agreements provide, among otherand March 2007, respectively, and (3) redemption at the option of thethings, that, upon request, the Company and domestic subsidiaries

Company, commencing in October 1996 for the 1st issue and April 1998

submit to the lenders for approval of their proposed appropriation

for the 3rd issue, at prices ranging from 106% to 100% of the principalof income (including dividends) before such appropriation isamount.

submitted to the stockholders. Neither the Company nor any of its

At March 31, 2003, investment securities and property, plant andequipment at book value amounting to ¥15,042 million ($125,350
thousand) were pledged as collateral for secured loans and notes
issued by consolidated subsidiaries.

consolidated subsidiaries has ever received any such request.

The annual maturities of long-term debt at March 31, 2003 were as follows:
Millions of yen

Thousands of
U.S. dollars

2004 ....................................................................................................................................................................

¥ 91,079$ 758,992

2005 ....................................................................................................................................................................

106,758

889,650

2006 ....................................................................................................................................................................

45,730381,083

2007 ....................................................................................................................................................................

69,034575,283

2008 ....................................................................................................................................................................

21,747

181,225

2009 and thereafter ..........................................................................................................................................

355,053

2,958,776¥689,401$5,745,009

Year ending March 31

7. Derivative transactions
The Company and its consolidated subsidiaries use interest rate swap and foreign exchange forward contracts only for the purpose of mitigating
the risk of fluctuations in interest rates and foreign exchange rates.
Contract amounts, market values and recognized gains on the interest rate swap contracts, except those accounted for using hedge
accounting, at March 31, 2003 and 2002 were as follows:
Millions of yen
At March 31, 2003
Contract amounts Beyond one year

Recognized gains

Purchased cap option...............................................................................................

¥3,000¥0¥0¥0Millions of yen

At March 31, 2002
Contract amounts Beyond one year

Recognized gains

Purchased cap option...............................................................................................

¥3,000¥0¥0¥3,000Thousands of U.S. dollars
At March 31, 2003
Contract amounts Beyond one year

Market value

Recognized gains$0$0

Currency option contracts:
Purchased cap option...............................................................................................

$25,000$0

8. Employees’ severance and retirement benefits
Allowance for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2003 and2002 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Projected benefit obligation ............................................................................................................. ¥ 331,622¥ 306,912$ 2,763,517

Unrecognized prior service cost ........................................................................................................

178

193

1,483

Unrecognized actuarial differences ..................................................................................................

(64,194)(27,503)(534,950)

Less fair value of pension assets........................................................................................................

(146,710)(154,048)(1,222,583)

Employees’ severance and retirement benefits ............................................................................... ¥ 120,896¥ 125,554$ 1,007,467

41
Annual Report 2003

Market value

Currency option contracts:

Tokyo Gas Co., Ltd.

Market value

Currency option contracts:

Included in the consolidated statements of income for the years ended March 31, 2003 and 2002 were severance and retirement benefit
expenses comprised of the following:Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

Service costs – benefits earned during the year...............................................................................

¥ 10,132¥ 9,292$ 84,433

Interest cost on projected benefit obligation ..................................................................................

9,093

9,049

75,775

Expected return on plan assets .........................................................................................................

(4,662)(4,612)(38,850)

Amortization of prior service costs ...................................................................................................

(13)

–

(108)

Amortization of actuarial differences ..............................................................................................

2,825

1,628

23,542

Severance and retirement benefit expenses ....................................................................................

¥17,375¥15,357$144,792

The discount rate and the rate of expected return on plan assets used by the Company and its consolidated subsidiaries are approximately
2.5% and 3%, respectively, at March 31, 2003, and approximately 3.0% and 3%, respectively, at March 31, 2002.

9. Income taxes
The Company is subject to a number of taxes based on income, which, in the aggregate, indicate statutory rate in Japan of approximately 36.2%
for the years ended March 31, 2003 and 2002, respectively.
The differences between the statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended
Tokyo Gas Co., Ltd.

42

March 31, 2003 and 2002 were not significant.
Effective for years commencing on April 1, 2004 or later, according to the revised local tax law, income tax rates for enterprise taxes will be
reduced as a result of introducing the assessment by estimation on the basis of the size of business. Due to the change of income tax rates, atMarch 31, 2003, certain consolidated subsidiaries changed the tax rates for calculation of deferred taxes assets and liabilities. The effect on net
income of the change of effective tax rates is not significant.
Significant components of deferred tax assets and liabilities as of March 31, 2003 and 2002 were as follows:

Annual Report 2003

Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

Liabilities for retirement benefits................................................................................................

¥36,530¥35,151$304,417

Other – net ....................................................................................................................................

33,781

28,512

281,508

Subtotal .........................................................................................................................................

70,311

63,663585,925

Net unrealized holding gains on securities.................................................................................

9,830

19,04081,917

Reserve for tax-purpose cost reduction of certain pipelines .....................................................

1,883

2,309

15,692Other – net ....................................................................................................................................

3,617

3,852

30,142

Subtotal .........................................................................................................................................

15,33025,201

127,751

Net-total ........................................................................................................................................

¥54,981¥38,462$458,174

Deferred tax assets:

Deferred tax liabilities:

10. Stockholders’ equity
At the current conversion prices, 410,981 thousand shares of common stock were issuable at March 31, 2003 upon full conversion of theoutstanding convertible bonds (see Note 6).
Under the Japanese Commercial Code, excess of total of additional paid-in capital and legal reserve over 25% of common stock is available fordividends by resolution of the general meeting of shareholders. Additional paid-in capital is included in capital surplus and legal earnings reserve
is included in retained earnings in the accompanying consolidated balance sheets.
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial statements of theCompany in accordance with the Japanese Commercial Code.
Effective April 1, 2002, the Company and its consolidated subsidiaries adopted the new accounting standard for treasury stock and reversal ofstatutory reserves (Accounting Standards Board Statement No. 1, “Accounting Standard for Treasury Stock and Reduction of Statutory Reserves”,
issued by the Accounting Standards Board of Japan on February 21, 2002). The effect on net income of adopting the new standard is not significant.

11. Segment information
The Company’s primary business activities include (1) gas sales, (2) gas appliance sales, (3) related construction, (4) real estate rental and (5) otherbusiness.
A summary of net sales, costs and expenses, operating income, identifiable assets, depreciation and capital expenditures by business segments
is as follows:
Millions of yen
Gas appliance
sales

Relatedconstruction

Real estate
rentalOther

For 2003:
Sales:
Outside customers................................. ¥ 789,688
Inside group...........................................
2,766
792,454
Costs and expenses .....................................
632,230
Operating income....................................... ¥ 160,224¥141,225
1,411
142,636
134,794¥ 7,842¥67,045
3,523
70,56866,393¥ 4,175¥ 14,944
21,402
36,34628,723¥ 7,623¥114,732
43,595
158,327
148,701¥ 9,626¥–(72,697)(72,697)(6,501)¥ (66,196)¥1,127,634–
1,127,634
1,004,340¥ 123,294

Identifiable assets ....................................... ¥1,067,439
Depreciation................................................
111,343
Capital expenditures ..................................
88,573¥ 52,532
502
538¥23,058141
276¥215,197
14,5901,408¥185,981
12,216
21,287¥131,857(1,492)(1,894)¥1,676,064
137,300
110,188

For 2002:
Sales:
Outside customers................................. ¥ 750,439
Inside group...........................................
–
750,439
Costs and expenses .....................................
601,229
Operating income....................................... ¥ 149,210¥148,271
932
149,203
141,960¥ 7,243¥67,633
3,705
71,33867,688¥ 3,650¥ 15,685
21,86637,551
31,460¥ 6,091¥115,561
40,450156,011145,212¥ 10,799¥–(66,953)(66,953)(568)¥ (66,385)¥1,097,589–
1,097,589
986,981¥ 110,608

Identifiable assets ....................................... ¥1,105,280
Depreciation................................................
113,158
Capital expenditures ..................................
91,501¥ 56,547
608
314¥22,932
127
204¥226,981
16,0002,190¥184,473
13,214
11,940¥ 106,500(1,461)(1,858)¥1,702,713
141,646
104,291

Elimination or
corporate

Consolidated

Gas sales

Elimination or
corporate

Consolidated

Tokyo Gas Co., Ltd.

43

Gas appliance
sales

Relatedconstruction

Real estate
rentalOther

For 2003:
Sales:
Outside customers................................. $6,580,733
Inside group...........................................
23,0506,603,783
Costs and expenses ..................................... 5,268,583
Operating income....................................... $1,335,200$1,176,875
11,758
1,188,633
1,123,283$ 65,350$558,708
29,358588,066
553,275$ 34,791$ 124,533
178,350
302,883
239,358$ 63,525$ 956,101
363,292
1,319,393
1,239,173$ 80,220$–(605,808)(605,808)(54,175)$ (551,633)$ 9,396,950–
9,396,950
8,369,497$ 1,027,453

Identifiable assets ....................................... $8,895,325
Depreciation................................................
927,858
Capital expenditures ..................................
738,108$ 437,767
4,183
4,483

$192,150
1,175
2,300

$1,793,309
121,583
11,733$1,549,845
101,799
177,392$1,098,808(12,433)(15,783)$13,967,204
1,144,165
918,233

Gas sales

Assets in the corporate column mainly comprise current and noncurrent securities and deferred tax assets of the Company.
Geographic segment information is not shown due to the Company having no overseas consolidated subsidiaries. Information for overseas
sales is not disclosed due to overseas sales being immaterial compared to consolidated net sales.

Annual Report 2003

Thousands of U.S. dollars

12. Information for certain leases
Finance leases which do not transfer ownership to lessees are accounted for in the same manner as operating leases.
Information as lessee:
Lease payments in the years ended March 31, 2003 and 2002, and future minimum lease payments at March 31, 2003 and 2002 are as follows:
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

¥ 972

¥ 816

$ 8,100

Current...........................................................................................................................................

¥ 808

¥ 752

$ 6,733

Non-current ...................................................................................................................................

1,685

1,674

14,042¥2,493¥2,426$20,775

Lease payments ..................................................................................................................................
Future minimum lease payments inclusive of interest:

The Company uses certain production facilities, distribution facilities, service and maintenance facilities and other assets under leasearrangements. An analysis of equivalent amounts of leased assets under non-capitalized finance leases is as follows:
Millions of yen

Acquisition
cost
Tokyo Gas Co., Ltd.

44

Accumulated
depreciation

Net bookvalue

For 2003:
Production facilities ......................................................................................................................

¥

Distribution facilities.....................................................................................................................

98

¥

841

25

¥

397

73
444

Annual Report 2003

Service and maintenance facilities...............................................................................................

189

83

106

Other..............................................................................................................................................

3,655

1,785

1,870

¥4,783¥2,290¥2,493¥¥¥

For 2002:
Production facilities ......................................................................................................................
Distribution facilities.....................................................................................................................

72
698

50
321

22
377

Service and maintenance facilities...............................................................................................

212

127

85

Other..............................................................................................................................................

3,592

1,650

1,942

¥4,574¥2,148¥2,426

Thousands of U.S. dollars

Acquisition
cost

Accumulated
depreciation

Net bookvalue

For 2003:
Production facilities ......................................................................................................................
Distribution facilities.....................................................................................................................

$

817

$

7,008

208
3,308

$

609
3,700

Service and maintenance facilities...............................................................................................

1,575

692

883

Other..............................................................................................................................................

30,45814,875

15,583$39,858$19,083$20,775

Information as lessor:
Lease income in the years ended March 31, 2003 and 2002, and future lease payments to be received at March 31, 2003 and 2002 are as follows:
Millions of yen

Thousands of
U.S. dollars

2003

2002

2003

¥ 4,477¥ 4,400$ 37,308

Current...........................................................................................................................................

¥ 4,343¥ 4,035$ 36,192

Non-current ...................................................................................................................................

13,00812,306

108,400¥17,351¥16,341$144,592

Lease income ......................................................................................................................................
Future lease payments to be received:

Some of the consolidated subsidiaries lease other assets under direct financing leases as lessors. An analysis of leased assets under direct
financing lease is as follows:
Millions of yen

Acquisition
cost

Accumulated
depreciation

Net book
value¥24,007¥16,359¥7,648¥23,654¥13,993¥9,661For 2003:
Other assets ...................................................................................................................................
For 2002:
Other assets ...................................................................................................................................

Thousands of U.S. dollars

Acquisition
cost

Accumulated
depreciation

Net book
value$200,058$136,325$63,733

For 2003:
Other assets ...................................................................................................................................

Period of acquisitions: May 1, 2003 to May 30, 2003

The Company and its consolidated subsidiaries were contingently

Method for acquisitions: Market buying

liable (1) to debt guarantee in the amount of ¥2,000 million ($16,667

According to the resolution of the Board of Directors Meeting, thethousand) at March 31, 2003 for bank loans that affiliated companies

Company acquired 26,578,000 shares at the total price of ¥10,000

other than consolidated subsidiaries born (2) to banks in the amountmillion ($83,333 thousand).

of ¥560 million ($4,667 thousand) at March 31, 2003 with respect to(b) On May 26, 2003, the Board of Directors resolved the acquisition

guarantors for the in-substance defeasance of domestic unsecuredof treasury stock based upon the approval of the General Meeting ofnotes in the amount of ¥50,000 million ($416,667 thousand) issued by

Shareholders.

the Company, which were assigned to certain banks under the debt

Number of shares: With a limit of 50,000,000 sharesassumption agreements made in the years ended March 31, 2003,

Total value of acquisitions: With a limit of ¥20,000 million ($166,667

2002 and 1999.

thousand)At March 31, 2003, the Company had several long-term purchase
contracts for the supply of LNG. The purchase price determinable(2) Issuance of domestic unsecured notes

under such contracts is contingent upon fluctuations in the market

On June 10, 2003, the Company issued domestic unsecured notes inprice of crude oil.

the amount of ¥20,000 million ($166,667 thousand) due 2023 at a
rate of 1.01%.

14. Subsequent events(1) Acquisitions for treasury stock(3) Appropriation of retained earnings(a) On April 23, 2003, the Board of Directors resolved the acquisition

At the annual meeting held on June 27, 2003, the Company’sof treasury stock based on the approval of the General Meeting ofshareholders approved (i) payment of year-end cash dividends of ¥3.0

Shareholders.

($0.03) per share aggregating ¥8,334 million ($69,449 thousand) to

Number of shares: With a limit of 30,267,000 shares

the shareholders of record as of March 31, 2003, and (ii) payment of

Total value of acquisitions: With a limit of ¥10,000 million ($83,333

bonuses to directors totaling ¥61 million ($508 thousand).

thousand)45
Annual Report 2003

joint and several liabilities upon default of debtors and (3) as

Tokyo Gas Co., Ltd.

13. Commitment and contingent liabilities

Report of Independent Public Accountants
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries

To the Stockholders and the Board of Directors of TOKYO GAS CO., LTD.
We have audited the accompanying consolidated balance sheets of TOKYO GAS CO., LTD. (aJapanese corporation) and subsidiaries as of March 31, 2003 and 2002, and the related consolidated
statements of income, stockholders’ equity and cash flows for the years then ended, expressed inJapanese yen. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits 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 financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
Tokyo Gas Co., Ltd.

46

audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material

Annual Report 2003

respects, the consolidated financial position of TOKYO GAS CO., LTD. and subsidiaries as of March
31, 2003 and 2002, and the consolidated results of their operations and their cash flows for theyears then ended, in conformity with accounting principles generally accepted in Japan as describedin Note 1 to the consolidated financial statements.
Without qualifying our opinion, we draw attention to Note 14 (1) to the consolidated financial
statements. Subsequent to March 31, 2003, the Company decided the acquisition of treasury stock.
The consolidated financial statements as of and for the year ended March 31, 2003 have beentranslated into United States dollars solely for the convenience of the reader. We have recomputed
the translation and, in our opinion, the consolidated financial statements expressed in Japanese yen
have been translated into United States dollars on the basis set forth in Note 1 to the consolidated
financial statements.

Tokyo, Japan
June 27, 2003