Toyo Kanetsu K.K.

Annual Report 2012
For the year ended March 31, 2012

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

pipe

pilingbusiness,makingnewefforts

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

Contents
Consolidated Financial Highlights ····················································· 2
To Our Shareholders ······································································ 3
Board of Directors, Auditors and Corporate Officers································ 4
Lines of Business ·········································································· 4
TKK Group Companies ·································································· 5
Analysis of Operating Environment and Results ··································· 6
Business Risks ············································································· 7
Financial Section
Consolidated Balance Sheets ························································ 9Consolidated Statements of Income and Comprehensive Income ············· 11
Consolidated Statements of Changes in Net Assets ······························ 12
Consolidated Statements of Cash Flows ··········································· 15
Notes to the Consolidated Financial Statements ································· 16
Report of Independent Auditors····················································· 35
Corporate Data············································································· 36
Directory···················································································· 36

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31
Thousands of
U.S. dollars

Millions of yen

2012

2011

2010

2009

2008

2012

¥ 40,733
23,625
11,624
3,338
2,146
1,474
714
1,083
482

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

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

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

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

$495,960
287,655
141,53140,642
26,132
17,942
8,695
13,191
5,873

Shareholders’ Equity
Accumulated Other Comprehensive Income
Minority Interests
Total Liabilities and Net Assets¥32,750
12,5795,920
244
51,493
18,5933,275
28,724794
107
51,493¥33,792
12,5466,437
281
53,056
19,582
3,735
29,205426
108
53,056¥37,748
12,4907,792
338
58,36820,842
7,250
29,549618
109
58,368¥33,705
13,046
7,920
274
54,94521,555
5,375
27,824102
89
54,945¥30,245
16,324
12,269221
59,05921,272
8,988
26,5642,235
59,059$398,761
153,157
72,086
2,970
626,974
226,389
39,881
349,7259,671
1,308
626,974

Order Backlog

50,94050,80757,37966,071

57,412620,239

Per Share:
Net Income
Cash Dividends
Shareholders’ Equity

2012
¥5.93
4.00
244.77

2011
¥1.31
4.00
246.042010¥28.754.00
250.392009¥ 22.99
4.00
222.092008¥ 27.904.00
216.05

2012
13,626694

2011
14,109678

2010
14,027631

2009
14,400629

2008
15,747597

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

Yen

Number of Shareholders
Number of Employees

U.S. dollars

The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of \82.13=$1.00, solely for readers’ convenience.

2

Toyo Kanetsu K.K. Annual Report 2012

2012
$0.07
0.05
2.98

To Our Shareholders
In fiscal year 2012, ended March 31, 2012, the Japanese

Status of achievement of TKK Group’s medium-term

economy faced very severe conditions and its future isbusiness plan (FY2010-2012)

uncertain in consequence of Great East Japan Earthquake,

We addressed the priority issues based on our basic policy ofhistoric yen appreciation and worsening corporate profits“securing stable profit” (Plant & Machinery Business) andresulting from overseas economic slowdown.

“revitalizing operations & establishing an operating base”

Our consolidated business performance showed a decrease(Material Handling Systems Business). As a result,in both earnings and profits, except net income. In Plant &compared with average target figures during the plan period,

Machinery Business, while we assured a stable work load

operating income reached ¥2,640 million, exceeding theagainst the backdrop of active energy demand, the number

goal of ¥2,090 million, while net sales recorded ¥46,600

of profitable overseas projects has decreased. In Material

million, falling short of the goal of ¥56,100 million.

Handling Systems Business, in addition to a downturn inorders received in the previous year due to intensification of

Status of the main businesses is as follows.

competition and rapid shrinkage of our main markets, someprojects proved to have unprofitable aspects. The dividend◆Plant & Machinery Businessfor the year under review has been set at ¥4 per share from

We worked on securing orders of new domestic/overseas

the perspective of continuous stable distribution.

projects, expanding an overseas fabrication plant, improving
welding technology & construction method, ensuring site

Based on the status of achievement of TKK Group’s

manpower and streamlining project organization.

medium-term business plan shown below, we are making an

Consequently, new domestic and overseas projects as well as

overall review of business operation system, including

domestic maintenance projects progressed steadily and

expedited responses to unsolved issues in the plan, aimed at

profit exceeded the target throughout the plan period.

revitalizing the Material Handling Systems Business. The
next medium-term business plan will be set based on its◆Material Handling Systems Businessprogress and fruit.

While there were several achievements that were expected to
become the core part of our business in the future, such as

On April 1, 2012, we made an equity-method affiliate, Toyodelivering of the new product “Multishuttle system” to new

Koken K.K. a wholly owned subsidiary of TKK through aclients, the planned profit hasn’t been achieved because

stock exchange with the aim to enhance the comprehensive

some projects proved to have unprofitable aspects instrength and advance our corporate value.

addition to ordering downturn due to worsening market
environment, and performance after 2nd year (fiscal year2011) stayed stagnant. It led to the result that every areasuch as sales, engineering and construction left subjects to
be dealt with.

August 2012
Takeshi Mizukami
President and Representative Director

Toyo Kanetsu K.K. Annual Report 20123

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

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

Kazuto Abe
Keiichi Miyakawa
Toshiaki Hiwatari
Tsuneo Nagai

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

Tetsuya Watanabe
Shiro Ito
Fumitomo Miyashita
Yukio Kurosaka
Masayuki Takeda
Yasuhiro YamadaLines of Business
Plant & Machinery BusinessTotal engineering and construction forstorage tanks such as low-temperature tanks,
cryogenic tanks, high-pressure sphericaltanks, floating roof tanks, cone roof tanks
and dome roof tanks, including all related
ancillary works such as civil works, piping
and instrumentation.

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

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

4

Toyo Kanetsu K.K. Annual Report 2012

TKK Group Companies
TOYO KANETSU K.K.
(Material Handling Systems Business)(Building Construction Business)(Plant & Machinery Business)

Toyo Miyama Co., Ltd.

P.T. Toyo Kanetsu Indonesia

Toyo Kanetsu Solutions K.K.

AL GHALLILAH ENGINEERING& CONSTRUCTION L.L.C.

K-Techno Inc.

(Other Business)
TKL Co., Ltd.

Toyo Kanetsu (Malaysia) SDN. BHD.

Toyo Service System K.K.

TOYO KANETSU
SINGAPORE PTE. LTD.

Domestic Subsidiaries

TKK-USA, Inc.

Overseas Subsidiaries

Toyo Koken K.K.

Affiliated Companies

Major Subsidiaries and Affiliated Companies(Domestic)
Toyo Kanetsu Solutions K.K.
Establishment
October 1, 2002
Capital¥400 million
Business
Planning,
design,manufacturing,
construction and sales for material handlingsystems
K-Techno Inc.
Establishment
CapitalBusiness

TKL Co., Ltd.
Establishment
CapitalBusiness

April 17, 1992
¥60 million
Distribution business consulting; servicing,
maintenance and tuning of distribution
equipment; parts sales

September 13, 1985
¥10 million
Leasing operations
equipment operations

andprovisional

Toyo Service System K.K.
Establishment
September 19, 1986
Capital¥60 million
Business
Building management, real estate andOA-related operations
Toyo Koken K.K.
Establishment
February 11, 1957
Capital¥897.49 million
Business
Design, manufacturing and construction of
winches and hoists, lift ladders, conveyors,balancers, industrial robots and othermachinery

Toyo Miyama Co., Ltd.
Establishment
August 8, 1988
Capital¥100 million
Business
Design, industrial manufacturing andon-site construction of house components,
steel construction housing, stores, offices
and other buildings(Overseas)
P.T. Toyo Kanetsu Indonesia
Establishment
September 9, 1974
CapitalUS$2,000,000
Business
Manufacturing and sales of tanks and steel
framing
Toyo Kanetsu (Malaysia) SDN. BHD.
Establishment
April 13, 1992
CapitalRM2,000,000
Business
Manufacturing and sales of storage tanks;
manufacturing and sales of material handlingsystem equipment and devices
AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C.

Establishment
CapitalBusiness

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

TOYO KANETSU SINGAPORE PTE. LTD.

Establishment
CapitalBusiness

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

Toyo Kanetsu K.K. Annual Report 20125

Analysis of Operating Environment and Results
In the fiscal year ended March 31, 2012, the Japanese
economy was in very severe condition and its outlook was
clouded. This was due to Great East Japan Earthquake,historic yen appreciation and worsening corporate profits
resulting from overseas economic slowdown.
In the Plant & Machinery Business, the expansion ofenergy demand thanks to the high growth rate in China,
India and other emerging countries stimulated numerous
plans for electricity-generating plants, gas supply facilities,
oil refineries and other energy-related projects. In particular,
the increased gas demand which arose from surging crude
oil prices and the use of gas as a way of reducing carbon
dioxide emissions boosted planning activity in the area ofstorage facilities for LNG receipt and distribution.
In the Material Handling Systems Business, a reduction in
the volume of materials handled in the domestic market andan increasing shift toward overseas production in
manufacturing industry were among the factors driving theclosure and integration of logistics centers and the movetoward outsourcing of operations. This meant depressed
levels of activity in the construction of transportation anddistribution centers and warehousing facilities, with theresult that demand for material handling systems is on adecreasing trend.
Against this business background, consolidated net sales
for the fiscal year amounted to ¥40,733 million(US$495,960 thousand), a decline of 16.4% from theprevious fiscal year. Operating income and income before
extraordinary items decreased by 43.1% to ¥1,474 million(US$17,942 thousand) and 37.9% to ¥1,432 million(US$17,440 thousand) respectively. Net income increased
by 351.6% to ¥714 million (US$8,695 thousand), which isthanks to eliminated extraordinary losses in the previous
fiscal year. Total orders received decreased by 3.0% to¥38,720 million (US$294,862 thousand).
Plant & Machinery BusinessIn overseas markets, the booming energy demand on theback of the high rate of economic growth in China, India &other Asian countries and worldwide population growth led
to an increase in the trading of LNG which is effective in
reducing carbon dioxide emissions. One result of this was tostimulate plans for LNG plants, including storage facilities,
in both exporter and importer nations. On the strength of ourrich track record and our international competitiveness, we
won contracts for a total of four LNG tanks and LPG tanks
in the domestic and Oceania regions. In the maintenancemarket, we secured a steady supply of contracts, among
them orders for modification works to floating-roof tanks
following a partial revision to the Fire Service Act.
Under this business environment, net sales for the segment
totaled ¥23,625 million (US$287,655 thousand), a decline of
11.5% from the previous fiscal year, and operating income
decreased by 22.3% to ¥1,956 million (US$23,817

6

Toyo Kanetsu K.K. Annual Report 2012

thousand) and orders received decreased by 2.5% to ¥24,217
million (US$294,862 thousand) due to a decrease inprofitable overseas projects.
Material Handling Systems BusinessNet sales of the fiscal year remained stagnant due to a low
level of orders received in the previous fiscal year affectedby rapidly shrinking airport and consumer cooperative
sectors that are our main clients, as well as fiercer
competition in distribution sector. Also, some project proved
to be unprofitable and there was an increasing number ofless profitable projects. These factors led to the posting of an
operating loss for the segment. At the same time, there was a
decline in the number of new large orders received from ourmain clients, so that the main focus of business was on the
upgrading of existing facilities. Against this background, we
progressed with the development of new markets such as
manufacturing, mail order and distribution industry,including winning orders for the Multishuttle automatedcase storage system released in 2009. As for the maintenancesector, we have steadily improved the performance.
Consequently, net sales declined by 33.9% from theprevious year to ¥11,624 million (US$141,531 thousand)and the segment posted an operating loss of ¥729 million(US$8,872 thousand), contrasting with operating loss of¥163 million in the previous year. Orders received totaled¥12,202 million (US$148,789 thousand), an increase of
6.8% from the previous fiscal year.
Building Construction BusinessWe steadily shifted from the leased apartment sector which
was our main client to general construction sector such as
welfare facilities and distribution centers. However, theirprofitability remained challenging because construction costrose due to the shortage of materials and manpower after
Great East Japan Earthquake.
Against this background, net sales for the segment
increased by 53.1% from the previous fiscal year to ¥3,338
million (US$40,642 thousand). Operating income and orders
received dropped by 60.3% to ¥14 million (US$174
thousand) and 37.1% to ¥2,300 million (US$280 thousand)respectively.
Other Businesses
Net sales in sectors other than the above totaled ¥2,146
million (US$26,132 thousand), a decline of 4.2% from theprevious fiscal year, while operating income increased by
2.1% to ¥491 million (US$5,983 thousand).

Business Risks
The following risks may affect the business results, stock
price and financial position of the TKK Group.
Potential risks associated with international activities
and overseas advance
The TKK Group conducts some operations in overseas
markets, primarily those of the Plant & Machinery Business.
Further, its subsidiary manufactures tank materials inIndonesia. These overseas operations carry inherent risks as
stated below, and the TKK Group’s business results andfinancial position may be adversely affected by such risks.
1) Unexpected changes in laws and regulations
2) Political and economic instability
3) Difficulties in securing human resources
4) Tax system revisions that could be unfavorable to the
TKK Group5) Social confusion arising from acts of terror, war or any
other factors

enter into price competition with the TKK Group. Although
the TKK Group strives to reduce all kinds of costs andreinforce its price competitiveness, such unreasonable
downward pressure on the TKK Group’s earnings may
adversely affect the TKK Group’s business results andfinancial position.
Disasters
The TKK Group takes necessary measures such as daily
check, drill and establishment of contact system to continue
our business activities preparing for fire, earthquakes orother large-scale natural disasters.
However, in cases where such disasters cause serious
physical/human damage and large amount of restoration cost,
TKK Group’s business results and financial position may be
adversely affected.

Exchange rate fluctuations
The TKK Group’s business activities include manufacturing
products, selling materials and implementing construction
operations
overseas.
Foreign-currency-denominatedaccounting items such as sales, expenses and assets aretranslated into Japanese yen for the purpose of preparing
consolidated financial statements. The exchange rates usedin currency conversion may affect the yen-denominatedvalue. As most of our payments and receipts aredenominated in U.S. dollars or Euros, a stronger yen will
adversely affect the TKK Group’s business, while a weaker
yen will favorably affect the TKK Group’s business.
The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly
entering into forward exchange contracts or option contracts,
and by implementing structural solutions such as using
overseas manufacturing bases and internationally procuring
raw materials. However, an unexpected change in exchange
rates may adversely affect the TKK Group’s business results
and financial position.
Project execution
The business results of the TKK Group may be affected bysituations where, for customer reasons, projects are
suspended or postponed or the project content is otherwise
altered.
Further, as our projects take the form of inclusive contracts,
deterioration in project profitability may impact on businessresults in the event of a sudden change in the economic
situation leading to unforeseen rises in equipment andmaterial prices, transportation costs, construction costs orother expenses, or in the event of natural disaster, outbreakof disease, serious accident or other eventualities.
Intense competition for winning orders
All of the major businesses of the TKK Group are being
operated under the make-to-order type system and the TKKGroup is facing severe competition to win orders.
Depending on the circumstances, we recognize thepossibility that a competitor may disregard profitability andToyo Kanetsu K.K. Annual Report 20127

Financial Section
For the years ended March 31, 2012 and 20118

Toyo Kanetsu K.K. Annual Report 2012

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance Sheets
At March 31, 2012 and 2011

2012

2011

Thousands of
U.S. dollars(Note 3)2012

Current Assets:
Cash on hand and at bankNotes and accounts receivable
Marketable securities
Investments in leases
Inventories (Note 4)
Deferred tax assets (Note 9)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥9,985
8,627
3,999
1,671
7,425
453
738
(148)
32,750¥7,772
11,631
3,999
2,463
7,379
147
567
(166)
33,792$121,577
105,039
48,695
20,34690,401
5,516
8,992(1,805)
398,761

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

10,074
5,558
9,140
63
(12,256)
12,57910,077
5,585
8,914
53
(12,083)
12,546

122,658
67,674111,283769(149,227)
153,157

Investments and Advances:
Investments in securities (Notes 5)
Long-term loans receivable
Deferred tax assets (Note 9)
Other investments
Less: Allowance for doubtful accounts
Total investments and advances

4,960
106
258
853
(257)
5,920

5,200
223
396
942
(324)
6,437

60,386
1,286
3,141
10,399(3,126)72,086244
244¥51,493281
281¥53,056

2,970
2,970
$626,974

ASSETS
Millions of yen

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

Toyo Kanetsu K.K. Annual Report 20129

LIABILITIES and NET ASSETS
Millions of yen

Thousands of
U.S. dollars(Note 3)
2012

2012

2011

Current Liabilities:
Short-term debt and current portion of long-term debt (Note 6)
Notes and accounts payable
Accrued income taxes
Accrued liabilities
Advances from customers
Lease obligations (Note 6)
Deferred tax liabilities (Note 9)
Accrued bonuses
Reserve for losses on work in progress
Reserve for warranty costs for completed works
Other current liabilities
Total current liabilities¥2,983
1,959
765
3,900
8,031
74
2
194
137
250
298
18,593¥4,603
2,225
588
4,214
6,790
160
241
304
228
229
19,582$36,320
23,8549,315
47,482
97,779
898
23
2,361
1,665
3,049
3,643
226,389

Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Deferred tax liabilities on revaluation of land (Notes 7 and 9)
Deferred tax liabilities (Note 9)
Accrued retirement benefits for employees (Note 8)
Asset retirement obligations (Note19)
Other long-term liabilities
Total long-term liabilities

500
131
1,904
38
314
298
90
3,275

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

6,088
1,593
23,185
468
3,822
3,628
1,097
39,881

18,5801,104
12,768(3,728)28,724

18,5801,104
13,271(3,750)29,205226,228
13,443
155,458(45,404)
349,725

317
3
1,062
(588)
794
107
29,625¥51,493

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

3,854
37
12,932(7,152)
9,671
1,308
360,704$626,974

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

10

Toyo Kanetsu K.K. Annual Report 2012

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Income and Comprehensive Income
For the years ended March 31, 2012 and 2011

2012

2011

Thousands of
U.S. dollars(Note 3)
2012

¥40,733
35,745
4,988
3,514
1,474

¥48,718
42,142
6,576
3,986
2,590

$495,960
435,223
60,73742,795
17,942

194
(9)
(56)
(289)
81
37
(42)
1,432

186
(26)
(230)
(286)
15
56
(285)
2,305

2,367
(107)
(680)
(3,523)
986
455
(502)
17,440

(6)
3
(0)
-

3
27
(1,350)
(0)
67
(298)

(76)
43
(4)
-

(0)
(3)
1,429

19
(1,532)
773

(3)
(40)
17,400

1,072
(366)
706
723

699
(85)
614
159

13,051(4,455)
8,596
8,804

Minority interests in net income of consolidated subsidiaries
Net Income

9
¥714

1
¥158

109
$8,695

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

9
723

1
159

109
8,804

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

198
3
270
(119)
8

(231)
0
39
(2)

2,416
41
3,285
(1,445)90

Total Comprehensive Income

360
1,083

(194)
(35)

4,387
13,191

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

1,084
(0)

(33)
(2)

13,193(2)

Millions of yen

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

2012

2011

U.S. dollars(Note 3)
2012

¥5.93

¥1.31

$0.07

Yen

Per Share (Note 22)
Net income
The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 201211

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2010, 2011 and 2012

Millions of yen

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

Minority interests
Balance at March 31, 2011

Treasury
stock

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

-

(12)

-

(12)

-

-

(483)
158
-

(7)

(483)
158
(7)

-

-

-

-

-

-

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

Number of shares ofcommon stock

Additional
Accumulated
paid-in capital earnings (deficit)

Common stock

138,730,741¥18,580¥1,104---

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

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

Minority interests
Balance at March 31, 201112

Toyo Kanetsu K.K. Annual Report 2012

Deferred
gains orlosses onhedges

Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
incomeMinority
interests

Total net assets

¥350

¥(5)

¥792

¥(519)¥618¥109¥30,276

-

-

-

-

-

-

(12)

-

-

-

-

-

-

(483)
158
(7)

(232)

-

-

-

(232)

-

(232)

¥118

(1)
¥(6)

¥792

41
¥(478)

(1)
41
¥426

(1)
¥108

(1)
41
(1)
¥29,739Millions of yen

Balance at April 1, 2011
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Treasury
stock

Total
shareholders’equity¥13,271¥(3,750)¥29,205

-

-

-

-

-

-

(603)
714
-

(1)

(603)
714
(1)

-

-

-

(614)

23

(591)

-

-

-

-

-

-

138,730,741¥18,580¥1,104¥12,768¥(3,728)¥28,724

Number of shares ofcommon stock

Additional
Accumulated
paid-in capital earnings (deficit)

Common stock

138,730,741¥18,580¥1,104---

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

Balance at April 1, 2011
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Deferred
gains orlosses onhedges

Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
incomeMinority
interests

Total net assets

¥118

¥(6)

¥792

¥(478)¥426¥108¥29,739

-

-

-

-

-

-

-

-

-

-

-

-

-

(603)
714
(1)

-

-

-

-

-

-

(591)

199

-

-

-

199

-

199

¥317

9
¥3

270
¥1,062(110)¥(588)

9
270
(110)
¥794

(1)
¥107

9
270
(110)
(1)
¥29,625

Toyo Kanetsu K.K. Annual Report 201213

Thousands of U.S. dollars (Note 3)

Balance at April 1, 2011
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Treasury
stock

Total
shareholders’equity$161,589$(45,671)$355,589

-

-

-

-

-

-

(7,342)
8,695
-

(24)

(7,342)
8,695
(24)

-

-

-

(7,484)291(7,193)

-

-

-

-

-

-

138,730,741$226,228$13,443$155,458$(45,404)$349,725

Minority
interests

Total net assets

Number of shares ofcommon stock

Common stock

138,730,741$226,228$13,443---

Net unrealized
holding (gains)losses on
investment
securities

Balance at April 1, 2011
Effect of changes in accounting
policies applied to companies
accounted for using the equity
methodCash dividends paid
Net income for the year
Purchase of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Deferred
gains orlosses onhedgesThousands of U.S. dollars (Note 3)
Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
income$1,437$(70)$9,647$(5,818)$5,196$1,310$362,095

-

-

-

-

-

-

-

-

-

-

-

-

-

(7,342)
8,695
(24)

-

-

-

-

-

-

(7,193)

2,417

-

-

-

2,417

-

2,417

$3,854

107
$37

3,285
$12,932(1,334)$(7,152)

107
3,285(1,334)$9,671(2)$1,308107
3,285(1,334)(2)$360,704

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

14

Toyo Kanetsu K.K. Annual Report 2012

Additional
Accumulated
paid-in capital earnings (deficit)

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2012 and 2011

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of long-term prepaid expenses
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for employees’ retirement benefits
Increase (decrease) in provision for losses on work in progress
Increase (decrease) in provision for warranty costs for completed works
Interest and dividend income
Interest expense
Gain on allotment of shares
Exchange loss (gain)
Equity in loss (income) of affiliates
Loss (gain) on sales of investment securities
Loss (gain) on write-down of investments in securities
Loss (gain) on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss (gain) on transfer of business
Loss on adjustment for changes of accounting standard for asset retirement
obligations
Decrease (increase) in notes and accounts receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments
Decrease (increase) in accrued income
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances from customers
Other
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Payments into time deposits (over 3-month term)
Proceeds from withdrawal of time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Proceeds from transfer of business
Payments of loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Capital dividend paid
Net cash provided by (used in) financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year (Note 15)

Thousands of
U.S. dollars(Note 3)
2012

2012

2011

¥1,429
643
16
(85)
13
(168)
22
(194)
9
(15)
289
(3)
(0)
5
-

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

$17,400
7,833
190(1,039)153(2,040)271(2,367)
107
(178)
3,523
(43)
(3)
60
-

2,988
630
(46)
(83)
(51)
(512)
1,249
(193)
5,943
198
(9)
(896)
5,236

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

36,375
7,675(563)(1,008)(622)(6,235)
15,210(2,342)
72,357
2,408(113)(10,895)
63,757

(436)
596
(683)
125
(353)
8
(5)
122
72
(554)

(76)
38
(747)
131
(695)
125
23
(80)
200
23
(1,058)(5,309)7,257(8,313)
1,525(4,297)
92
(57)
1,482
870
(6,750)1,095
400(3,221)(2)(600)(2,328)19
2,373
11,580¥13,953(1,723)100(1,269)(8)(480)(3,380)
(187)
1,777
9,803
¥11,580

13,3384,870(39,224)(24)(7,302)(28,342)230
28,895140,997$169,892

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

Toyo Kanetsu K.K. Annual Report 201215

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2012 and 2011
1. Basis of Presenting the Consolidated Financial Statements
The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (hereinafter the “Company”) and its
domestic consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, andare compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Law of Japan. The accounts of overseas-consolidated subsidiaries are based on their financial statements prepared inconformity with generally accepted accounting principles and practices prevailing in the respective countries in which thesubsidiaries are incorporated.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan
have been reclassified in these accounts for the convenience of readers outside Japan.
2. Summary of Significant Accounting Policies(1) Principles of Consolidation and Investments in Affiliated Companies
The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control.
The consolidated financial statements include the accounts of its nine subsidiaries. All significant inter-company transactions
and accounts and unrealized inter-company profits are eliminated on consolidation.
The consolidated company, AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C is in the course of liquidation.
Investments in affiliated companies in which the Company has significant influence are accounted for under the equity method.
These affiliated companies to which the equity method is applied total three at March 31, 2012 and 2011. Consolidated net
income includes the Company’s equity in the current earnings of those companies after elimination of unrealizedinter-company profits.
The affiliated company, Manavis Co., Ltd. has been excluded from the scope of equity method for the year ended March 31,
2012, because Manavis Co., Ltd. does not meet the requirements to be an affiliated company.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five overseas subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2011 for the current year
consolidation and at December 31, 2010 for the previous year consolidation, respectively. Material differences ininter-company transactions and accounts arising from the use of the different fiscal year ends are appropriately adjusted for on
consolidation.
(2) Revaluation of Assets and Liabilities of the Subsidiaries
All assets and liabilities of the subsidiaries are fair valued as of the date of acquisition of control.
(3) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to bewithdrawn on demand and highly liquid short-term investments with an original maturity of three months or less which carry
only a minor risk of fluctuation in value.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount for losses which are expected to occur but cannot be determinedon an item-by-item or group basis. This general allowance is calculated using historical write-off experience from prior periods.
In addition, an amount for expected losses on individual uncollectible receivables is calculated based on management’s
estimate.
(5) Inventories
Inventories are valued at cost as determined by the following methods:
Raw materials……………………….Mainly Gross-average method (a carrying amounts on the balance sheet is written
down if the profitability decreases)
Work in process and supplies ………Specific identification method (a carrying amounts on the balance sheet is written
down if the profitability decreases)

16 Toyo Kanetsu K.K. Annual Report 2012

(Changes in accounting policies)
Change in valuation method of raw materials
Effective from the year ended March 31, 2012, the consolidated subsidiary, Toyo Kanetsu Solutions K.K. has changed thevaluation method of raw materials from Moving-average method (a carrying amounts on the balance sheet is written down if
the profitability decreases) to Gross-average method (a carrying amounts on the balance sheet is written down if the
profitability decreases).
This change is intended to streamline the process of fixing raw material balance with renewing its main system of orderplacement/inventory management in August 2011, considering the minor fluctuation of purchase price.
Also, the change is not applied retrospectively to the previous years because the effect of this change on the financial result is
immaterial.
Since the change is associated with the renewal of the system in August 2011, the said company applied the valuation methodfrom second quarter of the year ended March 31, 2012.
(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as “hedging instruments” (see Note 18.
Derivative and Hedging Activities below).
(b) Securities to be Held to Maturity
These are accounted for using the amortized cost method (straight-line method).
(c) Investments in Securities
Securities held by the Company and its subsidiaries are classified into two categories:“Investments of the Company in equity securities issued by the affiliated companies” are accounted for by the equity method.
Other investments in debt and equity securities are classified as “Other securities.” “Other securities” with market quotations
are stated at fair value with any unrealized holding gains and losses, net of tax, being reported in separate component of net
assets. The cost of sold is determined by the moving-average method.
“Other securities” without market quotations are stated at cost determined by the moving-average method.
(7) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments” are deferred as an
asset or liability and included in net assets in the same period during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest rate swaps
contracts meet certain exceptional criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the related hedged liabilities.
Derivatives designated as hedging instruments by the Company are principally forward exchange contracts and interest swaps.
The related hedged items are expected account receivables or payables in foreign currency, and long-term bank loans.
In accordance with the Company’s regulations on the handling of derivative transactions, the Company does not make active
use of individual transactions for speculative purposes but uses them exclusively to reduce exposure to risk from foreignexchange and interest rate fluctuations.
The Company evaluates the effectiveness of its hedging activities by reference to the accumulated gains or losses on thehedging instruments and the related hedged items beginning from the commencement of the hedges. The Company, however,does not evaluate the effectiveness of interest swaps because of exceptional accounting treatment.
(8) Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of maintenance, repairs and minor renewals is charged to current
operations; major renewals and enhancements are capitalized. Depreciation is mainly computed using the declining-balancemethod, except for buildings acquired after April 1, 1998, to which the straight-line method is applied for the Company and its
domestic subsidiaries. The principal estimated the range of useful lives from 3 to 57 years for buildings and from 6 to 13 years
for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(9) Intangible Assets
Amortization of intangible assets is computed using the straight-line method. Software for internal use is amortized over its
expected useful life (5 years), on a straight-line basis.
(10) Reserve for Losses on Work in Progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
Toyo Kanetsu K.K. Annual Report 201217

Work in progress on construction contracts in which losses are envisaged and the reserve for losses on work in progress are notmutually offset but are both presented.
Of the total amount of work in progress on construction contracts in which losses are envisaged, the amount corresponding to
the reserve for losses on work in progress is ¥20 million ($241 thousand) and ¥30 million for the years ended March 31, 2012
and 2011, respectively.
(11) Reserve for Warranty Costs for Completed Works
A reserve for warranty costs for completed works is provided based on the past experience rates for warranty costs andafter-sales service costs for completed works on an item-by-item or group basis.
(12) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes.
Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in
respect of temporary differences between the tax base of assets and liabilities and those as reported in the consolidated
financial statements.
(13) Accrued Bonuses
Accrued bonuses to employees are provided for at the estimated amounts which the Company and its consolidated subsidiaries
are obligated to pay to employees after the fiscal year-end, based on services provided during the current period.
(14) Accrued Retirement Benefits for Employees
Accrued retirement benefits for employees of the Company and its major consolidated subsidiaries are provided based on theestimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant
consolidated subsidiaries, accrued retirement benefits for employees are calculated using the simplified method. The amount of
actuarial gains (losses) is amortized on a straight-line basis over five years and recognized as deductions from expenses or
included in expenses, respectively, in the next fiscal year. Prior service cost is recognized as deductions from expenses or
included in expenses, respectively, in the year of occurrence.
(15) Significant Accounting Policies for Earnings and Expenses(a) Regarding the accounting policy for the net sales of completed construction contracts and the cost of sales of completed
construction contracts, for work in progress in the years ended March 31, 2012 and 2011, the Company accounted for projects
with an outcome deemed certain on the percentage-of-completion basis (with the estimated stage of completion calculated on
the cost-to-cost basis) and other projects on the completed-contract basis.
(b) Regarding finance lease transactions, sales and cost of sales were recorded when lease receivables from customers are paid.
(16) Accounting for Consumption Tax
The Company and its domestic consolidated subsidiaries account for consumption tax by the tax-exclusion method.
(17) Change in Method of Presentation(Consolidated Statements of Income and Comprehensive Income)
Effective from the year ended March 31, 2012, gain on sales of scraps is separately set down because of its increasing
importance, which was included in Other, Other Income until the year ended March 31, 2011. In order to reflect this change
in method presentation, the financial statement for the year ended March 31, 2011 is reclassified.
As a result of reclassification, other income in consolidated statements of income and comprehensive income of the year ended
March 31, 2011 is divided into gain on sales of scraps ¥15 million and other, net ¥56 million.
(18) Additional Information(Application of Accounting Standard for Accounting Changes and Error Corrections)
Effective from the year ended March 31, 2012, the Company and its consolidated subsidiaries have applied “AccountingStandard for Accounting Changes and Error Corrections” (Statement No.24 issued by the ASBJ on December 4, 2009) and“Guidance on Accounting Standard for Accounting Changes and Error Corrections” (Guidance No.24 issued by the ASBJ on
December 4, 2009).
3. United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥82.13=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2012, has been used in translation. The inclusion of such amounts are
not intended to imply that the Japanese yen has been or could be readily converted, realized or settled in U.S. dollars at thisrate or any other rates.

18 Toyo Kanetsu K.K. Annual Report 2012

4. Inventories
Inventories as at March 31, 2012 and 2011 consisted as follows:
Thousands of
U.S. dollars
2012
$24
6,958
83,419$90,401

Millions of yen
2011
2012
¥1
¥2
585
572
6,793
6,851
¥7,379¥7,425

March 31
Merchandise and finished goods
Raw materials and supplies
Work in progress
Total

5. Investments in Securities
The aggregate fair value and carrying amounts of securities to be held to maturity with market quotations at March 31, 2012
and 2011 were as follows:
Millions of yen
Thousands of U.S. dollars
2011
2012
2012
March 31
Government
bonds and local
government
bonds
Bonds
Other
Total

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

¥ 96

¥ 100

¥ (4)

¥-

¥-

¥-

$ 1,175$1,218

$(43)

578
¥674

600
¥700

(22)
¥(26)

587
¥587

600
¥600

(13)
¥(13)

7,037
$8,212

7,305$8,523(268)$(311)

The aggregate acquisition cost and carrying amounts of other securities with market quotations at March 31, 2012 and 2011were as follows:
Millions of yen
Thousands of U.S. dollars
2011
2012
2012
March 31
Equity securities
Bonds
Other
Total

Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference¥2,05950¥2,109¥2,55049¥2,599

¥491
(1)
¥490

¥2,060¥2,060¥2,257¥2,257¥197¥197$25,071609$25,680$31,052593$31,645$5,981(16)$5,965

Proceeds from sale of other securities were ¥8 million ($94 thousand) and ¥82 million for the years ended March 31, 2012 and2011, respectively. On those sales, gross realized gains were ¥3 million ($43 thousand) and ¥27 million for the years ended
March 31, 2012 and 2011, respectively. Gross realized losses were nothing and ¥0 million ($0 thousand) for the years ended
March 31, 2012 and 2011.
Non-listed stocks whose fair value was not determinable were not included in the above table. For the years ended March 31,
2012 and 2011, the carrying amounts of them in the consolidated balance sheet were respectively ¥1,660 million ($20,218
thousand) and ¥2,168 million.
Commercial paper, etc. were not included in the above table as the period to maturity of it was short and the fair value wasclose to the book value. For the years ended March 31, 2012 and 2011, the carrying amounts of them on the balance sheet were
¥3,999 million ($48,695 thousand) and ¥3,999 million, respectively.
Investments in affiliates included in investments in securities were ¥574 million ($6,995 thousand) and ¥1,540 million for theyears ended March 31, 2012 and 2011, respectively.
6. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars
2012

Millions of yen
2011

2012
Weighted
averageinterest
rate

March 31
Short-term debt
Current portion of long-term debt
Lease obligations (current liabilities)
Long-term debt
Lease obligations (long-term liabilities)
Total¥2,483
500
74
500
131
¥3,688

0.89%
1.30
1.21
-

Weighted
averageinterest rate

¥1,381
3,222
160
600
205
¥5,568

0.85%
1.31
1.29
-

$30,233
6,088
898
6,088
1,593
$44,900

Note: The above interest rates were calculated by weighted average method based on the balance of debt at the end of the fiscal year.
Toyo Kanetsu K.K. Annual Report 201219

Secured debt as at March 31, 2012 and 2011 was as follows:
March 31
Short-term debt secured by buildings, machinery and landLong-term debt secured by buildings, machinery and land
Total

Millions of yen
2011
2012
¥1,350¥1,127500
300¥1,850¥1,427

Thousands of
U.S. dollars
2012$13,719
3,653$17,372

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2012 and 2011 were as follows:
Millions of yen
2011
2012
¥496
¥462
5
0
5,459
5,459
¥5,960¥5,921March 31
Buildings (at net book value)
Machinery (at net book value)
Land
Total

Thousands of
U.S. dollars
2012$5,620066,467$72,087

Annual maturities of long-term debt and lease obligations as at March 31, 2012 were as follows:Year ending on March 31,
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years

Long-term debt
Thousands ofMillions of yen
U.S. dollars
¥$400
4,870
100
1,218
-

Lease obligations
Thousands ofMillions of yen
U.S. dollars
¥78
$952
53
641
-

7. Revaluation of Land
In accordance with the “Law on Land Revaluation” issued on March 31, 1998 and the “Law Related to the Revision of the
Law of Land Revaluation” issued on March 31, 2001, the Company revalued its business-purpose land. Of the revaluationdifference, the amount related to tax is recognized as a deferred tax liability and the revaluation difference, net of tax, is
recognized as a component of net assets.
The revaluation was performed on March 31, 2002 based on the fixed asset tax revaluation amount set in the “Law on Land
Revaluation” Article. 2, Item 3, and is calculated based on land prices set in the “Law on Land Revaluation” Article.2, Item 4
with certain reasonable adjustments.
The excess of the book value over the current market value of such revalued land held at March 31, 2012 and 2011 amounted
to ¥3,401 million ($41,411 thousand) and ¥3,306 million, respectively.
8. Retirement Benefits Plan
The Company and some consolidated subsidiaries have defined benefits pension plans and employee’s pension funds bymulti-employer plan as the system of defined benefits. The other consolidated subsidiaries have the smaller enterpriseretirement allowance mutual aid and termination allowance plan. The Company and certain consolidated subsidiaries also havethe defined contribution pension plans.
The accrued retirement benefits as of March 31, 2012 and 2011 were as follows:
March 31
Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial differences
Net retirement benefit obligations
Less: Pension costs paid in advanceAccrued retirement benefits for employees

20 Toyo Kanetsu K.K. Annual Report 2012

Millions of yen
2011
2012
¥(2,796)¥(2,853)
2,642
2,642
(154)
(211)
(90)
(32)
(244)
(243)
58
71
(302)
(314)

Thousands of
U.S. dollars
2012$(34,732)
32,168(2,564)(395)(2,959)863(3,822)

Net pension and severance costs related to the retirement benefit plans for the years ended March 31, 2012 and 2011 were as
follows:
Thousands ofMillions of yen
U.S. dollars
March 31
2011
2012
2012
Net pension and severance costs
¥117
¥184
$2,244Service costs
134
141
1,720
Interest cost
43
43
529
Expected return on plan assets
(26)
(26)
(322)
Net amortization
(26)
(16)
(190)
Amortization of prior service costs(49)
Transfer to defined contribution pension plans
41
42
507

Assumptions used in calculation of the above information were as follows:
March 312012
Discount rate
1.5%
Expected rate of return on plan assets
1.0%
Method of attributing the projected benefit obligations toStraight-line basis
periods of service
Expensed in the year of
Amortization of prior service costs
occurrence
Amortization of unrecognized actuarial differences
5 years

2011
1.5%
1.0%
Straight-line basis
Expensed in the year ofoccurrence
5 years

9. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in thestatutory income tax rate of approximately 40.7% for the years ended March 31, 2012 and 2011. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
At March 31, 2012 and 2011, significant components of deferred tax assets and liabilities were as follows:

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

Millions of yen
2011
2012

Thousands of
U.S. dollars
2012

Less: valuation allowance
Gross deferred tax assets¥1,276
58
111
72
111
51
295
57
368
65
106
278
485
3,333
(2,372)
¥961

¥909
47
124
98
158
125
337
85
421
61
121
301
477
3,264
(2,641)¥623$15,537
706
1,355
882
1,347
620
3,596
690
4,482
792
1,293
3,382
5,900
40,582(28,883)$11,699

Deferred tax liabilities
Deferred tax liabilities on revaluation of land
Net unrealized holding gains on investments in securities
Special item for lease
Foreign currency translation adjustment
Other
Gross deferred tax liabilities¥1,904175
38
75
2¥2,194¥2,17480
65
1¥2,320$23,185
2,130
461
912
28
$26,716

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

Toyo Kanetsu K.K. Annual Report 201221

Deferred tax assets and liabilities as at March 31, 2012 and 2011 were recorded in the consolidated balance sheet as follows:
Thousands ofMillions of yen
U.S. dollars
2011
2012
2012
Deferred tax assets (current assets)
Deferred tax assets (other assets in investments and advances)
Deferred tax liabilities (other current liabilities in current liabilities)
Deferred tax liabilities (long-term liabilities)
Deferred tax liabilities on revaluation of land (long-term liabilities)

¥453
258
2
38
1,904

¥147
396
66
2,174

$5,5163,141
23
468
23,185

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2012 and2011 were as follows:
2011
2012
Statutory income tax rate
40.7%
40.7%
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance
58.5(10.5)
Permanently non-deductible expenses
6.6
3.4
Permanently non-taxable dividends received
(1.9)
(0.8)
Local inhabitant’s tax
3.7
2.0
Difference in tax rates for foreign subsidiaries
(0.1)
(0.7)
Equity in income of affiliates
13.2
9.6
Adjustment for unrealized gains and losses
(2.3)
0.6
Decrease of deferred tax assets by tax rate change
4.9(39.0)Tax effect of investments, etc., in subsidiary due for liquidation
Other
0.0
0.2
Effective income tax rate
79.4%
49.4%
(Effects of Corporate Tax Rate Changes, etc.)
The “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating Taxation System Responding to Changes
in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources
Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of 2011) were
promulgated on December 2, 2011.
Due to these changes in tax laws, temporary differences that are expected to reverse in the consolidated fiscal year beginningon or after April 1, 2012, the statutory tax rates for calculating deferred tax assets and liabilities will be changed from 40.69%
to 38.01%. Regarding temporary differences that are expected to reverse in the consolidated fiscal year beginning on or after
April 1, 2015, the statutory tax rates will be changed to 35.64%.
Following these changes, deferred tax assets and liabilities recorded in this fiscal year decreased by ¥76 million ($931
thousand) and ¥33 million ($ 400 thousand), while unrealized holding gains on investments in securities and tax expenses
recorded in this fiscal year increases by ¥25 million ($302 thousand) and ¥74 million ($ 899 thousand), respectively.
Also, deferred tax liabilities pertaining to revaluation decreased ¥270 million ($ 3,285 thousand) and unrealized gains onrevaluation of land increased in the same amount.
10. Commitments and Contingent Liabilities
As at March 31, 2012 and 2011, the Company was contingently liable for the affiliated company as follows:
March 31
Trade liabilities

Millions of yen
2011
2012
¥389
¥213

Thousands of
U.S. dollars
2012$2,592

11. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2012 and 2011 were as
follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2011
2012
2012
Salaries and benefits¥1,390¥1,362$16,588
Bonuses
402
274
3,333
Accrued bonuses
93
71
868
Pension and severance costs
120
134
1,629
Allowance for doubtful accounts
51
(23)
(284)
12. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2012 and 2011 were ¥244 million ($2,968 thousand) and ¥318 million, respectively.

22 Toyo Kanetsu K.K. Annual Report 2012

13. Tax effects and Reclassification Pertaining to Other Comprehensive Income
Components of other comprehensive income for the year ended on March 31, 2012 were as follows.

Year ended on March 31
Net unrealized holding gains on investments:
Unrealized gains (losses) arising during the year
Reclassification to profit or loss for the year
Before tax effects adjustments
Tax effectNet unrealized holding gains on investments
Deferred gains or losses on hedges:
Unrealized gains (losses) arising during the year
Tax effect
Deferred gains or losses on hedges
Unrealized gains on revaluation of land:Tax effects
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the year
Tax effects
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted forusing equity method:
Unrealized gains (losses) arising during the year
Reclassification to profit or loss for the year
Share of other comprehensive income of associates accounted
for using equity method Deferred gains or losses on hedges
Total other comprehensive income

Millions of yen
2012

Thousands of
U.S. dollars
2012

¥293
(0)
293
(95)
198

$3,576(4)
3,572(1,156)
2,416

5
(2)
3

67
(26)
41

270

3,285

(44)
(75)
(119)

(533)
(912)
(1,445)

2
6
8

27
63
90

¥360

$4,387

14. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2012 and 2011 were as follows:
Thousands of sharesYear ended on March 31
Issued stock
Common stock
Number of issued stock at the beginning of the fiscal year
Increase in number of stock
Decrease in number of stock
Number of issued stock at the end of the fiscal year

2012

2011

138,731
138,731

138,731
138,731

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

18,29610
169
18,137

18,25046
18,296

For the year ended March 31, 2012, treasury stock increased by 10 thousand shares resulting from purchasing shares less than
one unit, decrease by 169 thousand shares resulting from the change in equity in affiliates accounted for by equity method.
For the year ended March 31, 2011, treasury stock increased by 46 thousand shares resulting from purchasing shares less than
one unit.
Cash dividends paid to shareholders from the beginning of the effective date were as follows:
2012
Approved by annual general shareholders’ meeting
Date of approval
June 29, 2011
Type of shares
Common stock
Date of record
March 31, 2011
Effective dateJune 30, 2011
Dividends per share¥5.00 ($0.06)¥603 million
Amount of cash dividends($7,342 thousand)2011
June 29, 2010
Common stock
March 31, 2010
June 30, 2010
¥4.00
¥483 million

Toyo Kanetsu K.K. Annual Report 201223

The dividend per share of 2012 includes a commemorative dividend of ¥1.00 per share to mark the 70th anniversary of theCompany’s establishment.
Cash dividends for the year ended March 31, 2012 as a date of record but an effective date subsequent to the current fiscal year
were as follows:
Amount of cash dividends
Resolution
Type ofDate ofEffective
Per share
Millions ofThousands ofapproved bysharesrecorddate
Paid from(Yen)
yen
U.S. dollars
Annual generalshareholders’March 31,
June 29, Accumulated
Common stock
¥4.00
¥482
$5,873
meeting held on
2012
2012
earnings
June 28, 2012
15. Cash and Cash Equivalents
Cash and cash equivalents as at March 31, 2012 and 2011 for the purpose of statement of cash flows consisted of:Thousands ofMillions of yen
U.S. dollars
March 31
2011
2012
2012
Cash on hand and at bank
¥7,772¥9,985$121,577
Less: Time deposits, over 3-month term
(190)
(30)
(365)
Less: Other
(1)
(1)
(14)
Commercial paper (Marketable securities)
1,999
1,999
24,3422,000
2,000
24,352
Money held in trust (Marketable securities）
Cash and cash equivalents¥11,580¥13,953$169,892
16. Leases
Lessee
The future payments due under non-cancellable operating lease transactions were as follows:
March 31
Within one year
Over one year

Millions of yen
2011
2012
¥10
¥15
33
28
¥43
¥43

Thousands of
U.S. dollars
2012
$179
340
$519

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

Millions of yen
2011
2012
¥1,716126(171)¥1,671¥2,610144(291)¥2,463Thousands of
U.S. dollars
2012$20,890
1,532(2,076)$20,346

Expected amount of collection from receivables of lease rental revenue in each annual period are as follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2011
2012
2012
Within one year
¥1,078¥855$10,407
1 to 2 years
811
437
5,319
2 to 3 years
393
267
3,250
3 to 4 years
223
120
1,461
4 to 5 years
76
26
315
Over 5 years
29
11
138

24 Toyo Kanetsu K.K. Annual Report 2012

17. Financial Instruments(1) Overview(A) Policy for financial instruments
The Company raises funds required for its operations through borrowings from banks. In the event temporary surplus of funds
arise, the Company invests them in financial instruments, which are highly secured.
In accordance with the Company’s policy for derivative transactions, such transactions are used to reduce exposure to the risks
specified in (B) and derivative transaction is not used for speculation purpose.

(B) Description of financial instruments and related risk and risk management systems
Notes and accounts receivable and investments in leases are exposed to customer credit risk, while certain receivables
denominated in foreign currency are exposed to the risk of foreign currency exchange rate fluctuation. In the case of customer
credit risk, the Company seeks to minimize risk by regularly monitoring the status of receivables using management charts andother methods; in the case of risk from foreign currency exchange rate fluctuation, measures to minimize risk include making
borrowings denominated in foreign currency as necessary.
Marketable securities are exposed to credit risk of invested entity. To mitigate such risk, the Company invests in short-termcommercial papers of high credit rating and high security and in money trusts under the prescribed internal procedures.
Investments in securities are exposed to credit risk of invested entity and to the risk of fluctuations in market price. These
consist primarily of shares in listed companies with which the Company has business relationship. The investments are held in
the form of other marketable securities and are subject to regular checks of fair value.
Short-term loans receivable and long-term loans receivable consist primarily of loans to equity-method affiliates. These loans
are exposed to credit risk, but business performance trends, operational developments, and other factors are subjected toconstant scrutiny to keep track of the financial situation of the invested entity.
Notes and accounts payable and accrued liabilities are exposed to liquidity risk, while certain liabilities denominated in foreign
currency are exposed to risk of foreign currency exchange rate fluctuation. In the case of liquidity risk, the Company seeks tominimize risk by regularly preparing cash flow worksheets and using other methods; in the case of risk of foreign currency
exchange rate fluctuation, measures to minimize risk include entering into forward exchange contracts as necessary.
Within Company borrowings, short-term debt consists primarily of finance relating to routine business transactions, while
long-term debt consists primarily of temporary advances for major projects and finance relating to investments in leases.
Borrowings at variable interest rates are exposed to risk of interest rate fluctuation. In order to avoid this risk by fixing interest
rates for major long-term debt, interest rate swaps are used as a hedging instrument for individual contracts. Interest rate swaps
are limited to the debt where the application of exceptional treatment is allowed under accounting principles generally adopted
in Japan. Evaluation of the effectiveness of the hedge is omitted here. For the liquidity risk, efforts to minimize risk are madeby regularly preparing financing charts and similar methods.
Lease obligations consist of those investments in leases involving properties for which lease transfers have been carried out
and are exposed to liquidity risks. Efforts to minimize risk are however made by regularly preparing cash flow worksheet andsimilar methods.
The execution and management of derivative transactions is carried out in accordance with the Company’s policies forderivative transactions. When using derivatives, in order to minimize credit risk, the Company enters into transactions
exclusively with financial institutions with high credit rating. For information on hedge accounting, including hedging
instruments, hedging policy, and the method of evaluating hedge effectiveness, refer to Note 2. Summary of Significant
Accounting Policies (7) Hedge Accounting.

(C) Supplementary notes on fair value of financial instruments, etc.
In addition to fair value based on market price, the fair value of financial instruments may include prices calculated on areasonable basis where a market price is not available. The calculation of the price is based on variable factors and the price istherefore subject to fluctuation depending on the different assumptions made and other factors. It should further be noted that
contract value of derivative transactions referred to in Note 18. Derivative and Hedging Activities does not represent themarket risk involved in the derivative transactions.

(2) Fair value of financial instruments, etc.
The carrying amounts in the consolidated balance sheet and fair values and the corresponding differences at March 31, 2012
and 2011 (the consolidated accounting date) are as set out below. In the case of items where estimation of the fair value isrecognized to be very difficult, the relevant item is not included in the table below (see note *4 below).
Toyo Kanetsu K.K. Annual Report 201225

Year ended March 31, 2012
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets
Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due within
one year)(l) Lease obligations (including amount due within
one year)
Total liabilities
Derivative transactions (*2)(m) Transactions not covered by hedge accounting(n) Transactions covered by hedge accounting
Total derivative transactions

Year ended March 31, 2011
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases
Allowance for doubtful accounts (*1)(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets

Carrying amountMillions of yen
Fair value

Differences¥9,985
8,627
(136)
8,491

¥9,985

¥-

8,491

-

3,999
1,545

3,999
1,584

39

3,299
120
106
(11)
95
¥27,534

3,272
121

(27)
1

94
¥27,546(1)¥12¥1,9592,483
3,737¥1,959
2,483
3,737

¥-

1,000

1,002

2

205

218

13

¥9,384¥9,399

¥15

¥5
¥5

¥5
¥5

¥¥-

Carrying amountMillions of yen
Fair value

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

11,592

-

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

3,999

-

2,371

66

3,031
120
223
(11)
212
¥29,030

3,078
120

47
0

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

¥-

3,822

3,830

8

Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due within
one year)(l) Lease obligations (including amount due within
one year)
Total liabilities

365

389

24

¥11,780¥11,812¥32

Derivative transactions (*2)(m) Transactions not covered by hedge accounting(n) Transactions covered by hedge accounting
Total derivative transactions

¥0
(1)
¥(1)

¥0
(1)
¥(1)

¥¥-

26 Toyo Kanetsu K.K. Annual Report 2012

Year ended March 31, 2012
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets

Carrying amountThousands of U.S. dollars
Fair value

Differences$121,577
105,039(1,660)103,379$121,577$-

103,379-

48,695
18,814

48,695
19,281

467

40,168
1,461
1,286
(137)
1,149
$335,243

39,857
1,470

(311)
9

1,141
$335,400(8)$157$23,854
30,23245,500$23,854
30,23245,500$-12,176

12,20327

Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due within
one year)(l) Lease obligations (including amount due within
one year)
Total liabilities

2,491

2,655

164

$114,253$114,444$191

Derivative transactions (*2)(m) Transactions not covered by hedge accounting(n) Transactions covered by hedge accounting
Total derivative transactions

$59
$59

$59
$59

$$-

*1. The allowances for doubtful accounts included in notes and accounts receivable, investments in leases, and long-term loans
receivable have been deducted.
*2. Net credits and liabilities arising from derivative transactions are presented on a net basis; in the case of an overall net
liability, the amount is presented in parentheses.
*3. Fair value calculation method for financial instruments and notes on marketable securities and derivative transactions[Assets](a) Cash on hand and at bank and (b) Notes and accounts receivable
As these are mainly settled over short periods and the fair value is close to the book value, these are stated at the relevantbook value.
(c) Marketable securities
As the period to maturity is short and the fair value is close to the book value, these are stated at the relevant book value.
(d) Investments in leases
These are presented at present value consisting of receivables from lease receivables, following elimination of estimatedresidual value, discounted at a rate consisting of the base rate for the period to maturity and an allowance for credit risk.
(e) Investments in securities
Fair value reflects stock exchange price or the price quoted by the financial institution dealing with the Company. For
related notes, see Note 5. Investments in Securities.
(f) Short-term loans receivable and (g) Long-term loans receivable
These are stated at present value, consisting of the principal at the balance sheet date and interest receivable up to therepayment date, discounted at an interest rate applicable at the balance sheet date.
[Liabilities](h) Notes and accounts payable (i) Short-term debt and (j) Accrued liabilities
As these are settled over short periods and the fair value is close to the book value, these are stated at the relevant bookvalue.
(k) Long-term debt (including amount due within one year)
Fair value of long-term debt with variable interest rate is estimated based on cash flow of repayments of principal andinterest determined together with the applicable interest rate swap, which is accounted for under exceptional method. The
cash flow is discounted at a reasonable estimate of the interest rate that would apply if a new borrowing of the sameamount for the same term were to be made.
(l) Lease obligations (including amount due within one year)
These are treated similarly to investments in leases (Item (d) in the Assets section above), but since the credit risk istransferred to the creditor of the investment in leases that constitutes the liability, they are stated at present value
discounted at the base rate without risk.
[Derivative transactions]
Toyo Kanetsu K.K. Annual Report 201227

For related notes, see Note 18. Derivative and Hedging Activities.
*4. As there is no market price for non-listed stocks (carrying amount in consolidated balance sheet ¥1,660 million ($20,218
thousand) and ¥2,168 million for the years ended March 31, 2012 and 2011, respectively) and it is also not practicable to
make estimates of future cash flow, etc., and fair value. These stocks are therefore not included in the item (e) Investments
in securities in the Assets section above.
*5. The carrying amounts for (d) Investments in leases in the above table does not include residual value.
*6. Repayment schedule subsequent to the end of the fiscal year of monetary debt and marketable securities with maturity
dates are as follows:
Millions of yen
As at March 31, 2012
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years¥9,958
8,491
4,000
760

¥774

¥11

¥-

-

700
50

-

-

120
¥23,32952¥1,576

¥11

42
¥42

1 to 5 years

5 to 10 years

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

¥27

¥-

120
¥24,368600
169¥2,130

¥27

42
¥42

1 to 5 years

5 to 10 years

Over 10 years$121,250
103,379
48,7039,254$9,426

$134

$-

-

8,523
609

-

-

1,461
$284,047

635$19,193

$134

514
$514

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

Within one year

Thousands of U.S. dollars
As at March 31, 2012
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Short-term loans receivable
Long-term loans receivable
Total

Within one year

*7. Repayment schedule of long-term debt and other interest-bearing debt is mentioned in Note 6. Short-Term Debt,
Long-Term Debt, and Lease Obligations.
18. Derivative and Hedging Activities
There were no relevant transactions as of March 31, 2012. As of March 31, 2011, derivative transactions, for which hedged
accounting have been applied, are as indicated below.
Millions of yen
Contract value
Unrealized
Fair value
Due within one
Due after one
gain (loss)
Total
As at March 31, 2011
year
year
Forward exchange contract
Sell U.S. dollar
¥498
¥¥498
¥499
¥(1)
¥498
¥¥498
¥499
Note: The fair value of the above was based on the price quoted by the financial institution dealing with the Company.

28 Toyo Kanetsu K.K. Annual Report 2012¥(1)

In the year ended March 31, 2012 and 2011, derivative transactions, for which hedged accounting have been applied, are as
follows:(1) Currency-related
Millions of yen
Contract value
Fair value
Due within one
Due after one
Total
As at March 31, 2012
year
year
Forward exchange contract
Buy Euro
¥88
¥¥88
¥93
¥88

As at March 31, 2011
Forward exchange contract
Buy Euro

As at March 31, 2012
Forward exchange contract
Buy Euro

Due within one
year

¥-

¥88

Millions of yen
Contract value
Due after one
Total
year

¥93

Fair value

¥372

¥-

¥372

¥371

¥372

¥-

¥372

¥371

Due within one
year

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

Fair value$1,076$-$1,076$1,135$1,076$-$1,076$1,135*1. The principal object of the hedge is accounts payable in the balance sheets.
*2. Payables hedged by the above contracts, which met certain hedging criteria for deferral hedge accounting, were translated
at the relevant contract rates.
*3. The fair value of the above was based on the price quoted by the financial institution dealing with the Company.
(2) Interest-related

As at March 31, 2012
Interest rate swaps(receivable rate variable/payable rate fixed)

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

As at March 31, 2012
Interest rate swaps(receivable rate variable/payable rate fixed)

Due within one
year

Millions of yen
Contract value
Due after one
Total
year

¥500

Due within one
year

¥300

Due within one
year

¥800

Millions of yen
Contract value
Due after one
Total
year

¥3,050¥500$3,653(*4)

Fair value¥3,550Thousands of U.S. dollars
Contract value
Due after one
Total
year

$6,088Fair value(*4)

Fair value$9,741(*4)*4. As items to which exceptional treatment of interest rate swaps is applicable are treated as a single unit with the long-term
debt covered by the hedge, the fair value is included in the fair value indicated for the relevant long-term debt.
19. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets as of March 31, 2012 and 2011.
a. Outline of relevant asset retirement obligations
These are obligations under the Ordinance on Prevention of Asbestos Hazards relating to certain facilities for lease.
b. Method of calculation of amount of relevant asset retirement obligations
Toyo Kanetsu K.K. Annual Report 201229

For the facilities in a. above, calculations are based on estimated period of use 31 years and discount rate 2.2%.
c. Increase/decrease in total amount of relevant asset retirement obligations for the year ended March 31, 2012 and 2011 are as
follows.
Thousands ofMillions of yen
U.S. dollars
March 31
2011
2012
2012
Balance at the beginning of the fiscal year
¥298
¥298
$3,628
Increase/decrease during year
Balance at the end of the fiscal year
¥298
¥298
$3,628From the fiscal year ended March 31, 2011, the balances shown are amounts for the beginning of the year reflecting theCompany’s application of the Accounting Standard for Asset Retirement Obligations (Statement No. 18 issued by ASBJ on
March 31, 2008) and the associated implementation guidance (Guidance No. 21 issued by ASBJ on March 31, 2008).
20. Real Estate for Leasing
In the Tokyo area and other districts, the Company and certain of its subsidiaries undertake leasing of part of their businesspremises or of land and buildings used for residential leasing. In the year ended March 2012 and 2011, the net rent income on
the relevant real estate for leasing was ¥321 million ($3,911 thousand) and ¥302 million with rent income recorded under net
sales and rent expenses under cost of sales.
The carrying amounts in the consolidated balance sheet of the relevant real estate for leasing, the change during the period, andthe fair value are as set out below.
Thousands ofMillions of yen
U.S. dollars
March 31
2011
2012
2012
The carrying amounts in the consolidated balance sheet
Balance at the beginning of the fiscal year
¥5,451¥5,470$66,605
Change during the fiscal year
20
(55)
(672)
Balance at the end of the fiscal year
5,470
5,415
65,933
Fair value at the end of fiscal year

¥3,790¥3,892$46,152*1. The carrying amounts in the consolidated balance sheet are the acquisition cost, net of accumulated depreciation andaccumulated impairment loss.
*2. The change during the year ended March 31, 2012 was mainly due to a decrease by depreciation accounting for ¥41 million($495 thousand). The change during the fiscal year ended March 31, 2011, was due mainly to an increase in leased area
accounting for ¥61 million.
*3. Fair value of significant properties at March 31, 2012 and 2011 represents a price based on appraised value determined by
an external real estate appraiser. Fair value of insignificant properties is based on index considered to appropriately reflectmarket price.
21. Segment Information(1) Outline of Reporting Segments
The Company’s reporting segments consist of components of its business for which separate financial information is available
and which are evaluated regularly by the Company’s board of directors in deciding the allocation of operational resources andin assessing business performance.
The TKK Group conducts its operations on the basis of a comprehensive business strategy formulated to cover the products
and services of its different business segments and of the Company’s subsidiary Toyo Kanetsu Solutions K.K.
Accordingly, the Company recognizes the following reporting segments, which consist of segments handling different products
and services: Plant & Machinery Business; Material Handling Systems Business; and Building Construction Business.
The operations of the Plant & Machinery Business consist chiefly of the design, manufacture, and installation of storage tanks
for LNG, LPG, crude oil, and other gases and liquids and maintenance operations for these various types of tank. The Material
Handling Systems Business engages chiefly in the development, design, and installation of material distribution systems
consisting mainly of sorting, picking, and conveying systems, and the maintenance of these various systems. The Building
Construction Business engages chiefly in the design, construction, and management of buildings of various types including
apartment buildings, office buildings, welfare facilities, and warehouses.
(2) Method of Calculation of Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
The accounting methods applied to the reporting segments are the same as those specified above in Note 2. Summary of
Significant Accounting Policies. The income of the reporting segments is based on operating income. Intersegmental
transactions are entered at the actual amount.

30 Toyo Kanetsu K.K. Annual Report 2012

(3) Information on Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
Millions of yen

Year ended March 31, 2012
Sales
Sales to external customers
Inter-segment sales
Total
Operating income
AssetsOther items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets

Plant &
MachineryBusiness

Reporting segment
Material
Building
Handling
Construction
Systems
Business
Business

Subtotal

Other

Adjustments

Total¥23,625
23,625
1,956¥11,624
11,624(729)¥3,3383,338
14¥38,587
38,5871,241¥2,146
682
2,828
491

¥(682)(682)(258)¥ 40,733
40,733
1,474

15,425

9,611

1,859

26,8958,228

16,37051,493

274

200

10

484

145

14

643

551

83

0

634

40

5

679

Millions of yen

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

Year ended March 31, 2012
Sales
Sales to external customers
Inter-segment sales
Total
Operating income
AssetsOther items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets

Plant &
MachineryBusiness

Reporting segment
Material
Building
Handling
Construction
Systems
Business
Business

Subtotal

Other

Adjustments

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

¥(746)(746)(282)¥ 48,718
48,7182,590

20,042

8,556

2,008

30,606

10,238

12,21253,056

273

240

9

522

157

15

694

635

62

1

698

33

6

737

Plant &
MachineryBusiness

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

Adjustments

Total$287,655
287,655
23,817$141,531
141,531(8,872)$40,642
40,642
174$469,828
469,828
15,119$26,132
8,303
34,435
5,983$(8,303)(8,303)(3,160)$495,960
495,960
17,942

187,810117,027

22,631

327,468

100,178

199,328

626,974

3,332

2,438

127

5,897

1,766

170

7,833

6,712

1,012

6

7,730

481

56

8,267

(4) Differences between Segmental Totals and Consolidated Financial Statement Totals and Main Factors in Difference(a) Operating income
Thousands ofMillions of yen
U.S. dollars
March 31
2011
2012
2012
Sum total of reporting segments operating income¥2,390¥1,242$15,117
Income in Other category
482
491
5,984
Corporate expenses (*)
(290)
(268)
(3,265)
Other adjustments
89106
Operating income in consolidated financial statements¥2,590¥1,474$17,942* Corporate expenses are chiefly expenses for administrative and other managerial divisions that do not belong to areporting segment.

Toyo Kanetsu K.K. Annual Report 201231

(b) Assets
March 31
Sum total of reporting segments assets
Assets in Other category
Corporate assets (*)
Other adjustments
Total assets of consolidated financial statements

Millions of yen
2011
2012
¥30,606¥26,895
10,238
8,228
12,24816,396(36)(26)¥53,056¥51,493

Thousands of
U.S. dollars
2012$327,467
100,178
199,632(303)$626,974* Corporate assets are chiefly Company cash and deposits and assets relating to the administration department forinvestments in securities etc., which do not belong to a reporting segment.
(5) Information by Individual Product or Service
March 31
Sales to external customers
Storage tanks, etc.
Storage tank maintenance operations
Material handling systems and machinery, etc.
Apartment and office buildings, etc.
Other
Total

Millions of yen
2011
2012
¥15,888
7,737
11,624
3,338
2,146¥40,733¥17,557
9,153
17,5902,180
2,238¥48,718

Thousands of
U.S. dollars
2012$193,451
94,204
141,532
40,642
26,131$495,960(6) Geographical Information(a) Sales
Millions of yen
2011
2012

March 31
Sales to external customers
Japan¥38,808¥30,047
South-east Asia
701
2,116
Middle East
4,186
2,272
Oceania
1,853
5,960
Africa
2,907
282
Other
263
56
Total
¥48,718¥40,733
Note: Net sales figures are categorized by country or region based on the location of the contract.

Thousands of
U.S. dollars
2012$365,841
25,762
27,667
72,5733,438
679$495,960(b) Tangible fixed assets
March 31
Japan
South-east Asia
Total

Millions of yen
2011
2012
¥11,268
1,311¥12,579

Thousands of
U.S. dollars
2012$137,196
15,961$153,157

Note: Regarding tangible fixed assets for the year ended March 31, 2011, as the amount of the tangible fixed assets located inJapan accounts for more than 90% of the amount of tangible fixed assets recorded in the consolidated balance sheets, therelevant information has been omitted.
(7) Information on Main Customers
Main Customer for the year ended March 31, 2012 was Bechtel and sales to Bechtel was ¥6,225 million ($75,797 thousand).
Regarding the year ended March 31, 2011, main customer was Joint Venture of TKK-Shimizu Corp and sales to Joint Ventureof TKK-Shimizu Corp was ¥4,959 million.
22. Amount Per Share
Amounts per share at March 31, 2012 and 2011 and for the years then ended were as follows:
Yen
2011
2012
Net assets¥246.04¥244.77
Net income
1.31
5.93

U.S. dollars
2012
$2.98
0.07

Diluted net income per share for the years ended March 31, 2012 and 2011 has not been presented because no potentiallydilutive shares of common stock were outstanding.

32 Toyo Kanetsu K.K. Annual Report 2012

Net income per share was calculated on the following basis:

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

Weighted-average number of outstanding shares of common stock

Millions of yen
2011
2012
¥158
¥714
¥158
¥714

Thousands of
U.S. dollars
2012$8,695$8,695

Thousands of shares
2011
2012
120,451
120,441

23. Subsequent Event(Acquisition of 100% ownership of Toyo Koken K.K. by share exchange)
The Company (hereinafter "TKK") and an equity-method affiliated company, Toyo Koken K.K. (hereinafter “KOK”) resolved
at their respective board of directors meetings held on December 20, 2011 and concluded an agreement on the same day, toimplement a share exchange (the "Share Exchange") pursuant to a share exchange agreement entered into by TKK and KOK(the "Share Exchange Agreement"), under which TKK will become the wholly owning parent of KOK and KOK will become awholly owned subsidiary of TKK.
Pursuant to the provision of Paragraph 3 of Article 796 of Japanese Corporate Law, the Share Exchange was implemented as ashort-form share exchange for which the approval at a general meeting of TKK shareholders is not required. The Share
Exchange subject to the approval of the Share Exchange Agreement by a resolution at the extraordinary general meeting of
KOK shareholders was held on February 28, 2012.
Based on the Share Exchange Agreement, the Share Exchange became effective as of April 1, 2012 and KOK became asubsidiary of TKK.
(1) Outline of business combination(a) Acquired company: Toyo Koken K.K.
(b) Business lines: Manufacture and sales of winch, balancer, conveyor and industrial robot(c) Main reason of business combination
This acquisition is designed to advancement of corporate value and enhancement of the comprehensive strength byunifying/streamlining the development/production/sales structure, and integrating their technology resources.
(d) Acquisition date: April 1, 2012(e) Form of acquisition: Share exchange(f) Ratio of voting rights
Ratio before the business combination
Ratio additionally acquired on the business combination date
Ratio after the acquisition

39.4%
60.6%
100.0%(g) Main reason of deciding the acquired company
The Company acquired the 100% voting rights shares of KOK by Share Exchange.
(2) Acquisition cost and breakdown
Millions of yen

Acquisition price (Common stock)
Cost incurred directly
Acquisition cost

¥626 million
33 million¥659 million

Thousands of
U. S. dollars$7,623398$8,021(3) Share exchange rate, calculation basis and number of allocated shares(a) Share exchange rate
Company Name
TKK(Parent Company)
1
Share Exchange Rate

KOK
0.6

Toyo Kanetsu K.K. Annual Report 201233

(b) Calculation Basis
In order to ensure fairness and reasonableness of the share exchange ratio for the Share Exchange, each of the parties decided
to request a separate independent third party valuation institution to calculate a share exchange rate. For this purpose, TKK
appointed Daiwa Securities Capital Markets Co., Ltd. (Current Daiwa Securities Co., Ltd. hereinafter "Daiwa Securities CM ")and KOK appointed A.G.S. Consulting Co., Ltd. (hereinafter “AGS”).
Daiwa Securities CM and AGS determined that the value of TKK and KOK Shares should be analyzed using the market pricemethod based on the fact that both of their market prices are available and the discount cash flow method in order to reflect thestatus of future activities.
TKK and KOK engaged in repeated negotiations and discussions based on the analysis provided by the above third party
valuation institutions, and bearing in mind their respective financial conditions, performance trends and stock price movements,
etc. As a result, TKK and KOK determined that the share exchange rate set forth above and resolved the share exchange rate
for the Share Exchange upon approval obtained at meetings of their respective boards of directors.
(c) Number of allocated shares
Common Stock 3,045,000 shares (Common stock held in treasury 3,045,000 shares)(d) Amount of goodwill, reason for its recognition, amortization method and period
i. Amount of goodwill¥311 million
ii. Reason for its recognition
Goodwill is recognized in the total amount of difference between the amount of subsidiary stock which is additionallyacquired and market value of net assets on the date of the acquisition, and difference between the acquisition cost ofpreviously owned shares and the carrying amount under equity method.
iii. Amortization method and period
5 years with straight-line method(e) Assets acquired and liabilities assumed on the acquisition dateThousands ofMillions of yen
U. S. dollars
Current assets¥2,123$25,848
Fixed assets
936
11,401
Total assets
3,059
37,249Current liabilities
1,907
23,227
Fixed liabilities
513
6,242
Total liabilities¥2,420$29,469

34 Toyo Kanetsu K.K. Annual Report 2012

Toyo Kanetsu K.K. Annual Report 201235

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

138,730,741

Number of Shareholders

14,109Security Traded

Tokyo Stock Exchange Market, First Section

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

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

Directory
Head Office
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp/
Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173
Material Handling Systems Business(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
Building Construction Business
Tel: +81-3-5857-3160 Fax: +81-3-5857-3186

Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Plant & Machinery Business
Tel: +81-72-645-2520 Fax: +81-72-645-2532
Material Handling Systems Business(Toyo Kanetsu Solutions K.K. West Japan Sales Office)Tel: +81-72-645-2530 Fax: +81-72-645-2532

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

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
URL: http://www.tksl.co.jp/

P.T. Toyo Kanetsu Indonesia(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950

K-Techno Inc.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3155 Fax: +81-3-5857-7248
URL: http://k-techno.co.jp
TKL Co., Ltd.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-5606-6377
URL: http://www.web-tkl.co.jp
Toyo Service System K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3201
URL: http://www.toyoservice.co.jp

36

Toyo Kanetsu K.K. Annual Report 2012

TOYO KANETSU SINGAPORE PTE. LTD.
38, Robinson Road, #17-00, The Corporate Office,Singapore 068906
Tel: +62 6228 0561 Fax: +62 6223 1735
Toyo Kanetsu (Malaysia) SDN. BHD.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60 (86) 338122 Fax: +60 (86) 338123

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