Annual Report 2018
For the year ended March 31, 2018

Lighting up thefuture together

Prof ileYour Partner in theSocial Infrastructure

CONTENTS
02

The Kandenko Group04

Consolidated Financial Highlights

Consolidated 10-Year Financial Summary 28

05

Progress of Medium-Term Management
Plan and Business Results Outlook

Financial Position 29

Kandenko Co., Ltd. aims for the mutual prosperity of its

from design and execution to maintenance andshareholders, customers, and the communities where it

renovation of electrical, telecommunications, and other06

Message from the Management

works, and finds its purpose in this pursuit. We conduct

kinds of work. We are also active in the renewable

08

Business Review by Divisionbusiness in a wide range of fields and have grown into

energy field, where the execution expertise we haveone of the largest general infrastructure companies

accumulated in the fields of solar and wind powerin Japan.

serves us well.

Power Distribution Line Engineering Work 10

telecommunications infrastructure, and electric power

technology front, nurture human resources, and build a

Electric Power & Civil Engineering Work 11

developed technologies, expertise, and work methods
to provide end-to-end engineering services ranging

Consolidated Statement of Income 32
Consolidated Statement ofComprehensive Income 33
Consolidated Statement of
Changes in Equity 34

Information & Communication Work 09

Kandenko will continue to innovate on thesounder financial structure while making a long-lasting

12

Topicscontribution to society as a partner in social

18

Research and Development Activities

the infrastructure.

20

Corporate Governance24

Environmental Initiatives

26

Initiatives for Female Advancement

Financial Section

Consolidated Balance Sheet 30

Electrical Engineering, Environmental Facilities
and Systems, and Renovation Work 08

In fields such as building infrastructure,
infrastructure, Kandenko uses its independently

27

Consolidated Statement of Cash Flows 37
Notes to Consolidated Financial Statements 38
Independent Auditors’ Report 66

67

Company Profile
History 67
Stock Information 68
Board of Directors and Audit &Supervisory Board Members / Network 69

Corporate Motto"People First"
Corporate Philosophy

1. Based on respect for humanity, Kandenko fulfills its duty of corporate social
contribution and contributes to creating richer human environments.
2. By anticipating the needs of customers and seeking technologicalinnovation, Kandenko provides optimal services and facilities.
3. By working for human resource development and continual improvement,
Kandenko aims to be a future-oriented company.

Annual Report 2018

1

The Kandenko GroupThe Kandenko Group consists of Kandenko Co., Ltd. and 31 consolidated subsidiaries whose businesses include facility
installation, electrical equipment sales, real estate and leasing operations, and electric power generation. The positions of thesebusinesses within the Group and the business segment to which they belong are explained below.

Facility Installation Business
The business areas of Kandenko Co., Ltd., and its subsidiaries facility

worksite security operations and Bay Techno Co., Ltd., carries out design

installation works in the electrical, plumbing, and other sectors are theand estimation operations. Kandenko outsources some engineeringbusiness field of Kandenko Co., Ltd., Kawasaki Setsubi Kogyo Co., Ltd.,work, worksite security, and design and estimation operations to these

Kanko Facilities Co., Ltd., Kanagawa K-Techno Co., Ltd., Chiba

subsidiaries.

K-Techno Co., Ltd., Saitama K-Techno Co., Ltd., Ibaraki K-Techno Co.,

Kandenko, Transmission Line Construction Co., Ltd., and SYSTEC

Ltd., Tochigi K-Techno Co., Ltd., Gunma K-Techno Co., Ltd., TamaENGINEERING K.K. receive orders for electrical work from the Tokyo

K-Techno Co., Ltd., Shizuoka K-Techno Co., Ltd., HANDENKO

Electric Power Company (TEPCO) Group.

CORPORATION, Kanko Power Techno Co., Ltd., Kanagawa Power

From the fiscal year ended March 31, 2018, the following entities

Techno Co., Ltd., Chiba Power Techno Co., Ltd., Saitama Power Techno

have been included in the consolidated accounts in view of theirCo., Ltd., Ibaraki Power Techno Co., Ltd., Tochigi Power Techno Co.,accounting significance: Chiba Power Techno Co., Ltd., Ibaraki Power

Ltd., Gunma Power Techno Co., Ltd., Nishikanto Power Techno Co., Ltd.,Techno Co., Ltd., Tochigi Power Techno Co., Ltd., Gunma Power Techno

Shizuoka Power Techno Co., Ltd., Transmission Line Construction Co.,

Co., Ltd., Nishikanto Power Techno Co., Ltd., and Shizuoka Power

Ltd., Sato Kensetsu Kogyo Co., Ltd., SYSTEC ENGINEERING K.K., andTechno Co., Ltd., which were established on July 3, 2017.

NETSAVE Co., Ltd. While, Tokyo Kouji Keibi Co., Ltd., undertakes

Other Businesses
Kandenko Co., Ltd. operates in the real estate and electric powerLtd., land and buildings as well as vehicles and other equipment.

generation businesses; KANKO SYOJI CO., LTD., in the electrical

Kandenko, Choshi Wind Development Co., Ltd., and Maebashi Biomass

equipment sales business; K Asset Management Co., Ltd., in the real

Power Co., Ltd. sell electric power to the TEPCO Group.

estate and leasing businesses; and Choshi Wind Development Co., Ltd.,

operations in March 2018, has been included in the consolidated

the electric power generation business. Kandenko Co., Ltd., purchases

accounts from the fiscal year ended March 31, 2018 in view of its

from KANKO SYOJI CO., LTD., part of the materials and other supplies

accounting significance.

required for installation work, and leases from K Asset Management Co.,

Our online mission video ‘Lighting Up’

2

Maebashi Biomass Power Co., Ltd., whose power plant started

Kama Solar Power Co., Ltd., and Maebashi Biomass Power Co., Ltd. inKandenko Group Structure
The businesses mentioned above are arranged in a schematic diagram below showing the Kandenko Group’s structure.
(As of March 31, 2018)●: Consolidated subsidiaries■ : Affiliates

Clients
TEPCO Group
Other clients■ Tokyo Electric Power Company Holdings, Inc. ・TEPCO Fuel & Power, Inc.
■ TEPCO Power Grid, Inc.

・TEPCO Energy Partner, Incorporated

Installation
work

Real estate
rentalElectricity
sales

Sales ofReal estate rental/
electrical equipment
Leasing

Electricity
sales

Kandenko
Facility installation business and other businesses
Installation
work

Installation
work

Worksite safety &security

Design &estimation

Facility installation business● Kawasaki Setsubi Kogyo Co., Ltd.
● Kanko Facilities Co., Ltd.
● Kanagawa K-Techno Co., Ltd.
● Chiba K-Techno Co., Ltd.
● Saitama K-Techno Co., Ltd.
● Ibaraki K-Techno Co., Ltd.
● Tochigi K-Techno Co., Ltd.
● Gunma K-Techno Co., Ltd.
● Tama K-Techno Co., Ltd.
● Shizuoka K-Techno Co., Ltd.
● HANDENKO CORPORATION● Kanko Power Techno Co., Ltd.
● Kanagawa Power Techno Co., Ltd.

Other businesses● Chiba Power Techno Co., Ltd.
● Saitama Power Techno Co., Ltd.
● Ibaraki Power Techno Co., Ltd.
● Tochigi Power Techno Co., Ltd.
● Gunma Power Techno Co., Ltd.
● Nishikanto Power Techno Co., Ltd.
● Shizuoka Power Techno Co., Ltd.
● Transmission Line Construction Co., Ltd.
● Tokyo Kouji Keibi Co., Ltd.
● Sato Kensetsu Kogyo Co., Ltd.
● SYSTEC ENGINEERING K.K.
● NETSAVE Co., Ltd.

Sales ofelectricalequipment
Real estate
rental/Leasing

Sales of electrical equipment● KANKO SYOJI CO., LTD.
Real estate and leasing● K Asset Management Co., Ltd.
Power generation● Choshi Wind Development Co., Ltd.
● Kama Solar Power Co., Ltd.
● Maebashi Biomass Power Co., Ltd.

● Tokyo Kouji Keibi Co., Ltd.
● Bay Techno Co., Ltd.

Kandenko Group

Annual Report 20183

Consolidated Financial Highlights

Kandenko Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2018
Millions of yen

2017

2018

Reference:
2018(Kandenko, non-consolidated)¥ 470,943¥ 507,205¥ 444,452

Operating profit

26,39729,261

24,843

Ordinary profit

27,34530,031

25,828

Profit attributable to owners of parent*

17,591

19,05816,919Comprehensive income

18,422

22,927−

Total assets

424,874

443,752

380,348

Total net assets

213,356

230,810202,140

Equity ratio (%)

48.72

50.51

53.15

Net assets per share (yen)1,013.33

1,097.36

989.63

Earnings per share (yen)

86.11

93.31

82.83

Cash dividends per share (yen)

20.00

24.00

−

Number of employees (persons)

9,244

9,571

6,976

Net sales*In the column for Kandenko’s non-consolidated results, the figure indicates profit.

Operating Profit(Millions of yen)

(Millions of yen)

30,00020,00019,05825,00017,59140,00026,397

470,943447,673436,682

437,930

600,000

507,205(Millions of yen)

Profit Attributable to Owners of Parent

29,261Net Sales

400,000

20,0009,412

16,41615,000

4

2014

2015

2016

2017

2018

0

2014

9,388
2015

2016

2017

2018

0

4,615

0

5,000

4,226

10,0008,284

10,000200,000

2014

2015

2016

2017

2018

Progress of Medium-Term Management Plan and Business Results Outlook

Numerical targets

In 2016, the Kandenko Group announced a growth strategy(Billions of yen)aimed at establishing a resilient corporate structure capable

2018

2019

2020

Consolidated net sales

545.0

600.0

650.0

Consolidated operating profit

30.5

33.0

36.0

of sustained growth and achieving high profitability. The
Group is now uniting around the Medium-Term Management
Plan based on this strategy to further improve businessresults.

Progress of the Medium-Term Management Plan
Consolidated net sales■ Medium-Term Management Plan:

Consolidated operating profit■ Achievement and Business Results Outlook■ Medium-Term Management Plan:■ Achievement and Business Results Outlook(Billions of yen)

700.0(Billions of yen)

40.0

600.0
30.0

500.0
400.0

20.0
300.0
200.0

10.0

100.0
0.0

2017

2018

2019

0.0

2020

2017

2018

2019

2020

・Accelerated progress with operations in Electrical Engineering,
Environmental Facilities and Systems, and Renovation Work・Improved profitability in Electrical Engineering, Environmental
Facilities and Systems, and Renovation Work・Increased net sales in electric power generation business due topower plant startups and acquisitions

・Improved productivity in Power Distribution Line Engineering Work・Share of net sales from TEPCO Group down to the lowest-ever level

・Improved profit contribution also from the electric power generation
business

Key Management Policies for Fiscal 2018
Reinforce initiatives to improvecustomer confidence■ Ensure compliance with ethical, safety, and quality behavior

Reinforce profit-generating capacity
and ability to win orders■ Expand orders for renovation work

Develop technologies to support
business activities■ Develop technologies to contribute to improving productivity andReinforce "people first" principle tomotivate staff and energize the workplace■ Reinforce human resources development

Progress with structural reformof business■ Enhance ability to offer one-stop service■ Ensure strong work execution abilities and deploy effectively

enhancing safety and labor-saving at the worksite■ Promote reforms for work practices and annual leave systems■ Establish renovation work as a major focus

Annual Report 20185

Message from the Management

Kiyoshi Goto
Chairman and Director

Yoshimi Morito
President and Director

Fiscal 2017 Business Environment

OutlookIn fiscal 2017, ended March 31, 2018, the Japanese economy continued

Looking ahead, the forecast is for a continuing squeeze on investment

along a path of recovery driven by strong exports and solid consumer

in electric power facilities due to cost-cutting measures by the TEPCO

spending, with the added boost of positive corporate results andGroup. On the other hand, domestic construction investment is expected

other factors.

to continue its strong development on the back of projects in the

Against this background, the contraction in electric power facility

planning pipeline. These include the construction of factory and logistics

investment continued, but private-sector construction investment

facilities to promote labor-saving, increased efficiency and otherremained at a high level. This was due notably to construction demand

improvements, and the upgrading and expansion of accommodation andfor office and commercial buildings in major cities and for factory plants

transport facilities to meet overseas tourist demand.

to provide expanded production capacity.
In response, Kandenko rolled out customer-focused total solution

Kandenko’s response to these conditions will be to follow throughwith the declared growth strategy—covering the period up to the end

services and implemented sales activities benefiting from enhancedof fiscal 2020 in March 2021—by implementing the key management

coordination between corporate divisions. In parallel, we took action

policies outlined below.

to improve price-competitiveness by stepping up cost management
initiatives and cutting operational unit costs.
As a result, we were able to post favorable business results for the
fiscal year, as shown in the table on the page 7.

First, we will work to secure contracts by rolling out sales activities
tailored to regional markets and by making use of our accumulated storeof technology and expertise to expand our business fields. In parallel,
we will pursue a range of profit-generating strategies including stringent
cost control initiatives and the review and standardization of the work
management process.
Next, we will move energetically forward with technology
development that not only responds to customer needs but also

6

By working to build a resilient corporate structure andachieve high profitability as a general infrastructurecompany, we are committed to continued progress
toward our management targets.
contributes to safety and labor-saving at worksites and improved
productivity.
To complement these strategies, we will seek to develop the humanresources that are our future by promoting skill development among

Fiscal 2017 Business Results
Consolidated results (Billions of yen)

Net sales¥ 507.2 (up 7.7% YoY)

young and mid-level employees and to teach them technical skills andOperating profit

29.3 (up 10.9% YoY)

abilities. We will also address the issue of reforming work styles andOrdinary profit

30.0 (up 9.8% YoY)

Profit attributable to owners of parent

19.1 (up 8.3% YoY)

annual leave systems, which is seen as an urgent task for businesscorporations, with the aim of creating an energized work environment
where individuals can develop to their full potential.
We will stay closely attuned to contemporary social changes, from

Non-consolidated results

the introduction of artificial intelligence and the Internet of Things to the

New orders received¥ 506.0 (up 6.7% YoY)

decline in the working population and the move toward a more sustainable

Net sales

444.5 (up 8.4% YoY)

Operating profit

24.8 (up 13.3% YoY)

Ordinary profit

25.8 (up 13.0% YoY)

Profit16.9 (up 9.2% YoY)

society based on long-lasting infrastructure. This will enable us to respondwith speedy and dynamic structural reform of our businesses.
Going forward, we will maintain a rigorous focus on complianceand on work safety and quality that are at the heart of our management
approach. In this way, we are fully committed to building a corporate
brand that inspires customer trust and to meeting the expectations of ourvalued shareholders.

Fiscal 2018 Business Results (Forecast)
Consolidated results (Billions of yen)

Net sales¥ 545.0 (up7.5% YoY)

Basic Policy on Sharing Profits: Dividends for
Fiscal 2017 and 2018

Operating profit

30.5 (up4.2% YoY)

Ordinary profit

31.3 (up4.2% YoY)

Our basic policy emphasizes maintenance of a stable shareholder return

Profit attributable to owners of parent

20.4 (up7.0% YoY)

New orders received¥ 520.0 (up2.8% YoY)

year-end dividend of ¥12, respectively, for a total annual dividend of ¥24

Net sales

475.0 (up6.9% YoY)

per share.

Operating profit

26.0 (up4.7% YoY)

Ordinary profit

27.0 (up4.5% YoY)

Profit18.2 (up7.6% YoY)

as well as twice-yearly payment of an interim and a year-end dividend.
By actively reflecting profit growth in the dividend, we work to ensure
appropriate shareholder return.
For fiscal 2017, the dividend consists of an interim dividend and a

For fiscal 2018, we plan to issue an annual dividend of ¥26 pershare (an interim dividend of ¥13 and a year-end dividend of ¥13), up by¥2 from the dividend for fiscal 2017.

Non-consolidated results

Annual Report 20187

Business results by type of work

DescriptionofBusiness

263,342
235,0402015

251,469

2014

224,170
202,815

217,182
195,170

200,000

226,677

250,000

Electrical Engineering,
Environmental Facilities
and Systems, andRenovation Work

(Millions of yen)

300,000

191,227

Business Review by Division

Net sales

203,627

New orders received

150,000

100,000

50,000

0

2016

2017

2018

Electrical Engineering Work: Work on electrical facilities and equipment inside all types of buildings
and structures, building interiors, and control equipment
Environmental Facilities and Systems, and Renovation Work: Work on air conditioning as wellas water, heat and disaster prevention systems

In the segment covering electrical engineering work, environmental facilities andsystems, and renovation work, we energetically rolled out one-stop sales
activities aimed at increasing orders for maintenance and renovation work. To
cope with high levels of work in hand, we also took steps to further expand work
execution abilities, enhance worksite support systems, and achieve otherimprovements. As a result, we were able to improve on the business results ofthe previous fiscal year, with new orders received up 4.7% to ¥263,342 million
and net sales up 15.4% to ¥235,040 million.

Kawasaki Heavy Industries, Ltd. Energy Center in Akashi Factory

Nihombashi Takashimaya S.C. East Building

8

Business results by type of work
Net sales(Millions of yen)
44,646

New orders received

31,86027,876

31,596

2015

2016

2017

30,000Information &Communication Work37,65140,05130,08032,65040,00035,56933,23850,00020,00010,0000

DescriptionofBusiness

2014

2018

Develop proposals for and carry out installation and maintenance of information and telecommunications systems, lay optical fiber cables for telecommunications providers, install opticaltransmission equipment, build and maintain transmission base stations for mobile communications,build and maintain networks for cable TV and municipalities, and maintain telecommunications facilities
for electric power providers

In the segment covering information and communication work, progress wasmade with upgrades to the highway telecommunications network and withlarge-scale updating work for cable television operators to prepare for the
next generation of high-definition broadcasting (4K/8K). At the same time, byvigorously promoting joint sales activities with other divisions, we sought tosecure orders for installation of networks and related operations. As a result,
we were able to improve on our business results of the previous fiscal year
across the board, with new orders received growing 11.5% to ¥44,646
million and net sales up 19.2% to ¥37,651 million.

Updating cable television facilities

Installing a wireless telecommunications antenna

Annual Report 20189

Business results by type of work
New orders received

139,234
138,419

140,632
138,557

147,853
136,633

2016

2017

2018

100,000

50,0000

DescriptionofBusiness

130,700
128,742150,000

Power Distribution LineEngineering Work

(Millions of yen)

200,000

135,650
133,910

Business Review by Division

Net sales

2014

2015

Construction and maintenance of TEPCO’s electric power facilities

The segment covering engineering work on overhead and undergroundpower distribution lines was impacted by reduced investment in electric
power distribution facilities. In response, we worked to improve productivity
through close management of work projects and wide-area deployment ofwork execution abilities. Additionally, we sought to win orders from newcustomers in areas such as cable-laying work for factories and railway
facilities. This resulted in a 5.1% increase in new orders received to¥147,853 million, while net sales dipped 1.4% to ¥136,633 million.

Work on overhead power distribution lines using indirect live-line techniques

Connecting underground power distribution cables

10

Business results by type of work
New orders received

Net sales(Millions of yen)

35,12742,29936,411

36,23931,00432,62920,0000

DescriptionofBusiness

29,383

Electric Power & Civil
Engineering Work35,07832,68140,00050,18460,000

2014

2015

2016

2017

2018

Power Generation and Transformation Work: Work on power stations and substations, and wind
power generation
Transmission Lines Work: Work on overhead transmission lines
Civil Engineering Work and Underground Lines Work: Work on underground transmission lines,
and civil engineering work using C.C. Box technology
Nuclear Power Work: Regular inspections and maintenance of nuclear power plant facilities
and equipment

This segment covers civil engineering work involving power generation andtransformation, overhead and underground power transmission lines, andnuclear and wind power generation. The division benefited from major
expansions in the installation of extra high-voltage power intake andtransformer equipment for large factories and similar facilities, and in workon transmission lines to prepare for the introduction of renewable energy. We
also worked to increase orders in the field of social infrastructure, including
laying of underground natural gas pipelines and sewage pipe works. As aresult, new orders received grew 18.6% from the previous fiscal year to¥50,184 million, while net sales slipped 3.5% to ¥35,127 million.

Connecting power lines to renewable energy systems

Laying an underground gas pipe

Annual Report 201811

Topics: Projects by Kandenko

1 DCM Homac Sapporo Product Center (Eniwa, Hokkaido)

8 Hamamatsu Photonics K.K., Miyakoda Plant, Block 3 (Shizuoka)

9 Osaka Heavy Ion Therapy Center (Osaka)

2 Niigata Post Office (Niigata)

10 Ropponmatsu 421 (Fukuoka)
3 Saitama Sekishinkai Hospital (Saitama)

4 Kanagawa Prefectural Office, New Building, Debating Chamber (Kanagawa)

12 Pacific Century Place Jakarta (Indonesia)

11 Nouren Plaza (Okinawa)

1

5 Culttz Kawasaki: Kawasaki City Sports and Culture Center (Kanagawa)

11

2

9

8

3
6
5
7
4

10
6 X-PRESS Yurakucho (Tokyo)

12
7 Sumitomo Fudosan Osaki Garden Tower (Tokyo)

12

Annual Report 201813

Topics

Moving ahead with undergrounding of
power lines
In the lead-up to the 2020 Tokyo Olympic Games, the construction of competition venues and related facilities is progressing steadily.
To coincide with this, the Tokyo Metropolitan Government is moving forward actively with the undergrounding of power lines, with theaim of strengthening the city’s disaster resilience and improving its scenic amenities.
Since its establishment, Kandenko has accumulated a wealth of experience and expertise in undergrounding cables, as part of its
contribution to developing the electrical infrastructure. We are currently engaged in a major project for the undergrounding of power
cables along the Tokyo Port Seaside Road, beside the Sea Forest Waterway, where the rowing and canoeing events of the Tokyo
Olympics will take place.
Demand for undergrounding is expected to continue to grow, and Kandenko will work to expand its contract portfolio by further
strengthening its sales and operational abilities.

Tokyo

Rainbow Bridge

WakasuTokyo
Seaside ParkBig Sight

Miraikan –The National Museum of
Emerging Science andInnovation

Tokyo
Gate Bridge

Kandenko worksite
Planned construction
site of Sea
Forest Waterway

At this worksite, some 15 workers take part in night and day operations undergrounding power lines

Pipe-laying work

14

Central Breakwater in Tokyo Bay, where construction work on the Olympic rowing and canoeing venue is under way

Laying telecommunications cables
for the Hakone Ropeway
The Owakudani Valley, where white volcanic steam rises inthick clouds from the rugged terrain, is one of the most iconic
locations in the scenic Hakone area. The Hakone Ropeway
offers a panoramic view over this dramatic landscape andattracts large numbers of tourists from Japan and overseas.
The safety of the ropeway is ensured by telecommunications
cables that monitor the status of the facilities and transmit
emergency signals. Work to update the cables was recently
planned, but because of a volcanic eruption in the Owakudaniarea in 2015, which caused the land to shift and otherdamage, the no-entry zone was extended and a new route forcabling had to be engineered. As this work needed to be doneon steep slopes inaccessible to heavy machinery, a difficult
operation involving many hazards was envisaged. The
contract was awarded to Kandenko in recognition of ourrecord of experience and expertise with projects inmountainous environments.
We laid the groundwork for the operations carefully,
carrying out exhaustive on-site surveying and selecting ateam highly experienced in similar operations. As a result, wewere able to complete the project safely and successfully.

Annual Report 201815

Topics

Completion of disaster relief housing in Onagawa
Onagawa, a town on the Pacific coast in eastern Miyagi Prefecture, suffered great damage from the devastating earthquake and tsunami
of 2011. Today, seven years later, the town is gradually recovering its former vitality.
As part of the recovery, Kandenko completed electrical work in July 2017 for a municipal project to provide replacement public
housing called Onagawa Jutaku on high ground overlooking Onagawa Bay. Residents who had been waiting eagerly to transfer from
temporary housing have now moved in. This promises to add a powerful impetus to the town’s reconstruction.
Going forward, we hope to continue contributing to the recovery of the Tohoku region by carrying out electrical work forsimilar facilities.

16

Participation in the Mount Fuji Reforestation Project
Kandenko recently participated in the Mount Fuji Reforestation Project. Operated by the Organization for Industrial, Spiritual andCultural Advancement (OISCA), a nonprofit foundation, the project aims to regenerate the forest environment around Mount Fuji,
which has suffered serious damage.
Through the unique landscape created by its majestic shape and natural endowments, Mount Fuji exerts a fascinating appeal on
people both in Japan and overseas. However, the forests that stretch across its foothills have suffered damage in places from insects
and deer. In 2002, a mass die-off of trees was identified covering an area extending to 100 hectares, about 20 times the size of Tokyo
Dome baseball stadium, resulting in fears about the shrinking of this richforest resource and the negative impact on the ecosystem.
The tree planting carried out in May 2017 and June 2018 together
attracted 273 participants from among Kandenko employees and theirfamilies. In an area located around 1,600 meters above sea level, close to
the second base station, seedlings of various native deciduous species
were planted, including mountain cherry, maple, and Mongolian oak. Nets
were also put in place to prevent damage from feeding deer. Kandenko
employees from Yamanashi Prefecture were also invited to come and listen
to talks on the natural environment of Mount Fuji as part of the Family
Nature Education Project for parents and children.
Going forward, we intend to continue our participation in this project
as a way to contribute to the conservation of Mount Fuji's environment.

Annual Report 201817

Research and Development Activities
To respond to issues at the worksite and customer needs, the Kandenko Group is focusing on three key areas: technology
development to support worksite safety, labor saving and cost reduction; technology development to meet customer needs; andtechnology development to support business field expansion. In fiscal 2017, our R&D was guided by the idea of enhancing
Kandenko’s brand strength through technology development, as we aim to become a ‘‘100-Year Company Supporting Society.’’
In particular, we actively promoted IT and robot introduction technology that contributes to work safety and labor saving,alongside technology designed to support business continuity plans and disaster prevention, and applied technology adaptable
to social infrastructure. At the same time, we worked to further strengthen our research system, to create new lines of research,and to reinforce our brand strength and the external appeal of our technology.
Consolidated R&D expenses in fiscal 2017 totaled ¥1.217 million. The main achievements of our R&D activities arepresented below. Please note that R&D expenses are not broken down by business segment.

Development of safety education system using virtual reality technology
To prevent work accidents caused for instance by falls, flying or falling objects or
cuts, it is necessary to predict hidden hazard points at the worksite and improvesafety awareness to avoid these dangers. With this in mind, we used virtual
reality(VR) technology to develop educational software designed to heighten
sensitivity to danger and improve safety awareness. This is done by simulating thephysical experience of falls or electric shock, which have a high risk of developing
into serious accidents, through visual, aural, and tactile stimulation using video
software, sounds, vibrations, and electric impulses. Going forward, we will promote
improved safety awareness by using this system at our Construction Headquarters,
branches, and elsewhere to carry out safety training based on realistic physicalencounters with danger.

Development of a support system for recording measurements
In indoor electrical engineering work, the results of lighting

Tablet (portable computer)measurements are first entered by hand in drawings or documents
by the measurement or recording operatives, and the final

Luminometer

documents are then prepared through electronic data entry. The
recording and entry operations were therefore time-consuming andopen to mistakes. To remedy this, we developed a system that
automatically enters measurement results directly into online
drawings and documents, from where they can be furthertransmitted. We plan to further adapt this system for use inoperations such as measurements of insulation resistance andvoltage, as a way to boost operational efficiency through laborsaving at the worksite.

18

Communication format:
Bluetooth Low Energy(BLE)
Application: AutoCAD

Development of quake-resistant devices for transformers
We have developed quake-resistant devices for transformers that canbe mounted on old-style transformers, which are not compliant withguidelines on preventing seismic displacement of power distribution
transformers. The device makes it possible to restrict oscillation in
the top part of the transformer during seismic motion, protecting thetransformer itself and preventing accidents such as short circuits andground faults between the transformer and attached equipment. We
will promote this device as a disaster response technology that will
benefit customers’ business continuity plans, and aim to increase
orders during renovation and upgrading work.

Development of simple utility tunnel excavator—a technology to support undergrounding of power cables
In work on electric power cables in joint utility tunnels, digging must
be carried out while ensuring access to the entrances of adjacent
stores and dwellings. This means that the timing and thearrangements for the process have to be coordinated with the wishesof local residents and other parties, which leads to reduced
operational efficiency. In response, we developed an easy-to-operate
excavator that makes it possible to dig utility tunnels while leaving
unexcavated the short stretches in front of store doorways andresidential entrances. We will deploy this excavator to boost
operational efficiency and target more orders for electric power workand other infrastructural projects.

Hydraulic unit
Target shaft

Street trees

Start shaft

Groundembedded
objectAuger

Rail (for drill stand)Simple pipe channel excavator

Annual Report 201819

Corporate GovernanceCorporate Governance
As Kandenko’s operating environment changes dramatically, we are working to make management more efficient and transparent
while ensuring the fairness of business execution. We realize that Kandenko’s continued existence as a company with high value toits stakeholders depends on a robust corporate governance system. We are therefore unstinting in our efforts to strengthen
corporate governance.

Basic Corporate Governance Policy
In keeping with the content and the spirit of the Corporate Governance Code established by the Tokyo Stock Exchange, Kandenko
implements a basic corporate governance policy that sets out its basic approach with the aim of enhancing the practical effectivenessof corporate governance.

Outline of the Current Corporate Governance System

Audit & Supervisory Board members with the Auditing Office to enable thecomplete and effective fulfillment of their duties.

Board of Directors
The Kandenko Board of Directors, which consists of 15 members including

Independent Accounting Auditor

two outside directors, meets regularly once a month, and additionallyKandenko has appointed Inoue Audit Corporation as its independentwhenever necessary, to discuss important business matters and to reachaccounting auditor. The three CPAs who audited Kandenko’s accounts are

final decisions, taking account of the contributions of the independent

Masami Hiramatsu, Teruo Hayashi, and Katsuhiro Suzuki, none of whom

directors and other considerations. The Board also oversees the execution

has audited our accounts for over seven consecutive years. Six other CPAs

of business by the directors. A designated corporate department is inand one additional person assist with the account audit.

place to provide support to the outside directors, for instance by briefingthem where necessary on items due to be discussed at Board meetings.

Internal Audit

Important managerial issues, including those that will be brought up at a

For internal auditing, the 18-strong staff of the Internal Audit Division

Board of Directors' meeting, are discussed by the Management Committee,

carries out the audit in accordance with the Internal Control Enhancement

which meets regularly each week and additionally whenever necessary. In

Plan. The audit results are reported to the Internal Control Committee andthese ways, we strive for rational corporate administration. Moreover, we

the Management Committee, and as appropriate to the Board of Directors,

have introduced an executive officer system, which separates managerial

to enable any required remedial action to be taken.

oversight from business execution, to accelerate the decision-making

Independent accounting auditors and the Internal Audit Division

process and reinforce business execution while enhancing the efficiency

report their findings at Audit & Supervisory Board meetings and regularlyof the directors’ business execution system. To foster swift responses

discuss these matters with the Audit & Supervisory Board members,

to changes in the operating environment and invigorate management,

including outside members. Opinions are exchanged whenever necessary

directors’ terms are limited to one year from the time of appointment.

so that cooperation is ensured. While the Audit & Supervisory Board
members (including outside members), independent accounting auditors,

Audit & Supervisory Board Members

and the Internal Audit Division carry out their audits, they receive regularKandenko has employed an Audit & Supervisory Board member system

reports on the maintenance and state of internal control from each division

for some time. Five Audit & Supervisory Board members, including three

responsible for business execution.

from outside the Company, conduct audits appropriately based on legal

20

requirements and Kandenko’s audit policy. The outside members heighten

Outside Directors and Outside Audit & Supervisory Board Members

our system’s independence and neutrality. They attend our Board of

Currently, the Company has two outside directors and three outside Audit

Directors' meetings and other important meetings, where they express their& Supervisory Board members. We appoint outside directors and outside

independent and objective opinions. Audit & Supervisory Board members,

Audit & Supervisory Board members to fulfill audit and oversight functions

including outside members, meet with the Company’s directors on a regularand to enhance transparency, so in accordance with the Companies Act andand irregular basis to ask about the state of the latter’s work. We provide theother regulations, we look for candidates whose experience and expertiseCorporate Governance System

General Meeting of Shareholders
Appointment, dismissal

ReportReportReportDecision-making, supervision and oversight

Board of Directors (Directors)
Supervisionandoversight

Audit

ReportAppointment,
dismissal

Audit & Supervisory
Board member

Audit & Supervisory
Board
Audit & Supervisory Report
Board members(

Decision-making,supervision and oversight,
business execution

Appointment,
dismissal)

Management Committee
Audit,
reportPresident /Director responsible
for business

Internal Control
Committee

Auditing Office

Safety, Environment &Quality Committee

ReportAudit

Accountant audit

Independentaccounting auditor

Business execution

Directors, executive officers(

Division managers,
department managers, branch heads)

Internal
Control Division(Compliance consultations)

Employees

Affiliated companies

outside the Company will be useful to Kandenko, and who can oversee and

Board of Directors nominates a number of outside director candidates who

audit the directors’ execution of duties from an independent and neutral

meet the independence criteria listed below, giving due consideration to

standpoint. Regarding outside Audit & Supervisory Board members,

the practical effectiveness of its operations. For outside members of thethe Audit & Supervisory Board meeting first agrees on the candidates,

Audit & Supervisory Board, the Board of Directors nominates a number

the Board of Directors approves them, and then they are presented atof candidates with the ability to audit the execution of business by thea shareholders’ meeting for a vote. In the case of outside directors, thedirectors from a position of independence and objectivity.

Annual Report 201821

Corporate GovernanceIndependence Criteria for Independent Outside Directors
Kandenko considers outside director candidates to be independent as longCompliance System

as they do not trigger any of the following exclusion criteria:

To clarify important points in the Kandenko Group’s business activities

1. The candidate is or has been a business executive of Kandenko or aand encourage deeper entrenchment of compliance, we have enacted theKandenko’s subsidiary.

Kandenko Group Charter of Corporate Behavior, and we are promoting its

2. The candidate is a business executive of a major shareholder of

establishment and raising the consciousness of all Group employees

Kandenko (a shareholder with 10% or more of the voting rights

about the Charter. We have set up a compliance consultation point forincluding indirect holdings) or a business executive of a company of

employees and an internal system where legal violations can be reported.

which Kandenko is a major shareholder.

We are working to establish and maintain a corporate culture of fairness

3. The candidate is a business executive of a major creditor of Kandenko(a creditor who has provided loans of more than 1% of consolidated
assets in the most recent fiscal year).

and transparency.
In its attitude to antisocial forces, the whole Kandenko organizationis committed to a resolute stance rejecting any action that could raise

4. The candidate is a business executive of a major business client ofsuspicion of an inappropriate relationship. Backing this stance are theKandenko (a client accounting for more than 1% of consolidated

Kandenko Group Charter of Corporate Behavior and the Internal Control

net sales in the most recent fiscal year) or a business executive of aEnhancement Plan adopted by the Internal Control Committee, which form

company of which Kandenko is a major business client.

the basis for education, training, and related activities to ensure compliance

5. The candidate is a representative employee or an employee of anand promote full awareness throughout the organization.

accounting auditor of Kandenko.
6. The candidate is a person who has, or a member of a group that has,received from Kandenko material benefits or gifts of high value (morethan ¥10 million excluding corporate officers’ remuneration).
7. The candidate is a business executive of a company with a reciprocal
relationship with Kandenko through outside officers.

Risk Management System
The Kandenko Group operates a set of internal regulations on risk
management. Having categorized and defined risks relating to business
operations item by item, Kandenko devises countermeasures to match

8. The candidate has a relative (a spouse or relative within the second

their degree of impact and likelihood of occurrence. In addition to taking

degree of kinship) to whom any of 1 to 6 above applies (restricted toadvance measures of this kind to prevent risk, Kandenko has designatedofficers and senior employees).

reporting channels and response systems in place for the event of

9. The candidate has triggered any of 2 to 8 above in the past five years.

risk materializing.

State of Progress of the Internal Control System

check the operating status of the risk management system and to analyze

Based on the Basic Policy for Enhancing the Internal Control Systemof a dedicated Internal Control Division serves to strengthen the risk

adopted by the Board of Directors (enacted April 2006, revised May 2015),

management system.

Additionally, the Internal Control Committee meets periodically toand evaluate risk status and related matters, while the establishment

Kandenko has established an Internal Control Committee chaired by the

Described below are factors that could possibly have a significant

company president that discusses issues relating to the internal control

impact on decisions made by investors. In recognizing that there is thesystem. The Company also lays down internal control regulations that set

potential for such risks to occur, the Kandenko Group is undertaking efforts

out the basic principles of internal control and management regulations forto avoid their occurrence as well as formulating countermeasures in theaffiliated companies that set out relevant management principles. Throughevent such risks occur.

these and other measures, Kandenko has put in place a system to ensure

Moreover, the statements described below regarding the future reflectappropriate business conduct by the Company and by the corporate group

judgments made by the Kandenko Group based on what was known up to

consisting of Kandenko and its subsidiaries. Additionally, to promote

the end of the fiscal year ended March 31, 2018.

adaptation to the internal control reporting system introduced in 2008 in
accordance with the Financial Instruments and Exchange Act, the Company

Changes in the Business Environment

has set up a department in charge of reviewing internal controls relating to

In the event that significant changes occur in the business environment,

financial reporting in order to promote appropriate operation and evaluationsuch as decreases in construction-related investments or capital investment

and to ensure the credibility of financial reporting.

in electric power facilities and equipment exceeding projected changes, it ispossible that the actual financial performance or other results of theCompany could be affected. Sales to the TEPCO Group account for about
40% of the Kandenko Group’s sales.

22Fluctuations in the Cost of Materials or Labor Costs
increase cannot be reflected in the contracted fees, it is possible that

Systems to Ensure Appropriate BusinessConduct by Kandenko and the Corporate Group
Consisting of Kandenko and Its Subsidiaries

the actual financial performance or other results of the Company

Kandenko has put in place a system to promote information sharing with its

could be affected.

subsidiaries, under which the Kandenko Board of Directors receives reports

Should the cost of materials or labor costs increase significantly, and theon important matters relating to the business conduct of subsidiaries,

Work and Related Risks
If work done by Kandenko turns out to be seriously defective or an

including their accounting and internal control operations.
Moreover, for the purpose of risk management at subsidiaries,

accident occurs in the course of work, it is possible that the actual financial

internal regulations are in place whose basic aim is to prevent crisis

performance or other results of the Company could be affected.

situations in advance and to minimize the impact on business activities
in the event that a crisis situation materializes. Additionally, Kandenko

Credit Risk of Client Company

provides advice and other support for the creation of risk management

In the construction industry, the contract fee for one transaction is very

systems at subsidiaries, and periodically checks and evaluates the status oflarge, and in many cases, a condition of concluding the contract is thatrisk management at its subsidiaries.

payment of a large sum of the construction fee is to be made when

By periodically receiving reports from its subsidiaries, Kandenko is

the handover of the construction project is completed. Should the client

able to check their conduct of business, ascertain the state of managementcompany suffer from a credit shortage before the Company can receive

operations at the subsidiary, and offer advice and other measures to tackle

payment of the construction fee, it is possible that the actual financial

management issues.

performance or other results of the Company could be affected.

In parallel, the Internal Audit Division carries out internal audit ofsubsidiaries in accordance with the Internal Control Enhancement Plan.

Asset Holding Risk

The audit results are reported to the Internal Control Committee and the

As it is necessary to have such assets as real estate and securities forManagement Committee, and as appropriate to the Board of Directors, tobusiness activities, should something happen, such as a significant decline

enable any required remedial action to be taken.

in the value of the held assets, or a dramatic drop in the profitability of thereal estate for business purposes, it is possible that the actual financial
performance or other results of the Company could be affected.

Liability for Employees’ Retirement Benefits
Should the value of pension assets decline, or should there be changes in
the assumptions, such as the return on investments or discount rate, used
to calculate the liability for employees’ retirement benefits, it is possiblethat the actual financial performance or other results of the Company could
be affected.

Legal Regulations
The Company is subject to legal regulations, including the Construction
Business Act, the Antimonopoly Act and the Industrial Safety and HealthAct. Should there be any changes, such as the revision or repeal of legal
regulations, or the enactment of new legal regulations, or if changes are
made to criteria for their application or administrative sanctions are handed
down based on the legal regulations, it is possible that the actual financial
performance or other results of the Company could be affected.

Annual Report 201823

Environmental Initiatives
The human race has enjoyed many benefits of industrial and economic development, but these benefits have come at the cost of
global warming, pollution, and ecological destruction. A great burden has thus been placed on the global environment.
Coexistence with the natural environment, the foundation of our existence, is essential for any healthy society. This isalso a theme that we must continually keep in mind in our business activities.
At Kandenko, we take the long-term view that it is corporate management’s vital social responsibility to have anenvironmental vision leading to the creation of a sustainable society. We will do our part to leave a safe, sound environment for
future generations by implementing initiatives that reduce the burden on the environment.

Basic Policy on the Environment

Structure for Promoting Environmental Preservation

Our Philosophy

To facilitate a deep review of its policies and initiatives in the field of

As a member of a recycling-based society, Kandenko will help to constructenvironmental conservation activities, Kandenko appoints a Safety,

a rich human environment, and through unceasing innovations, will help toEnvironment & Quality Committee chaired by the company president.

conserve the global environment.

Under the control of the Environmental Department of Safety, Environment
and Quality Division, the departments set up to promote environmental

Activity Plan

activities are as follows: in the Construction Headquarters, the

1. We consider environmental conservation to be an important management

Safety, Environment & Quality Promotion Group; and in the Regional

issue. We are committed to making continual, incremental improvements

Headquarters, the General Affairs Department, General Affairs Team and theto our environmental management system (EMS).

Safety, Environment & Quality Promotion Group.

2. While engaged in activities to save resources, conserve energy, promote
recycling, and prevent pollution, we will reduce the volume of waste
produced by our businesses.

Environmental Education

3. We will follow legal regulations and agreements and enact our own

We believe that in promoting environmental activities such as energy

environmental standards to promote environmental conservation.

conservation, the reduction of CO2 emissions, and proper disposal of

4. We will educate our employees about the environment and raise theirindustrial waste, each employee’s correct understanding and concern forenvironmental awareness.
5. We will build bridges of cooperation to regional society and seek
harmony with society as a whole.

environmental issues is critical, so we carry out environmental education
for people of all ranks.
Kandenko encourages employees to take the Certification Test forEnvironmental Specialists (Eco Test), which is organized by the Tokyo

Environmental Management System

Chamber of Commerce and Industry. People who pass the test have a broad

In accordance with its basic environmental policy, Kandenko has built anconservation initiatives among their colleagues and in their communities,

EMS that covers the entire Company, and has been engaged in making

making this qualification valuable to both the individual and the Company.

continuous improvements to the system and carrying forward proactive
environmental conservation activities.
To promote environmental conservation activities, Kandenko’s
head office, regional headquarters, branches, and representative offices
have cooperated as one in constructing an EMS that complies with ISO
140001 standards. Seeking a fair and just assessment from a third party,
we acquired ISO 140001 certification for our branches in Tokyo, Saitama,
Chiba, Kanagawa, Shizuoka and Nagoya.

24

knowledge of the environment and can voluntarily lead environmental

Initiatives to Reduce the Environmental Burden

Promoting Green Purchasing

Given the increasing seriousness of global environmental issues, wematerials used at its offices and worksites, including stationery, officebelieve that we can contribute to protecting the healthy biodiversity of the

supplies, office machinery, furnishings, and uniforms. To prioritize

ecosystem and realize a sustainable society by implementing systematicpurchasing of environment-friendly eco-products, Kandenko bases its

and efficient environmental conservation measures in all aspects of ourinitiatives on a set of green purchasing guidelines.

Kandenko engages in green purchasing activities with respect tobusiness activities.
In addition to promoting environment-friendly procurement,

Electric Energy-Saving Initiatives

Kandenko’s initiatives for environmental conservation include efforts to

Kandenko is rolling out a service known as Kandenko Eco-Business

reduce consumption of resources and energy and measures to improveto respond to the many and diverse needs of customers in the field ofindustrial waste recycling rates and convert waste into valuable resources.

environmental burden reduction. Covering customer facilities such as

By ensuring strict compliance with environmental laws and regulations, weelectric power, air conditioning and sanitation systems, IT networks,

are also working to eliminate environmental risk, enhance environmental

and security systems, it offers a one-stop service from inspection,awareness, and further integrate environmental conservation activities. As adiagnosis, and planning to design, installation, and maintenance tocorporate member of a recycling-based society, Kandenko seeks to create a

promote energy saving and CO2 reduction at customer facilities.

rich human environment and implement unceasing innovation, contributing

Kandenko’s business bases are fitted with an energy-savingin this way to activities that conserve the global environment.

office lighting control system that uses daylight sensors to detect thestrength of daylight from windows and personnel sensors to detect

Concrete Initiatives

human movement, and then adjusts the amount of artificial light

Introducing Green Electric Powersaving facilities such as LED lighting, ice-based thermal storage air

Kandenko is one of the first in the industry

conditioning systems, and its hot-water supply system for industrial

to participate in a Green Electric Poweruse: EcoCute Q.

Fund, which promotes the use of naturalprovided accordingly. Kandenko has additionally introduced energy-

Kandenko’s other energy-saving activities include switching off

energy sources. To receive a green electricunnecessary lighting and avoiding wasteful air conditioning settings

power supply, the Company entered intothat result in excessive cooling or heating of indoor spaces.

a 15-year contract effective from April
2002 with Japan Natural Energy Company

Vehicle Energy-Saving Initiatives

Limited based on a Green Energy

Kandenko employs a large vehicle fleet consisting mainly of work

Certification System.

vehicles such as aerial work platform trucks and other vehicles to

In fiscal 2016, Kandenko was awarded a Green Energy Certificate

transport materials and equipment. To raise the fuel efficiency of all

for using 1,000,000 kWh of natural energy. This is equivalent to about

vehicles, employees have worked in concert to promote eco-driving.

34.0% of the electric power consumption of the Kandenko head officebuilding supplied from natural energy sources.

Concurrently, Kandenko is promoting the introduction of electricvehicles, which have outstanding environmental performance features
such as no CO2 emissions during operation, and hybrid vehicles, whichhave excellent fuel efficiency.
Electric vehicles and a high-speed
charging equipment (behind of thevehicle on the right)

Meeting room that exclusively
uses LED lighting (head office)Kandenko’s hot-water supply system
for industrial use: EcoCute Q(Kawasaki Representative Office)Electric aerial platform truck

Annual Report 201825

Initiatives for Female Advancement
Project to Promote Female Advancement
Kandenko has had an in-house female advancement promotion team Since 2006. The team works to create a workplace environment inwhich female employees feel motivated and valued.
In fiscal 2016, as an action plan to further promote the advancement of female employees, we launched the Project toPromote Female Advancement. So that all our staff can continue to enjoy ongoing professional growth in a positive and motivating
atmosphere, this project aims to ensure that all employees, both male and female, can develop their abilities in line with theirambitions by creating a conducive workplace environment.
Going forward, we will continue with positive initiatives for female advancement.

Period of the Action Plan

Participation in Science and Technology Challenge*

April 1, 2016 to March 31, 2021

Since fiscal 2016, we have participated in the Science and Technology
Challenge—an initiative organized by the Japanese Cabinet Office and theAction Target

Japan Business Federation—by actively supporting female high school

A fourfold or more increase (32 or more people) in the number of females

technology.

students in their choice of career paths in the fields of science andin managerial positions to the end of fiscal 2020.

Basic Policies of Initiative
Improvement in Workplace Culture and Awareness
Create a workplace culture and awareness that appropriately values andrewards people who work hard regardless of gender.

Expansion of Assigned Duties and Development ofProfessional Abilities
Roll out initiatives to expand the range of duties assigned to female
employees, for instance by promoting the advancement of women at
engineering worksites, and create an environment in which employees cantake the initiative in developing their professional skills.

Enhanced Support for Work-Life Balance
Achieve a workplace environment that supports both male and female
employees who continue working while raising children.

http://www.gender.go.jp/c-challenge/about_rikochalle/index.html(Japanese only)* Through initiatives led by the Gender Equality Bureau of the Cabinet Office, the Science and Technology
Challenge supports female high school and university students interested in the fields of science andtechnology, who are taking on the challenge of a related career path based on a clear vision of their future.

Kurumin Accreditation Mark Recognizing
Support for Child-Rearing
In 2015, Kandenko was recognized by the Tokyo Labor Bureau as acompany that supports child-rearing with the award of the Kurumin Mark.
To be recognized as a company that supports child-rearing, companies
must meet a certain set of conditions, including formulation of an
Employers’ Action Plan in accordance with the Act on Advancement of
Measures to Support Raising Next-Generation Children and achievement
during the plan of a target figure for female employees taking
child-rearing leave.
Kandenko received the accreditation markin recognition of achievements during thefive years of the plan starting from 2010,
which included the introduction of achild-rearing leave system that exceeds thelegal requirement and a relaxation of thequalifying requirements for a maternityfriendly work pattern.

26

Kurumin MarkFinancial Section
28

Consolidated 10-Year Financial Summary

34

Consolidated Statement of Changes in Equity

29

Financial Position

37

Consolidated Statement of Cash Flows

30

Consolidated Balance Sheet

38

Notes to Consolidated Financial Statements

32

Consolidated Statement of Income

66

Independent Auditors’ Report

33

Consolidated Statement of Comprehensive Income

Annual Report 201827

Consolidated 10-Year Financial Summary(Millions of yen)

For the fiscal years ended March 31
Net sales

2010

2011

2012

2013

2014

2015

2016

2017

2018

¥ 473,804 ¥ 453,623 ¥ 462,482 ¥ 441,786 ¥ 447,741 ¥ 437,930 ¥ 436,682 ¥ 447,673 ¥ 470,943 ¥507,205

Operating profit

8,858

9,477

10,735

8,034

7,364

8,284

9,388

16,416

26,39729,261

Ordinary profit

9,854

10,484

11,634

9,070

8,301

9,089

10,336

17,077

27,34530,031

Profit attributable to ownersof parent

5,586

5,428

5,866

1,876

3,952

4,226

4,615

9,412

17,591

19,058

–

–

1,772

4,381

8,238

7,327

11,984

7,137

18,422

22,927

Total assets

379,093378,150

353,342359,726

364,008359,933

366,177

407,681424,874

443,752

Total net assets

172,487

177,536

176,808

178,757

184,269

189,692

193,345

197,980

213,356

230,810Equity ratio (%)

44.57

45.96

48.93

48.54

49.49

51.45

51.44

47.22

48.72

50.5

Net assets per share (yen)826.08850.04845.67854.31

881.41906.29922.05942.42

1,013.33

1,097.36

Earnings per share (yen)

27.30

26.54

28.69

9.18

19.34

20.69

22.59

46.07

86.11

93.31

Cash dividends per share (yen)

12.00

14.00

12.00

12.00

12.00

12.00

14.00

14.00

20.00

24.00

Net cash provided by (used in)operating activities

16,947

12,236

10,257

13,035

15,401(2,218)2,921

18,042

6,751

11,469Net cash provided by (used in)investing activities(9,825)(9,763)(3,799)1,583(12,748)(5,839)2,253(7,101)(17,867)(10,015)

Net cash used infinancing activities(3,519)(4,400)(4,037)(5,423)(2,900)(4,540)(3,743)19,807(169)(7,857)

Cash and cash equivalents at endof period

41,06039,142

41,53950,72550,55038,69740,15770,89959,61254,099Number of employees (persons)

8,513

8,665

8,769

8,746

8,732

8,821

8,839

8,915

9,244

9,571

Comprehensive income

28

2009

Financial Position
Analysis of Consolidated Financial Position

Cash Flows

Total assets at the end of the fiscal year under review increased ¥18,877

In the consolidated fiscal year under review, cash and cash equivalents

million over the previous fiscal year to ¥443,752 million.

(henceforth “funds”) decreased by ¥5,513 million year on year to ¥54,099
million. This reflected net outflows of funds from both investing activities

Assetsand financing activities, which offset the positive contribution fromDue mainly to increases of ¥23,921 million in notes receivable, accounts

operating activities.

receivable from completed construction contracts and other, total current
assets grew by ¥8,974 million over the previous fiscal year-end.
Primarily reflecting increases of ¥6,505 million in property, plant andCash Flows from Operating Activities
In the fiscal year under review, cash flows from operating activities added

equipment, and ¥4,779 million in investment securities, total non-current¥11,469 million to funds (up ¥4,718 million from the previous fiscal

assets rose by ¥9,903 million from the end of the previous fiscal year.

year). This was due to positive items, such as ¥29,133 million in profit
before income taxes, ¥6,860 million in decrease in costs on uncompleted

Liabilities

construction contracts, and ¥7,320 million in increase in notes andTotal current liabilities increased by ¥3,443 million over the previous fiscal

accounts payable–trade, outweighing negative items such as ¥23,869

year-end. This was due, among other factors, to the growth of ¥7,305

million in increase in notes and accounts receivable–trade and ¥8,706

million in notes payable, accounts payable for construction contracts andmillion in income taxes paid.

others, which offset a decrease of ¥2,089 million in advances received on
uncompleted construction contracts.
Total non-current liabilities declined by ¥2,020 million from the end

Cash Flows from Investing Activities
During the fiscal year under review, funds decreased by ¥10,015 millionof the previous fiscal year. This was primarily because of a decrease of

due to investing activities (up ¥7,851 million from the previous fiscal year).

¥3,081 million in net defined benefit liability, which offset an increase of

The decrease was attributable mainly to expenditures of ¥9,614 million for¥1,217 million in long-term loans payable.

the purchase of property, plant and equipment.

Total liabilities rose by ¥1,423 million year on year to ¥212,941 million.

Cash Flows from Financing Activities
Net Assets

During the fiscal year under review, financing activities decreased funds by

Due largely to rises of ¥14,110 million in retained earnings and ¥2,868¥7,857 million (down ¥7,688 million from the previous fiscal year). The

million in valuation difference on available-for-sale securities, total net

chief factors in this were a net decrease of ¥1,632 million in short-term

assets grew by ¥17,454 million over the previous fiscal year-end to reachloans payable and ¥4,902 million in cash dividends paid.

¥230,810 million.
Accordingly, net assets per share and the equity ratio were ¥1,097.36
and 50.50%, respectively (compared with ¥1,013.33 and 48.72% in theprevious fiscal year).

Annual Report 201829

Consolidated Balance Sheet
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2017 AND 2018
(Millions of Yen)

(Thousands of U.S. Dollars)
2018

2017

2018

AssetsCurrent assets
Cash and deposits*3

Notes receivable, accounts receivable from completed
construction contracts and other*3¥

Securities
Costs on uncompleted construction contracts

60,073*3

139,139*3¥

30,900*3

163,061*3

9,999

14,999*556,78724,040*5$

535,726
1,538,311
94,330*5

226,792

Raw materials and supplies

4,552

5,123

48,330

Deferred tax assets

6,852

6,226

58,735

Other

12,843

13,148124,037

(598)

(648)

(6,113)

268,764

277,738

2,620,169

Allowance for doubtful accounts
Total current assets

Non-current assets
Property, plant and equipment
Buildings and structures*3

88,570*3

90,192*3

850,867

Machinery, vehicles, tools, furniture and fixtures*3

54,567*3

60,105*3

567,028*2, *360,278*2, *360,292*2, *3568,792

Land
Leased assets

2,414

2,537

23,933

Construction in progress

760

1,095

10,330

Accumulated depreciation(108,013)(109,140)(1,029,622)

Total property, plant and equipment

98,577105,082

991,339

5,323

5,902

55,679Intangible assets

Investments and other assets
Investment securities

41,539*1, *3Net defined benefit asset
Deferred tax assets
Other

436,962

0

0

5,326

3,498

33,000

6,003

*3

*3

56,632

Allowance for doubtful accounts

(869)

(792)

(7,471)

Total investments and other assets

52,20955,027519,122

156,110

166,013

1,566,160

443,752$ 4,186,339

Total non-current assets
Total assets
The accompanying notes are an integral part of financial statements.

30*1, *3

–

6,213

*3

46,318*1, *3¥424,874¥(Millions of Yen)

(Thousands of U.S. Dollars)
2018

2017

2018

Liabilities
Current liabilities
Notes payable, accounts payable for construction
contracts and other
Short-term loans payable¥

10,920*3¥

82,39889,704
10,072*3$*3846,264
95,018

Lease obligations

425

477

4,500

Income taxes payable

5,375

4,639

43,764

Advances received on uncompleted construction
contracts

19,60017,510165,188

Provision for warranties for completed construction

1,226

241

2,273

Provision for loss on construction contracts

4,050

*5

3,214

*5

*5

30,320Other

21,792

23,373

220,500

Total current liabilities

145,789

149,233

1,407,858

20,08020,060189,245

Non-current liabilities
Convertible bond-type bonds with shareacquisition rights
Long-term loans payable

7,581

*3

Lease obligations
Deferred tax liabilities for land revaluation

8,799

*3

966

795
6,789

*2

*3

6,772

*2

83,0099,113*263,886

Net defined benefit liability

28,26925,188

237,622

Other

2,213

1,921

18,122

Total non-current liabilities

65,72863,708601,018

211,518

212,941

2,008,877

Capital stock

10,264

10,264

96,830Capital surplus

6,350

6,351

59,915Retained earnings

182,458

196,568

1,854,415

(575)

(585)

(5,518)

198,496

212,599

2,005,650

12,41815,286144,207

(522)

(471)

(4,443)

Total liabilities
Net assets
Shareholders’ equity

Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land

(4,861)*2(4,842)*2*2(45,679)

Remeasurements of defined benefit plans

1,460

1,573

14,839Total accumulated other comprehensive income

8,494

11,546108,924

6,364

6,665

62,877

213,356

230,810

2,177,452

443,752$ 4,186,339

Non-controlling interests
Total net assets
Total liabilities and net assets¥

424,874¥

The accompanying notes are an integral part of financial statements.

Annual Report 201831

Consolidated Statement of Income
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2017 AND 2018
(Millions of Yen)
2018

2017
Net sales of completed construction contracts
Cost of sales of completed construction contracts¥

Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses¥

470,943421,208*1, *2(Thousands of U.S. Dollars)

23,337507,205
452,828*1, *2$ 4,784,952
4,271,962*1, *2

54,37749,734*3

201825,115*3

512,990236,933*3

26,39729,261

276,047

Interest income

44

16

150

Dividend income

766

837

7,896

Other

583

428

4,037

Total non-operating income

1,394

1,282

12,094

Interest expenses

213

237

2,235

Business commencement expenses

18

95

896

Other

214

180

1,698

Total non-operating expenses

446

512

4,830

27,34530,031

283,311

Operating profit (loss)
Non-operating income

Non-operating expenses

Ordinary profit (loss)
Extraordinary income
Gain on sales of non-current assets

–

150

*5

1,415

*5

Gain on bargain purchase

135

–

–

Gain on sales of investment securities

34

–

–

Total extraordinary income

170

150

1,415

Loss on retirement of non-current assets

269

621

5,858

Impairment loss

101

Other

27

62

584

Total extraordinary losses

397

1,048

9,886

Profit (loss) before income taxes

27,11829,133274,839

Income taxes - current

8,243

8,234

77,679

Income taxes - deferred

627

1,071

10,103

Total income taxes

8,871

9,306

87,792

Profit (loss)

18,246

19,826

187,037

655

768

7,245

Extraordinary losses

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent
The accompanying notes are an integral part of financial statements.

32¥

17,591363*6¥

19,058

3,424

*6

$

179,792

Consolidated Statement of Comprehensive Income
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2017 AND 2018
(Millions of Yen)
2018

2017
Profit (loss)¥(Thousands of U.S. Dollars)¥

18,2462018
19,826$

187,037

Other comprehensive income
Valuation difference on available-for-sale securities

(40)

2,899

27,349Deferred gains or losses on hedges

53

50

471

Remeasurements of defined benefit plans, net of tax

163

150

1,415

Total other comprehensive income
Comprehensive income

176

*1

¥

18,422

3,100

*1

¥

22,927

29,245*1$

216,292

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

22,091

17,753
¥

669

¥

835

208,405$

7,877

The accompanying notes are an integral part of financial statements.

Annual Report 201833

Consolidated Statement of Changes in Equity
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2017
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264

¥

6,349

¥

168,576¥

Total shareholders’equity(565)¥

184,624

Changes of items during period
Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(3,268)(3,268)

Profit (loss) attributable toowners of parent

17,591

17,591

Reversal of revaluation
reserve for land

(440)

(440)

Change of scope of
consolidation––

Purchase of treasury shares
Disposal of treasury shares

0

(10)

(10)

0

0

(10)

13,872

Net changes of items otherthan shareholders’ equity
Total changes of items during period
Balance at end of current period–¥

10,264

Valuation difference
on available-forsale securities
Balance at beginning ofcurrent period¥

12,4600¥6,350

13,881¥

182,458

¥

(575)

¥

198,496

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincome
plans
¥

(575)

¥

(5,302)

¥

1,309

¥

7,891

¥

5,464

Total net assets¥

197,980

Changes of items during period
Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(3,268)

Profit (loss) attributable toowners of parent

17,591

Reversal of revaluation
reserve for land

(440)

Change of scope of
consolidation–

Purchase of treasury shares(10)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

(42)

53

440

151

603

900

1,503

Total changes of items during period

(42)

53

440

151

603

900

15,375

Balance at end of current period¥

12,418The accompanying notes are an integral part of financial statements.

34

¥

(522)

¥

(4,861)

¥

1,460

¥

8,494

¥

6,364

¥

213,356

YEAR ENDED MARCH 31, 2018
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264¥6,350¥ 182,458¥

Total shareholders’equity(575)¥ 198,496

Changes of items during period
Purchase of shares of
consolidated subsidiaries

1

1

Dividends of surplus(4,902)(4,902)

Profit (loss) attributable toowners of parent

19,05819,058

Reversal of revaluation
reserve for land

(19)

(19)

Change of scope of
consolidation

(26)

(26)

Purchase of treasury shares
0

Disposal of treasury shares

(10)

(10)

0

0

(10)

14,102(585)¥ 212,599

Net changes of items otherthan shareholders’ equity–

Total changes of items during period
Balance at end of current period¥

10,264

Valuation difference
on available-forsale securities
Balance at beginning ofcurrent period¥

12,418¥1

14,1106,351¥ 196,568¥

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincome
plans
¥

(522)

¥

(4,861)

¥

1,460

¥

8,494

¥

6,364

Total net assets¥ 213,356

Changes of items during period
Purchase of shares of
consolidated subsidiaries

1

Dividends of surplus(4,902)

Profit (loss) attributable toowners of parent

19,058

Reversal of revaluation
reserve for land

(19)

Change of scope of
consolidation(26)

Purchase of treasury shares(10)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

2,868

50

19

112

3,051

300

3,352

Total changes of items during period

2,868

50

19

112

3,051

300

17,454

6,665¥ 230,810

Balance at end of current period¥

15,286

¥

(471)

¥

(4,842)

¥

1,573

¥

11,546¥

The accompanying notes are an integral part of financial statements.

Annual Report 201835

YEAR ENDED MARCH 31, 2018
(Thousands of U.S. Dollars)
Capitalstock
Balance at beginning ofcurrent period$

Capitalsurplus96,830$59,905

Shareholders’ equity
Retained
Treasury
earnings
sharesTotal shareholders’equity$ 1,721,301$ 1,872,603$(5,424)

Changes of items during period
Purchase of shares of
consolidated subsidiaries

99

Dividends of surplus(46,245)(46,245)

Profit (loss) attributable toowners of parent

179,792

179,792

Reversal of revaluation
reserve for land

(179)

(179)

Change of scope of
consolidation

(245)

(245)

Purchase of treasury shares
0

Disposal of treasury shares

(94)

(94)

0

0

(94)

133,037(5,518)$ 2,005,650

Net changes of items otherthan shareholders’ equity–

Total changes of items during period
Balance at end of current period

Balance at beginning ofcurrent period$

96,830$9133,11359,915$ 1,854,415$

Valuation difference
on available-forsale securities

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincomeplans

Total net assets$$$ 2,012,792

117,150(4,924)$(45,858)$

13,773$80,132$60,037

Changes of items during period
Purchase of shares of
consolidated subsidiaries

9

Dividends of surplus(46,245)

Profit (loss) attributable toowners of parent

179,792

Reversal of revaluation
reserve for land

(179)

Change of scope of
consolidation(245)

Purchase of treasury shares(94)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

27,056

471

179

1,056

28,7832,830

31,622

Total changes of items during period

27,056

471

179

1,056

28,783

2,830

164,660

62,877$ 2,177,452

Balance at end of current period$

144,207

The accompanying notes are an integral part of financial statements.

36$(4,443)$(45,679)$

14,839$108,924$

Consolidated Statement of Cash Flows
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2017 AND 2018
(Millions of Yen)
2018

2017
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Impairment loss
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for loss on
construction contracts
Increase (decrease) in net defined benefit liability
Decrease (increase) in net defined benefit asset
Interest and dividend income
Interest expenses
Loss (gain) on valuation of investment securities
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in costs on uncompleted
construction contracts
Decrease (increase) in other inventories
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in advances received on uncompleted
construction contracts
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of period

¥

*1

¥

(Thousands of U.S. Dollars)¥

27,118
4,774
101
(135)
(51)

2018
29,133
5,101
363
–
(26)

$

274,839
48,122
3,424
–
(245)

1,654

(835)

(7,877)(2,323)
–
(811)
213
–
(34)
(7,245)(2,063)
(0)
(854)
237
21
–
(23,869)(19,462)(0)(8,056)2,235
198–(225,179)

4,227

6,860

64,716(403)(3,831)

(570)
7,320

(5,377)
69,056(215)(2,089)(19,707)(7,328)15,709811(233)(9,535)
6,751

851
19,579854(257)(8,706)
11,4698,028
184,707
8,056(2,424)(82,132)
108,198(2,000)(11,999)
9,000(7,290)142(1,340)45

2,873(5,199)5,199(9,614)9(709)
26

27,103(49,047)
49,047(90,698)
84(6,688)245(2,445)

–

–

(0)
33
(2,011)(17,867)(533)
220(2,287)(10,015)(5,028)
2,075(21,575)(94,481)

2,357
2,036
(702)
(532)
(3,268)
(60)
(169)
(1)
(11,286)
70,899(1,632)
560
(798)
(522)
(4,902)(562)(7,857)(5)(6,407)59,612(15,396)
5,283(7,528)(4,924)(46,245)(5,301)(74,122)(47)(60,443)562,377

–

894

8,433

59,612*1¥

54,099*1$

510,367

The accompanying notes are an integral part of financial statements.

Annual Report 201837

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2017 AND 2018

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Kandenko Co., Ltd. (the “Company”) and its consolidated subsidiaries (thefinancial statements as of and for the year ended March 31, 2018 have been“Companies”) maintain their accounting records and prepare their financialtranslated from yen amounts into U.S. dollar amounts at the rate of ¥106

statements in accordance with accounting principles generally accepted=U.S.$1.00, the exchange rate prevailing on March 31, 2018.

in Japan, which are different in certain respects as to the application andAs permitted by the Financial Instruments and Exchange Act of

disclosure requirements of International Financial Reporting Standards.

Japan, amounts of less than one million yen have been omitted. As a result,

The accompanying financial statements have been compiled from thethe totals shown in the accompanying consolidated financial statements

consolidated financial statements prepared by the Company as required by(both in yen and in dollars) do not necessarily agree with the sum of thethe Financial Instruments and Exchange Act of Japan.

individual amounts.

For the convenience of readers, the accompanying consolidated

SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
1. The scope of consolidation

Among these subsidiaries, Chiba Power Techno Co., Ltd., Ibaraki PowerTechno Co., Ltd., Tochigi Power Techno Co., Ltd., Gunma Power Techno Co.,

(1) Number of consolidated subsidiaries: 31

Ltd., Nishikanto Power Techno Co., Ltd. and Shizuoka Power Techno Co.,

Names of the consolidated subsidiaries

Ltd., which were established on July 3, 2017, and Maebashi Biomass Power

Kawasaki Setsubi Kogyo Co., Ltd.

Co., Ltd., which started commercial operations in March 2018, have been

Kanko Facilities Co., Ltd.

included in the scope of consolidation from the year ended March 31, 2018

Kanagawa K - Techno Co., Ltd.

in consideration of their importance.

Chiba K - Techno Co., Ltd.
Saitama K - Techno Co., Ltd.

(2) Name of major non-consolidated subsidiary:

Ibaraki K - Techno Co., Ltd.

THAI KANDENKO CO., LTD.

Tochigi K - Techno Co., Ltd.
Gunma K - Techno Co., Ltd.

(Reason for excluding from the scope of consolidation)

Tama K - Techno Co., Ltd.

All of the non-consolidated subsidiaries are small in scale and have no

Shizuoka K - Techno Co., Ltd.

material impact on the consolidated financial statements in terms of total

HANDENKO CORPORATION

assets, net sales, net income (amount corresponding to equity interest) andKanko Power Techno Co., Ltd.

retained earnings (amount corresponding to equity interest).

Kanagawa Power Techno Co., Ltd.
Chiba Power Techno Co., Ltd.
Saitama Power Techno Co., Ltd.
Ibaraki Power Techno Co., Ltd.
Tochigi Power Techno Co., Ltd.

2. Application of equity method(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None

Gunma Power Techno Co., Ltd.
Shizuoka Power Techno Co., Ltd.

(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity method:

Transmission Line Construction Co., Ltd.

THAI KANDENKO CO., LTD.

Nishikanto Power Techno Co., Ltd.

Sato Kensetsu Kogyo Co., Ltd.
SYSTEC ENGINEERING Co., Ltd.

(Reason for excluding from the scope of the equity method)

NETSAVE Co., Ltd.

Non-consolidated subsidiaries and affiliates that are not accounted for by

Tokyo Kouji Keibi Co., Ltd.

the equity method have immaterial impact on the consolidated financial

Bay Techno Co., Ltd.

statements in terms of net income (amount corresponding to equity

KANKO SYOJI CO., LTD.

interest) and retained earnings (amount corresponding to equity interest),

K asset management Co., Ltd.

and are not material, taken as a whole.

Choshi Wind Development Co., Ltd.
Kama Solar Power Co., Ltd.
Maebashi Biomass Power Co., Ltd.

38

3. Accounting period of consolidated subsidiaries

sufficient to cover possible losses on collection. It consists of the estimated

The year-end date for consolidated subsidiaries is the same as theamount calculated by applying the percentage of actual losses on collection

consolidated year-end date.

uncollectible amount with respect to identified doubtful receivables and an
experienced in the past to remaining receivables.
(b) Provision for warranties for completed construction

4. Significant accounting policies

To provide for possible future expenses under warranties for completed(1) Evaluation methods for significant assets

during the year is provided based on future estimated amount.

(a) Securities
i. Held-to-maturity securities
Amortized cost method (straight-line method)
ii. Available-for-sale securities
Securities with market quotations:construction contracts, provision for construction contracts completed(c) Provision for loss on construction contracts
To provide for future losses on construction orders, provision for
estimated losses is provided for uncompleted construction contracts at
the end of the year that are likely to incur losses and the amount can bereasonably estimated.

Stated at market value at the end of the year (Unrealized gains orlosses, net of applicable taxes, are comprehensively reported as a(4) Accounting method relating to retirement benefits

component of net assets and the cost of securities sold is computed(a) Method of attributing expected retirement benefit to periods

using the moving-average method.).

Method of attributing expected retirement benefit to periods is allocatedby the straight-line basis (the expected benefit divided by the total

Securities without market quotations:
Stated at cost determined by the moving-average method.
(b) Derivatives
Fair value method(c) Inventories
i. Costs on uncompleted construction contracts
Stated at cost determined by the specific cost method.
ii. Raw materials and supplies
Stated at cost determined by the moving-average method (Balanceservice years would be deemed as arising in each period).
(b) Amortization of actuarial gains and losses and past service cost
Past service costs are being amortized as incurred by the straight-line
method over a certain period (5 years) within the average remaining
years of service of the eligible employees.
Actuarial gains and losses are amortized by the straight-line
method over a certain period (5 years) within the average remaining
years of service of the eligible employees commencing with thefollowing periods.

sheet amounts are determined by writing down the carrying amountbased on declining profitability.)(5) Accounting policies for significant revenues and expenses(a) Recognition of revenues and costs of completed construction contracts(2) Depreciation methods of significant depreciable assets(a) Property, plant and equipment (excluding leased assets)i. Construction contracts that the outcome of the construction activity isdeemed certain during the course of the activity at the end of the year

Depreciated mainly by the declining-balance method

Percentage-of-completion method (cost proportion method shall

Useful life and residual value are determined on the same basis as thatbe applied to estimate the percentage-of-completion of suchof the method provided in the Corporate Tax Act.
Useful lives of certain buildings are deemed as 30 years although
their useful lives based on the Corporate Tax Act are longer

construction contract)ii. Other construction contracts
Completed-contract methodthan 30 years.
(b) Intangible assets (excluding leased assets)
Straight-line method(6) Significant hedge accounting method(a) Hedge accounting method

Software for internal use is amortized by the straight-line method over

The Companies use the deferral hedge accounting method. However,an estimated useful life (5 years).

the exceptional accounting is used for interest rate swaps that meet(c) Leased assets

specified matching criteria.

Leased assets related to finance lease transactions that do not transfer(b) Hedging instruments and hedged items

ownership are depreciated using the straight-line method based on the

Hedging instruments: Interest rate swaps

assumption that the useful life equals the lease term, and the residual

Hedged items:

value equals zero.

Loans payable(c) Hedging policy
In accordance with internal approval procedures for derivative(3) Accounting policies for significant allowance and provisions

transactions, interest rate fluctuation risks related to the hedged items(a) Allowance for doubtful accounts

are hedged to a certain degree.

The allowance for doubtful accounts is provided for to the amount
Annual Report 2018

39

The Companies evaluate the effectiveness of their hedging activities(8) Cash and cash equivalents in the consolidated
statements of cash flows

by comparing cumulative changes in cash flows on the hedging

Cash and cash equivalents include cash in hand, readily available deposits

instruments with cumulative changes in cash flows on the related

and short-term investments with maturities of three months or less from thehedged items. However, the evaluation of hedging effectiveness ispurchase date whose value is not subject to significant fluctuation risk.

(d) Method for evaluating the effectiveness of hedges

omitted for interest rate swaps to which the exceptional accounting
is applied.

(9) Other significant accounting policies for the preparationof consolidated financial statements(7) Method and period of amortization of goodwill

Accounting method for consumption taxes:

Goodwill is amortized by the straight-line method over the estimated period

Consumption and local consumption taxes are accounted for by the tax-that the benefits are expected to be received, not exceeding 20 years.

exclusion method.

ACCOUNTING STANDARDS, ETC. NOT YET EFFECTIVE
・“Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No.
28, amendment on February 16, 2018, Accounting Standards Board ofJapan)
・“Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26, latest amendment on February 16, 2018, AccountingStandards Board of Japan)(1) Outline
The International Accounting Standards Board (IASB) and US Financial
Accounting Standards Board (FASB) co-developed a new comprehensive
revenue recognition standard and published “Revenue from Contracts with
Customers” in May 2014 (IFRS No. 15 in IASB, Topic 606 in FASB). Given
that IFRS No. 15 will be applied from fiscal years starting on or after January
1, 2018 and Topic 606 from fiscal years starting after December 15, 2017,(1) Outline

the Accounting Standards Board of Japan (ASBJ) developed comprehensive“Implementation Guidance on Tax Effect Accounting,” etc. underwent the

Accounting Standard on Revenue Recognition and published it together withfollowing necessary revisions, essentially adhering to the content of practicalimplementation guidance.

guidelines on tax effect accounting transferred from the Japanese Institute of

The fundamental policy for developing Accounting Standard on

Certified Public Accountants (JICPA) to the Accounting Standards Board of

Revenue Recognition by the ASBJ was that the accounting standard would

Japan (ASBJ).

incorporate the fundamental policy of IFRS No. 15 as the starting point from

(Main revisions to accounting treatment)

the perspective of comparability of financial statements, which is one of the・Treatment of taxable temporary difference related to stocks of subsidiaries,
etc. in non-consolidated financial statements

benefits of achieving consistency with IFRS No. 15. For matters that require・Treatment of recoverability of deferred tax assets related to companies
corresponding to (Category 1)

consideration, alternative treatment will be added to an extent that does not(2) Scheduled date of application

be applied from the beginning of the first fiscal year to start on or after

This implementation guidance will be applied from the beginning of theyear ending March 31, 2019.

(3) Effects of the application of this accounting standard, etc.
The effects of the application of the “Implementation Guidance on Tax EffectAccounting,” etc. on the consolidated financial statements are currently
under assessment.
・“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29,
March 30, 2018, Accounting Standards Board of Japan)
・“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 30, 2018, AccountingStandards Board of Japan)

40

actual practice, etc. carried out in Japan up until present to be taken into
impair financial statement comparability.
This accounting standard and its implementation guidance will
April 1, 2021; provided, however, that this accounting standard and its
implementation guidance may be applied from the beginning of the fiscal
years that start on or after April 1, 2018.

(2) Scheduled date of application
The date of application is presently under consideration.

(3) Effects of the application of this accounting standard, etc.
The effects of the application of the “Accounting Standard for Revenue
Recognition,” etc. on the consolidated financial statements are currently
under assessment.

CHANGES IN PRESENTATION
Because the amount of “business commencement expenses,” which(Consolidated statement of income)was included in “other” in “non-operating expenses” in the year ended March

Because the amount of “insurance premiums refunded cancellation” in

31, 2017, has exceeded 10% of the total amount of non-operating expenses,“non-operating income,” which was presented as a separate item in the year

this item is presented as a separate item from the year ended March 31, 2018.

ended March 31, 2017, is 10% or less of the total amount of non-operating

The consolidated financial statements for the year ended March 31, 2017

income, this item is included in “other” in “non-operating income” from thehave been reclassified to reflect this change in presentation.

year ended March 31, 2018. The consolidated financial statements for the

As a result, ¥232 million, which was presented as “other” in “non-year ended March 31, 2017 have been reclassified to reflect this change inoperating expenses” in the consolidated statement of income for the year

presentation.

ended March 31, 2017, has been reclassified to ¥18 million of “businessAs a result, ¥230 million, which was presented as “insurance

commencement expenses,” and ¥214 million of “other.”premiums refunded cancellation” in “non-operating income” in the
consolidated statement of income for the year ended March 31, 2017, hasbeen reclassified to “other.”

NOTES TO CONSOLIDATED BALANCE SHEET*1. Amounts of non-consolidated subsidiaries and affiliates’ stocks included in investment securities
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Investment securities (Stocks)
Investment securities (Investments in capital)

¥

1,377
82

¥

2018
1,687
82

$

15,915773*2. The Company revalued its land held for business use in accordance with the “Act on Revaluation of Land” (the Act No. 34, March 31, 1998) and recorded
revaluation reserve for land in the net assets section.
(a) Method of revaluation:
Revaluation was made by reasonably adjusting the market value of standard sites as stipulated by the Article 2 Clause 1 of the “Ordinance for
Enforcement of the Act on Revaluation of Land” (Ordinance No. 119, March 31, 1998) and value determined by the method for calculating taxable land
price of land holding tax in accordance with the Article 16 of the Land-holding Tax Act as defined and published by the Commissioner of National Tax
Agency as stipulated by the Article 2 Clause 4 of the “Ordinance for Enforcement of the Act on Revaluation of Land.”(b) Date of revaluation:
March 31, 2002(c) As of March 31, 2017, the combined fair value of the revalued land was ¥3,478 million lower than its combined book value
after revaluation.
*3. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral which the Company’s subsidiaries provide and secured obligations
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
Land
Investments and other assets – Other (lease deposits)
Total
Short-term loans payable
Long-term loans payable
Total

[–]

¥ 2,082[–]$ 19,641

57

[–]

107

[–]

1,009

[–]

831
6,669
558
7
¥ 10,094[609][6,669][–][–]¥ [7,279]

1,557
10,097657
7¥ 14,510[587][6,366][–][–]¥ [6,954]

14,68895,254
6,198
66$ 136,886[5,537][60,056][–][–]$[65,603]¥¥¥ 1,562
8,419¥ 9,981¥$ 14,735
79,424$ 94,160$ [5,801][52,433]$[58,235]

¥

¥

1,969

890
6,941
7,832

¥

[601]
[6,173]¥ [6,775]

¥

2018

[615]
[5,558]¥ [6,173]$[–]

Note: The figures in the brackets show factory foundation mortgaged assets and related obligations.

Annual Report 201841

(2) Assets pledged as collateral for the loans of the investing company of the Company and its subsidiaries
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Buildings and structures

¥

1

Land

2018

¥

0

$

0

26

26

245

Investment securities

44

44

415

Investments and other assets – Other (long-term loans receivable)

130

129

1,216

Total

¥

201

¥

201

$

1,896

4. Contingent liabilities
The Company provides guarantees of the employees’ loans from financial institutions.
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Employees (housing loans)

¥

1,356

¥

2018
1,188

$

11,207*5. Both costs on uncompleted construction contracts relating to construction contracts that are likely to incur losses and provision for loss on construction
contracts are presented without offsetting.
		

Amount of costs on uncompleted construction contracts corresponding to provision for loss on construction contracts
Millions of Yen

Thousands of U.S. Dollars
2018

2017
¥

106

2018

¥

233

$

2,198

NOTES TO CONSOLIDATED STATEMENT OF INCOME*1. Provision for loss on construction contracts included in cost of sales of completed construction contracts
Millions of Yen

Thousands of U.S. Dollars
2018

2017
¥

3,165

¥

2018
1,454

$

13,716*2. The value of inventories at the year-end represents the value after writing down of the book value in accordance with the declining in profitability of assets,
and the following loss on valuation of inventories is included in cost of sales of completed construction contracts
Millions of Yen

Thousands of U.S. Dollars
2018

2017
¥

163

¥

2018
198

$

1,867

*3. Principal accounts and amounts in selling, general and administrative expenses
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Employees’ salaries and allowances
Retirement benefit expenses

42¥

10,948699¥

2018
11,786609$

111,1885,745

4. Total amount of research and development expenses included in general and administrative expenses and manufacturing costs
Millions of Yen

Thousands of U.S. Dollars
2018

2017
¥

1,188

¥

2018
1,217

$

11,481*5. Breakdown of gain on sales of non-current assets
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Intangible assets

¥

–

¥

2018
150

$

1,415

*6. Impairment loss

The Companies recorded impairment loss for the following asset groups.

For the year ended March 31, 2017
Disclosure is omitted due to immateriality.
For the year ended March 31, 2018
Location

Purpose of Use

Type

Number of assets

Tokyo and others

Idle assets

Land

17

Tokyo

Assets for lease

Land, etc.

3

Chiba prefecture and others Power production facilities and others Machinery, vehicles, tools, furniture and fixtures, etc.

3

Idle assets, assets for lease and power production facilities and others for which impairment loss was recognized were grouped mainly by individual properties.
The book value of the above asset group was reduced to the respective recoverable amount, due to a decline in land prices of the idle assets and assets
for lease and a decline in the profitability of the power production facilities. The decline was recorded as impairment loss of ¥363 million ($3,424 thousand) in
extraordinary losses. The impairment loss breaks down as ¥212 million ($2,000 thousand) for land, ¥91 million ($858 thousand) for buildings and structures,and ¥59 million ($556 thousand) for machinery, vehicles, tools, furniture and fixtures.
The recoverable amount for idle assets and assets for lease was measured at the net sales price, primarily based on the market value of standard sites
and the assessed value of inheritance tax using roadside land prices. For power production facilities, the recoverable amount was measured based on value in
use, applying a discount rate of 7.2% to future cash flow.

Annual Report 201843

NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Valuation difference on available-for-sale securities:
Losses arising during the year
Reclassification adjustments
Amount before income tax effect
Income tax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Gains (losses) arising during the year
Remeasurements of defined benefit plans:
Gains (losses) arising during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectRemeasurements of defined benefit plans, net of tax
Total other comprehensive income

¥

(37)
(24)
(62)
21
(40)

¥

¥

2018
4,192
(9)
4,182
(1,283)
2,899$

39,547(84)
39,452(12,103)
27,349

53

50

471

653
(429)
224
(61)
163
176

1,017
(845)
172
(21)
150
3,100

9,594
(7,971)
1,622
(198)
1,415
29,245¥$NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended March 31, 2017
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2016
Shares issued:
Common shares
Total
Treasury shares:
Common shares
Total

Increase

Decrease

As of March 31, 2017

205,288,338
205,288,338

–
–

–
–

205,288,338
205,288,338

1,009,642
1,009,642

11,075
11,075937
937

1,019,780
1,019,780

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to repurchase requests.

2. Matter related to dividends(1) Dividends paid
Resolution
Ordinary general
meeting ofshareholders on
June 29, 2016
Board of directors’
meeting on
October 31, 201644

Class of shares

Total dividends

Dividends per share

Record date

Effective dateCommon shares¥1,634 million¥8.0

March 31, 2016

June 30, 2016

Common shares¥1,634 million¥8.0

September 30, 2016

December 5, 2016

(2) Dividends whose record date fell in the year ended March 31, 2017, but whose effective date comes after March 31, 2017
Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 27, 2017

Common shares¥2,451 million

Source of dividend funds Dividends per share

Retained earnings¥12.0

Record date

Effective date

March 31, 2017

June 28, 2017

For the year ended March 31, 2018
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2017

Increase

Decrease

As of March 31, 2018

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

1,019,780

9,182

407

1,028,555

1,019,780

9,182

407

1,028,555

Treasury shares:
Common shares
Total

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to repurchase requests.

2. Matter related to dividends(1) Dividends paid
Resolution

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on
June 27, 2017

Common shares¥2,451 million$23,122 thousand

¥12.0
$0.11

March 31, 2017

June 28, 2017

Board of directors’
meeting on
October 31, 2017

Common shares¥2,451 million$23,122 thousand

¥12.0
$0.11

September 30, 2017 December 5, 2017

(2) Dividends whose record date fell in the year ended March 31, 2018, but whose effective date comes after March 31, 2018
Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 27, 2018

Common shares¥2,451 million$23,122 thousand

Source of dividend funds Dividends per share

Retained earnings

¥12.0
$0.11

Record date

Effective date

March 31, 2018

June 28, 2018

Annual Report 201845

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS*1. Relationship between the balance of cash and cash equivalents at the end of the year and the amount on the consolidated balance sheet
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Cash and deposits
Time deposits with maturities of more than three months
Short-term investments with maturities of three months or lessfrom the purchase dateCash and cash equivalents¥¥

60,073(11,461)$535,726(81,952)

5,999

10,999¥2018
56,787(8,687)¥59,61254,09956,594$510,367

FINANCIAL INSTRUMENTS
1. Status of financial instruments(1) Policies on financial instruments
The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities andraise funds through borrowings from banks and other financial institutions
and issuance of convertible bond-type bonds with share acquisition rights.
Certain consolidated subsidiaries enter into derivative transactions
to hedge interest rate fluctuation risks arising from borrowings and theCompanies do not use derivative transactions for speculative purposes.
(2) Description of financial instruments and related risks
Notes receivable, accounts receivable from completed construction
contracts and other, trade receivables, are exposed to customer credit risk.
Securities and investment securities, primarily consist of held-to-maturity
debt securities and shares of companies with business relationship, areexposed to market price fluctuation risks.
Notes payable, accounts payable for construction contracts andother, trade payables, are due within one year. Proceeds from short-termloans payable are mainly used for operational funds requirement andproceeds from convertible bond-type bonds with share acquisition rights
and long-term loans payable are mainly used for capital expenditures.
Floating rate borrowings are exposed to interest rate fluctuation risks, but
are hedged by using derivative transactions (interest-rate swaps).
Derivative transactions are interest rate swaps used as hedging
instruments, in order to hedge interest rate fluctuation risks for borrowings.
Details of hedge accounting including hedging instruments and hedged
items, hedging policy and method for evaluating the effectiveness ofhedges are described in “SIGNIFICANT MATTERS PROVIDING THE BASISFOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS, 4.
Significant accounting policies (6) Significant hedge accounting method.”(3) Risk management system for financial instruments(a) Credit risk management (risks that counterparties may default)
For trade receivables, the sales administration division regularly
monitors major counterparties’ credit status, and performs due date46

controls and balance controls for each customer to mitigate and quickly
capture the collectability issues caused by deterioration in the financial
conditions.
Held-to-maturity securities are invested in debt securities withhigh credit rating, therefore, exposed to minimum credit risk.
The Companies enter into derivative transactions with financial
institutions with high credit rating in order to mitigate credit risk.

(b) Market risk management (fluctuation risks in market prices
and interest rates)
Interest rate swaps are used to mitigate interest rate fluctuation risks
for borrowings. As for securities, and investment securities, except for
held-to-maturity debt securities, the accounting department regularly
monitors fair values and issuers’ (counterparties’) financial status,
considers the relationships with the counterparties, and continuously
reviews the Company’s securities holdings.
Derivative transactions are executed and managed in accordancewith the nature and limits approved by the board of directors of thesubsidiaries. The executed transactions are periodically reported to theboard of directors.

(c) Liquidity risk management associated with financing activities(payment default risks)
The accounting department prepares and updates a monthly
management plan of funds as necessary to manage theliquidity risk.

(4) Supplementary explanation on fair value of financial instruments
Fair value of financial instruments is measured based on the quoted market
price, if available, or reasonably assessed value if a quoted market price is
not available. Fair value of financial instruments, for which a quoted market
price is not available, is calculated based on certain assumptions, and thefair value might differ if different assumptions are used. In addition, thecontract amount of the derivative transactions described in “DERIVATIVE
TRANSACTIONS” does not represent the market risk of the derivativetransactions.

2. Fair value of financial instruments
Carrying amount and fair value of financial instruments, and differences between these values are as follows. The financial instruments whose fair values are
deemed extremely difficult to determine are excluded from the table below. (See Note 2 below)
Millions of Yen

For the year ended March 31, 2017
Carrying amount(1) Cash and deposits¥(2) Notes receivable, accounts receivable from completed construction contracts and other

60,073

Fair value¥

60,073Difference¥–

139,139

Allowance for doubtful accounts (*1)

(529)
138,610

138,610–

1) Held-to-maturity securities

15,04815,047(0)2) Available-for-sale securities

37,511

37,511–(4) Notes payable, accounts payable for construction contracts and other (*2)(82,398)(82,398)–(5) Short-term loans payable (*2)

(10,920)(10,920)–(6) Convertible bond-type bonds with share acquisition rights (*2)(20,080)(21,720)

1,639(7) Long-term loans payable (*2)

(7,581)(7,595)

13(3) Securities and investment securities(8) Derivative transactions (*3)

¥

(522)

¥

(522)

¥

–

(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Millions of Yen

For the year ended March 31, 2018
Carrying amount(1) Cash and deposits¥

56,787

Fair value¥

56,787

Difference¥–

163,061(2) Notes receivable, accounts receivable from completed construction contracts and other(587)

Allowance for doubtful accounts (*1)

162,473

162,473–

1) Held-to-maturity securities

10,04010,040(0)2) Available-for-sale securities

41,695

41,695–(4) Notes payable, accounts payable for construction contracts and other (*2)(89,704)(89,704)–(5) Short-term loans payable (*2)

(10,072)(10,072)–(6) Convertible bond-type bonds with share acquisition rights (*2)(20,060)(23,330)

3,269(7) Long-term loans payable (*2)

(8,799)(8,764)(35)(3) Securities and investment securities(8) Derivative transactions (*3)

¥

(471)

¥

(471)

¥

–

Annual Report 201847

Thousands of U.S. Dollars

For the year ended March 31, 2018
Carrying amount(1) Cash and deposits$

535,726

Fair value$

535,726

Difference$–

1,538,311(2) Notes receivable, accounts receivable from completed construction contracts and other(5,537)

Allowance for doubtful accounts (*1)

1,532,764

1,532,764–

1) Held-to-maturity securities

94,716

94,716(0)2) Available-for-sale securities

393,349

393,349–(4) Notes payable, accounts payable for construction contracts and other (*2)(846,264)(846,264)–(5) Short-term loans payable (*2)(95,018)(95,018)–(6) Convertible bond-type bonds with share acquisition rights (*2)

(189,245)(220,094)

30,839(7) Long-term loans payable (*2)(83,009)(82,679)(330)(3) Securities and investment securities(8) Derivative transactions (*3)$(4,443)$(4,443)$–(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Notes:
1. The calculation methods for the fair value of financial instruments, marketable securities and derivative transactions(1) Cash and deposits
Deposits are stated at their carrying amount as the fair value approximates the carrying amount because of the short maturity.
(2) Notes receivable, accounts receivable from completed construction contracts and other
The fair value of these instruments is stated at the net present value by maturity group which is discounted considering the credit risk. The fair value withshort maturity approximates the carrying amount.
(3) Securities and investment securities
The fair value of stocks is calculated by quoted market price and the fair value of debt securities is calculated by quoted market price or quotes fromcounterparty financial institutions. Negotiable certificates of deposit and jointly operated money trusts are stated at their carrying amount as the fairvalue approximates the carrying amount because of the short maturity.
		

Information by holding purpose is described in “SECURITIES.”(4) Notes payable, accounts payable for construction contracts and other, and (5) Short-term loans payable
These are stated at their carrying amount as the fair value approximates the carrying amount because of the short maturity.
(6) Convertible bond-type bonds with share acquisition rights
The fair value of convertible bond-type bonds with share acquisition rights is based on the prices presented by the counterparty financial institutions.
(7) Long-term loans payable
The fair value of long-term loans payable is based on the present value of sum of principal and interest discounted using the borrowing rate for similar
new borrowings. The fair value of long-term loans payable with variable interest rates subject to the exceptional accounting of interest rate swaps iscalculated by discounting the sum of principal and interest that were recognized together with the interest rate swaps, with the reasonably estimated rate
which would be applied if a similar new borrowing were entered into.
(8) Derivative transactions
Please refer to “DERIVATIVE TRANSACTIONS.”48

2. The carrying amount of financial instruments whose fair values are deemed extremely difficult to determine
Millions of Yen

Thousands of U.S. Dollars
2018

2017
Unlisted stocks, etc.

¥

2018

¥

3,979

4,582

$

43,226Since no quoted market price is available, it is extremely difficult to estimate future cash flows and it is deemed extremely difficult to determine their fair value,
these financial instruments are not included in “(3) Securities and investment securities.”
3. Expected redemption amount of monetary receivables and securities with maturity dates after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2017

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

¥

Notes receivable, accounts receivable from completed construction
contracts and other

60,073–––

132,652

6,486

–

–

–

10

–

–

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)
Held-to-maturity securities (corporate bonds)

8,000

–

–

–

Held-to-maturity securities (other)

6,000

1,000

–

–

Available-for-sale securities with maturities (other)

1,000

–

–

–

Total

¥

207,726

¥

7,496

¥

–

¥

–
Millions of Yen

For the year ended March 31, 2018

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

¥

Notes receivable, accounts receivable from completed construction
contracts and other56,787–163,061

–

–
–

–
–

Securities and investment securities
–

10

–

–

Held-to-maturity securities (corporate bonds)

6,000

–

–

–

Held-to-maturity securities (other)

3,000

1,000

–

–

Held-to-maturity securities (government/municipal bonds)

1,000

Available-for-sale securities with maturities (other)
Total

¥

229,848

–
¥

1,010

–
¥

–

–
¥

–

Thousands of U.S. Dollars

For the year ended March 31, 2018

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

$

$

$

$

Notes receivable, accounts receivable from completed construction
contracts and other535,726–

1,538,311

–

–
–

–
–

Securities and investment securities
–

94

–

–

Held-to-maturity securities (corporate bonds)

56,603–––

Held-to-maturity securities (other)

28,301

9,433

–

–

Held-to-maturity securities (government/municipal bonds)

9,433

Available-for-sale securities with maturities (other)
Total

$

2,168,377

–
$

9,528

–
$

–

–
$

–

Annual Report 201849

4. Scheduled amount of repayment of short-term loans payable, convertible bond-type bonds with share acquisition rights and long-term loans payable after
the consolidated year-end dateMillions of Yen

For the year ended March 31, 2017

Short-term loans payable

Due within one year

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

¥

¥

¥

10,920

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with share acquisition rights

–

–

–

20,000––Long-term loans payable

–

1,582

1,029

658

342

3,968

Total

¥

10,920

¥

1,582

¥

1,029

¥

20,658

¥

342

¥

3,968
Millions of Yen

For the year ended March 31, 2018

Short-term loans payable

Due within one year

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

¥

¥

¥

10,072

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with share acquisition rights––

20,000–––Long-term loans payable

–

1,245

874

557

567

5,554

Total

¥

10,072

¥

1,245

¥

20,874

¥

557

¥

567

¥

5,554

Thousands of U.S. Dollars

For the year ended March 31, 2018

Short-term loans payable

Due within one year

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

$

$

$

Convertible bond-type bonds
with share acquisition rights

–

50

$

95,018–––Long-term loans payable
Total

95,018

11,745$

188,679

11,745$–

196,924

$

–

8,245
$

–

5,254

$

–

5,254
$

–

–

5,349
$

5,349

–

52,396$52,396SECURITIES
1. Held-to-maturity securities
Millions of Yen

For the year ended March 31, 2017
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

¥

–

¥

–

¥

–

Corporate bonds

–

–

–

Other

–

–

–

Subtotal

¥

–

¥

–

¥

–

¥

10

¥

9

¥

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds

7,999

7,999

Other

7,038

7,038

Subtotal
Total

(0)
–

¥

15,048¥15,047¥(0)¥

15,048¥15,047¥(0)Millions of Yen

For the year ended March 31, 2018
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

¥

–

¥

–

Corporate bonds

–

–

Other

–

–

Subtotal

¥

–

¥

10

¥

¥

–
–
–

–

¥

–

9

¥

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds¥

Corporate bonds

5,999

5,999

(0)

Other

4,030

4,030

–

Subtotal
Total¥

10,040¥10,040¥(0)¥

10,040¥10,040¥(0)Thousands of U.S. Dollars

For the year ended March 31, 2018
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

$

$

$

–

$

–

–

Other
Subtotal––

Corporate bonds

–

–

–

$

94

$

–
–

–

$

–

84

$

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds$

Corporate bonds

56,59456,594

Other

38,01838,018Subtotal
Total

(0)
–

$

94,716$

94,716$(0)$

94,716$

94,716$(0)

Annual Report 201851

2. Available-for-sale securities
Millions of Yen

For the year ended March 31, 2017
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥

33,842¥

15,636

Bonds

–

–

Other

–

–

Subtotal¥

18,205––¥33,842¥

15,636¥18,205

¥

2,669

¥

2,917

¥

(248)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks
Bonds

–

–

–

Other

1,000

1,000

–

Subtotal
Total

¥

3,669

¥

3,917

¥

(248)

¥

37,511¥

19,553¥

17,957

Millions of Yen

For the year ended March 31, 2018
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥38,472¥

15,948

Bonds

–

–

Other

–

–

Subtotal¥

22,524––¥38,472¥

15,948¥22,524

¥

2,223

¥

2,607

¥

(384)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks

–

Bonds

1,000

Other
Subtotal
Total

–

–

1,000

–

¥

3,223

¥

3,607

¥

(384)

¥

41,695¥

19,556¥

22,139Thousands of U.S. Dollars

For the year ended March 31, 2018
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks$362,943$

150,452$

212,490

Bonds

–

–

–

Other

–

–

–

Subtotal$

362,943$

150,452$

212,490$

20,971$

24,594$(3,622)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks
Bonds

–

–

Other

9,433

9,433

Subtotal
Total

52

–
–

$

30,405$34,028$(3,622)$

393,349$

184,490$

208,858

3. Available-for-sale securities sold during the year
For the year ended March 31, 2017

For the year ended March 31, 2018

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

4. Impairment loss on securities
For the year ended March 31, 2017

For the year ended March 31, 2018

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

Annual Report 2018

53

DERIVATIVE TRANSACTIONS
Derivative transactions to which hedge accounting is applied
Interest rate-related
For the year ended March 31, 2017
Hedge accounting method

Type of transactions

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Long-term loans
payable¥4,804 million¥4,540 million¥(522) million

Notes: Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.

Hedge accounting method

Type of transactions

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Exceptional accounting of
the interest rate swaps

Interest rate swaps:
fixed payment, floatingreceipt

Long-term loans
payable¥1,149 million¥1,018 million(Note)

Note: The fair value of interest rate swaps subject to the application of the exceptional accounting is recognized together with long-term loans payable, which is designated as the hedged item, therefore their fair value isincluded in the fair value of the relevant long-term loans payable (the fair value of current portion of long-term loans payable is included in the fair value of short-term loans payable).

For the year ended March 31, 2018
Hedge accounting method

Type of transactions

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Long-term loans
payable¥ 4,540 million$42,830 thousand¥ 4,270 million$40,283 thousand¥ (471) million$(4,443) thousand

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Long-term loans
payable¥ 1,018 million$ 9,603 thousand¥ 215 million$ 2,028 thousand(Note)

Note: Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.

Hedge accounting method

Type of transactions

Exceptional accounting Interest rate swaps:of the interest rate fixed payment, floatingreceiptswaps

Note: The fair value of interest rate swaps subject to the application of the exceptional accounting is recognized together with long-term loans payable, which is designated as the hedged item, therefore their fair value isincluded in the fair value of the relevant long-term loans payable (the fair value of current portion of long-term loans payable is included in the fair value of short-term loans payable).

54

RETIREMENT BENEFITS
1. Overview of retirement benefit plans
The Companies have funded and unfunded defined benefit plans and defined contribution plans to prepare for retirement benefits to employees. Defined
benefit pension plans (funded plans) offer retirement lump-sum payments or pensions according to the salary and service period of the eligible employees.
Retirement lump-sum payment plans (unfunded plans) offer retirement lump-sum payments according to the salary and service period of the eligible
employees. When employees retire, the Companies may provide them with additional retirement benefits, etc.
Certain consolidated subsidiaries participate in multi-employer corporate pension fund, which is accounted for in the same manner as defined
contribution plans because it is impracticable to reasonably estimate an amount of plan assets for the contributions made by the subsidiaries. In addition,
regarding the multi-employer corporate pension fund, note on the multi-employer plan is omitted due to immateriality.
Certain consolidated subsidiaries use the simplified method in calculating net defined benefit liability and asset, and retirement benefit expenses.

2. Defined benefit plans(1) Changes in defined benefit obligations
Millions of Yen
Balance at beginning of year
Current service cost
Interest cost
Actuarial gains and losses
Benefit paid
Increase accompanying with new consolidation
Balance at end of year¥

70,005
2,244
607
(390)
(5,197)670
67,940¥67,940
2,242
581
(98)
(4,157)–66,508

Thousands of U.S. Dollars
2018$
640,943
21,1505,481(924)(39,216)–$
627,433

39,670
589
919
3,360
(3,217)–(2)
41,320Thousands of U.S. Dollars
2018$374,245
5,556
8,669
31,698(30,349)–(18)$
389,811

2018

2017
¥

¥

(2) Changes in plan assets
Millions of Yen
2018

2017
Balance at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefits paid
Increase accompanying with new consolidation
Other
Balance at end of year¥

39,040
585
263
3,246
(3,855)388
239,670¥¥¥(3) Reconciliation between ending balances of defined benefit obligations and plan assets and the net defined benefit liability and net
defined benefit asset reported on the consolidated balance sheet
Millions of Yen
2018

2017
Funded defined benefit obligations
Plan assets¥¥

Unfunded defined benefit obligations
Net amount of liabilities and assets recognized in consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net amount of liabilities and assets recognized in consolidated balance sheet

¥
¥
¥
¥

48,490(39,670)
8,819
19,44928,26928,269–28,269

¥
¥
¥
¥
¥
¥

46,661(41,320)
5,341
19,84625,18825,188(0)
25,188

Thousands of U.S. Dollars
2018$
440,198(389,811)$
50,386
187,226$
237,622$
237,622$(0)$
237,622

Annual Report 201855

(4) Breakdown of retirement benefit expenses
Millions of Yen
Current service cost
Interest cost
Expected return on plan assets
Actuarial gains and losses recognized in the year
Past service cost recognized in the year
Other
Total

Thousands of U.S. Dollars
2018

2017
¥

2,244
607
(585)
(441)
12
262
2,099

¥

¥

2018
2,242
581
(589)
(857)
12
249
1,639

¥

$

21,1505,481(5,556)(8,084)113
2,349
15,462$(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen
Past service cost
Actuarial gains and losses
Total

Thousands of U.S. Dollars
2018

2017
¥

(12)
(212)
(224)

¥

¥

2018
(12)
(159)
(172)

¥

$

(113)
(1,500)(1,622)$(6) Accumulated remeasurements of defined benefit plans
Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen
Unrecognized past service cost
Unrecognized actuarial gains and losses
Total

¥

12
(2,088)(2,076)¥

Thousands of U.S. Dollars
2018

2017
¥

2018
–
(2,248)(2,248)¥$$–(21,207)(21,207)(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2018

2017
General account
Bonds
Equities
Other
Total

42%
35%
22%
1%
100%

41%
34%
24%
1%
100%

(b) Method of determining the long-term expected rates of return on plan assets
Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of plan assets and current and anticipatedfuture long-term performance of individual asset classes that comprise the funds’ asset mix.

(8) Assumptions used in actuarial calculations
Major assumptions used in actuarial calculations
Discount rate
Expected return rate on plan assets

2017
mainly 0.9%
mainly 1.5%

2018
mainly 0.9%
mainly 1.5%

3. Defined contribution plans
The required amount of contribution to the defined contribution plans (including the multi-employer corporate pension fund accounted for in the samemanner) of the Companies was ¥1,627 million and ¥1,615 million ($15,235 thousand) for the years ended March 31, 2017 and 2018, respectively.

56

DEFERRED TAX ACCOUNTING
1. Breakdown of major factors that caused deferred tax assets and liabilities
Millions of Yen

Thousands of U.S. Dollars
2018

2017

2018

Deferred tax assets:
Net defined benefit liability

¥

8,708

¥

7,756

$

73,169Depreciation and amortization

3,656

3,674

34,660Accrued bonuses

3,017

3,053

28,801

Loss on valuation of assets

1,349

1,405

13,254

Provision for loss on construction contracts

1,253

987

9,311

Allowance for doubtful accounts

422

474

4,471

Loss carry-forward

255

247

2,330

Others

3,363

2,792

26,33922,026

20,391

192,367(2,908)(2,485)(23,443)

Subtotal
Valuation allowance
Total

¥

19,118¥17,906$

168,924(5,463)¥(6,746)$(63,641)

Deferred tax liabilities:
Valuation difference on available-for-sale securities¥

Reserve for advanced depreciation of non-current assets(1,019)(991)(9,349)Reserve for special depreciation

(373)

(291)

(2,745)

OthersTotal
Net deferred tax assets

(179)

(171)

(1,688)¥(7,028)¥(8,209)$(77,443)¥

12,089

¥

9,696

$

91,471

Note: Except for above, deferred tax liabilities for land revaluation are recorded as follows:

Millions of Yen
Deferred tax liabilities for land revaluation¥

Thousands of U.S. Dollars
2018

2017
6,789

¥

2018
6,772

$

63,886

2. Breakdown of items which caused the difference between the statutory tax rate and the effective
tax rate after adopting tax effect accounting
2018

2017
Statutory tax rate

30.9%

(Adjustments)
Expenses not deductible for tax purposes

1.5%

Non-taxable dividend income(0.3%)Per capita levy of inhabitant taxes

1.0%

Increase in valuation allowance

1.2%

Reversal of revaluation reserve for land

(0.6%)

Others-net(1.0%)

Effective tax rate after adopting tax effect accounting

This note has been
omitted as the difference
between the statutory
tax rate and the effective
tax rate after adopting
tax effect accounting is
5% or less of thestatutory tax rate.

32.7%

Annual Report 201857

SEGMENT INFORMATION, ETC.
(Segment information)
1. Outline of reportable segment information
Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of anentity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
The Companies engage in facility installation work, sales of electrical equipment, rental of real estate, leasing, sales of electrical power and others.
“Engineering” is determined to be the reportable segment.
“Engineering” includes business related to electrical work, plumbing work and various other work on facilities.

2. Method of measurement for the amounts of net sales, profit or loss, assets and other items byreportable segment
The accounting treatment regarding the reportable business segments are the same as recorded in “SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE
PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS.” The profit of reportable segments is based on operating profit. The intersegment profit andtransfers are based on trading prices in the market.

58

3. Net sales, profit or loss, assets and other items by reportable segments
Millions of Yen

For the year ended March 31, 2017
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:
Customers¥

461,451

¥

9,491

Total

¥

461,646¥

35,174

Segment profit
Segment assets¥

24,982

¥

1,468

¥

26,451¥(54)¥

26,397¥

378,006¥

60,936¥438,942¥(14,068)¥

424,874

¥

3,718

¥

1,127

¥

4,845

¥

(71)

¥

4,774

Inter-segment

195¥

470,943¥496,820

25,682¥–¥(25,877)

25,877¥

470,943¥

470,943(25,877)–

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

6,837

5,337

12,175(243)

11,932

Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Millions of Yen

For the year ended March 31, 2018
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:¥

496,633

Total¥

Segment profit
Segment assets

Customers¥

10,571¥

507,205

501,350¥

44,815¥¥27,491

¥

1,706

¥

394,693

¥

¥

3,999

¥

4,716

Inter-segment¥–546,165¥¥

29,19772,788

¥

1,595

¥

34,243¥507,205(38,960)¥

507,205¥64¥

29,261

467,481¥(23,729)¥443,752

5,594

¥

(493)

¥

5,101

38,960(38,960)–

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

7,919

7,575

15,495(1,917)

13,578
Thousands of U.S. Dollars

For the year ended March 31, 2018
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

Net sales:
Customers$ 4,685,216$

44,490Inter-segment

99,726$ 4,784,952

323,047

367,547$(367,547)–$ 4,784,952–

422,783$ 5,152,500$ (367,547)$ 4,784,952

$

$

Total

$ 4,729,716$

Segment profit$

259,349$

16,094$

Segment assets$ 3,723,518$

686,679$ 4,410,198$ (223,858)$ 4,186,339$$

15,047$$$

275,443603

276,047

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

37,72674,707

71,462

52,773
146,179(4,650)(18,084)

48,122
128,094

Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Annual Report 2018

59

(Related information)
For the year ended March 31, 2017

For the year ended March 31, 2018

1. Information about products and services

1. Information about products and services

Information is omitted as similar information is described in the segment

Information is omitted as similar information is described in the segment

information.

information.

2. Information about geographical region

2. Information about geographical region(1) Net sales(1) Net sales

Information is omitted as net sales to external customers in Japan

Information is omitted as net sales to external customers in Japanaccounted for more than 90% of net sales reported in the consolidated

accounted for more than 90% of net sales reported in the consolidated

statement of income.

statement of income.

(2) Property, plant and equipment(2) Property, plant and equipment

Details of property, plant and equipment are omitted as amounts of

Details of property, plant and equipment are omitted as amounts ofproperty, plant and equipment located in Japan accounted for more

property, plant and equipment located in Japan accounted for morethan 90% of all property, plant and equipment reported on thethan 90% of all property, plant and equipment reported on the

consolidated balance sheet.

consolidated balance sheet.

3. Information about major customers

3. Information about major customers

Customer Name

Net sales

Related segment

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company Group¥172,871 million

Engineering

Tokyo Electric Power
Company Group¥171,029 million

Engineering

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company Group

$1,613,481 thousand

Engineering(Information about impairment loss in non-current assets of each reportable segment)
For the year ended March 31, 2017
Disclosure is omitted due to immateriality.
Millions of Yen

For the year ended March 31, 2018
Engineering
Impairment loss¥

256

Other (Note)¥106

Corporate/elimination
¥

–

Total
¥

363

Thousands of U.S. Dollars

For the year ended March 31, 2018
Engineering
Impairment loss
Note: “Other” is related to real estate business and power generation business.

60

$

2,415

Other (Note)
$

1,000

Corporate/elimination
$

–

Total
$

3,424

(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2017

For the year ended March 31, 2018

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

(Information about gain on bargain purchase of each reportable segment)
For the year ended March 31, 2017

For the year ended March 31, 2018

Disclosure is omitted due to immateriality.

Not applicable.

(RELATED PARTY TRANSACTIONS)Transactions between related parties
Transactions between the Company and related parties
The parent company and major shareholders (limited to companies) of the Company
For the year ended March 31, 2017Type

Other affiliates

Type

Name

Location

Capital stock

Description ofbusiness

Ratio of voting
rights held

Relation to the related
partyTokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo¥1,400,975 million

Electric powerbusiness(Held)
Direct–%Indirect 47.8%

Electric work contract

TEPCO Power Grid,
Incorporated

Chiyoda-ku, Tokyo¥

General powertransmission anddistribution business(Held)
Direct 46.6%
Indirect 0.3%

Electric work contract

Name

Nature of transaction

Tokyo Electric Power
Company Holdings,
Incorporated

Installation ofelectric work

80,000 million

Amount of transaction

Account

Balance at end of year

¥ 7,376 million¥ 12,631 million

Notes receivable,accounts receivable fromcompleted construction
contracts and other
Advances received on
uncompleted
construction contracts¥

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥22,753 million

Advances received on
uncompleted
construction contracts¥

Notes payable, accounts
payable for construction
contracts and other¥ 1,839 million

Other affiliates

TEPCO Power Grid,
Incorporated

Installation ofelectric work

Purchase of
raw materials¥146,793 million¥ 35,587 million

132 million

626 million

Annual Report 201861

For the year ended March 31, 2018
Type

Name

Location

Capital stock

Description of business

Ratio of voting rights Relation to the related
held
party

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo¥ 1,400,975 million$13,216,745 thousand

Electric powerbusiness(Held)
Direct–% Electric work contract
Indirect 47.6%

TEPCO Power Grid,
Incorporated¥
Chiyoda-ku, Tokyo$

80,000 million
754,716 thousand

General powertransmission anddistribution
business(Held)
Direct 46.4% Electric work contract
Indirect 0.3%

Name

Nature of transaction

Amount of transaction

Other affiliates

Type

Tokyo Electric Power
Company Holdings,
Incorporated

Installation ofelectric work¥$

8,718 million
82,245 thousand

Other affiliates

TEPCO Power Grid,
Incorporated

Installation ofelectric work

Purchase of
raw materials¥ 144,059 million$1,359,047 thousand¥ 34,395 million$ 324,481 thousand

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 5,069 million$ 47,820 thousand

Advances received on
uncompleted
construction contracts¥$

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 28,457 million$268,462 thousand

Advances received on
uncompleted
construction contracts¥ 1,250 million$ 11,792 thousand

Notes payable, accounts
payable for construction
contracts and other¥ 2,670 million$ 25,188 thousand

Notes:
1. Above transaction amounts do not include consumption taxes and above balances at the end of the year include consumption taxes.
2. Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials are determined based on arm’s length basis through negotiations considering market price, etc.

62

100 million
943 thousand

PER SHARE INFORMATION
Yen

U.S. Dollars
2018

2017
Net assets per share¥

1,013.33¥

2018
1,097.36$

10.35

Earnings per share

86.11

93.31

0.88

Diluted earnings per share

79.34

85.93

0.81

Notes:
1. The basis of calculating earnings per share and diluted earnings per share is as follows:

Millions of Yen

Thousands of U.S. Dollars
2018

2017

2018

Earnings per share
Profit attributable to owners of parent¥

17,591¥

19,058$

179,792

Amount not attributable to common shareholders

–

–

–

Profit attributable to owners of parent applicable tocommon shares

17,591

19,058

179,792

Thousands of Shares
2018

2017
Weighted average number of common shares during the year

204,262204,273

Millions of Yen

Thousands of U.S. Dollars
2018

2017

2018

Diluted earnings per share
Adjustment of profit attributable to owners of parent

(13)

(13)

(122)

[Interest expenses, net of tax included in the above][(13)][(13)][(122)]

Thousands of Shares
2018

2017
Increase in common shares

17,256

17,365[Convertible bond-type bonds with share acquisition rights
included in the above][17,256][17,365]

Overview of dilutive securities that are not included in thecomputation of diluted earnings per share because of theiranti-dilutive effect––

2. The basis of calculating net assets per share is as follows:

Millions of Yen
2018

2017
Total net assets¥

Thousands of U.S. Dollars

213,356¥2018
230,810$

2,177,452

Amount deducted from total net assets

6,364

6,665

62,877[Non-controlling interests included in the above][6,364][6,665][62,877]

Total net assets related to common shares

206,991

224,145

2,114,575

Thousands of Shares
2018

2017
Number of common shares outstanding at end of year

204,268

204,259

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

Annual Report 2018

63

CONSOLIDATED SUPPLEMENTAL SCHEDULES(Schedule of bonds)
Company name

Issue typeIssuance dateKandenko Co.,Ltd.

Euro-yenconvertiblebond-type bonds
with shareacquisition rights
due 2021, subject
to call

March 31,
2016

Total

–

–

As of April 1,
2017

As of March 31,
2018

Interest rate (%)

Collateral

Maturity¥ 20,080 million¥ 20,060 million$189,433 thousand $189,245 thousand

–

None

March 31,2021

¥ 20,080 million¥ 20,080 million$189,433 thousand $189,245 thousand

–

–

–

Notes:
1. Information on convertible bond-type bonds with share acquisition rights is as follows:

Shares to be issued

Common shares

Issuance price of share acquisition rights

GratisIssuance price of shares¥$

Total issuance value¥ 20,100 million$189,622 thousand

Total issuance value of shares issued through the exercise of share acquisition rights¥

Grant ratio of share acquisition rights (%)

100

Exercise period of share acquisition rights

April 14, 2016 to March 17, 2021

1,151.7
10.86–

millionUpon the exercise of each of the share acquisition rights, the bonds relating to the share acquisition rights shall be contributed. The value of the bonds shall be the same as their face amount.

2.The redemption schedule for five years subsequent to March 31, 2018 is summarized as follows:64

Due within one year

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years––¥ 20,000 million$188,679 thousand––

(Schedule of loans)
As of April 1, 2017

As of March 31, 2018

Short-term loans payable¥ 10,122 million$ 95,490 thousand¥ 8,490 million$ 80,094 thousand

0.7–

Current portion of long-term loans payable¥$

798 million
7,528 thousand¥ 1,582 million$ 14,924 thousand

1.7–

Current portion of lease obligations¥$

425 million
4,009 thousand¥$

477 million
4,500 thousand––

Long-term loans payable (excluding current portion of
long-term loans payable)¥ 7,581 million$ 71,518 thousand¥ 8,799 million$ 83,009 thousand

1.6

2019 to 2032

Lease obligations (excluding current portion of leaseobligations)

¥
$

¥
$

966 million
9,113 thousand–2019 to 2025

–

–

–

–

¥ 19,723 million$ 186,066 thousand¥ 20,315 million$ 191,650 thousand––

795 million
7,500 thousand

Other interest-bearing debt
Total

Average interest rate (%)

Maturity

Notes:
1. Interest rates and balances at the end of the year are used to calculate average interest rate. The average interest rate of lease obligations has not been presented since lease obligations before deducting the amountequivalent to interest expense included in total lease payments are recorded on the consolidated balance sheet.
2. The redemption schedule of long-term loans payable and lease obligations (excluding current portion) for five years subsequent to March 31, 2018 is summarized as follows:

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years

Long-term loans payable¥ 1,245 million$ 11,745 thousand¥$

874 million
8,245 thousand¥$

557 million
5,254 thousand¥$

567 million
5,349 thousand

Lease obligations

¥
$

¥
$

297 million
2,801 thousand¥$

173 million
1,632 thousand¥$

71 million
669 thousand

375 million
3,537 thousand(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2017 and March 31, 2018 are less than 1% of the total liabilities and net assets
as of April 1, 2017 and March 31, 2018. Therefore, the disclosure is omitted.

OTHERS
Quarterly information for the year ended March 31, 2018
Cumulative period

First quarter

Second quarter

Third quarter

Fourth quarter

Net sales¥ 112,739 million¥ 231,512 million¥ 342,315 million¥ 507,205 million$ 1,063,575 thousand $ 2,184,075 thousand $ 3,229,386 thousand $ 4,784,952 thousand

Profit before income taxes¥$

7,491 million
70,669 thousand¥ 14,113 million¥ 18,614 million¥ 29,133 million$ 133,141 thousand $ 175,603 thousand $ 274,839 thousand

Profit attributable to owners of parent¥$

4,832 million
45,584 thousand¥$

9,107 million
85,915 thousand

Earnings per share

¥
$

23.66
0.22

¥
$

44.59
0.42

Each quarter
Earnings per shareFirst quarter
¥
$

23.66
0.22

¥ 11,967 million¥ 19,058 million$ 112,896 thousand $ 179,792 thousand¥$

Second quarter
¥
$

20.93
0.19

58.59
0.55

¥
$

Third quarter
¥
$

14.00
0.13

93.31
0.88
Fourth quarter

¥
$

34.72
0.32

Annual Report 201865

Independent Auditors’ Report66Company Profile
HistoryTime
Sep. 1944

Notes
Kyoritsu Kogyo Co., Ltd., and seven other companies merge to rationalize their electrical engineering work. Kanto Haiden Co., Ltd. joins the new group to form
Kanto Denki Koji Co., Ltd., an electrical engineering company with capital of ¥3 million and a head office at 2 Tameike, Akasaka Ward, Tokyo. Eight regional
branches are established in Kanagawa, Saitama, Chiba, Gunma, Tochigi, Ibaraki, Yamanashi, and Numazu (now Shizuoka), and operations begin.

Mar. 1948
Oct. 1949
Jan. 1959
Sep. 1960
July 1961
Oct. 1961
Jan. 1970
Feb. 1970

The Tama Branch is established.

May 1970
Aug. 1970
Apr. 1971
June 1973
Apr. 1974
June 1976
July 1979
Oct. 1981
Sep. 1984
Nov. 1984
Jan. 1985
May 1985
July 1987
Dec. 1988
Apr. 1990
July 1991
July 1993
July 1994
July 1995
July 1997

The air-conditioning duct business (now the environmental facilities and systems and renovation business) is launched.

Oct. 1997
July 1998
Nov. 2000
Aug. 2001
Dec. 2001
May 2003
June 2004
Apr. 2008
Oct. 2012
Mar. 2013
Oct. 2014
July 2015
Mar. 2016
Apr. 2016
Oct. 2016
July 2017

In accordance with the Construction Business Act, the Company receives ministerial registration No. 250, which it renews every two years.
The Osaka (now Kansai) Branch is established.
The head office moves to 4-1-18 Yushima, Bunkyo Ward, Tokyo.
The Company invests in Oyo Denki Co., Ltd. (now KANKO SYOJI CO., LTD.).
The Company’s stock is listed on the Second Section of the Tokyo Stock Exchange (capital: ¥350 million).
The Sendai (now Tohoku) Branch is established.
The Shinetsu (now Nagano) Branch is established.
The civil engineering business is launched.
The Company’s stock listing moves to the First Section of the Tokyo Stock Exchange (capital: ¥1,700 million).
The Sapporo (now Hokkaido) Branch is established.
The Company invests in Dai-ichi Kigyo Co., Ltd. (now Kanko Power Techno Co., Ltd.).
The Comprehensive Education Center (now the Education & Training Center) is established.
Due to revision of the Construction Business Act, the Company receives ministerial permit (Special – 49) No. 3885, which it currently renews every five years.
The Company receives ministerial permit (Ordinary – 51) No. 3885, which it currently renews every five years.
The nuclear energy-related business is launched.
The Singapore Office is established.
The Company name is changed to Kandenko Co., Ltd.
Kanko Fudousan Kanri Co., Ltd. (now K Asset Management Co., Ltd.) is established.
The Company invests in Tokyo Kouji Keibi Co., Ltd.
The Company’s first issue of unsecured convertible bonds (¥10 billion) takes place.
Kanko Maintenance Service Co., Ltd. (now Kanko Facilities Co., Ltd.) is established.
The head office moves to 4-8-33 Shibaura, Minato Ward, Tokyo (its present location).
The Nagoya Branch is established.
The Kyushu Branch is established.
The Tsukuba Technology Research & Development Institute (now the Technology Research & Development Institute) is established.
Bay Techno Co., Ltd. is established.
The Niigata Branch is established.
The Chuo (now Tokyo) Branch is established.
Ibaraki K-Techno Co., Ltd., Tochigi K-Techno Co., Ltd., Gunma K-Techno Co., Ltd., Yamanashi K-Techno Co., Ltd. (now Tama K-Techno Co., Ltd.), and Shizuoka
K-Techno Co., Ltd., are established.
Kanagawa K-Techno Co., Ltd., Chiba K-Techno Co., Ltd., and Saitama K-Techno Co., Ltd., are established.
NETSAVE Co., Ltd. is established.
The Taiwan Branch is established.
In accordance with the Building Lots and Buildings Transaction Business Act, the Company receives a Building Lots and Building Transactions Business License(1) No. 80352 from the governor of Tokyo, which it renews every five years.
The Company invests in Hankyu Denki Koji Co., Ltd. (now HANDENKO CORPORATION).
The Company invests in Transmission Line Construction Co., Ltd.
The Company invests in Kawasaki Setsubi Kogyo Co., Ltd. (listed on the Second Section of the Nagoya Stock Exchange).
The Company invests in Choshi Wind Development Co., Ltd. (and launches the power generation business).
Kama Solar Power Co., Ltd. is established.
The regional headquarters system is introduced.
The Fukushima Headquarters is established.
The Company issues ¥20 billion of euro-yen convertible bond-type bonds with subscription rights to shares due 2021.
Kanagawa Power Techno Co., Ltd. and Saitama Power Techno Co., Ltd. are established.
The Company invests in Sato Kensetsu Kogyo Co., Ltd. (indirect ownership of the latter’s subsidiary Systec Engineering)
Chiba Power Techno Co., Ltd., Ibaraki Power Techno Co., Ltd., Tochigi Power Techno Co., Ltd., Gunma Power Techno Co., Ltd., Nishikanto Power Techno Co.,
Ltd., and Shizuoka Power Techno Co., Ltd. are established.

Annual Report 201867

Stock Information (As of March 31, 2018)
The shares of common stock of theCompany are listed on the First

Principal Shareholders

Section of the Tokyo Stock Exchange.
On March 31, 2018, there were a totalof 9,213 shareholders.
The following table lists the 10
largest shareholders appearing on theregister at that date.

Name

Shares held as a percentage
of total outstanding shares

1

TEPCO Power Grid, Inc.

94,753,552

46.15

2

Japan Trustee Services Bank, Ltd. (Trust Account)

9,560,200

4.66

3Mizuho Bank, Ltd.

8,121,839

3.96

4The Master Trust Bank of Japan, Ltd. (Trust Account)

7,505,100

3.66

5

Kandenko Group Employees Shareholding Association

5,724,815

2.79

6STATE STREET BANK AND TRUST COMPANY 505001

2,047,934

1.00

7Japan Trustee Services Bank, Ltd. (Trust Account 5)

1,705,300

0.83

8Japan Trustee Services Bank, Ltd. (Trust Account 9)1,685,200

0.82

9EVERGREEN

1,499,000

0.73

10

The Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

1,491,700

0.73

134,095,540

65.32

Total

Number of Shares Held by Type of Shareholder

Stock-Related Information

Treasury stock
0.50%(0.50%)

Fiscal year-end

March 31

Ordinary general
meeting of shareholders

June

Record dates for
dividend payments

March 31 for the fiscal year-end dividend.
September 30 for the interim dividend.

Record date

The date on which shares must be owned forshareholders to exercise voting rights at the general
meeting of shareholders is March 31. If other votes
are required, the record date will be set andannounced in advance.

Method of public
notification

Notification will be given electronically. However, if
we cannot issue an electronic notification, we willplace a notice in the Nihon Keizai Shimbun,
published in Tokyo. Kandenko’s URL for public
notices is as follows.
http://www.kandenko.co.jp/index.html

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku,
Tokyo 100-8233, Japan

Transfer agent contact
point (inquiries about
stock-related matters)

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063, Japan
Tel: 0120-782-031 (toll-free)

Individuals,
other13.72%(14.82%)Foreigncompanies, etc.
15.23%(13.57%)

Total number of shares issued
205,288,338 shares

Note: Figures in parentheses show
data as of March 31, 2017

Financial
institutions
20.79%(21.43%)

Japanesecompanies
49.76%(49.68%)Monthly Stock Price(Unit : Yen)
1,400

1,200

1,000

800

0

68

Number ofshares held

Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
2017
2018

Board of Directors and Audit & Supervisory Board Members (As of June 27, 2018)
ChairmanKiyoshi Goto

Senior Managing Directorand Executive Officer

Shinichirou Kitayama

President and Executive
Officer

Yoshimi Morito

Managing Directors
and Executive Officers

Shuichi Yamaguchi

Hiroyuki Kaneko

Executive Vice
Presidents

Shigenori Takaoka

Toru Yukimura

Sumihito Okawa(outside)

Shoichiro Kashiwabara

Shigeru Nagaoka

Takashi Suetsuna(outside)

Toshio Nakama

Eimei Shimura

Takehiro Yamaguchi(outside)

Kenichi Takahashi

Yuji Ueda

Executive Vice Presidents
and Executive Officers

Directors (outside)

Audit & Supervisory Board
Haruhiko Terauchi
Members

Takashi Uchino
Masataka Ishizuka

Network
Domestic Offices

Overseas Offices

Head Office

4-8-33 Shibaura, Minato-ku, Tokyo, JapanTokyo Branch

4-8-33 Shibaura, Minato-ku, Tokyo, Japan

Kanagawa Branch 1-1-8 Hiranuma, Nishi-ku, Yokohama, Japan
Chiba Branch

2-1-24 Shinjuku, Chuo-ku, Chiba, Japan

Saitama Branch

1-9-6 Sakuragicho, Omiya-ku, Saitama, Japan

Ibaraki Branch

2-7-14 Jonan, Mito-shi, Ibaraki, Japan

Tochigi Branch

91-1 Imaizumicho, Utsunomiya-shi, Tochigi, Japan

Gunma Branch

215-6 Furuichimachi, Maebashi-shi, Gunma, Japan

Yamanashi Branch

4-12-25 Chuo, Kofu-shi, Yamanashi, Japan

Shizuoka Branch

8-12 Yoneyamacho, Numazu-shi, Shizuoka, Japan

Tama Branch

2-24-6 Myojincho, Hachioji-shi, Tokyo, Japan

Kansai Branch

Nakanoshima Festival Tower 20th Floor,
2-3-18 Nakanoshima, Kita-ku, Osaka, Japan

Nagoya Branch

Nagoya Toho Building 6th Floor,
1-2-7 Sakae, Naka-ku, Nagoya-shi, Aichi, Japan

Kyushu Branch

Yakuin Business Garden 4th Floor,
1-1-1 Yakuin, Chuo-ku, Fukuoka, Japan

Hokkaido Branch

Takeda Resona Building 3rd Floor,

Singapore
Branch6001 Beach Road, #20-03/04 Golden Mile Tower,
Singapore 199589

Taiwan Branch

6F-1, No. 45, Section 1, Minchuan Eastern Road,
Taipei, Taiwan

Yangon Branch

BLK-31, Room 21, 2nd Floor, Shwe Ohn Pin Apartment,
Yanshin Road, Yankin Township, Yangon, Myanmar

Indonesia
Representative
Office12th Floor, Summitmas II Building, Jl. Jend. Sudirman
Kav. 61-62, Jakarta 12190 Indonesia

4-1-2 Kitaichijo Nishi, Chuo-ku, Sapporo-shi,
Hokkaido,Japan
Tohoku Branch

Sendai Daiichi Seimei Tower Building,
4-6-1 Ichibancho, Aoba-ku, Sendai-shi, Miyagi, Japan

Nagano Branch

1629-32 Midoricho, Nagano, Japan

Annual Report 2018

69

KANDENKO CO., LTD. Annual Report 2018 For the year ended March 31, 2018https://www.kandenko.co.jp/

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