TOYO KANETSU K.K.

Annual Report 2010
For the year ended March 31, 2010

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 andinstallation of highly standardized conveyors systems. Since that time, the businesshas 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 oflogistics 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 the 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 complex. In recent years, we have also pushed into the steel
pipe piling business, making new efforts toward environmentally friendly
execution.
TKK will continue to provide the advanced technology to answer the needs of ourclients for today and tomorrow.

Contents
Consolidated Financial Highlights ·························· 1
To Our Shareholders ··········································· 2
Board of Directors, Auditors and Corporate Officers ····· 3
Lines of Business ·············································· 3
TKK Group Companies ······································· 4
Analysis of Operating Environment and Results ········· 5Business Risks·················································· 6
Financial Section
Consolidated Balance Sheets ····························· 8Consolidated Statements of Operations ················· 10
Consolidated Statements of Changes in Net Assets ··· 11
Consolidated Statements of Cash Flows ················ 14
Notes to the Consolidated Financial Statements ······· 15
Report of Independent Auditors ·························· 31
Corporate Data ················································· 32
Directory ························································ 32

Toyo Kanetsu K.K. and Consolidated Subsidiaries

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

Millions of yen

2010

2009

2008

2007

2006

2010

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

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

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

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

¥ 45,530
14,643
20,909
5,668
4,310
1,904
1,626
-

$542,144
260,340
224,574
28,298
5,795
23,13741,51838,261
5,413

37,74812,4907,792
338
58,36820,842
7,250-

33,705
13,046
7,920
274
54,94521,555
5,375-

30,245
16,324
12,269221
59,05921,272
8,988-

30,226
16,956
21,498322
69,002
22,865
14,195-25,30916,56624,852413
67,14020,084
15,647
10
31,399405,673
134,228
83,737
3,637
627,275
223,987
77,910
-

-

-

-

-

67,140-Shareholders’ Equity
Valuation and Translation Adjustments
Minority Interests in Consolidated Subsidiaries
Total Liabilities and Net Assets

29,549618
109
58,36827,824102
89
54,94526,5642,235
59,05924,6517,283
869,002-

317,561
6,641
1,176
627,275

Order Backlog¥57,379¥66,071¥57,412¥34,176¥38,467$616,642

Per Share:
Net Income
Cash Dividends
Shareholders’ Equity

2010¥28.754.00¥250.392009¥ 22.99
4.00¥222.092008¥ 27.90
4.00¥216.052007¥ 20.52
3.00¥231.102006¥ 11.76
2.00¥227.112010
14,027631

2009
14,400629

2008
15,747597

2007
16,797573

2006
17,005552

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
Cash Dividends
At 31st March:
Current Assets
Property, Plant and Equipment
Investments and Advances
Intangible Fixed Assets
Total Assets
Current Liabilities
Long-Term Liabilities
Minority Interests in Consolidated Subsidiaries

Shareholders' Equity
Total Liabilities, Minority Interests andShareholders’ Equity

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 \93.05=$1.00, solely for readers’ convenience.

1

Toyo Kanetsu K.K. Annual Report 2010

2010
$0.31
0.04
$2.69

To Our Shareholders
In fiscal year 2010, ended March 31, 2010, the growth indemand for storage facilities due to recovering levels ofenergy consumption, coupled with the fruition of key
measures in the Material Handling Systems Business,allowed the Toyo Kanetsu Group (TKK Group) to achieve asubstantial growth in revenues, resulting in increases in bothsales and profits compared with the previous fiscal year.
The proposed dividend for the year has been set at ¥4 pershare, the same as in the previous year. In November 2009,
meanwhile, the TKK Group acquired approximately ¥900
million worth of treasury stock as a measure to promoteshareholder return from a long-term perspective.
To fulfill the consolidated performance targets for fiscal
year 2010 as set out in the medium-term business plan (forfiscal years 2009 through 2011), the TKK Group iscommitted to steadily implementing the priority measuresdetailed below, taking a management perspective oriented
still more strongly than before toward the medium to longterm. In this way, we will work to meet the expectations ofshareholders and other stakeholders by further increasing
Group corporate value.
Basic policy of our core businesses
Under the TKK Group’s management vision of being “agroup that sustainably grows and develops backed by its
superior technology, products and services,” the Company’s
Plant & Machinery Business and Material Handling Systems
Business have respective business policies of securing astable profit and revitalizing operations and establishing an
operating base.
Priority measures for our core businesses[Material Handling Systems Business]
In the Material Handling Systems Business, we will promote
the following five priority measures:
1) Reinforcing price competitivenessWe will work to strengthen competitiveness by rolling out
low-cost conveyor systems and undertaking design
reviews and by promoting improvement of operational
procedures.
2) Reinforcing suggestion-making capability
We will increase our ability to propose low-cost systems
solutions by focusing the combined strength of ourorganization.
3) Further cultivating the core market and expanding into
growth markets
We will work to increase the number of inquiries received
by focusing business resources on target customers.

The Plant & Machinery Business will implement fivepriority measures to achieve its business policy of securing astable profit.

4) Fostering human resources and enhancing organizational
agility
We will speed up the decision-making process by carryingout training and promoting the flattening andsimplification of organizational structures.

1) Reinforcing price competitivenessWe will reinforce competitiveness by identifying new
suppliers and expanding fabrication shops.

5) Reinforcing cooperation with maintenance subsidiaries
We will work together to promote improvement ofcustomer relations by sharing customer information.

2) Expanding the project handling capability and developinga handling framework
We will enhance our project staff and train engineers.

[Building Construction Business][Plant & Machinery Business]

3) Reinforcing sales and marketing capabilities
We will strengthen relationships with major customers inJapan and overseas with the aim of increasing the volumeof orders received.

Although the business environment surrounding theconstruction industry is challenging, we will strive to further
reinforce our revenue base by eliminating unprofitableprojects and developing new fields, while enhancing oursales and marketing capabilities and construction
management framework, and making cost reduction efforts.

4) Promoting research and development
We will work to improve our engineering abilities bypromoting research into materials, welding technology,
and construction methods.

We look forward to your continued understanding andsupport in the future.

5) Reinforcing human resource management
We will work to strengthen human resources by carryingout training and pursuing active recruitment.

August 2010

Takeshi Mizukami
President & Representative Director
Toyo Kanetsu K.K. Annual Report 20102

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

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

Auditors
AuditorOutside Auditor
Outside Auditor
Outside Auditor

Teruo Nojo
Masaharu Hino
Keiichi Miyakawa
Takashi Nakamura

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

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

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

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

Building Construction BusinessAll use, building structural planning design and construction of condominiums,
apartment buildings, offices, stores, medical facilities, residential housing, andwarehouses; steel pipe piling design and execution.

3

Toyo Kanetsu K.K. Annual Report 2010

TKK Group Companies
TOYO KANETSU K.K.

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

Toyo Miyama Co., Ltd.

P.T. Toyo Kanetsu Indonesia

Toyo Kanetsu Solutions K.K.

AL GHALLILAH ENGINEERING& CONSTRUCTION L.L.C.

K-Techno Inc.

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

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

Toyo Koken K.K.

Domestic Subsidiaries

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

Overseas Subsidiaries

Affiliated Companies

Major Subsidiaries and Affiliated Companies(Domestic)

Toyo Koken K.K.

Toyo Kanetsu Solutions K.K.

Establishment
CapitalBusiness

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

TKL Co., Ltd.

Establishment
CapitalBusiness

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

P.T. Toyo Kanetsu Indonesia

Establishment
CapitalBusiness

provisional

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

Toyo Miyama Co., Ltd.

Establishment
CapitalBusiness

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

Toyo Kanetsu (Malaysia) SDN. BHD

Establishment
CapitalBusiness

Toyo Service System K.K.

Establishment
CapitalBusiness

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

K-Techno Inc.

Establishment
CapitalBusiness

Establishment
CapitalBusiness

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

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

AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C.

Establishment
CapitalBusiness

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

TOYO KANETSU SINGAPORE PTE. LTD.

Establishment
CapitalBusiness

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

Toyo Kanetsu K.K. Annual Report 2010

4

Analysis of Operating Environment and Results
In the fiscal year ended March 31, 2010, thanks to thesuccess of economic measures taken by Japan, Europe,
America, and the developing nations of Asia, and despite thepersistence of a deflationary gap and other issues, theJapanese economy showed a gradual recovery from theserious economic downturn that began with the financial
crisis in the fall of 2008.
The Plant & Machinery Business benefited from the
expansion in energy consumption and the recovery in the
crude oil price that accompanied the economic recovery in
China, India, and other developing nations. This led to therevival of plans for storage facilities and otherenergy-related projects that had been suspended or
postponed. In particular, increased demand for gas inresponse to CO2 reduction measures led to an upsurge in
new LNG-related projects.
In the Material Handling Systems Business, corporations
are responding to reduced volumes of goods and calls for
reduced CO2 emissions by reorganizing and integrating
logistics bases and outsourcing logistics operations. Our
Material Handling Systems Business benefited from thistrend toward complex and increasingly sophisticated needs
among users of logistics systems.
In the Building Construction Business, where the market
has been slow to recover, although construction material
costs and other costs fell, stagnant demand made for intensecompetition and a continued challenging environment.
Against this business background, consolidated net sales
for the fiscal year were ¥50,447 million (US$542,144
thousand), up 5.8% from the previous year while operating
income was ¥3,863 million (US$41,518 thousand), up
106.9% from the previous year. Net income grew by 18.5%
from the previous year to ¥3,560 million (US$38,261
thousand), a result influenced by a fall in extraordinary
income, a growth in deferred income taxes, and other factors.
Total orders received were ¥39,062 million (US$419,796
thousand), down 24.9% from the previous year.
Plant & Machinery BusinessIn overseas markets, demand for storage facilities was at
high levels due to the expansion of supply facilities in
response to growing energy consumption. We used ourstrengths in the form of international competitiveness and anabundant track record of achievement to win an order for 43
tanks for a Middle Eastern oil refinery. In the Japanesemaintenance market, we received orders for modification
works to floating-roof tanks following a partial revision to
the Fire Service Law. On the strength of our management
system solutions integrating all stages from design toconstruction, we also won an inclusive multi-year contract
for tank maintenance at a large oil refinery, representing afurther expansion of our capacities in this field of operations.
Regarding sales and profits, large-scale project completionin the overseas market was one factor explaining the lack of
net sales growth. However, thanks to steady progress withongoing large-scale LNG projects and maintenance works inJapan, and due to progress with profit-enhancing measures,
profits increased despite the decrease in sales income.

5

Toyo Kanetsu K.K. Annual Report 2010

As a result, net sales for this business were ¥24,225
million (US$260,341 thousand) in the fiscal year underreview, down 8.2% from the previous year, and operating
income was ¥2,440 million (US$26,226 thousand), up
18.4%. Orders received totaled ¥20,448 million(US$220,187 thousand), down 40.8%.
Material Handling Systems Business
Here, we actively implemented the priority measures
identified in our medium-term business plan, and benefited
from this by receiving orders that included picking systems
for consumer cooperatives, which are engaged in
restructuring of their logistics facilities, baggage conveyor
facilities and air freight logistics systems for airports, andsorting systems for retailers. Net sales were lifted by the
major projects for consumer cooperatives, airports, and theretail trade, while priority measures including cost
reductions and increased operational efficiency were steadily
implemented. The result was a substantial increase in bothsales and profits.
As a result, net sales for this business were ¥20,897
million (US$224,574 thousand) in the fiscal year underreview, up 74.7% from the previous year, and operating
income was ¥1,064 million (US$11,430 thousand),contrasting with an operating loss of ¥499 million in theprevious period. Orders received totaled ¥16,414 million(US$176,404 thousand), up 23.2%.
Building Construction Business
As the construction market remained sluggish, we continued
to face challenges in securing orders for the leased
apartment construction and steel pipe pile construction
projects that are the mainstay of the sector. As a result, net
sales for this business were ¥2,633 million (US$28,298
thousand) in the fiscal year under review, down 47.5% fromthe previous year, and operating income was ¥65 million(US$694 thousand) down 58.5%. Orders received totaled¥2,159 million (US$23,207 thousand), down 46.3%.
Real Estate Utilizing Business and Other Businesses
Sales in the Real Estate Leasing Business totaled ¥539
million (US$5,795 thousand), an 8.9% decrease from theprevious year, while operating income came to ¥292 million(US$3,136 thousand), a 20.0% decrease. The Other
Businesses sector, which includes Group companies notcovered in the above, posted sales of ¥2,153 million(US$23,137 thousand), a fall of 41.8% from the previous
year, and operating income of ¥271 million (US$2,917
thousand), an increase of 89.1%.

Business Risks
The following risks may affect the business results, stock priceand financial position of the TKK Group.

TKK Group’s earnings may adversely affect the TKK Group’sbusiness results and financial position.

Potential risks associated with international activities andoverseas advance

Dependence on business results of specific customers in the
Building Construction Business

The TKK Group conducts some operations in overseas markets,primarily those of the Plant & Machinery Business. Further, its
subsidiary manufactures tank materials in Indonesia. These
overseas operations carry inherent risks as stated below, and the
TKK Group’s business results and financial position may be
adversely affected by such risks.

The TKK Group’s building construction business depends on
obtaining construction work contracted with specific customers
and supplying building materials to such customers.
Consequently, the TKK Group’s sales generated from thisbusiness may be significantly affected by the business results ofsuch customers or other factors that are beyond the TKKGroup’s control. Further, any price reductions that we make inresponse to customers’ requests may shrink the TKK Group’s
profit margins.

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 TKKGroup5) Social confusion arising from acts of terror, war or any otherfactors
Exchange rate fluctuations
The TKK Group’s business activities include manufacturing
products, selling materials and implementing construction
operations overseas. Foreign-currency-denominated accounting
items such as sales, expenses and assets are translated into
Japanese yen for the purpose of preparing consolidated
financial statements. The exchange rates used in currency
conversion may affect the yen-denominated value. As most of
our payments and receipts are denominated in US dollars or
euros, a stronger yen will adversely affect the TKK Group’sbusiness while a weaker yen will favorably affect the TKKGroup’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 byimplementing 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 andfinancial position.
Project risk
The business results of the TKK Group may be affected bysituations where, for customer reasons, projects are suspended
or postponed or the project content is otherwise altered.
Further, as our projects take the form of inclusive contracts,
deterioration in project profitability may impact on businessresults in the event of a sudden change in the economic
situation leading to unforeseen rises in equipment and material
prices, transportation costs, construction costs, or otherexpenses, or in the event of natural disaster, outbreak of disease,serious accident, or other eventualities.
Competition for winning orders
All of the major businesses of the TKK Group are being
operated under the make-to-order type system and the TKKGroup is facing severe competition to win orders. Depending on
the circumstances, we recognize the possibility that acompetitor may disregard profitability and enter into pricecompetition with the TKK Group. Although the TKK Group
strives to reduce all kinds of costs and reinforce its pricecompetitiveness, such unreasonable downward pressure on the

Toyo Kanetsu K.K. Annual Report 20106

Financial Section
For the years ended March 31, 2010 and 20097

Toyo Kanetsu K.K. Annual Report 2010

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance Sheets
For the years ended March 31, 2010 and 2009

2010

2009

Thousands of
U.S. dollars(Note 3)2010

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¥8,956
13,511
1,000
3,208
8,882
509
1,840
(158)
37,748¥6,97812,674
4,011
8,741
812
805
(316)
33,705$96,253
145,209
10,74434,47795,451
5,467
19,773(1,701)
405,673

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

9,898
5,278
8,735
88
(11,509)
12,49010,214
4,830
9,041
225
(11,264)
13,046

106,378
56,72393,870944(123,687)
134,228

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

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

6,421
476
1,398
(375)
7,920

71,114
3,694
12,782(3,853)83,737338
338¥58,368274
274¥54,945

3,637
3,637
$627,275

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 2010

8

2010

2009

Thousands of
U.S. dollars(Note 3)2010

Current Liabilities:
Short-term debt and current portion of long-term debt (Note 6)
Notes and accounts payable
Accrued income taxes
Accrued liabilities
Advances from customers
Lease obligations (Note 6)
Accrued bonuses
Reserve for losses on work in progress
Reserve for warranty costs for completed works
Other current liabilities
Total current liabilities¥4,280
2,757
195
4,270
7,357
157
249
717
478
382
20,842¥8,815
3,082
105
4,418
3,304
194
198
1,070
119
250
21,555$46,002
29,6272,098
45,89379,066
1,687
2,679
7,708
5,135
4,092
223,987

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)
Other long-term liabilities
Total long-term liabilities

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

1,340
522
2,189
210
966
148
5,375

42,574
3,919
23,364
3,014
4,071
968
77,91018,5801,104
13,608(3,743)29,54918,580
1,104
10,953(2,813)27,824

199,678
11,865
146,248(40,230)
317,561

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

338
40
376
(652)
102
89
28,015¥54,945

3,767
(61)
8,514
(5,579)6,641
1,176
325,378$627,275

LIABILITIES and NET ASSETS
Millions of yen

Commitments and Contingent Liabilities (Note 10)
Net Assets
Shareholders’ Equity:
Common stock:
Authorized: 297,000,000 shares
Issued: 138,730,741 shares
Additional paid-in capital
Accumulated earnings
Less: Treasury stock, at cost
Total shareholders’ equity
Valuation and Translation Adjustments:
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 valuation and translation adjustments
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of the consolidated financial statements.

9

Toyo Kanetsu K.K. Annual Report 2010

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Operations
For the years ended March 31, 2010 and 2009

2010

2009

Thousands of
U.S. dollars(Note 3)
2010

¥50,446
42,600
7,846
3,983
3,863

¥47,661
41,514
6,147
4,280
1,867

$542,144
457,822
84,32242,80441,518

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

384
(87)
(586)
422
58
191
2,058

1,708
(875)
(2,792)
729
361
(869)
40,649

241
0
(5)
165
-

15
(25)
(49)
(37)
146
542
(55)
133
292

2,595
0
(58)
1,778
-

57
458
4,240

100
1,062
3,120

609
4,924
45,573

211
453
664
16
¥3,560

151
(39)
112
3
¥3,005

2,269
4,873
7,142
170
$38,261

Millions of yen

Net Sales
Cost of Sales (Note 12)
Gross profit
Selling, General and Administrative Expenses (Notes 11 and 12)
Operating Income
Other Income (Expenses):
Interest and dividend income
Interest expense
Foreign currency exchange gain (loss)
Equity in income (loss) of affiliates
Other, net
Income before extraordinary items
Extraordinary Profit (Loss):
Gain on sale or disposal of property, plant and equipment, net
Loss 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
Reversal of provision for contingent loss
Impairment loss
Gain on forgiveness of debts
Gain on adjustment for changes of accounting standard forlease transaction
Other, net
Income before income taxes and minority interests
Income Taxes (Note 9):
Current
Deferred
Minority Interests in Net Income (Loss) of Consolidated Subsidiaries
Net Income

2010

2009

U.S. dollars(Note 3)2010

¥28.75¥22.99$0.31

Yen

Per Share (Note 21)
Net income

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

Toyo Kanetsu K.K. Annual Report 201010

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2008, 2009 and 2010

Millions of yen

Balance at March 31, 2008
Cash 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, 2009

Treasury
stock

Total
Shareholders’Equity¥8,481
(533)
3,005
-

¥(1,601)(1,212)¥26,564(533)
3,005(1,212)

-

-

-

-

¥1,104¥10,953¥(2,813)¥27,824

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stock

Common stock

138,730,741-¥18,580-¥1,104---

138,730,741¥18,580

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

Balance at March 31, 2008
Cash 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, 200911

Toyo Kanetsu K.K. Annual Report 2010

Deferred
gains orlosses onhedges

Unrealized
Foreign
Total
gains oncurrency
valuation andrevaluation of translationtranslation
land
adjustments adjustments

Minority
interests

Total Net Assets¥2,576
-

¥(94)
-

¥391
-

¥(638)-¥2,235-¥-¥28,799(533)
3,005(1,212)(2,238)---(2,238)-(2,238)

-

134
-

(15)
-

(14)

134
(15)
(14)

-

-

89

134
(15)
(14)
89

¥338

¥40

¥376

¥(652)¥102¥89¥28,015

Millions of yen

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

Minority interests
Balance at March 31, 2010

Treasury
stock

Total
Shareholders’Equity¥10,953
(504)
3,560
-

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

-

(401)

-

(401)

-

-

-

-

-

¥18,580¥1,104¥13,608¥(3,743)¥29,549

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stock

Common stock

138,730,741-¥18,580-¥1,104---

138,730,741

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

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

Minority interests
Balance at March 31, 2010

Deferred
gains orlosses onhedges

Unrealized
Foreign
Total
gains oncurrency
valuation andrevaluation of translationtranslation
land
adjustments adjustments

Minority
interests

Total Net Assets

¥338
-

¥40
-

¥376
-

¥(652)
-

¥102
-

¥89
-

¥28,015
(504)
3,560
(930)

-

-

-

-

-

-

(401)

12

-

-

-

12

-

12

¥350

(45)
¥(5)

416
¥792

133
¥(519)

(45)
416
133
¥618

20
¥109

(45)
416
133
20
¥30,276

Toyo Kanetsu K.K. Annual Report 201012

Thousands of U.S. dollars (Note 3)

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

Minority interests
Balance at March 31, 2010

Treasury
stock

Total
Shareholders’Equity$117,707(5,413)38,261-$(30,231)(9,999)$299,019(5,413)38,261(9,999)-(4,307)-(4,307)

-

-

-

-

-

$199,678$11,865$146,248$(40,230)$317,561

Minority
interests

Total Net Assets

Additional
Accumulated
paid-in capital earnings (deficit)

Number of shares ofcommon stock

Common stock

138,730,741-$199,678-$11,865---

138,730,741

Thousands of U.S. dollars (Note 3)

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

Minority interests
Balance at March 31, 2010

Net unrealized
holding (gains)losses on
investment
securities

Deferred
gains orlosses onhedges$3,635-$425-$4,041-$(7,009)-$1,092-$962-$301,073(5,413)38,261(9,999)

-

-

-

-

-

-

(4,307)

132

-

-

-

132

-

132

$3,767

(486)
$(61)

4,473
$8,514

1,430$(5,579)

(486)
4,473
1,430
$6,641214$1,176

(486)
4,473
1,430
214
$325,378

Unrealized
Foreign
Total
gains oncurrency
valuation andrevaluation of translationtranslation
land
adjustments adjustments

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

13

Toyo Kanetsu K.K. Annual Report 2010

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2010 and 2009

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Amortization of long-term prepaid expenses
Impairment loss
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for employees’ retirement benefits
Increase (decrease) in provision for retirement benefit for directors
and corporate auditors
Increase (decrease) in provision for losses on work in progress
Increase (decrease) in provision for warranty costs for completed works
Increase (decrease) in provision for contingent loss
Interest and dividend income
Interest expense
Exchange loss (gain)
Equity in loss (income) of affiliates
Loss (gain) on sale of investments in 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
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
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
Increase in Cash and Cash Equivalents from Newly Consolidated Subsidiaries
Cash and Cash Equivalents at End of Year (Note 14)

Thousands of
U.S. dollars(Note 3)
2010

2010

2009

¥4,240¥3,120$45,573

739
134
(174)
(588)

680
402
55
(5)
(666)

7,937
1,443
(1,872)(6,316)

-

(193)

-

(353)
359
(159)
81
(23)
(68)
0
(283)
39
(568)
580
(140)
(1,153)
39
(545)
4,054
149
6,360
181
(76)
(86)
6,379

167
(144)
(542)
(384)
87
441
(422)
25
49
(46)
21
(578)
105
257
(166)
987
(3,855)
(47)
(652)
392
(93)
(169)
(522)

(3,791)
3,855(1,708)
875
(242)
(729)
0
(3,042)422(6,106)
6,227(1,509)(12,392)421(5,859)43,567
1,599
68,353
1,950
(822)
(924)
68,557

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

(36)
176
(737)
68
(199)
27
(168)
690
(155)
(334)

(817)
387
(6,792)5,614(2,310)
0
(323)
1,729
376
(2,136)(3,653)3,650(1,864)(930)(501)(3,298)
56
2,938
6,865
¥9,803

3,979(1,553)(1,212)
(530)
684
(325)
(497)
7,326
36
¥6,865(39,260)
39,226(20,031)(9,999)(5,379)(35,443)596
31,57473,776$105,350

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

Toyo Kanetsu K.K. Annual Report 201014

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2010 and 2009
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 (ten subsidiaries in 2009). All significant
inter-company transactions and accounts and unrealized inter-company profits are eliminated on consolidation.
The consolidated subsidiary, Global Eight Corporation has been excluded from consolidated subsidiaries for the year ended
March 31, 2010, according to liquidation. The affiliated company, Toyo Kanetsu (Malaysia) Sdn. Bhd. has been included inconsolidated subsidiaries for the year ended March 31, 2009, because of the increased significance of business transaction with
the Company and certain consolidated subsidiaries.
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, 2010 and 2009. Consolidated net
income includes the Company’s equity in the current earnings of those companies after elimination of unrealizedinter-company profits.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five overseas subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2009 for the current year
consolidation and at December 31, 2008 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.
(Changes in accounting method)
The Company applied to “Standard Accounting Treatments to the Accounting of Overseas Subsidiaries in the Consolidated
Financial Statements” (Statement No.18 corresponding business reporting issued by the Accounting Standards Board of Japan(hereinafter the “ASBJ”) on May 17, 2006) for the year ended March 31, 2009. The standards require the Company to makenecessary adjustments to conform the accounts of foreign subsidiaries with the accounting principles and practices generally
accepted in Japan.
(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 short-term investments with an original maturity of three months or less and which represent 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.

15

Toyo Kanetsu K.K. Annual Report 2010

(5) Inventories
Inventories are valued at cost as determined by the following methods:
Raw materials……………………….Moving-average method (a carrying amounts on the balance sheet is written down
if the profitability decreases)
Work in process and supplies ………Specific identification method (a carrying amounts on the balance sheet is written
down if the profitability decreases)(Changes in accounting method)“Accounting Standards for Revaluation of Inventories (Statement No. 9 issued by ASBJ on July 5, 2006)” were effective forthe year ended March 31, 2009.
Accordingly, the Company and its consolidated subsidiaries have determined costs of inventory mainly based on specificidentification method and have written off carrying amounts to reflect the lower profitability for the year ended March 31,
2009.
(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as "hedging instruments" (see 17.
Derivative and Hedging Activities below).
(b) 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,skips to 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 50 years for buildings and from 6 to 13 years
for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries has changed the useful
lives for the machinery and equipment in connection with the amendments of Corporation Tax Law in Japan.
(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.

Toyo Kanetsu K.K. Annual Report 201016

(10) Reserve for Losses on Work in Progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
Work in progress on construction contracts in which losses are envisaged and the reserve for losses on work in progress are notmutually offset but are both presented.
Of the total amount of work in progress on construction contracts in which losses are envisaged, the amount corresponding to
the reserve for losses on work in progress is ¥123 million ($1,318 thousand).
(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) Reserve for Contingent Loss
A reserve for contingent loss is provided at the amount which can be reasonably estimated according to the occurrence ofcontingency and considering the risks of each contingency.
(13) 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.
(14) 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.
(15) Accrued Retirement Benefits for Employees
Accrued retirement benefits to 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 to employees are calculated using the simplified method. The amount of
actuarial gains (losses) is amortized on a straight-line basis over five years and recognized as deductions from expenses or
included in expenses, respectively, in the next fiscal year. Prior service cost is recognized as deductions from expenses or
included in expenses, respectively, in the year of occurrence.
(Changes in accounting method)
Effective from the year ended March 31, 2010, the Company and its consolidated subsidiaries adopted the partial amendmentof the Financial Accounting Standard for Retirement Benefits (Part 3) (Statement No. 19 issued by ASBJ on July 31, 2008).
The application of the standard had no effect on operating income or net income before income taxes.
(16) Leases(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries have adopted “AccountingStandard for Lease Transactions (Statement No. 13 issued by the ASBJ on March 30, 2007)” and “Guidance on AccountingStandard for Lease Transactions (Guidance No. 16 issued by the ASBJ on March 30, 2007)”.
Lessee;In accordance with the above standards, finance leases, prior to April 1, 2008 without transferring ownership of the lease assets
to the lessee have been accounted for as sales-type transactions while they were previously accounted for as operating leases.
In addition, depreciation of assets on finance leases without transferring ownership of the lease assets to the lessee is computed
using the straight-line with no residual value over lease period as useful lives. In this regard, however, all leases transacted onor before March 31, 2008 are accounted for as operating leases.
Lessor;In accordance with the above standards, finance leases, prior to April 1, 2008 without transferring ownership of the lease assets
to the lessee have been accounted for as sales-type transactions while they were previously accounted for as operating leases.
(17) Accounting for Consumption Tax
The Company and its domestic consolidated subsidiaries account for consumption tax by the tax-exclusion method.

17

Toyo Kanetsu K.K. Annual Report 2010

(18) Significant Accounting Policies for Earnings and Expenses(a) Accounting policy for net sales of completed construction contracts and cost of sales of completed construction contracts
For work in progress up to March 31, 2010, the Company accounted for projects with an outcome deemed certain on thepercentage-of-completion basis (with the estimated stage of completion calculated on the cost-to-cost basis) and other projects
on the completed-contract basis.
(Changes in accounting method)
Regarding the accounting policy for earnings from construction contracts, previously, the Company and some consolidated
subsidiaries accounted for contracts of which period from the beginning of construction work to the date of delivery is one year
or longer on the percentage-of-completion basis and other contracts on the completed-contract basis or upon delivery. Effectivefrom the fiscal year ended March 31, 2010, the Company and some consolidated subsidiaries adopted the Accounting Standard
for Construction Contracts (Statement No. 15 issued by ASBJ on December 27, 2007) and the Guidance on AccountingStandard for Construction Contracts (Guidance No. 18 issued by ASBJ on December 27, 2007). Accordingly, starting withconstruction contracts begun in the year ended March 31, 2010, for work in progress up to March 31, 2010, the Company andsome consolidated subsidiaries accounted for contracts, of which percentage of completion can be reliably estimated on thepercentage-of-completion basis (with the estimated stage of completion calculated on the cost-to-cost basis) and other projects
on the completed-contract basis.
The effect of the application of the standard in the fiscal year ended March 31, 2010, was to increase “Net sales” by ¥1,488
million ($15,991 thousand) and each of “Operating income”, “Income before extraordinary items”, and “Net income before
income taxes” by ¥59 million ($638 thousand).
The effect on segmental information is presented at the relevant section.
(b) Regarding finance lease transactions, sales and cost of sales were recorded when lease receivables from customers are paid.
(c) One consolidated subsidiary recognizes revenue on the installment basis.
3. United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥93.05=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2010, 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.
4. Inventories
Inventories as at March 31, 2010 and 2009 consisted as follows:
Thousands of
U.S. dollars
2010
$32
6,882
88,537$95,451

Millions of yen
2009
2010
¥29
¥3
621
640
8,091
8,239
¥8,741¥8,882

March 31
Merchandise
Raw materials and supplies
Work in process
Total

5. Investments in Securities
The aggregate acquisition cost and carrying amounts of other securities with market quotations at March 31, 2010 and 2009were as follows:
Millions of yen
March 31
Equity securities
Bonds
Other
Total

Thousands of U.S. dollars
2010

2009

2010
Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference

Acquisition
Cost

Carrying
AmountDifference¥3,370¥3,370¥3,957¥3,957¥587¥587¥3,193¥3,193¥3,803¥3,803¥610¥610$36,212$36,212$42,525$42,525$6,313$6,313

The Company writes down the book value of other securities when the market value declines by more than 50%, or the market
value declines by more than 30% but less than 50% and the Company management determines the decline to be other than
temporary.
Proceeds from sale of other securities were nothing and ¥26 million for the years ended March 31, 2010 and 2009, respectively.
On those sales, gross realized gains were nothing and ¥0 million for the years ended March 31, 2010 and 2009, respectively.
Gross realized losses were nothing and ¥25 million for the years ended March 31, 2010 and 2009, respectively.
Non-listed stocks whose fair value was not determinable was not included in the above table. For the years ended March 31,
2010 and 2009, the carrying amounts of them in the consolidated balance sheet were respectively ¥2,442 million ($26,248
thousand) and ¥803 million.
Toyo Kanetsu K.K. Annual Report 201018

Commercial paper was not included in the above table as the period to maturity of it was short and the fair value was close to
the book value. For the years ended March 31, 2010 and 2009, the carrying amounts of them on the balance sheet wererespectively ¥1,000 million ($10,744 thousand) and nothing.
Investments in affiliates included in investments in securities were ¥1,857 million ($19,957 thousand) and ¥1,815 million forthe years ended March 31, 2010 and 2009, respectively.
6. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. dollars
2010

Millions of yen
2009

2010
March 31
Short-term debt
Current portion of long-term debt
Lease obligations (current liabilities)
Long-term debt
Lease obligations (long-term liabilities)
Total

Weighted
averageinterest rate

¥3,252
1,029
157
3,961
365
¥8,764

0.83%
2.27%
1.33%
-

Weighted
averageinterest rate

¥6,951
1,864
194
1,340
522
¥10,871

1.07%
2.28%
2.29%
-

$34,947
11,055
1,687
42,574
3,919$94,182*The above interest rates were calculated by weighted average method based on the balance of debt at end of fiscal year.

Secured debt as at March 31, 2010 and 2009 were as follows:
March 31
Short-term debt secured by buildings, machinery and landLong-term debt secured by buildings, machinery and land
Total
Short-term debt secured by investments in securities
Long-term debt secured by investments in securities
Total

Millions of yen
2009
2010
¥2,520
¥470
100
1,850
¥2,620¥2,320
¥124
214
¥338

¥230
100
¥330

Thousands of
U.S. dollars
2010$5,051
19,882$24,933$1,335
2,297$3,632

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2010 and 2009 were as follows:
Millions of yen
2009
2010
¥572
¥535
14
9
5,459
5,459
¥6,045¥6,003

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

¥361

¥374

Annual maturities of long-term debt and lease obligations as at March 31, 2010 were as follows:Year ending on March 31,
2012
2013
2014
2015

19

Toyo Kanetsu K.K. Annual Report 2010

Long-term debt
Thousands ofMillions of yen
U.S. dollars¥3,311$35,589
650
6,985
-

Lease obligations
Thousands ofMillions of yen
U.S. dollars¥160$1,720
74
793
78
840
53
566

Thousands of
U.S. dollars
2010$5,74598
58,668$64,511$3,883

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” No. 2 article 3, and is calculated based on land prices set in the “Law on Land Revaluation” No. 2 article 4, withcertain reasonable adjustments.
The excess of the book value over the current market value of such revalued land held at March 31, 2010 and 2009 amounted
to ¥3,118 million ($33,506 thousand) and ¥3,612 million, respectively.
8. Retirement Benefits Plan
The Company and some consolidated subsidiaries have defined benefits pension plans and employee’s pension funds bymulti-employer plan as the system of defined benefits. The other consolidated subsidiaries have tax-qualified pension plans
and termination allowance plans.
The Company and certain consolidated subsidiaries also have the defined contribution pension plans.
The accrued retirement benefits as of March 31, 2010 and 2009 were as follows:
Millions of yen
2009
2010
¥(3,012)¥(2,815)
1,888
2,634
(1,124)
(181)
158
(168)
(966)
(349)
30
¥(966)¥(379)March 31
Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial differences
Net retirement benefit obligations
Less: Pension costs paid in advanceAccrued retirement benefits for employees

Thousands of
U.S. dollars
2010$(30,252)
28,310(1,942)(1,806)(3,748)323$(4,071)

Net pension and severance costs related to the retirement benefit plans for the years ended March 31, 2010 and 2009 were as
follows:
Millions of yen
2009
2010
¥159
¥147
51
46
(16)
(19)
16
33
45
43
¥255
¥250

Thousands of
U.S. dollars
2010$1,576
498
(203)
357
459
$2,687

2010
1.5%
1.0%

2009
1.5%
1.0%

Straight-line basis

Straight-line basis

Expensed in the year ofoccurrence
5 years

Expensed in the year ofoccurrence
5 years

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

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

Toyo Kanetsu K.K. Annual Report 201020

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, 2010 and 2009. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
At March 31, 2010 and 2009, 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
2009
2010

Thousands of
U.S. dollars
2010

Less: valuation allowance
Gross deferred tax assets

¥708
23
116
101
172
292
337
85
581
62
444
2,921
(2,377)544¥2,000
15
239
81
274
438
348
92
424
96
189
4,196
(3,359)837$7,608
242
1,242
1,090
1,845
3,136
3,625
917
6,247
668
4,771
31,391(25,547)
5,844

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

2,174
206
77
27
¥2,484

2,189
109
100
1
¥2,39923,364
2,214
830
285
$26,693

Other

Deferred tax assets and liabilities as at March 31, 2010 and 2009 were recorded in the consolidated balance sheet as follows:
Millions of yen
2009
2010
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)

¥509
35
30
280
¥2,174

Thousands of
U.S. dollars
2010

¥812
25
210
¥2,189$5,467
378
315
3,014
$23,364

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2010 and2009 were as follows:
Statutory income tax rate
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance
Permanently non-deductible expenses
Permanently non-taxable dividends received
Local inhabitant’s tax
Difference in tax rates for foreign subsidiaries
Equity in income of affiliates
Adjustment for unrealized gains and losses
Other
Effective income tax rate

2010
40.7%

2009
40.7%

(26.5)
1.5
(0.7)
0.6
(0.2)
(0.6)
0.6
0.3
15.7%

(32.5)
2.5
(2.6)
0.9
(0.3)
(5.5)
0.2
0.2
3.6%

10. Commitments and Contingent Liabilities
As at March 31, 2010, the Company was contingently liable for the affiliated company as follows:
March 31
Trade liabilities

21

Toyo Kanetsu K.K. Annual Report 2010

Millions of yen
2009
2010
¥1,600¥500

Thousands of
U.S. dollars
2010$5,373

11. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2010 and 2009 were as
follows:
Thousands of
U.S. dollars
2010$14,161
1,047
1,845
45

Millions of yen
2009
2010
¥1,347¥1,318
70
97
184
172
15
127
4

Year ended on March 31
Salaries and benefits
Accrued bonuses
Pension and severance costs
Accrued retirement benefits for directors and corporate auditors
Allowance for doubtful accounts

12. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2010 and 2009 were ¥344 million ($3,700 thousand) and ¥496 million, respectively.
13. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2010 and 2009 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

2010

2009

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

12,9905,260
18,2505,433
7,557
12,990For the year ended March 31, 2010, treasury stock increased by 5,260 thousand shares resulting from purchasing treasury stock
5,088 thousand shares based on decision in the board of director’s meeting and purchasing 172 thousand shares less than one
unit.
For the year ended March 31, 2009, treasury stock increased by 7,557 thousand shares resulting from purchasing treasury stock
7,491 thousand shares based on decision in the board of director’s meeting and purchasing 66 thousand shares less than one
unit.
Cash dividends paid to shareholders from the beginning of the effective date were as follows:
Approved by annual general shareholder’s meeting
Date of approval
Type of shares
Date of record
Effective date
Dividends per share
Amount cash dividends

2010

2009

June 26, 2009
Common stock
March 31, 2009
June 29, 2009
¥4.00 ($0.04)¥504 million($5,413 thousands)

June 27, 2008
Common stock
March 31, 2008
June 30, 2008
¥4.00
¥533 million

Cash dividends for the year ended March 31, 2010 as a date of record but an effective date subsequent to the current fiscal year
were as follows:
Resolution
approved by
Annual generalshareholder’smeeting held on
June 29, 2010

Type ofsharesDate ofrecordEffective
date

Paid from

Common stock

March 31,2010

June 30,
2010

Accumulated
earnings

Per share
(Yen)
¥4.00

Amount cash dividends
Millions ofThousands of
Yen
U.S. dollars¥483$5,186

Toyo Kanetsu K.K. Annual Report 201022

14. Cash and Cash Equivalents
Cash and cash equivalents as at March 31, 2010 and 2009 for the purpose of statement of cash flows consisted of:March 31
Cash on hand and at bankLess: Time deposits, over 3-month term
Less: Other
Commercial paper
Cash and cash equivalents

Millions of yen
2009
2010
¥6,978¥8,956
(112)
(152)
(1)
(1)
1,000
¥6,865¥9,803Thousands of
U.S. dollars
2010$96,253(1,634)(13)
10,744$105,350

15. Leases
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
2009
2010
¥3,491156(439)¥3,208

Thousands of
U.S. dollars
2010¥4,435179(603)¥4,011$37,514
1,679(4,716)$34,477

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

Millions of yen
2009
2010
¥1,189¥1,443
1,017
1,083
750
911
333
643
164
225
¥38
¥130

Thousands of
U.S. dollars
2010$12,778
10,930
8,054
3,575
1,765
$412

16. Financial Instruments(1) Overview(A) Policy for financial instruments
The Company raises funds required for its operations through borrowings from banks. In the event temporary surplus of funds
arise, the Company invests them in financial instruments, which are highly secured.
In accordance with the Company’s policy for derivative transactions, such transactions are used to reduce exposure to the risks
specified in (B) and derivative transaction is not used for speculation purpose.
(B) Description of financial instruments and related risk and risk management systems
Notes and accounts receivable and investments in leases are exposed to customer credit risk, while certain receivables
denominated in foreign currency are exposed to the risk of foreign currency exchange rate fluctuation. The Company seeks tominimize risk by regularly monitoring the status of receivables using management charts and other methods in the case ofcustomer credit risk and by making borrowings denominated in foreign currency as necessary in the case of risk from foreign
currency exchange rate fluctuation.
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 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.

23

Toyo Kanetsu K.K. Annual Report 2010

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. The Company seeks to minimize liquidity risk by
regularly preparing cash flow worksheet and using other methods and enters into forward exchange contracts as necessary inthe case of risk of foreign currency exchange rate fluctuation.
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 fix interest rates for major
long-term debt, interest rate swaps are used as a hedging instrument for individual contracts. Interest rate swaps are limited tothe 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 made byregularly 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 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 the Note 17. Derivative and Hedging Activities does not represent themarket risk involved in the derivative transactions.
(2) Fair value of financial instruments, etc.
The carrying amounts in the consolidated balance sheet and fair values and the corresponding differences at March 31, 2010
(the consolidated accounting date) are as set out below. In the case of items where estimation of the fair value is recognized tobe very difficult, the relevant item is not included in the table below (see note *4 below).
Millions of yen
March 31
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases
Allowance for doubtful accounts (*1)(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets
Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due
within one year)(l) Lease obligations (including amount due
within one year)
Total liabilities
Derivative transactions (*2)

Carrying amount

Fair value

Differences¥8,956
13,511(34)
13,477¥8,956¥-

13,477

-

1,000
3,052
(30)
3,022

1,000

-

3,136

114

4,175
120
344
(13)
331
¥31,081

4,137
120

(38)
0

331
¥31,157

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

¥-

4,990

5,012

22

522

562

40

¥15,536¥15,598

¥62

¥(1)

¥(1)

¥-

Toyo Kanetsu K.K. Annual Report 201024

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

Carrying amount

Fair value

Differences$96,253
145,209(374)
144,835$96,253$-

144,835-

10,74432,798(316)
32,482

10,744-33,705

1,223

44,866
1,290
3,694
(137)
3,557
$334,027

44,457
1,290

(409)
0

3,558
$334,842

1$815$29,627
34,94743,153$29,627
34,94743,153$-53,62953,860

231

5,606

6,036

430

$166,962$167,623

$661

$(6)

$(6)

$-

*1.The allowances for doubtful accounts included in notes and accounts receivable, investments in leases, and long-term loans
receivable have been deducted.
*2.Net credits and liabilities arising from derivative transactions are presented on a net basis; in the case of an overall net
liability, the amount is presented in parentheses.
*3.Fair value calculation method for financial instruments and notes on marketable securities and derivative transactions[Assets](a) Cash on hand and at bank and (b) Notes and accounts receivable
As these are mainly settled over short periods and the fair value is close to the book value, these are stated at therelevant book value.
(c) Marketable securities
As the period to maturity is short and the fair value is close to the book value, these are stated at the relevant bookvalue.
(d) Investments in leases
These are presented at present value consisting of receivables from lease receivables, following elimination of estimatedresidual value, discounted at a rate consisting of the base rate for the period to maturity and an allowance for credit risk.
(e) Investments in securities
Fair value reflects stock exchange price. For related notes, see Notes on 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.

25

Toyo Kanetsu K.K. Annual Report 2010

(l) Lease obligations (including amount due within one year)
These are treated similarly to investments in leases (Item (d) in the Assets section above), but since the credit risk istransferred to the creditor of the investment in leases that constitutes the liability, they are stated at present value
discounted at the base rate without risk.
[Derivative transactions]
For related notes, see 17.Derivative and Hedging Activities.
*4.As there is no market price for non-listed stocks (carrying amount in consolidated balance sheet ¥2,442 million ($26,248
thousand)) 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 end of the fiscal year of monetary debt and marketable securities with maturity dates are
as follows:
Millions of yen
As at March 31, 2010
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

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

¥37
¥37

¥42
¥42

Thousands of U.S. dollars
As at March 31, 2010
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Short-term loans receivable
Long-term loans receivable
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years$95,933
127,473
10,744
10,3651,290
13$245,818$17,362
21,723
3,090$42,175

$394
$394

$454
$454

*7.Repayment schedule of long-term debt and other interest-bearing debt is mentioned in 6. Short-Term Debt, Long-Term Debt,
and Lease Obligations.
(Additional information)
From the fiscal year ended March 31, 2010, the Company and its consolidated subsidiaries applied the Accounting Standard
for Financial Instruments (Statement No. 10 issued by ASBJ on March 10, 2008) and the Guidance on Disclosures about Fair
Value of Financial Instruments (Guidance No. 19 issued by ASBJ on March 10, 2008).
17. Derivative and Hedging Activities
In the year ended March 31, 2010, there were no derivative transactions to which hedge accounting was not applied.
In the year ended March 31, 2010, derivative transactions covered by hedge accounting were as follows:(1)Currency-related

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

Due within one
year
¥616
255
¥871

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

¥616
255
¥871

Fair value

¥619
251
¥870

Toyo Kanetsu K.K. Annual Report 201026

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

Due within one
year

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

$6,616
2,745$9,361$$-$6,616
2,745$9,361

Fair value$6,656
2,699$9,355*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, 2010
Interest rate swaps(receivable rate variable/payable rate fixed)

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

Due within one
year
¥380

Due within one
year$4,083

Millions of yen
Contract value
Due after one
Total
year
¥3,790¥4,170Thousands of U.S. dollar
Contract value
Due after one
Total
year
$40,734$44,817

Fair value(*4)

Fair value(*4)*4.As item to which exceptional treatment of interest rate swaps is applicable are treated as a single unit with the long-term
debt covered by the hedge, the fair value is included in the fair value indicated for the relevant long-term debt.
18. 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 period ended March 2010, the net rent income on therelevant real estate for leasing was ¥292 million ($3,136 thousand) with rent income recorded under net sales and rent
expenses under cost of sales and the gain on sales of fixed assets ¥274 million ($2,945 thousand) recorded under extraordinary
profit.
The carrying amounts in the consolidated balance sheet of the relevant real estate for leasing, the change during the period, andthe fair value are as set out below.
Millions of yen
2010

Thousands of
U.S. dollars
2010

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

¥6,310(859)
5,451$67,807(9,230)58,577

Fair value at the end of fiscal year

¥3,989$42,871*1.The carrying amounts in the consolidated balance sheet is the acquisition cost, net of accumulated depreciation andaccumulated impairment loss.
*2.Change during the period is mainly due to decrease in leased area ¥366 million ($3,932 thousand), sale of land ¥316 million($3,400 thousand), and sale of depreciation assets ¥107 million ($1,146 thousand).
*3.Fair value of significant properties at March 31, 2010 represents a price based on appraised value determined by an external
real estate appraiser. Fair value of insignificant properties is based on index considered to appropriately reflect market
price.
(Additional information)
From the fiscal year ended March 31, 2010, the Company and its consolidated subsidiaries applied the Accounting Standard
for Disclosures about Fair Value of Investment and Rental Property (Statement No. 20 issued by ASBJ on November 28, 2008)
and the Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property (Guidance No.
23 issued November 28, 2008).

27

Toyo Kanetsu K.K. Annual Report 2010

19. Segment Information(1) Industry Segment Information
The operations of the Company and its consolidated subsidiaries for the years ended March 31, 2010 and 2009 weresummarized by product group as follows:
Millions of yen
Plant &
Machinery
Division

Material
Handling
Systems
Division

Building
Construction
Division

Real Estate
Utilizing
Division¥24,224
24,224¥20,897
20,897¥2,633
2,633

¥539
102
641

Operating costs and expenses
Operating income

21,7842,440

19,833
1,064

2,568
65

AssetsDepreciation
Capital expenditure

20,763250
370

12,530
248
115

3,235
13
5

Plant &
Machinery
Division

Material
Handling
Systems
Division

Building
Construction
Division

Real Estate
Utilizing
Division¥26,392
26,392¥11,961
11,961¥5,020
(1)
5,019

¥592
124
716

Operating costs and expenses
Operating income (loss)

24,331
2,061

12,460
(499)

4,863
156

AssetsDepreciation
Impairment loss
Capital expenditure

22,112
174
243

10,401
185
389

3,946
10
5

Year ended March 31, 2010
Sales
Sales to external customers
Inter-segment sales
Total

Sub total

Eliminationor
corporate
assetsConsolidated
total¥2,153785
2,938¥50,446887
51,333

¥
(887)
(887)

¥ 50,446
50,446

349
292

2,667
271

47,201
4,132

(618)
(269)

46,583
3,863

5,425
92
1

6,542
115
43

48,495
718
534

9,873
21
166

58,368739
700

Sub total

Eliminationor
corporate
assetsConsolidated
total¥3,696825
4,521¥47,661
948
48,609

¥
(948)
(948)

¥ 47,661
47,661

351
365

4,377
144

46,382
2,227

(588)
(360)

45,794
1,867

4,972
144
30

6,656
148
55
86

48,087
661
55
753

6,858
19
3

54,945
680
55
756

Other

Millions of yen

Year ended March 31, 2009
Sales
Sales to external customers
Inter-segment sales
Total

Other

*1. Major products of each division are as follows:
Plant & Machinery Division……………..storage tanks for LNG, LPG, crude oil and other gas/liquid
Material Handling Systems Division……..material handling systems for delivery, sorting, control and various type of
convey instruments
Building Construction Division….............apartment house, office building, shop building and warehouse building
Real Estate Utilizing Division……………real estate rental
Other…………………………………...leasing etc.
*2.Allocated operating costs and expenses belonging to administrative department for the year ended March 31, 2010 and 2009were respectively ¥281 million ($3,022 thousand) and ¥374 million, which was included in “Elimination or corporate
assets”.
*3.Corporate assets consisted of cash on hand and at bank, investments in securities and the assets belonging to theadministration department of the Company. Corporate assets at March 31, 2010 and 2009 were ¥11,622 million ($124,905
thousand) and ¥8,000 million, respectively.
*4.As indicated in 2. Summary of Significant Accounting Policies (18) Significant accounting policies for earnings andexpenses (a) above, from the fiscal year ended March 31, 2010, the Company and some consolidated subsidiaries applied
the Accounting Standard for Construction Contracts (Statement No. 15 issued by ASBJ on December 27, 2007) and the
Guidance on Financial Accounting Standard for Construction Contracts (Guidance No. 18 issued by ASBJ on December 27,2007).
In the fiscal year ended March 31, 2010, the application of the standard increased net sales by ¥192 million ($2,057
thousand) and operating income by ¥18 million ($195 thousand) in the Plant & Machinery Business, net sales by ¥1,205
million ($12,953 thousand) and operating income by ¥38 million ($409 thousand) in the Material Handling Systems
Business, and net sales by ¥91 million ($981 thousand) and operating income by ¥3 million ($34 thousand) in the Building
Construction Business.

Toyo Kanetsu K.K. Annual Report 201028

Thousands of U.S. dollars

Year ended March 31, 2010
Sales
Sales to external customers
Inter-segment sales
Total

Plant &
Machinery
Division

Material
Handling
Systems
Division

Building
Construction
Division

Real Estate
Utilizing
DivisionOther

Sub total

Eliminationor
corporate
assetsConsolidated
total$260,340
260,340$224,574
224,574$28,298
28,298$5,795
1,090
6,885$23,137
8,438
31,575$542,144
9,528
551,672$(9,528)(9,528)$542,144
542,144

Operating costs and expenses
Operating income

234,114
26,226

213,144
11,43027,604
694

3,749
3,136

28,6582,917

507,269
44,403(6,643)(2,885)

500,626
41,518AssetsDepreciation
Capital expenditure

223,143
2,684
3,982

134,657
2,668
1,232

34,764137
49

58,307993
1470,302
1,232
462

521,173
7,714
5,739

106,102223
1,779

627,275
7,937
7,518

(2) Geographic Segment Information
Segment information classified by geographic area is not presented because the majority of the Companies’ operations are
conducted in Japan.
(3) Export Sales and Sales by Overseas Subsidiaries
Overseas sales of the Company and its domestic consolidated subsidiaries and sales of the overseas consolidated subsidiaries
other than export to Japan for the year ended March 31, 2010 and 2009 were summarized as follows:
Millions of yen
Year ended March 31, 2010
Overseas sales
Consolidated Sales
Ratio

South-east
Asia¥1,206
2.4%

Middle
East
¥646
1.3%

Year ended March 31, 2009
Overseas sales
Consolidated Sales
Ratio

South-east
Asia¥4,310
9.0%

MiddleEast¥1,787
3.8%

Africa¥6,541
13.0%

Other
¥28
0.0%

Total
¥8,421¥50,446
16.7%

Other
¥593
1.3%

Total
¥12,657¥47,661
26.6%

Other
$305
0.0%

Total
$90,502$542,144
16.7%

Millions of yen
Africa¥5,967
12.5%* Major countries included in the above geographic areas were as follows:
South-east Asia:……Singapore, Malaysia
Middle East:………..Iran, Yemen
Africa:…….………..Angola, Algeria
Other:………………China
Thousands of U.S. dollars
Year ended March 31, 2010
Overseas sales
Consolidated Sales
Ratio

29

Toyo Kanetsu K.K. Annual Report 2010

South-east
Asia$12,955
2.4%

MiddleEast$6,942
1.3%

Africa$70,300
13.0%

20. Related Party Transactions
Material transactions of the Company with its related companies, excluding transactions with consolidated subsidiaries which
are eliminated in the consolidated financial statements and other than those disclosed elsewhere in these financial statements,
for the years ended March 31, 2010 and 2009 were as follows:

2010

2009

Thousands of
U.S. dollars
2010

¥500
4

¥1,600-$5,373
43

¥1

-

$16

¥746
274
6

-

$8,015
2,945
67

123
123
¥6

-

1,322
1,322
$59

Millions of yen
Toyo Miyama Co., Ltd.
Amounts of transaction:
Guarantee obligation (*2)
Guarantee commission received (*2)
Balance at the end of fiscal year:
Other current liabilities
Manavis Co., Ltd.
Amounts of transaction:
Sales of plant and land (*3)
Proceeds from sales
Gain on sales
Interest income received
Balance at the end of fiscal year:
Other current assets
Other investments
Other current liabilities*1. The terms and conditions of the above transactions are on an arm's-length basis.
*2. Certain of the operating liabilities are covered by debt guarantee.
*3. These are determined by negotiation with reference to the price as appraised by a real estate appraiser. The payment conditions
stipulate 50% on delivery and the balance in three equal yearly payments with the interest rate set at a reasonable level withreference to market interest rates.
*4. The transaction price does not include consumption taxes.
*5. The relationships with each related company were as follows:
Equity ownership
percentage
Name of related
Paid-inby the Company
Relationshipcompany
capitalPrincipal businessToyo Miyama Co., Ltd.

¥100 million

Architectural business

49.0% (direct)

Guarantee obligation

Manavis Co., Ltd.

¥45 million

Cosmetic and cleaningproducts

12.8% (direct)
3.3% (indirect)

Interlocking directorates(Changes in accounting method)
Effective from the year ended March 31, 2009, the Company and its consolidated subsidiaries adopted “Accounting Standard for
Related Party Disclosures (Statement No. 11 issued by the ASBJ on October 17, 2006)” and “Guidance on Accounting Standard for
Related Party Disclosures (Guidance No. 13 issued by the ASBJ on October 17, 2006)”.

21. Amount Per Share
Amounts per share at March 31, 2010 and 2009 and for the years then ended were as follows:Yen
Net assets
Net income

2010¥250.3928.75

2009¥222.09
22.99

U.S. dollars
2010
$2.69
0.31

Diluted net income per share for the years ended March 31, 2010 and 2009 has not been presented because no potentiallydilutive shares of common stock were outstanding.
Net income per share were 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
2009
2010
¥3,005¥3,560¥3,005¥3,560Thousands of
U.S. dollars
2010$38,261$38,261

Thousands of shares
2009
2010
130,724
123,819
Toyo Kanetsu K.K. Annual Report 2010

30

31

Toyo Kanetsu K.K. Annual Report 2010

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

14,027

Security 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

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
AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C.

P.O. Box 121, Postal Code 118, Al Harthy Complex,
Sultanate of Oman

Toyo Kanetsu K.K. Annual Report 201032

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/