Annual Report 2016
For the year ended March 31, 2016

Lighting up the future together

Profile
Kandenko Co., Ltd., aims for the mutual prosperity of its shareholders, customers, and the communities where it
works, and finds its purpose in this pursuit. We conduct business in a wide range of fields and have grown into oneof the largest general infrastructure companies in Japan.
In fields such as building infrastructure, telecommunications infrastructure, and electric power infrastructure,
Kandenko uses its independently developed technologies, expertise, and work methods to provide end-to-end
engineering services ranging from design and execution to maintenance and renovation of electrical,

CONTENTS
02

The Kandenko Group03

Consolidated Financial Highlights

04

Message from the Management06

Growth Strategy

08

Business Review by Division

telecommunications, and other kinds of work. We are also active in the renewable energy field, where the execution

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

expertise we have accumulated in the fields of solar and wind power serves us well.

Information & Communication Work 09

Kandenko will continue to innovate on the technology front, nurture its human resources, and build a sounderPower Distribution Lines Engineering Work 10

financial structure while making a long-lasting contribution to society as a partner in social infrastructure.

Your Partner in
Social Infrastructure

Electric Power & Civil Engineering Work 11

12

Topics19

Research and Development Activities

20

Corporate Governance24

Environmental Initiatives

27

Financial Section
Consolidated 10-Year Financial Summary 28
Financial Position 29
Consolidated Balance Sheet 30
Consolidated Statement of Income 32
Consolidated Statement ofComprehensive Income 33
Consolidated Statement of
Changes in Equity 34
Consolidated Statement of Cash Flows 37
Notes to Consolidated Financial Statements 38
Independent Auditors’ Report 66

Here we present the new online commercial that
Kandenko launched in July 2016 under the title“Lighting Up.”
Based around the key phrase “Lighting up thefuture together,” this commercial depicts in images
how actual structures take shape out of a design on

67

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

paper, spreading light throughout the city. In thisway, it communicates the importance and value ofKandenko’s work to support the vital infrastructure ofelectric power.
Annual Report 2016

1

The Kandenko GroupThe Kandenko Group consists of Kandenko Co., Ltd. and 20 consolidated subsidiaries whose businesses comprise 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

Other Businesses

Kandenko operates a facility installation business and subcontracts

Kandenko Co., Ltd., operates in the real estate and electric powersome of this work to Kawasaki Setsubi Kogyo Co., Ltd.; Kanko

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

Facilities Co., Ltd.; Kanko Power Techno Co., Ltd.; Kanagawa

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

K-Techno Co., Ltd.; Chiba K-Techno Co., Ltd.; Saitama K-Techno Co.,estate and leasing businesses; and Choshi Wind Development Co.,

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

Ltd., and Kama Solar Power Co., Ltd., in the electric power generation

K-Techno Co., Ltd.; Tama K-Techno Co., Ltd.; Shizuoka K-Techno

business. Kandenko Co., Ltd., purchases from KANKO SYOJI CO.,Co., Ltd.; NETSAVE Co., Ltd.; and HANDENKO CORPORATION.

LTD., part of the materials and other supplies required for installation

Worksite security is outsourced to Tokyo Kouji Keibi Co., Ltd., andwork, and leases from K Asset Management Co., Ltd., land anddesign and estimation work are given to Bay Techno Co., Ltd.

buildings as well as vehicles and other equipment.
Effective July 1, 2015, the consolidated subsidiary K Lease Co.,

Kandenko and Transmission Line Construction Co., Ltd., receive
orders from Tokyo Electric Power Company, Incorporated (TEPCO)

Ltd., was merged into K Asset Management Co., Ltd. (the new trading

and its affiliates, for the installation of electrical facilities.

name of Kanko Fudousan Kanri Co., Ltd.).
The businesses mentioned above are arranged in a schematic

Tama K-Techno Co., Ltd. is the new trading name ofdiagram below showing the Kandenko Group’s structure.

consolidated subsidiary Yamanashi K-Techno Co., Ltd., which was
adopted with effect from January 29, 2016.

Kandenko Group Structure(As of March 31, 2016)

Clients
Tokyo Electric Power Company, Incorporated (and its affiliates)

Other clients

Installation
Sales ofReal estate
workelectrical equipment
rentalLeasing

Electricity
sales●

Kandenko Group

Installation work
Worksite safety & security
Design estimation

Kandenko
Facility installation business and other businesses

Facility installation business● Kawasaki Setsubi Kogyo Co., Ltd. ● Kanko Facilities Co., Ltd.

2

● Kanko Power Techno 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.

● NETSAVE Co., Ltd.

● HANDENKO CORPORATION● Tokyo Kouji Keibi Co., Ltd.

● Bay Techno Co., Ltd.

● Transmission Line Construction Co., Ltd.

Sales of electricalequipment
Real estate rental
Leasing: Consolidated subsidiaries

Leasing
Real estate rental
Sales of electricalequipment

Other businesses
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.

Consolidated Financial Highlights

Kandenko Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2016
Millions of yen

2015

2016

Reference:
2016(Kandenko, nonconsolidated)¥ 436,682¥ 447,673¥ 398,495

Operating income

9,388

16,416

12,642

Ordinary income

10,336

17,077

13,280

Profit attributable to owners of parent*

4,615

9,412

7,480

Comprehensive income

11,984

7,137−

Total assets

366,177

407,681359,657

Total net assets

193,345

197,980

175,155

Equity ratio (%)

51.44

47.22

48.70

Net assets per share (yen)922.05942.42857.43

Earnings per share (yen)

22.59

46.07

36.62

Cash dividends per share (yen)

14.00

14.00

−

Number of employees (persons)

8,839

8,915

6,660

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

Operating Income

Profit Attributable to Owners of Parent(Millions of yen)

(Millions of yen)

447,673436,682

437,930

447,741

441,786

16,41620,000600,000(Millions of yen)
12,0009,412

Net Sales

15,000400,000

200,000

4,615

1,876

4,000
5,000

0

4,226

3,952

9,388

8,284

7,364

10,000

8,034

8,000

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

Annual Report 20163

Message from the Management

Manabu Yamaguchi
Chairman and Director

Fiscal 2015 Business Environment

below. In particular, we achieved strong profit growth based on
the success of the concerted corporate effort to fundamentally

In fiscal 2015, ended March 31, 2016, the Japanese economy wasreform cost structures that has been ongoing since the Great East

affected by negative factors such as the slowdown in China andJapan Earthquake.

other emerging Asian economies and the financial instability inEurope. It nevertheless continued on an overall course of gradual

Outlookrecovery, backed by solid corporate earnings and an improving

Looking ahead, there are plans for infrastructural provision ahead of

employment situation.

the Tokyo Olympic and Paralympic Games and other opportunities

This resulted in a trend toward growth in private-sector

including large-scale redevelopment projects, especially in the greater

construction investment based on major redevelopment projects,

Tokyo area. Investment in the electric power-related sector is also

especially in the greater Tokyo area, and market demand for office

expected to show an increasing trend, particularly in facility upgradesbuildings and other new construction. In the electric power-related

and related operations.

sector as well, the market showed early signs of a pickup, especiallywith regard to investment in power distribution facilities.
In response to these conditions, Kandenko was guided by the

In response to these conditions, Kandenko will work to realize
its vision as a “100-Year Company Supporting Society” by ensuringthat its business base is firmly grounded. To do so, we will accelerate

new management vision it launched in fiscal 2015 under the title

the structural reforms implemented thus far and reformulate the“Kandenko, a 100-Year Company Supporting Society.” Based on thisgrowth strategy due for launch in fiscal 2016, implementing the key

vision, we moved forward energetically with locally focused sales

management policies outlined below.

activities and wide-area deployment of work execution capabilities,

4

Yoshimi Morito
President and Director

First of all, we will put in place a locally focused repair andwhile implementing comprehensive cost-cutting measures andmaintenance system that can respond accurately to customer needs. We

other strategies.

will do this by drawing on our advanced technological and solutions

As a result, we succeeded in posting favorable results for thecapabilities and our comprehensive work execution capabilities,

fiscal year, improving on the previous year’s performance as detailed

realizing a maintenance system that is responsive to medium- toEstablishing a Resilient and Highly Profitable
Corporate Structure Capable of Sustained Growthlong-term trends in client markets. Concurrently, we will enhance our

The dividend for fiscal 2015 consists of an interim dividend of ¥6building renovation systems and roll out one-stop services promoting

and a year-end dividend of ¥8, including a special dividend of ¥2, for an

the introduction of energy-saving and long-lifespan construction

annual dividend of ¥14 per share.

equipment, among others.
Next, we will upgrade our sales systems to take account ofprogress with the reform of Japan’s electric power system, while working

For fiscal 2016, we plan to increase the regular dividend by ¥4 togive an annual dividend of ¥16 per share (an interim dividend of ¥8 anda year-end dividend of ¥8).

to expand our range of business fields to secure increased orders
from infrastructural networks such as railways, roads, waterways, andFiscal 2015 Business Results

gas supply. In parallel, we will draw on the technologies and expertise

Consolidated results (Billions of yen)acquired in the design and installation of solar and wind power
generation systems and related facilities to participate in renewableenergy generation projects.
Meanwhile, alongside sustained efforts to assist recovery in the
Fukushima area, we will work to ensure stable supply of electric power

Net sales¥ 447.6 (Up 2.5% YoY)

Operating income

16.4 (Up 74.9% YoY)

Ordinary income

17.0 (Up 65.2% YoY)

Profit attributable to owners of parent

9.4 (Up 103.9% YoY)

and effective response to large-scale disasters as part of our social
mission as a public utility company.
Additionally, as well as developing the human resources thatare essential to the implementation of our growth strategy, we will
strengthen on-the-job training, reform work practices and annual leavesystems, promote opportunities for women and older employees, andtake other measures to enhance the work environment.
We will also undertake investment to expand work execution

Non-consolidated results

New orders received¥ 431.5 (Up 5.5% YoY)

Net sales

398.4 (Up 2.4% YoY)

Operating income

12.6 (Up 85.3% YoY)

Ordinary income

13.2 (Up 70.7% YoY)

Profit7.4 (Up 96.5% YoY)

capabilities, for instance by developing technologies and IT systems thatwill raise efficiency and promote labor-saving, ensuring safety measures

Fiscal 2016 Business Results (Forecast)for vehicles, machinery, and other environments, and upgrading our

Consolidated results (Billions of yen)offices and facilities.
Going forward, Kandenko will continue to ensure fair andappropriate business operations to establish a resilient and highly
profitable corporate structure capable of sustained growth. In this way,
we are committed to meeting the expectations of our shareholders.

Basic Policy on Sharing Profits: Dividends
for Fiscal 2015 and 2016

Net sales¥ 490.0 (Up 9.5% YoY)

Operating income

20.0 (Up 21.8% YoY)

Ordinary income

20.6 (Up 20.6% YoY)

Profit attributable to owners of parent

12.2 (Up 29.6% YoY)

Non-consolidated results

New orders received¥ 470.0 (Up 8.9% YoY)

Our basic policy on profit sharing calls for maintaining a stable

Net sales

440.0 (Up 10.4% YoY)

return through twice-yearly payment of an interim dividend and a

Operating income

16.0 (Up 26.6% YoY)

Ordinary income

17.0 (Up 28.0% YoY)

Profit10.5 (Up 40.4% YoY)

year-end dividend. By actively reflecting profit growth in the dividend
payment and using other measures, we are committed to returning
profit to shareholders.

Annual Report 20165

Growth Strategy

Setting Out a Growth Strategy for Further New Achievements
Guided by its management vision, “Kandenko, a 100-Year Company Supporting Society,” the Kandenko Group is currently implementing

the Medium-Term Management Plan it launched in fiscal 2015. Results for the first year of the plan have been positive.

To build on these results, we have set out a new growth strategy to realize high profitability and a resilient corporate structure for sustained

growth.

Fiscal 2020 targets

Management Vision:“Kandenko,
a 100-Year Company
Supporting Society”

Important
Policies

Net sales■ Fiscal 2015 results■ Fiscal 2015 original plan
■ Fiscal 2016 revision

GrowthStrategy

Fiscal 2015

Fiscal 2015
Management
Plan
Based on fiscal 2015 results,
we have revised the planfor operations from fiscal 2016.

Fiscal 2016

Fiscal 2016
Management
Plan

1. Thoroughgoing compliance, improvement of safety and quality
2. Structural reform, profit expansion
3. Construction of a new business model, expansion of business fields

490.0(Billions of yen)
530.0

4. Human resources strategy

2. Business field expansion strategy

5. Investment strategy to enhance work
execution capabilities

3. Contribution to stable electric power supply

Fiscal 2016

Fiscal 2017

Net sales¥650.0 billion

Operating income¥36.0 billion

ROE

9.0% or more

Non-consolidated

Fiscal 2017
4. Fostering employees and technology that willsustain the Company in the future

New orders received¥610.0 billion

Net sales¥580.0 billion

Operating income¥30.0 billion

ROE

9.0% or more

5. Infusing the Company with vigor and liveliness

Operating income

Fiscal 2016 Management Plan

(Billions of yen)

560.0
16.4

Fiscal 2015
results

Fiscal 2018

1. Business base reinforcement strategy

Fiscal 2016

Fiscal 2016 Management Plan
447.6

Fiscal 2017

Consolidated

Fiscal 2018

Fiscal 2015
results

20.0

Fiscal 2016

27.0

23.0

Fiscal 2017

Dividend payout ratio

30%–40%

Number of employees

8,000 people

Fiscal 2018

Concrete Policies
1

Business Base Reinforcement Strategy

・Secure renovation project contracts by putting in place a one-stop sales
system covering electric power supply, air conditioning and sanitation
systems, information and communications, and building interiors
・Put in place systems for customer-focused repair and maintenance works andto increase the number of contracts for small-scale projects
・Strengthen operations in the air conditioning and sanitation works field toenable total solutions for electric power and gas supply
・Cut costs to strengthen price-competitiveness6

2

Business Field Expansion Strategy

・Expand into new fields and overseas markets on a comprehensive foundationin the electric power field consisting of work execution capabilities,
technological capabilities, and expertise・Develop business in the renewable energy generation sector
・Respond to liberalization of electric power retailing・Respond to plans for undergrounding of power lines to eliminate aboveground power masts and cables
・Reorganize overseas business systems
・Utilize in-house technology to expand operations in the field of social
infrastructure networks and related areas
・Leverage company-owned real estate to boost earnings

3

Contribution to Stable Electric Power Supply

・Initiatives to assist post-disaster reconstruction in Fukushima
・Maintenance initiatives for electric power transmission, transformation, anddistribution facilities, etc.
・Respond to updating of electric power facilities to support customer
businesses
・Strengthen the ability to provide recovery and reconstruction response
following large-scale natural disasters

4

Human Resources Strategy

・Reform employee attitudes to support growth strategy
・Expand the workforce
・Initiatives to improve productivity
・Initiatives to activate and cultivate human resources
・Strengthen coordination with partner companies

5

Investment Strategy to Enhance Work Execution Capabilities

・Invest in enhanced work execution capabilities by expanding the network ofoperational bases and upgrading offices and facilities, vehicles, and so on
・Invest in safety measures, technology development, and IT

Annual Report 20167

Business results by type of work
New orders received

217,182
195,170

200,000

2013

2014

2015

DescriptionofBusiness

150,000

100,000

50,0000

2016

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 andsanitation systems, heat supplying systems, and disaster prevention systems

In the segment covering electrical engineering, environmental facilities andsystems, and renovation work, we strove to meet lively construction demand,
particularly in the greater Tokyo area. We achieved this through finely targeted
sales activities based on advance gathering and analysis of market information,
presentation of renovation solutions matched to customer needs, and a range ofother proactive strategies. By additionally strengthening cost management
functions and promoting efficient operation of work execution capabilities, wereduced work costs and boosted productivity. As a result, both new orders
received and net sales increased from the previous fiscal year, as shown below.
New orders received: ¥224,170 million (up 3.2% year on year)
Net sales: ¥202,815 million (up 3.9% year on year)

TEKKO BUILDING

8224,170
202,815

191,227

226,677
181,820
187,3872012

250,000

Electrical Engineering,
Environmental Facilities
and Systems, andRenovation Work

(Millions of yen)

300,000

176,606
191,774

Business Review by Division

Net sales

Business results by type of work
New orders received

Net sales(Millions of yen)

30,08032,65031,86027,87635,56933,23831,21031,50740,00035,32032,36750,0002015

2016

30,000Information &Communication Work

20,00010,0000

DescriptionofBusiness

2012

2013

2014

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

In the segment covering information & communication work, we carried out
joint sales activities with other divisions to attract new customers. We also
worked to secure orders for large-scale renovation works on cable TV
broadcasting facilities and for communication cable works accompanying the
expansion of the expressway network.
As a result, new orders received expanded compared with the previous
fiscal year, to ¥31,860 million (up 5.9% year on year).
However, partly due to the impact of measures by communications
business operators to cut capital investment, net sales decreased to ¥27,876
million (down 14.6% year on year).

Installing a smart meter data aggregation device

Adjusting equipment inside a cable TV operating station

Annual Report 20169

Business results by type of work
New orders received

139,234
138,419

130,700
128,742

156,945
156,900

100,000

50,0000

DescriptionofBusiness

135,650
133,910150,000

Power Distribution
Lines Engineering Work

(Millions of yen)

200,000
144,413
143,699

Business Review by Division

Net sales

2012

2013

2014

2015

2016

Construction and maintenance of TEPCO’s electric power facilities

In the segment covering engineering work on overhead and undergroundpower distribution lines, there was a shift to recovery in the level of capital
investment in electric power distribution facilities, which had previously beensluggish. We responded by working to raise productivity through flexible
deployment of work execution capabilities over a wide area and stringent
control of work procedures. We also took steps to cut work costs throughclose monitoring of earnings and expenditures at each branch office andimprovements to working methods. As a result, both new orders received andnet sales rose from the previous fiscal year, as shown below.
New orders received: ¥139,234 million (up 6.5% year on year)
Net sales: ¥138,419 million (up 7.5% year on year)

Work on overhead power distribution lines using hot sticks

Laying cable for underground power distribution facilities

10Business results by type of work
New orders received

Net sales(Millions of yen)

36,23929,38331,00432,62936,44635,07832,681

29,51640,00030,591

38,34850,00030,000Electric Power & Civil
Engineering Work

20,00010,0000

DescriptionofBusiness

2012

2013

2014

2015

2016

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 utilizing C.C. Box
Nuclear Power Work: Conduct regular inspections and maintenance of nuclear power plant facilities
and equipment

This segment covers power generation and transformation, overhead andunderground power transmission lines, civil engineering, and nuclear andwind power generation. During the fiscal year under review, to respond tosolid investment in power source and trunk network facilities, we worked tosecure orders by bringing together divisional engineering capabilities.
Additionally, we drew on our accumulated store of technologies and expertiseto roll out energetic solutions-based sales activities, while focusing on
business fields such as railways, gas supply, and waterways.
As a result, new orders received reached ¥36,239 million (up 16.9%
year on year), but net sales fell to ¥29,383 million (down 9.9% year on year).

Replacing a circuit breaker at a 500kV power substation

Laying an underground gas pipeline using Kandenko’s unique Earth Little Tunneling Method(small-diameter pipe jacking method)

Annual Report 201611

Topics: Introduction of Projects by Kandenko

3 Nagano City Arts Center (Nagano)

2 DOME IWAKI BASE (Fukushima)
1 Eurus Yurikogen Wind Farm (Akita)

12 Kama Solar Power Plant 1 (Fukuoka)

11 Kure City New Office Building (Hiroshima)

10 Nikkei Inc., Osaka Head Office

Building (Osaka)

4 Lotte Co., Ltd., Urawa Factory #6 (Saitama)

14 Noi Bai International Airport

5 Toukatsu Hospital (Chiba)

Terminal 2 Building (Vietnam)

13 Cathay Landmark (Taipei, Taiwan)

6 Dai Nippon Printing Co., Ltd., Ichigaya-

Kagacho Building (Tokyo)

1
7 Futako Tamagawa Rise (Tokyo)

2

3
4
6

13
14

11

5
7 8
9

10

12

8 Sumitomo Mitsui Banking Corporation, Head

12

Office East Building (Tokyo)

9 Oi racetrack G-FRONT (Tokyo)
Annual Report 201613

Topics

Completion of the TOKYO RAKUTENCHI Asakusa
Building and Opening of MARUGOTO NIPPON
Asakusa is a district of Tokyo where the traditional popular culture of old Edo remains vividly present. In December 2015, the TOKYORAKUTENCHI Asakusa Building was completed in Asakusa Rokku, the area that is the district’s western gateway, and MARUGOTONIPPON was opened.
MARUGOTO NIPPON is a facility bringing together 50 retail outlets designed to allow a virtual tour of the regions of Japan.
With seasonal foods sourced directly from the producer region and handcrafted objects showcasing traditional artisan skills, visitors
can enjoy a variety of attractions under one roof in a facility that, it is hoped, will further boost tourism and contribute to locally
based production.
Kandenko was commissioned to install the building’s electric facilities, including an LED lighting system that achieves energy
savings through self-regulating adjustment. The facility will add to the charms of Asakusa, a major tourist center that receives morethan 20 million visitors a year.

14

“Gujjoba!!” Opens at Yomiuriland
In March 2016, the Yomiuriland amusement park at Inagi City in Tokyo saw the opening of “Gujjoba (Good/Job/Attractions)!!,” one ofJapan’s largest leisure facilities offering a hands-on experience of manufacturing culture.
“Gujjoba!!” is made up of four attraction zones, or “factories,” themed around automobiles, foods, fashion, and stationery. The
total of 15 attractions—offering the opportunity to have fun while learning how things are made—includes the Custom Garage, which
illustrates all stages of car manufacture from automobile design and assembly through to vehicle shipment. There is also the Spin
Runway, where visitors can experience the garment manufacturing process from cloth cutting to stitching while sitting in the comfort ofa fairground ridecar.
Alongside these are four workshops where visitors can actually make their own products, including cups of yakisoba noodles
made by combining ingredients of their own choosing and colorfully decorated personalized stationery.
Kandenko technology is also used in amusement facilities of this kind, where people can spend enjoyable times with family
and friends.

Annual Report 201615

Topics

Aspiring to Be “Kandenko, a 100-Year Company
Supporting Society”: Initiatives in Social Infrastructure
As part of its social mission to support the stable supply of electric power, Kandenko has since its foundation in 1944 worked todevelop advanced and unique technologies and accumulate rich expertise. This enables it to undertake work on facilities beyond theelectric power field, such as water supply and sewerage facilities, subways, and expressways.
Going forward, we will continue to draw on this store of technologies and expertise to strengthen business operations in thefield of social infrastructure projects, moving toward our aspiration to become “Kandenko, a 100-Year Company Supporting Society.”

Installing an expressway information board

Working on water main pipes

16

Yakushido Station on the Sendai City Subway Tozai Line

Undertaking Infrastructure Projects in Vietnam
In recent years, Vietnam has attracted interest as a new investment target among the emerging economies of Asia, and has posted
continuing high levels of growth. Kandenko carried out a project here to lay underground power distribution lines to supply electricity
to an industrial park.
Thang Long Industrial Park II, where the works took place, is located in the north of Vietnam around 30 kilometers southeast of
the capital of Hanoi, and is surrounded by peaceful rural landscapes. This region, which is characterized by a humid subtropicalclimate, has muddy soil that made operations difficult. From the preparatory earthworks to the underground laying of the cables andpipes that constituted the major part of the works, our team faced mud-drenched conditions. However, by drawing to the full on theiraccumulated expertise and building a close working relationship with local staff, they were able to
make steady progress and succeeded in completing the project on time.
In this way, Kandenko’s highly developed technologies and skills are contributing overseas

Thang Long
Industrial Park II

Laos

to infrastructure provision and the development of local communities.
ThailandCambodia
Vietnam

Pipe and cable laying operations were made complicated because of sludge.

This transformer will be the power source of the industrial park.
Annual Report 201617

Topics

Excellent Results at the National Technical Skills
Olympics with Two Gold Prizes
In December 2015, the 53rd National Technical Skills Olympics, at which young engineers compete in displays of theiraccomplishments, was held in the main hall of the Makuhari Messe exhibition center in Chiba Prefecture. Kandenko employees
distinguished themselves with gold prizes in the Electric Power Works and the Information Network Installation categories.
At the Olympics, besides the sessions announced in advance, there are additions and alterations on the day of the event,so not only accuracy and speed but also flexibility and adaptability are important skills. It was the two Kandenko competitors’
ample demonstration of the fruits of their day-to-day training, as well as their ability to adapt as needed to the additions andalterations, that secured their gold prize victories.
These wins in two categories reflect the human resource development that we have been promoting. We are committed tocontinuing to work to transmit technologies and skills to the generations that are our future.

Koichiro Yumoto (left), gold prize winner in the Electric Power Works category, and
Sho Tokumori, gold prize winner in the Information Network Installation category18

Research and Development Activities

To respond to customer requirements and worksite issues, the Kandenko Group is focusing on the key areas of technology
development to answer customer needs, as well as technology development to contribute to worksite safety, labor saving, andcost reduction, and to support the expansion of business fields. In fiscal 2015, we moved forward aggressively with technology
development in specific areas, to improve the lifespan and reliability of customer facilities, introduce new operational
techniques and robots to contribute to operational safety and labor saving, and support operations, maintenance, and increased
efficiency in the solar power business.
R&D expenses amounted to ¥1,093 million (consolidated) in fiscal 2015, and the main results are detailed below. (R&D
expenses are not broken down by segment.)

Facility Installation Business
Development of a High-Function Insulation Monitoring Device
Electric power facilities are legally required to carry out periodic testing of
insulation resistance, but as testing that involves electric power interruption
is impractical at certain facilities, such as data centers and production
plants that operate 24 hours a day, a method is needed to measureinsulation resistance that does not require power shutdown. We addressed
this need by developing a device that allows accurate measurement of
insulation resistance throughout even a live circuit, by passing a weaksignal through a low-voltage ungrounded circuit on the transformer
secondary side. The resulting continuous data recording means that any
insulation weakening in the circuit can be detected at an early stage. 		
We will market this device tocustomer facilities to expand
orders received, which willcontribute to improved reliability
High-function insulation monitoring device
at customer facilities.

Development of Self-Propelled Ceiling Wiring Robot
Previously, wiring work within ceilings required operatives to climb onto
unstable work platforms every time that work within the ceiling was necessary,
which made for a poor work environment and greatly reduced work efficiency.
In response, we developed a highly mobile self-propelled ceiling wiring
robot, operated by remote control, thatcan deliver wires for cable wiring to therequired position within the ceiling. We
will use this device to ensure the safetyof wiring operations within ceilings andboost operational efficiency.
Self-propelled ceiling wiring robot

Development of a Cable Laying Technique Using
Automatically Controlled Cable Transport
Under the existing technique for laying of cable in undergroundservice trenches, electric rollers are placed at three-meter intervals
to transport the cable, with a hauling machine required at curved
or inclined sections of the trench to grasp and carry the cable. This
operation requires not only a large deployment of labor but also amajor commitment of time and resources to prepare materials andmachinery, for example. We responded by developing a techniquethat combines a web camera-based monitoring system with anoperational control system that can simultaneously manage a numberof machines thatControl panel
integrate the functionsof cable transport andhauling. We will rollout this technique toenhance operational
efficiency and achieve
cost reductions.
Hauling machine

Development of a System to Manage Electric PowerInterruption and Restoration Procedures
At present, to ensure the reliability of electric power interruption andrestoration procedures during annual inspections and facility updating
at electric power facilities, display labels are used to show the statusof operations, with double-checking carried out by a team of two
operatives. However, to answer the need for further safety enhancement,
we developed procedure input support software that can check thesequence of procedures in advance, and atablet-based visualization system to replace
the display labels that relays and displays
operating status from the control panel inreal time. This system will be used to ensure
safety and improve operational efficiency.

Other Businesses

System to manage electric powerinterruption and restoration
procedures

Upgrade of the Mega-Solar Power Plant Measurement andMonitoring System
A system developed by Kandenko for measurement and monitoring at
mega-solar power plants has been enhanced by the addition of a functionthat can infer estimated parameters from past electric power generation
data and improved diagnostic algorithms. We are using the system to boost
operational safety and reliability
at our power generation plants.
We plan to market this system
to our customers so it that
contributes directly to sales.
Mega-solar power plant measurement andmonitoring system
Annual Report 201619

Corporate GovernanceCorporate Governance
As Kandenko’s operating environment drastically changes, 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 to its
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

Hideo Kayashima, Teruo Hayashi, and Hiroyuki Yoshimatsu, 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 three additional people 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 audit, the 18-strong staff of the Internal Audit Division carries

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

out the audit in accordance with the Internal Control Enhancement Plan.

which meets regularly each week and additionally whenever necessary. In

The audit results are reported to the Internal Control Committee and thethese ways, we strive for rational corporate administration. Moreover, weManagement Committee, and as appropriate to the Board of Directors, tohave introduced an executive officer system, which separates managerial

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 to the Audit & Supervisory Board meeting andof the directors’ business execution system. To foster swift responses

regularly discuss these matters with the Audit & Supervisory Board

to changes in the operating environment and invigorate management,

members, including outside members. Opinions are exchanged wheneverdirectors’ terms are limited to one year from the time of appointment.

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

Audit & Supervisory Board Members

auditors, and the Internal Audit Division carry out their audits, they receive

Kandenko has employed an Audit & Supervisory Board member systemregular reports on the maintenance and state of internal control from eachfor some time. Five Audit & Supervisory Board members, including threedivision responsible for business execution.

from outside the Company, conduct audits appropriately based on legal

20

stipulations 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

ReportDecision-making,supervision and oversight,
business execution

Appointment,
dismissal

Audit & Supervisory
Board member

Audit & Supervisory
Board members
Audit & Supervisory Report
Board

(

Management Committee

Appointment,
dismissal)

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

Related 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 to the candidates,

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

the Board of Directors approves them, and then they are presented toof 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 201621

Corporate GovernanceIndependence Criteria for Independent Outside Directors
Kandenko considers outside director candidates to be independent as longas they do not trigger any of the following exclusion criteria:
1. The candidate is or has been a business executive of Kandenko or a
Kandenko subsidiary.
2. The candidate is a business executive of a major shareholder ofKandenko (a shareholder with 10% or more of the voting rights
including indirect holdings) or a business executive of a company ofwhich Kandenko is a major shareholder.
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).
4. The candidate is a business executive of a major business client ofKandenko (a client accounting for more than 1% of consolidated
net sales in the most recent fiscal year) or a business executive of acompany of which Kandenko is a major business client.
5. The candidate is a representative employee or an employee of anCompliance System
To clarify important points in the Kandenko Group’s business activities
and encourage deeper entrenchment of compliance, we have enacted theKandenko Group Charter of Corporate Behavior, and we are promoting its
establishment and raising the consciousness of all Group employees
about the Charter. We have set up a compliance consultation point for
employees and an internal system where legal violations can be reported.
We are working to establish and maintain a corporate culture of fairness
and soundness.
In its attitude to antisocial forces, the whole Kandenko organizationis committed to a resolute stance rejecting any action that could raisesuspicion of an inappropriate relationship. Backing this stance are theKandenko Group Charter of Corporate Behavior and the Internal Control
Enhancement Plan adopted by the Internal Control Committee, which form
the basis for education, training, and related activities to ensure complianceand 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.
8. The candidate has a relative (a spouse or relative within the second
degree of kinship) to whom any of 1 to 6 above applies (restricted to
officers and senior employees).
9. The candidate has triggered any of 2 to 8 above in the past five years.

State of Progress of the Internal Control System
Based on the Basic Policy for Enhancing the Internal Control System
adopted by the Board of Directors (enacted April 2006, revised May 2015),
Kandenko has established an Internal Control Committee chaired by thecompany president that discusses issues relating to the internal control
system. The Company also lays down internal control regulations that set
out the basic principles of internal control and management regulations foraffiliated companies that set out relevant management principles. Throughthese and other measures, Kandenko has put in place a system to ensure
appropriate business conduct by the Company and by the corporate groupconsisting of Kandenko and its subsidiaries. Additionally, to promote
adaptation to the internal control reporting system introduced in 2008 in
accordance with the Financial Instruments and Exchange Act, the Company
has set up a department in charge of reviewing internal controls relating tofinancial reporting in order to promote appropriate operation and evaluationand to ensure the credibility of financial reporting.

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
their degree of impact and likelihood of occurrence. In addition to taking
advance measures of this kind to prevent risk, Kandenko has designatedreporting channels and response systems in place for the event ofrisk materializing.
Additionally, the Internal Control Committee meets periodically tocheck the operating status of the risk management system and to analyze
and evaluate risk status and related matters, while the establishmentof a dedicated Internal Control Division serves to strengthen the risk
management system.
Described below are factors that could possibly have a significant
impact on decisions made by investors. In recognizing that there is thepotential for such risks to occur, the Kandenko Group is undertaking efforts
to avoid their occurrence as well as formulating countermeasures in theevent such risks occur.
Moreover, the statements described below regarding the future reflect
judgments made by the Kandenko Group based on what was known up to
the end of the fiscal year ended March 31, 2016.

Changes in the Business Environment
In the event that significant changes occur in the business environment,such as decreases in construction-related investments or capital investment
in electric power facilities and equipment exceeding projected changes,
it is possible that the actual financial performance or other results of theCompany could be affected. Sales to TEPCO account for about 40% of theKandenko Group’s sales.

22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

Fluctuations in Materials Costs or Labor Costs
Should materials costs 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 the 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 law, the antimonopoly law, and the industrial safety and healthlaw. Should there be any changes, such as revision or repeal of legal
regulations, or enactment of new legal regulations, or if changes are madeto 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 201623

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.

As an additional part of its structures to promote environmental activity,
Kandenko has set up departments within the construction headquarters andActivity Plan

regional headquarters to take charge of environmental activities under the

1. We consider environmental conservation to be an important management

control of the Environmental Department of Safety, Environment and Quality

issue. We are committed to making continual, incremental improvements

Division. A broad range of environmental issues undergoes careful review

to our environmental management system (EMS).

by the Committee for Environmental Measures, which decides on concrete

2. While engaged in activities to save resources, conserve energy, promoteresponse initiatives and works to put them into practice.

recycling, and prevent pollution, we will reduce the volume of waste
produced by our businesses.
3. We will follow legal regulations and agreements and enact our own

Environmental Education

environmental standards to promote environmental conservation.

We believe that in promoting environmental activities such as energy

4. We will educate our employees about the environment and raise theirconservation, the reduction of CO2 emissions, and proper disposal ofenvironmental awareness.
5. We will build bridges of cooperation to regional society and seek
harmony with society as a whole.

industrial waste, each employee’s correct understanding and concern forenvironmental issues is critical, so we carry out environmental education
for people of all ranks.
Kandenko encourages employees to take the Certification Test forEnvironmental Management System
In accordance with its basic environmental policy, Kandenko has built anknowledge of the environment and can voluntarily lead environmental

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

conservation initiatives among their colleagues and in their communities,

continuous improvements to the system and carrying forward proactive

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

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

Environmental Specialists (Eco Test), which is organized by the Tokyo
Chamber of Commerce and Industry. People who pass the test have a broad

Initiatives to Reduce the Environmental Burden

Promoting Green Purchasing
Kandenko engages in green purchasing activities with respect toGiven 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 realizing 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.

business 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 to 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

Meeting room that exclusively uses LED lighting (head office)

Limited based on a Green Energy
Certification System.

Ice-based thermal storage air conditioning system (Ibaraki Branch)

Kandenko’s hot-water supply system for industrial use, “EcoCute Q”(Kawasaki Representative Office)Annual Report 201625

Environmental Initiatives
Vehicle Energy-saving Initiatives
Kandenko employs a large vehicle fleet consisting mainly of work vehicles suchas aerial work platform vehicles and trucks to transport materials and equipment.
To raise the fuel efficiency of vehicles, employees have worked concertedly topromote eco-driving.
Concurrently, Kandenko is promoting the introduction of electric vehicles,
which have outstanding environmental performance features such as no CO2emissions during operation, and hybrid vehicles, which have excellent fuelefficiency performance.

Battery-operated aerial
platform vehicle

Electric vehicles and a high-speed charging device (at the back of the vehicle on the right)

Resource Conservation Initiatives
At representative offices and other business bases, leftover work

Additionally, Kandenko implements water-saving measures in thematerials, outdated facilities, and any other disused materials are

day-to-day use of restrooms and other facilities, while recycled watercollected. Kandenko contributes to resource conservation by sorting

produced by collecting and purifying rainwater and wastewater is usedand storing these materials, then converting them for reuse, recyclingat the head office for toilet cleansing.

them into new products, or reutilizing them in some other way. The

Concurrently, to protect forestry resources, we utilize recycled

sorting of waste materials at representative offices, which is essential

paper and paper that supports forest management, work to cut the use

to reducing waste emissions and ensuring efficient use of resources,of photocopying paper, promote the use of paper-free projectors at

unites the staff of each office in concerted efforts.

meetings, and take other steps to promote resource conservation.

Sorting and storage at an office
Collection of rainwater

Sorting and storage of industrial waste

26

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 201627

Consolidated 10-Year Financial Summary(Millions of yen)

For the fiscal years ended March 31
Net sales

2008

2009

2010

2011

2012

2013

2014

2015

2016

¥ 452,645 ¥ 468,608 ¥ 473,804 ¥ 453,623 ¥ 462,482 ¥ 441,786 ¥ 447,741 ¥ 437,930 ¥ 436,682 ¥ 447,673

Operating income

4,350

6,457

8,858

9,477

10,735

8,034

7,364

8,284

9,388

16,416

Ordinary income

5,109

7,276

9,854

10,484

11,634

9,070

8,301

9,089

10,336

17,077

Profit attributable to ownersof parent

4,284

4,865

5,586

5,428

5,866

1,876

3,952

4,226

4,615

9,412

–

–

–

–

1,772

4,381

8,238

7,327

11,984

7,137

Total assets

371,970

373,674

379,093378,150

353,342359,726

364,008359,933

366,177

407,681

Total net assets

181,090

173,171

172,487

177,536

176,808

178,757

184,269

189,692

193,345

197,980

Equity ratio (%)

48.23

45.84

44.57

45.96

48.93

48.54

49.49

51.45

51.44

47.22

Net assets per share (yen)876.44837.07826.08850.04845.67854.31

881.41906.29922.05942.42

Earnings per share (yen)

20.93

23.78

27.30

26.54

28.69

9.18

19.34

20.69

22.59

46.07

Cash dividends per share (yen)

12.00

12.00

12.00

14.00

12.00

12.00

12.00

12.00

14.00

14.00

Net cash provided by (used in)operating activities(13,008)

23,153

16,947

12,236

10,257

13,035

15,401(2,218)2,921

18,042

Net cash provided by (used in)investing activities(9,579)2,439(9,825)(9,763)(3,799)1,583(12,748)(5,839)2,253(7,101)

Net cash used inoperating activities(1,529)(1,887)(3,519)(4,400)(4,037)(5,423)(2,900)(4,540)(3,743)19,807

Cash and cash equivalents at endof period

13,83437,50341,06039,142

41,53950,72550,55038,69740,15770,899Number of employees (persons)

7,676

7,893

8,513

8,665

8,769

8,746

8,732

8,821

8,839

8,915

Comprehensive income

28

2007

Financial Position
Analysis of Consolidated Financial Position

Cash Flows

Total assets at the end of the fiscal year under review increased ¥41,503

In the fiscal year under review, both operating activities and financing

million over the previous fiscal year to ¥407,681 million.

activities contributed to an increase in consolidated cash and cash
equivalents (henceforth “funds”). Despite the negative contribution madeAssetsby investing activities, consolidated funds increased ¥30,741 million fromDue mainly to increases of ¥33,231 million in cash and deposits and ¥12,639

the previous fiscal year to ¥70,899 million.

million in costs on uncompleted construction contracts, total current assets
grew by ¥46,233 million over the end of the previous fiscal year.
Owing to a decrease of ¥5,558 million in investment securities, total

Cash Flows from Operating Activities
In the fiscal year under review, cash flows from operating activities

non-current assets declined by ¥4,729 million from the end of the previous

added ¥18,042 million to funds (up ¥15,121 million from the previous

fiscal year.

fiscal year). This was because factors making a positive contribution to
funds, including chiefly ¥17,248 million in profit before income taxes

Liabilities

and an increase of ¥7,223 million in advances received on uncompleted

Due to an increase of ¥7,223 million in the current liabilities item of

construction contracts, outweighed negative factors such as an increase ofadvances received on uncompleted construction contracts, and an increase¥12,639 million in costs on uncompleted construction contracts.

in non-current liabilities including ¥20,100 million in zero coupon
convertible bonds, total liabilities grew by ¥36,868 million over the end of

Cash Flows from Investing Activities

the previous fiscal year.

In the fiscal year under review, funds decreased ¥7,101 million due toinvesting activities (down ¥9,355 million from the previous fiscal year).

Net Assets

Here, ¥3,537 million in proceeds from sales and redemption of investment

Due mainly to a ¥6,228 million rise in retained earnings, total net assets

securities was outweighed by a ¥2,570 million net increase in time deposits

climbed by ¥4,634 million compared to the end of the previous fiscal year.

and ¥7,869 million for purchase of property, plant and equipment.

Cash Flows from Financing Activities
In the fiscal year under review, financing activities increased funds by¥19,807 million (up ¥23,551 million from the previous fiscal year).
This was due to income of ¥4,364 million from long-term loans payableand ¥20,100 million from the issuance of convertible bond-type bonds
with subscription rights to shares, which offset ¥2,451 million in cash
dividends paid.

Annual Report 2016

29

CONSOLIDATED BALANCE SHEETKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2015 AND 2016
(Millions of Yen)

(Thousands of U.S. Dollars)
2016

2015

2016

AssetsCurrent assets
Cash and deposits*3

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

Securities
Costs on uncompleted construction contracts

44,128*3

129,326*3¥

21,260*3

129,855

*3

3,999

5,999
*5

77,36033,899*5$

684,601
1,149,159
35,389*5299,991

Raw materials and supplies

2,656

4,149

36,716

Deferred tax assets

5,543

6,535

57,831

Other

5,476

5,056

44,743

Allowance for doubtful accounts

(423)

(655)

(5,796)

213,967

260,200

2,302,654

Total current assets

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

84,429*3

85,438*3756,088

Machinery, vehicles, tools, furniture and fixtures*3

45,350*351,759*3458,044*2, *359,917*2

58,803*2

520,380

Land
Leased assets

2,567

2,349

20,787

Construction in progress

4,909

353

3,123

Accumulated depreciation(103,455)(105,064)(929,769)

Total property, plant and equipment

93,71893,640828,672

2,905

2,749

24,327

Intangible assets

Investments and other assets
Investment securities

45,324*1, *3

Deferred tax assets
Other

6,326

*3

*1, *3

6,281

5,861

5,797

*3

351,90255,584*3

51,300Allowance for doubtful accounts(1,925)(753)(6,663)

Total investments and other assets

55,586

51,090452,123

152,210

147,480

1,305,132

407,681$ 3,607,796

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

30

39,765*1, *3¥366,177¥

(Millions of Yen)

(Thousands of U.S. Dollars)
2016

2015

2016

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

¥

8,728

*3

¥

86,231

85,280
7,686

*3

$
*3

754,690
68,017

Lease obligations

516

395

3,495

Income taxes payable

972

6,260

55,398Advances received on uncompleted construction
contracts

11,86419,088

168,920

Provision for warranties for completed construction

965

974

8,619

Provision for loss on construction contracts

3,124

*5

2,391

*5

*5

21,159Other

15,21021,235

187,920

Total current liabilities

127,614143,312

1,268,247–

20,100177,876

Non-current liabilities
Convertible bond-type bonds with subscription rights tosharesLong-term loans payable

1,755

*3

Lease obligations
Deferred tax liabilities for land revaluation

5,567

*3

662

809
7,304

*2

*3

6,830

*2

49,2655,858*260,442

Net defined benefit liability

33,14930,964

274,017

Other

2,198

2,263

20,026

Total non-current liabilities

45,217

66,388587,504

172,832

209,700

1,855,752

Capital stock

10,264

10,264

90,831

Capital surplus

6,268

6,349

56,185Retained earnings

162,347

168,576

1,491,823

(553)

(565)

(5,000)178,327

184,624

1,633,840

15,402

12,460110,265

(332)

(575)

(5,088)

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

(6,414)*2(5,302)*2*2(46,920)

Remeasurements of defined benefit plans

1,385

1,309

11,584

Total accumulated other comprehensive income

10,0407,891

69,831

4,976

5,464

48,353

193,345

197,980

1,752,035

407,681$ 3,607,796

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

366,177¥

The accompanying notes are an integral part of financial statements.

Annual Report 201631

CONSOLIDATED STATEMENT OF INCOME
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2015 AND 2016
(Millions of Yen)
2016

2015
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¥

436,682405,245*1(Thousands of U.S. Dollars)

22,047

447,673
409,491*1$ 3,961,707
3,623,814*1

38,182

31,436*2

2016

21,765*2

337,893
192,610*2

9,388

16,416145,274

Interest income

83

40

353

Dividend income

611

712

6,300

Foreign exchange gains

132

–

–

Other

347

319

2,823

Total non-operating income

1,175

1,071

9,477

Interest expenses

125

110

973

Financing expenses

–

130

1,150

Other

101

170

1,504

Total non-operating expenses

227

410

3,628

10,336

17,077

151,123

1,263

1,324

11,716

–

28

247

1,263

1,353

11,973Operating income (loss)
Non-operating income

Non-operating expenses

Ordinary income (loss)
Extraordinary income
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Impairment loss

1,025

*4

9,070

*4

Other

166

156

1,380

Total extraordinary losses

458

1,182

10,460

Profit (loss) before income taxes

11,141

17,248

152,637

Income taxes-current

1,553

6,777

59,973

Income taxes-deferred

4,459

419

3,707

Total income taxes

6,013

7,196

63,681

Profit (loss)

5,128

10,052

88,955

Profit (loss) attributable to non-controlling interests

513

640

5,663

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

32

292

*4

¥

4,615

¥

9,412

$

83,292

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2015 AND 2016
(Millions of Yen)
2016

2015
Profit (loss)¥(Thousands of U.S. Dollars)

¥

5,128

2016
10,052$

88,955

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

5,674(2,983)(26,398)

Deferred gains or losses on hedges

(224)

(243)

(2,150)

Revaluation reserve for land

723

379

3,353

Remeasurements of defined benefit plans, net of tax

681

(66)

(584)

Total other comprehensive income
Comprehensive income

6,856

*1

¥

11,984(2,914)

*1

¥

7,137

(25,787)*1$

63,159Comprehensive income attributable toComprehensive income attributable to non-controllinginterests

6,530

11,477

Comprehensive income attributable to owners of parent
¥

507

¥

607

57,787$

5,371

The accompanying notes are an integral part of financial statements.

Annual Report 201633

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2015
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264

¥

6,425

¥

Cumulative effects of changes
in accounting policies

165,656¥

Total shareholders’equity(538)¥(5,247)

Restated balance

10,264

6,425

181,807(5,247)

160,408(538)

176,559

Changes of items during period
Purchase of shares of
consolidated subsidiaries

(156)

(156)

Dividends of surplus(2,860)(2,860)

Profit (loss) attributable toowners of parent

4,615

4,615

Reversal of revaluation
reserve for land

184

184

Purchase of treasury shares
Disposal of treasury shares

0

(14)

(14)

0

0

(14)

1,768

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

¥

9,763

(156)
¥

6,268

1,939
¥

162,347

¥

(553)

¥

178,327

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

(108)

¥

(6,953)

¥

660

¥

3,363

¥

4,521

Total net assets¥

Cumulative effects of changes
in accounting policies

189,692(5,247)

Restated balance

9,763

(108)

(6,953)

660

3,363

4,521

184,444

Changes of items during period
Purchase of shares of
consolidated subsidiaries(156)

Dividends of surplus(2,860)

Profit (loss) attributable toowners of parent

4,615

Reversal of revaluation
reserve for land

184

Purchase of treasury shares(14)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

5,638

(224)

538

724

6,677

455

7,132

Total changes of items during period

5,638

(224)

538

724

6,677

455

8,901

Balance at end of current period¥

15,402

The accompanying notes are an integral part of financial statements.

34

¥

(332)

¥

(6,414)

¥

1,385

¥

10,040

¥

4,976

¥

193,345YEAR ENDED MARCH 31, 2016
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264¥

6,268¥ 162,347

Cumulative effects of changes
in accounting policies¥

Total shareholders’equity(553)¥ 178,327–
10,264

Restated balance

6,268

–

162,347(553)

178,327

Changes of items during period
Purchase of shares of
consolidated subsidiaries

8080

Dividends of surplus(2,451)(2,451)

Profit (loss) attributable toowners of parent

9,412

9,412

Reversal of revaluation
reserve for land

(732)

(732)

Purchase of treasury shares–

Disposal of treasury shares

(12)

(12)

–

–

(12)

6,296

(565)

¥ 184,624

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¥

15,402

¥

80

6,228

6,349

¥ 168,576¥

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

(332)

¥

(6,414)

¥

1,385

¥

10,040¥

4,976

Cumulative effects of changes
in accounting policies

Total net assets¥ 193,345–

15,402

Restated balance(332)(6,414)

1,385

10,0404,976

193,345

Changes of items during period
Purchase of shares of
consolidated subsidiaries

80

Dividends of surplus(2,451)

Profit (loss) attributable toowners of parent

9,412

Reversal of revaluation
reserve for land

(732)

Purchase of treasury shares(12)

Disposal of treasury shares–

Net changes of items otherthan shareholders’ equity(2,941)

(243)

1,111

(75)

(2,149)487(1,661)

Total changes of items during period(2,941)

(243)

1,111

(75)

(2,149)

487

4,634

5,464

¥ 197,980

Balance at end of current period¥

12,460

¥

(575)

¥

(5,302)

¥

1,309

¥

7,891

¥

The accompanying notes are an integral part of financial statements.

Annual Report 201635

YEAR ENDED MARCH 31, 2016
(Thousands of U.S. Dollars)
Capitalstock
Balance at beginning ofcurrent period$

Capitalsurplus90,831$

55,469

Shareholders’ equity
Retained
Treasury
earnings
sharesTotal shareholders’equity$ 1,436,699$ 1,578,115

Cumulative effects of changes
in accounting policies$(4,893)–90,831

Restated balance

55,469–1,436,699(4,893)

1,578,115

Changes of items during period
Purchase of shares of
consolidated subsidiaries

707

707

Dividends of surplus(21,690)(21,690)

Profit (loss) attributable toowners of parent

83,292

83,292

Reversal of revaluation
reserve for land

(6,477)(6,477)Purchase of treasury shares–

Disposal of treasury shares

(106)

(106)

–

–

(106)

55,716(5,000)$ 1,633,840

Net changes of items otherthan shareholders’ equity–

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

Balance at beginning ofcurrent period$

90,831$

707

55,11556,185$ 1,491,823$

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$$$ 1,711,017

136,300(2,938)$(56,761)$

12,256$

88,849$44,035

Cumulative effects of changes
in accounting policies–
136,300

Restated balance(2,938)(56,761)

12,256

88,84944,035

1,711,017

Changes of items during period
Purchase of shares of
consolidated subsidiaries

707

Dividends of surplus(21,690)

Profit (loss) attributable toowners of parent

83,292

Reversal of revaluation
reserve for land

(6,477)Purchase of treasury shares(106)

Disposal of treasury shares–

Net changes of items otherthan shareholders’ equity(26,026)(2,150)

9,831

(663)

(19,017)

4,309(14,699)

Total changes of items during period(26,026)(2,150)

9,831

(663)

(19,017)

4,309

41,00848,353$ 1,752,035

Balance at end of current period$

110,265

The accompanying notes are an integral part of financial statements.

36$(5,088)$(46,920)$

11,584$

69,831$CONSOLIDATED STATEMENT OF CASH FLOWSKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2015 AND 2016
(Millions of Yen)
2016

2015
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for loss on
construction contracts
Increase (decrease) in net defined benefit liability
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
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
Proceeds from issuance of convertible bond-typebonds with subscription rights to shares
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
Cash and cash equivalents at end of period*1¥(Thousands of U.S. Dollars)¥

11,141
3,939
292
(213)

2016
17,248
4,320
1,025
(940)

$

152,637
38,2309,070(8,318)(1,347)(733)(6,486)(2,524)
(695)
125
11
(1,263)(14,371)(2,341)(752)
110–(1,309)(385)(20,716)(6,654)
973–(11,584)(3,407)

10,025(12,639)(111,849)

1,615
3,230

(1,492)
1,355(13,203)
11,991(5,147)

7,223

63,920(2,114)
2,702
696
(125)
(352)
2,921

8,397
19,087754(110)(1,688)18,04274,309168,911
6,672(973)(14,938)
159,663

5,970(2,000)3,000(7,390)17(1,978)
2,369
–
1,371
894

(2,570)(1,000)2,000(7,869)
161
(495)
3,537
(1,100)30
203(22,743)(8,849)17,699(69,637)
1,424(4,380)31,300(9,734)
265
1,796

2,253

(7,101)(62,840)

290
–
(281)

(506)
4,364
(1,088)(4,477)
38,619(9,628)–

20,100177,876(668)(2,860)(222)(3,743)28
1,460
38,697(558)(2,451)(51)
19,807(7)30,741
40,157(4,938)(21,690)(451)
175,283(61)
272,044355,371

40,157*1¥

70,899*1$

627,424

The accompanying notes are an integral part of financial statements.

Annual Report 201637

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2015 AND 2016

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, 2016 have been“Companies”) maintain their accounting records and prepare their financialtranslated from yen amounts into U.S. dollar amounts at the rate of ¥113

statements in accordance with accounting principles generally accepted=U.S.$1.00, the exchange rate prevailing on March 31, 2016.

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

2. Application of equity method(1) Number of consolidated subsidiaries: 20(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None

Names of the consolidated subsidiaries: K asset management Co., Ltd.,
Kanko Power Techno Co., Ltd., KANKO SYOJI CO., LTD.,
Kanagawa K - Techno Co., Ltd., Chiba K - Techno Co., Ltd.,(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity method:

Saitama K - Techno Co., Ltd., Ibaraki K - Techno Co., Ltd.,THAI KANDENKO CO., LTD.

Kanko Facilities Co., Ltd., Bay Techno Co., Ltd., Tokyo Kouji Keibi Co., Ltd.,

Tochigi K - Techno Co., Ltd., Gunma K - Techno Co., Ltd.,Tama K - Techno Co., Ltd., Shizuoka K - Techno Co., Ltd.,(Reason for excluding from the scope of the equity method)

NETSAVE Co., Ltd., HANDENKO CORPORATION, Kawasaki Setsubi Kogyo Co., Ltd.,

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

Transmission Line Construction Co., Ltd., Choshi Wind Development Co., Ltd.,the equity method have immaterial impact on the consolidated financial

Kama Solar Power Co., Ltd.

statements in terms of net income (amount corresponding to equity
interest) and retained earnings (amount corresponding to equity interest),

Among these subsidiaries, K asset management Co., Ltd., which changed

and are not material, taken as a whole.

its company name from Kanko Fudosan Kanri Co., Ltd. to the current name,conducted an absorption-type merger of K Lease Co., Ltd., a consolidated
subsidiary, effective July 1, 2015. Tama K - Techno Co., Ltd. changed its

3. Accounting period of consolidated subsidiaries

company name from Yamanashi K - Techno Co., Ltd. to the current name

The year-end date for consolidated subsidiaries is the same as theeffective January 29, 2016.

consolidated year-end date.

(2) Name of major non-consolidated subsidiary:

4. Significant accounting policies

THAI KANDENKO CO., LTD.

(1) Evaluation methods for significant assets(Reason for excluding from the scope of consolidation)
All of the non-consolidated subsidiaries are small in scale and have nomaterial impact on the consolidated financial statements in terms of total
assets, net sales, net income (amount corresponding to equity interest) andretained earnings (amount corresponding to equity interest).

(a) Securities
i. Held-to-maturity securities
Amortized cost method (straight-line method)
ii. Available-for-sale securities
Securities with market quotations:
Stated at market value at the end of the year (Unrealized gains orlosses, net of applicable taxes, are comprehensively reported as acomponent of net assets and the cost of securities sold is computed
using the moving-average method.).

38

Securities without market quotations:(4) Accounting method relating to retirement benefits

Stated at cost determined by the moving-average method.

(a) Method of attributing expected retirement benefit to periods(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 (Balance
sheet amounts are determined by writing down the carrying amountbased on declining profitability.)

Method of attributing expected retirement benefit to periods is allocatedby the straight-line basis (the expected benefit divided by the total
service 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 the(2) Depreciation methods of significant depreciable assets

following periods.

(a) Property, plant and equipment (excluding leased assets)
Depreciated mainly by the declining-balance method(5) Accounting policies for significant revenues and expenses

Useful life and residual value are determined on the same basis as that(a) Recognition of revenues and costs of completed construction contractsof the method provided in the Corporate Tax Act.
		

Useful lives of certain buildings are deemed as 30 years

i. Construction contracts that the outcome of the construction activity isdeemed certain during the course of the activity at the end of the year

although their useful lives based on the Corporate Tax Act are longer

Percentage-of-completion method (cost proportion method shallthan 30 years.

be applied to estimate the percentage-of-completion of such(b) Intangible assets (excluding leased assets)
Straight-line method
Software for internal use is amortized by the straight-line method overconstruction contract)ii. Other construction contracts
Completed-contract method

an estimated useful life (5 years).
(c) Leased assets
Leased assets related to finance lease transactions that do not transfer(6) Significant hedge accounting method(a) Hedge accounting method

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

The Companies use the deferral hedge accounting method. However,assumption that the useful life equals the lease term, and the residual

the exceptional accounting is used for interest rate swaps that meet

value equals zero.

specified matching criteria.
(b) Hedging instruments and hedged items(3) Accounting policies for significant allowance and provisions

Hedging instruments: Interest rate swaps(a) Allowance for doubtful accounts

Hedged items: Loans payable

The allowance for doubtful accounts is provided for to the amount(c) Hedging policy

sufficient to cover possible losses on collection. It consists of

In accordance with internal approval procedures for derivative

the estimated uncollectible amount with respect to identified

transactions, interest rate fluctuation risks related to the hedged items

doubtful receivables and an amount calculated by applying thepercentage of actual losses on collection experienced in the past
to remaining receivables.
(b) Provision for warranties for completed construction

are hedged to a certain degree.
(d) Method for evaluating the effectiveness of hedges
The Companies evaluate the effectiveness of their hedging activities
by comparing cumulative changes in cash flows on the hedging

To provide for possible future expenses under warranties for completed

instruments with cumulative changes in cash flows on the related

construction contracts, provision for construction contracts completed

hedged items. However, the evaluation of hedging effectiveness isduring the year is provided based on future estimated amount.

omitted for interest rate swaps to which the exceptional accounting(c) Provision for loss on construction contracts

is applied.

To provide for future losses on construction orders, provision for
estimated losses is provided for uncompleted construction contracts at(7) Method and period of amortization of goodwill

the end of the year that are likely to incur losses and the amount can be

Goodwill is amortized by the straight-line method over the estimated periodreasonably estimated.

that the benefits are expected to be received, not exceeding 20 years.

Annual Report 201639

(8) Cash and cash equivalents in the consolidated
statements of cash flows(9) Other significant accounting policies for the preparationof consolidated financial statements

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

Accounting method for consumption taxes:

and short-term investments with maturities of three months or less from theConsumption and local consumption taxes are accounted for by the tax-

purchase date whose value is not subject to significant fluctuation risk.

exclusion method.

ACCOUNTING STANDARDS, ETC. NOT YET EFFECTIVE“Implementation Guidance on Recoverability of Deferred
Tax Assets” (Accounting Standards Board of Japan(“ASBJ”) Guidance No. 26, March 28, 2016)

according to those categories, but it has made necessary revisions on the
category criteria and part of the treatment of the amount of deferred tax assets
recorded. This implementation guidance provides guidelines in applying
the “Accounting Standards for Tax Effect Accounting” (Business Accounting(1) Outline
The practical guidance on accounting standards and the practical guidanceCouncil) with regard to recoverability of deferred tax assets.

on auditing standards (portion relating to accounting treatments) for tax effect(2) Scheduled date of applicationaccounting issued by the Japanese Institute of Certified Public Accountants

This implementation guidance will be applied from the beginning of the(hereinafter referred to as “JICPA”) are to be transferred to the ASBJ. In thisyear beginning on or after April 1, 2016.

regard, “Implementation Guidance on Recoverability of Deferred Tax Assets”
still basically follows the framework of the guidance on recoverability of(3) Effects of the application of this accounting standard, etc.

deferred tax assets, which is principally stipulated in the JICPA Auditing

The effects of the application of the “Implementation Guidance on

Committee Report No. 66 “Audit Treatment Regarding Judgment ofRecoverability of Deferred Tax Assets” on the consolidated financial

Recoverability of Deferred Tax Assets,” where entities are classified into

statements are currently under assessment.

five categories and the amount of deferred tax assets recorded is estimated

CHANGES IN PRESENTATION
Consolidated statement of income

Changes in line with the application of the “AccountingStandard for Business Combinations,” etc.

Because the amount of “loss on retirement of non-current assets” in

The provisions stipulated in Paragraph 39 of the “Accounting Standard for“extraordinary losses,” which was presented as a separate item in the year

Consolidated Financial Statements” (ASBJ Statement No. 22, September

ended March 31, 2015, is 10% or less of the total amount of extraordinary13, 2013) and others have been applied, and a change in presentation oflosses, this item is included in “other” in “extraordinary losses” from the year

net income and a change in presentation from minority interests to non-ended March 31, 2016. The consolidated financial statements for the year

controlling interests have been made. The consolidated financial statements

ended March 31, 2015 have been reclassified to reflect this change

for the year ended March 31, 2015 have been reclassified to reflect thesein presentation.

changes in presentation.

As a result, ¥119 million, which was presented in “loss on retirement of
non-current assets” in “extraordinary losses,” has been reclassified to “other.”40

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
2016

2015
Investment securities (Stocks)

¥

2016

¥

653

826

$

7,309

*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
Millions of Yen

Thousands of U.S. Dollars
2016

2015
Difference between the fair value of the revalued land at end ofyear and its book value after revaluation¥¥(6,680)2016(4,627)$(40,946)*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
2016

2015
Cash and deposits¥

958

Notes receivable, accounts receivable from completed
construction contracts and other

¥

92

[–]

¥ 1,380

[–]

175

¥

2016
[–]

$ 12,212

[–]

1,548

$

[–]
[–]

Buildings and structures

1,248

[133]

546

[546]

4,831

[4,831]

Machinery, vehicles, tools, furniture and fixtures

1,910[1,909]5,662[5,662]50,106[50,106]

Land

1,668

[–]

–

[–]

–

[–]

–

[–]

7

[–]

61

[–]

Total

¥

5,878

¥ [2,042]¥ 7,772¥ [6,209]$ 68,778$[54,946]

Short-term loans payable

¥

1,288

¥

¥

¥

$ 6,601$ [6,601]

Investments and other assets – Other (lease deposits)

Long-term loans payable
Total

¥

[288]

746

[746]

1,555

[1,555]

4,967[4,967]

43,955[43,955]

2,844¥ [1,844]¥ 5,713¥ [5,713]$ 50,557$[50,557]

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

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

Thousands of U.S. Dollars
2016

2015
Investment securities¥

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

44

¥

175

44

$

130

131
¥

2016

¥

174

389
1,150

$

1,539

Annual Report 201641

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

Thousands of U.S. Dollars
2016

2015
Employees (housing loans)

¥

1,800

¥

2016
1,581

$

13,991*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
2016

2015
¥

264

¥

2016
16

$

141

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
2016

2015
¥

2,522

¥

2016
1,849

$

16,362*2. Principal accounts and amounts in selling, general and administrative expenses
Millions of Yen

Thousands of U.S. Dollars
2016

2015
Employees’ salaries and allowances¥

11,095Retirement benefit expenses¥

2016
10,541$

93,283

762

798

6,743

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

Thousands of U.S. Dollars
2016

2015
¥

42

1,024

¥

2016
1,093

$

9,672

*4. Impairment loss
The Companies recorded impairment losses for the following asset groups.
For the year ended March 31, 2015
Purpose of Use
Type

Location
Ibaraki prefecture and others

Idle assets

Number of assets

Land

12

Idle assets that impairment losses were recognized were grouped by individual properties.
The book value of the above asset group was reduced to the respective recoverable amount, due to decline in land prices of the idle assets. The decline
was recorded as impairment losses of ¥292 million in extraordinary losses.
The recoverable amount of the asset group was measured at the net sales price, primarily based on the market value of standard sites and the assessedvalue of inheritance tax by roadside land prices.

Location

For the year ended March 31, 2016
Purpose of Use
TypeTochigi prefecture and others

Idle assets

Number of assets

Land

27

Idle assets that impairment losses were recognized were grouped by individual properties.
The book value of the above asset group was reduced to the respective recoverable amount, due to decline in land prices of the idle assets. The decline
was recorded as impairment losses of ¥1,025 million ($9,070 thousand) in extraordinary losses.
The recoverable amount of the asset group was measured at the net sales price, primarily based on the market value of standard sites and the assessedvalue of inheritance tax by roadside land prices.

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
2016

2015

2016

Valuation difference on available-for-sale securities:
Gains (losses) arising during the year

¥

7,604

¥

(3,718)$(32,902)(8)(1,094)(9,681)

Amount before income tax effect

7,595(4,812)(42,584)

Income tax effect(1,921)

1,829

16,185

Valuation difference on available-for-sale securities

5,674(2,983)(26,398)

(224)

(243)

(2,150)

723

379

3,353

Gains (losses) arising during the year

1,255

(156)

(1,380)Reclassification adjustments

(258)

(0)

(0)

Amount before income tax effect

996

(156)

(1,380)

Income tax effect

(315)

90

796

Reclassification adjustments

Deferred gains or losses on hedges
Losses arising during the year
Revaluation reserve for land
Income tax effectRemeasurements of defined benefit plans:Remeasurements of defined benefit plans, net of tax
Total other comprehensive income

(66)

681
¥

6,856

¥

(2,914)(584)$(25,787)

Annual Report 201643

NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended March 31, 2015
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2014

Increase

Decrease

As of March 31, 2015

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

970,842

23,736805

993,773

970,842

23,736805

993,773

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 26, 2014

Common shares¥1,225 million¥6.0

March 31, 2014

June 27, 2014

Board of directors’
meeting on
October 29, 2014

Common shares¥1,634 million¥8.0

September 30, 2014

December 5, 2014

(2) Dividends whose record date fell in the year ended March 31, 2015, but whose effective date comes after March 31, 201544

Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 26, 2015

Common shares¥1,225 million

Source of dividend funds Dividends per share

Retained earnings¥6.0

Record date

Effective date

March 31, 2015

June 29, 2015

For the year ended March 31, 2016
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2015

Increase

Decrease

As of March 31, 2016

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

993,773

15,869–1,009,642

993,773

15,869–1,009,642

Treasury shares:
Common shares
Total

Note: Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.

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 26, 2015

Common shares¥1,225 million$10,840 thousand

¥6.0
$0.05

March 31, 2015

June 29, 2015

Board of directors’
meeting on
October 30, 2015

Common shares¥1,225 million$10,840 thousand

¥6.0
$0.05

September 30, 2015 December 4, 2015

(2) Dividends whose record date fell in the year ended March 31, 2016, but whose effective date comes after March 31, 2016
Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 29, 2016

Common shares¥1,634 million$14,460 thousand

Source of dividend funds Dividends per share

Retained earnings

¥8.0
$0.07

Record date

Effective date

March 31, 2016

June 30, 2016

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
2016

2015
Cash and deposits¥

44,128¥

2016
77,360$684,601

Time deposits with maturities of more than three months(6,971)(9,461)(83,725)

Short-term investments with maturities of three months or lessfrom the purchase date

2,999

2,999

26,539Cash and cash equivalents¥

40,157¥¥70,899$

627,424

Annual Report 2016

45

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 subscription rights
to shares.
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 heldto-maturity debt securities and shares of companies with business
relationship, are exposed to market price fluctuation risks.
Notes payable, accounts payable for construction contracts andother, trade payables, are due within one year. Proceeds from shortterm loans payable are mainly used for operational funds requirement
and proceeds from convertible bond-type bonds with subscription
rights to shares and long-term loans payable are mainly used forcapital 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 forborrowings. Details of hedge accounting including hedging instruments
and hedged items, hedging policy and method for evaluating theeffectiveness of hedges are described in “SIGNIFICANT MATTERS
PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATEDFINANCIAL STATEMENTS, 4. Significant accounting policies (6)Significant hedge accounting method.”46(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 date
controls and balance controls for each customer to mitigate andquickly capture the collectability issues caused by deterioration in thefinancial 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 inaccordance with the nature and limits approved by the boardof directors of the subsidiaries. The executed transactions are
periodically reported to the board 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, forwhich a quoted market price is not available, is calculated basedon certain assumptions, and the fair value might differ if different
assumptions are used. In addition, the contract amount of the derivativetransactions described in “DERIVATIVE TRANSACTIONS” does not
represent the market risk of the derivative transactions.

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, 2015
Carrying amount(1) Cash and deposits¥(2) Notes receivable, accounts receivable from completed construction contracts and other44,128Fair value¥

Difference

44,128¥–129,326

Allowance for doubtful accounts (*1)

(380)
128,946

128,946–

1) Held-to-maturity securities

5,999

6,000

0

2) Available-for-sale securities

41,132

41,132–(4) Notes payable, accounts payable for construction contracts and other (*2)

(86,231)(86,231)–(5) Short-term loans payable (*2)

(8,728)(8,728)

–

(–)

(–)

–

(1,755)(1,757)

1(3) Securities and investment securities(6) Convertible bond-type bonds with subscription rights to shares (*2)(7) Long-term loans payable (*2)(8) Derivative transactions (*3)

¥

(332)

¥

(332)

¥

–

(*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, 2016
Carrying amount(1) Cash and deposits¥

77,360Fair value¥

77,360Difference¥–

129,855(2) Notes receivable, accounts receivable from completed construction contracts and other(529)

Allowance for doubtful accounts (*1)

129,326

129,326–

1) Held-to-maturity securities

3,009

3,009

(0)

2) Available-for-sale securities

37,41037,410–(4) Notes payable, accounts payable for construction contracts and other (*2)(85,280)(85,280)–(5) Short-term loans payable (*2)

(7,686)(7,686)–(6) Convertible bond-type bonds with subscription rights to shares (*2)

(20,100)(20,450)350(7) Long-term loans payable (*2)

(5,567)(5,585)17(3) Securities and investment securities(8) Derivative transactions (*3)

¥

(575)

¥

(575)

¥

–

Annual Report 201647

Thousands of U.S. Dollars

For the year ended March 31, 2016
Carrying amount(1) Cash and deposits$

684,601

Fair value$

684,601

Difference$–

1,149,159(2) Notes receivable, accounts receivable from completed construction contracts and other(4,681)

Allowance for doubtful accounts (*1)

1,144,477

1,144,477–

1) Held-to-maturity securities

26,62826,628(0)2) Available-for-sale securities

331,061

331,061–(4) Notes payable, accounts payable for construction contracts and other (*2)(754,690)(754,690)–(5) Short-term loans payable (*2)(68,017)(68,017)–(6) Convertible bond-type bonds with subscription rights to shares (*2)(177,876)(180,973)

3,097(7) Long-term loans payable (*2)(49,265)(49,424)

150(3) Securities and investment securities(8) Derivative transactions (*3)$

(5,088)$(5,088)$–(*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. Jointly operated money trusts is stated at their carrying amount as the fair value approximates the carrying amountbecause 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 subscription rights to shares
The fair value of convertible bond-type bonds with subscription rights to shares is based on the prices presented by the counterparty financial
institutions.
(7) Long-term loans payable
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
2016

2015
Unlisted stocks, etc.

¥

2016

¥

4,191

3,345

$

29,601Since 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, 2015

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 other44,128129,326

–
–

–
–

–
–

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)
Held-to-maturity securities (corporate bonds)
Available-for-sale securities with maturities (other)
Total

–

–

–

–

6,000

–

–

–

–
¥

179,454

–
¥

–

–
¥

–

–
¥

–

Millions of Yen

For the year ended March 31, 2016

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 other77,360––––129,738

117

–

–

10

–

–

3,000

–

–

–

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

1,000

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

¥

211,099

–
¥

127

–
¥

–

–
¥

–

Thousands of U.S. Dollars

For the year ended March 31, 2016

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

684,601––––

1,148,123

1,035

–

–

88

–

–

26,548–––

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

8,849

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

$

1,868,132

–
$

1,123

–
$

–

–
$

–

Annual Report 201649

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

For the year ended March 31, 2015

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

¥

¥

¥

8,728

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with subscription rights toshares

–

–

–

–

–

–

Long-term loans payable

–

495

303

311

318

326

Total

¥

8,728

¥

495

¥

303

¥

311

¥

318

¥

326
Millions of Yen

For the year ended March 31, 2016

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

¥

¥

¥

7,686

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with subscription rights toshares––––

20,000–Long-term loans payable

–

662

773

708

543

2,880

Total

¥

7,686

¥

662

¥

773

¥

708

¥

20,543¥

2,880

Thousands of U.S. Dollars

For the year ended March 31, 2016

Short-term loans payable

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

$

$

$

68,017

–

–

$

–

$

–

$

–

Convertible bond-type bonds
with subscription rights toshares––––

176,991–

Long-term loans payable

–

5,858

6,840

6,265

4,805

25,486Total

50

Due within one year$

68,017

$

5,858

$

6,840

$

6,265

$

181,796$

25,486SECURITIES
1. Held-to-maturity securities
Millions of Yen

For the year ended March 31, 2015
Carrying amountMarket value

Difference

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

Corporate bonds
Other
Subtotal

–

¥

–

¥

–

2,000

2,001

1

–

–

–

¥

2,000

¥

2,001

¥

1

¥

–

¥

–

¥

–

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

3,999

3,999

–

–

(0)
–

¥

3,999

¥

3,999

¥

(0)

¥

5,999

¥

6,000

¥

0

Millions of Yen

For the year ended March 31, 2016
Carrying amountMarket value

Difference

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

¥

¥

–

¥

¥

–

–

–

Other
Subtotal––

Corporate bonds

–

–

–

¥

10

¥

–

–

¥

–

9

¥

(0)

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

Corporate bonds
Other
Subtotal
Total

2,999

2,999

–

–

(0)
–

¥

3,009

¥

3,009

¥

(0)

¥

3,009

¥

3,009

¥

(0)
Thousands of U.S. Dollars

For the year ended March 31, 2016
Carrying amountMarket value

Difference

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

$

–

$

–

$

–

Corporate bonds

–

–

–

Other

–

–

–

Subtotal

$

–

$

–

$

–

$

88

$

79

$

(0)

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

26,53926,539

–

–

(0)
–

$

26,628$26,628$(0)$26,628$26,628$(0)

Annual Report 201651

2. Available-for-sale securities
Millions of Yen

For the year ended March 31, 2015
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥38,837¥15,757

Bonds

–

–

Other

–

–

Subtotal¥

23,080––¥38,837¥15,757¥23,080

¥

2,294

¥

2,550

¥

(255)

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

–

–

–

Other

–

–

–

Subtotal
Total

¥

2,294

¥

2,550

¥

(255)

¥

41,132¥

18,308¥22,824

Millions of Yen

For the year ended March 31, 2016
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥33,560¥14,873

Bonds

–

–

Other

–

–

Subtotal¥

18,687––¥33,560¥14,873¥

18,687

¥

2,849

¥

3,524

¥

(674)

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

–

Bonds

1,000

Other
Subtotal
Total

–

–

1,000

–

¥

3,849

¥

4,524

¥

(674)

¥

37,410¥19,398¥18,012Thousands of U.S. Dollars

For the year ended March 31, 2016
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks$296,991$

131,619$

165,371

Bonds

–

–

–

Other

–

–

–

Subtotal$

296,991$

131,619$

165,371$

25,212$

31,185$(5,964)

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

–

–

Other

8,849

8,849

Subtotal
Total

52

–
–

$

34,061$40,035$(5,964)$331,061$

171,663$

159,398

3. Available-for-sale securities sold during the year
Millions of Yen

For the year ended March 31, 2015
Sales amount
Stocks

¥

Bonds

¥

1,264

–

Other
Total

Total gain on sales

1,342

–

–
¥

1,342

Total loss on sales
¥

–
¥

1,264

2
–
–

¥

2

Millions of Yen

For the year ended March 31, 2016
Sales amount
Stocks¥Total gain on sales

2,537

¥

1,324

Bonds

–

–

Other

–

–

Total

¥

2,537

¥

1,324

Total loss on sales
¥

15
–
–

¥

15
Thousands of U.S. Dollars

For the year ended March 31, 2016
Sales amount
Stocks$Total gain on sales

22,451$

11,716

Bonds

–

–

Other

–

–

Total

$

22,451$

11,716

Total loss on sales
$

132
–
–

$

132

4. Impairment loss on securities
For the year ended March 31, 2015

For the year ended March 31, 2016

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

Annual Report 2016

53

DERIVATIVE TRANSACTIONS
Derivative transactions to which hedge accounting is applied
Interest rate-related
For the year ended March 31, 2015
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 (forecasted
transaction)¥4,880 million¥4,880 million¥(332) million

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

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¥614 million¥518 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.

For the year ended March 31, 2016
Hedge accounting method

Type of transactions

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Primary hedged items

Contract amountLong-term loans
payable¥3,411 million$30,185 thousand

Long-term loans
payable (forecasted
transaction)¥1,468 million$12,991 thousand

Contract amount due after
one year

Fair value¥4,804 million$42,513 thousand¥(575) million$(5,088) thousand

Notes:
1. Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.
2. Since interest rate swaps are difficult to be classified by hedged items, the totals for “contract amount due after one year” and “fair value” are shown above.

Hedge accounting method

Type of transactions

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

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Long-term loans
payable¥518 million$4,584 thousand¥419 million$3,707 thousand(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.

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 a multi-employer welfare benefit 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 welfare benefit 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 retirement benefit expenses.

2. Defined benefit plans(1) Changes in defined benefit obligations
Millions of Yen
Balance at beginning of year
Cumulative effects of changes in accounting policies
Restated balance
Current service cost
Interest cost
Actuarial gains and losses
Benefit paid
Decrease accompanying with transfer to defined contribution plans
Balance at end of year¥

66,526
8,136
74,663
2,272
659
1,100
(6,012)–
72,683¥

72,683–
72,683
2,234
632
(252)
(5,245)(46)
70,005

Thousands of U.S. Dollars
2016$643,212–643,212
19,7695,592(2,230)(46,415)(407)$
619,513

39,534
592
(409)
3,239
(3,917)39,040Thousands of U.S. Dollars
2016$
349,858
5,238(3,619)28,663(34,663)$
345,486

2016

2015
¥

¥

(2) Changes in plan assets
Millions of Yen
2016

2015
Balance at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefits paid
Balance at end of year¥

37,734
565
2,355
3,205
(4,326)39,534¥¥¥(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
2016

2015
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 amount of liabilities and assets recognized in consolidated balance sheet¥¥¥

53,136(39,534)
13,602
19,54733,14933,14933,149¥¥¥¥¥50,558(39,040)
11,517
19,44730,96430,96430,964

Thousands of U.S. Dollars
2016$
447,415(345,486)$
101,920
172,097$
274,017$274,017$274,017

Annual Report 201655

(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
2016

2015
¥

2,272
659
(565)
(270)
12
–
2,108

¥

¥

2016
2,234
632
(592)
(12)
12
218
2,491

¥

$

19,7695,592(5,238)
(106)
106
1,929
22,044$(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
2016

2015
¥

(12)
(984)
(996)

¥

¥

2016
(12)
169
156

¥

$

(106)
1,495
1,380

$

(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

¥

37
(2,046)(2,008)¥

Thousands of U.S. Dollars
2016

2015
¥

2016
25
(1,876)(1,851)

¥

$
$

221
(16,601)(16,380)(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2016

2015
General account
Bonds
Equities
Other
Total

42%
32%
25%
1%
100%

43%
35%
21%
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

2015
mainly 0.9%
mainly 1.5%

2016
mainly 0.9%
mainly 1.5%

3. Defined contribution plans
The required amount of contribution to the defined contribution plans (including the multi-employer welfare benefit pension fund accounted for in the samemanner) of the Companies was ¥1,659 million and ¥1,646 million ($14,566 thousand) for the years ended March 31, 2015 and 2016, 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
2016

2015

2016

Deferred tax assets:
Net defined benefit liability¥

10,776

¥

9,557

$

84,575

Depreciation and amortization

3,795

3,652

32,318Provision for loss on construction contracts

1,034

738

6,530

Allowance for doubtful accounts

739

425

3,761

Loss carry-forward

234

119

1,053

Others

5,918

7,485

66,23822,497

21,978

194,495(2,081)(2,176)(19,256)

Subtotal
Valuation allowance
Total

¥

20,416¥19,801$

175,230(7,311)¥(5,482)$(48,513)

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

Reserve for advanced depreciation of non-current assets(1,116)(997)(8,823)

Reserve for special depreciation

(519)

(455)

(4,026)

Others

(93)

(85)

(752)

Total
Net deferred tax assets¥(9,041)¥(7,021)$(62,132)¥

11,374¥

12,779$113,088

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
2016

2015
7,304

¥

2016
(6,830)$(60,442)

2. Breakdown of items which caused the difference between the statutory tax rate and the effective
tax rate after adopting tax effect accounting
2016

2015
Statutory tax rate

35.5%

33.1%

(Adjustments)
Expenses not deductible for tax purposes

2.4%

2.5%

Non-taxable dividend income(1.1%)(0.5%)Per capita levy of inhabitant taxes

1.9%

1.2%

Increase (decrease) in valuation allowance(0.3%)

0.8%

Adjustment of deferred tax assets at end of year resulting
from tax rate changes

15.0%

6.2%

Reversal of revaluation reserve for land–%

(1.7%)

Others-net

0.6%

0.1%

54.0%

41.7%

Effective tax rate after adopting tax effect accounting

Annual Report 201657

3. Changes in the amount of deferred tax assets and deferred tax liabilities due to changes in the corporate tax rates
After the “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial Amendment of Local Tax Act, etc.” (Act No. 13
of 2016) passed the Diet on March 29, 2016 and corporate tax rates will be reduced effective from years beginning on or after April 1, 2016. As a result, thecorporate tax rate used to calculate deferred tax assets and liabilities will be changed from 32.3%, which was used for the fiscal year ended March 31, 2016, to30.9% for the temporary differences, etc. expected to be realized or settled for the year beginning on April 1, 2016 and for the year beginning on April 1, 2017
and to 30.6% for the temporary differences, etc. expected to be realized or settled for the year beginning on April 1, 2018.
As a result, deferred tax assets (after offsetting deferred tax liabilities) decreased by ¥732 million ($6,477 thousand) and income taxes-deferred,valuation difference on available-for-sale securities, and remeasurements of defined benefit plans increased by ¥1,070 million ($9,469 thousand), ¥304
million ($2,690 thousand) and ¥33 million ($292 thousand), respectively, as of and for the year ended March 31, 2016.
In addition, deferred tax liabilities for land revaluation decreased by ¥379 million ($3,353 thousand) and revaluation reserve for land increased by thesame amount as of March 31, 2016.

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.
“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, income 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 income of reportable segments is based on operating income. The intersegment profit
and transfers are based on trading prices in the market.

58

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

For the year ended March 31, 2015
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:
Customers¥

426,816

¥

9,866

Total

¥

431,281¥

39,891

Segment profit
Segment assets

¥

8,514

¥

803

¥

9,317

¥

70

¥

9,388

¥

336,474¥

53,979¥390,454¥(24,276)¥

366,177

¥

3,481

¥

588

¥

4,069

¥

(130)

¥

3,939

Inter-segment

4,465

¥

436,682¥

471,172

30,025¥–¥(34,490)

34,490¥436,682¥436,682(34,490)–

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

3,816

5,673

9,490

(85)

9,404

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 income presented in the consolidated statement of income.

Millions of Yen

For the year ended March 31, 2016
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:¥

437,231

Total¥

Segment profit
Segment assets

Customers¥

10,442¥447,673

439,479¥

45,390¥¥15,149

¥

1,527

¥

370,723

¥

¥

3,545

¥

2,247

Inter-segment¥–

484,869¥¥

16,677

59,124¥880¥

34,947¥

447,673(37,195)¥

447,673

¥

(260)

¥

16,416429,848¥(22,166)¥

407,681

4,426

¥

(105)

¥

4,320

37,195(37,195)–

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

2,990

2,859

5,849

(226)

5,622
Thousands of U.S. Dollars

For the year ended March 31, 2016
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

Net sales:
Customers$ 3,869,300$

19,884

Inter-segment

92,407$ 3,961,707

309,265

329,159$(329,159)–$ 3,961,707–

401,681$ 4,290,876$ (329,159)$ 3,961,707

$

$

Total

$ 3,889,194$

Segment profit$

134,061$

13,513$

Segment assets$ 3,280,734$

523,221$ 3,803,964$ (196,159)$ 3,607,796

$

$

7,787

$

$

$

147,584(2,300)145,274

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

31,371
26,46025,30039,16851,761(929)(2,000)38,23049,752

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 income presented in the consolidated statement of income.

Annual Report 2016

59

(Related information)
For the year ended March 31, 2015

For the year ended March 31, 2016

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
Millions of Yen

Millions of Yen

Customer Name

Net sales

Related segment

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company, Incorporated¥155,986

Engineering

Tokyo Electric Power
Company, Incorporated¥165,459

Engineering
Thousands of U.S. Dollars

60

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company, Incorporated$1,464,238

Engineering(Information about impairment loss in non-current assets of each reportable segment)
Millions of Yen

For the year ended March 31, 2015
Engineering
Impairment loss¥

288

Other (Note)¥

Corporate/elimination
3

¥

–

Total
¥

292

Note: “Other” is related to real estate business.

Millions of Yen

For the year ended March 31, 2016
Engineering
Impairment loss

¥

1,025

Other (Note)¥

Corporate/elimination
0

¥

–

Total
¥

1,025

Thousands of U.S. Dollars

For the year ended March 31, 2016
Engineering
Impairment loss

$

9,070

Other (Note)$

Corporate/elimination
0

$

–

Total
$

9,070

Note: “Other” is related to real estate business.

(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2015

For the year ended March 31, 2016

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, 2015

For the year ended March 31, 2016

Not applicable.

Not applicable.

Annual Report 2016

61

(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, 2015
Type

Name

Location

Capital stock

Description ofbusiness

Ratio of voting
rights held

Relation to the related
party

Other affiliates

Tokyo Electric Power
Company, Incorporated

Chiyoda-ku, Tokyo¥1,400,975 million

Electric powerbusiness(Held)
Direct 46.6%
Indirect 1.2%

Electric work contract

Type

Name

Nature of transaction

Other affiliates

Tokyo Electric Power
Company, Incorporated

Installation ofelectric work

Purchase of
raw materials

Amount of transaction

Account

Balance at end of year

¥30,788 million¥146,637 million

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

Notes payable, accounts
payable for construction
contracts and other¥ 2,461 million¥ 38,769 million

468 million

For the year ended March 31, 2016
Type

Other affiliates

Type

Other affiliates

Name

Location

Tokyo Electric Power
¥ 1,400,975 million
Chiyoda-ku, Tokyo
Company, Incorporated$ 12,398,008 thousand

Name

Tokyo Electric Power
Company, Incorporated

Nature of transaction

Installation ofelectric work

Purchase of
raw materials

Description ofbusiness

Ratio of voting
rights held

Relation to the related
partyElectric powerbusiness(Held)
Direct 46.6%
Indirect 1.2%

Electric work contract

Capital stock

Amount of transaction¥ 156,541 million$ 1,385,318 thousand¥ 38,344 million$ 339,327 thousand

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 30,614 million$ 270,920 thousand

Advances received on
uncompleted
construction
contracts¥$

Notes payable, accounts
payable for construction
contracts and other¥ 2,208 million$ 19,539 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.

62281 million
2,486 thousand

PER SHARE INFORMATION
Yen

U.S. Dollars
2016

2015
Net assets per share¥

922.05

Earnings per share¥2016
942.42

$

8.34

22.59

46.07

0.40

–

46.06

0.40

Diluted earnings per share
Notes:
1. Diluted earnings per share for the year ended March 31, 2015 has not been presented since there is no dilutive security.
2. The basis of calculating earnings per share and diluted earnings per share is as follows:

Millions of Yen

Thousands of U.S. Dollars
2016

2015

2016

Earnings per share
Profit attributable to owners of parent

¥

4,615

¥

9,412

$

83,292

Amount not attributable to common shareholders

–

–

–

Profit attributable to owners of parent applicable tocommon shares

4,615

9,412

83,292Thousands of Shares
2016

2015
Weighted average number of common shares during the year

204,286

204,308

Millions of Yen

TThousands of U.S. Dollars
2016

2015

2016

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

–

–

–

Thousands of Shares
2016

2015
Increase in common shares–

47[Convertible bond-type bonds with subscription rights toshares included in the above]

[–]

[47]

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

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

Millions of Yen
2016

2015
Total net assets¥

193,345

Amount deducted from total net assets

TThousands of U.S. Dollars¥

2016
197,980
5,464

4,976

$

1,752,035
48,353[Non-controlling interests included in the above][4,976][5,464][48,353]

Total net assets related to common shares

188,368

192,516

1,703,681

Thousands of Shares
2016

2015
Number of common shares outstanding at end of year

204,294

204,278

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

Annual Report 2016

63

CONSOLIDATED SUPPLEMENTAL SCHEDULES(Schedule of bonds)
Company name

Issue typeIssuance date

As of April 1,
2015

As of March 31,
2016

Interest rate (%)

Collateral

Maturity

Kandenko Co.,Ltd.

Euro-yenconvertiblebond-type bonds
with subscription
rights to sharesdue 2021, subject
to call

March 31,2016–

¥ 20,100 million$177,876 thousand

–

None

March 31,
2021

Total

–

–

–

¥ 20,100 million$177,876 thousand

–

–

–

Notes:
1. Information on convertible bond-type bonds with subscription rights to shares is as follows:

Shares to be issued

Common shares

Issuance price of subscription rights to shares

GratisIssuance price of shares¥ 1,159$ 10,256

Total issuance value¥ 20,100 million$177,876 thousand

Total issuance value of shares issued through the exercise of subscription rights to shares¥ – million

Grant ratio of subscription rights to shares (%)

100

Exercise period of subscription rights to shares

April 14, 2016 to March 17, 2021

Upon the exercise of each of the subscription rights to shares, the bonds relating to the subscription rights to shares 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, 2016 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$176,991 thousand

(Schedule of loans)
As of April 1, 2015

As of March 31, 2016

Short-term loans payable¥ 7,640 million$ 67,610 thousand¥ 7,134 million$ 63,132 thousand

0.7–

Current portion of long-term loans payable¥$

1,088 million
9,628 thousand¥$

552 million
4,884 thousand

1.9–

Current portion of lease obligations¥$

516 million
4,566 thousand¥$

395 million
3,495 thousand––

Long-term loans payable (excluding current portion of
long-term loans payable)¥ 1,755 million$ 15,530 thousand¥ 5,567 million$ 49,265 thousand

2.3

2017 to 2032

Lease obligations (excluding current portion of leaseobligations)

¥
$

¥
$

662 million
5,858 thousand–2017 to 2023

–

–

–

–

¥ 11,809 million$ 104,504 thousand¥ 14,311 million$ 126,646 thousand––

809 million
7,159 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, 2016 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¥$

662 million
5,858 thousand¥$

773 million
6,840 thousand¥$

708 million
6,265 thousand¥$

543 million
4,805 thousand

Lease obligations¥$

290 million
2,566 thousand¥$

193 million
1,707 thousand¥$

113 million
1,000 thousand¥$46 million
407 thousand(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2015 and March 31, 2016 are less than 1% of the total liabilities and net
assets as of April 1, 2015 and March 31, 2016. Therefore, the disclosure is omitted.

OTHERS
Quarterly information for the year ended March 31, 2016
Cumulative period

First quarter

Second quarter

Third quarter

Fourth quarter

Net sales¥ 94,695 million¥ 200,251 million¥ 299,899 million¥ 447,673 million$ 838,008 thousand $ 1,772,132 thousand $ 2,653,973 thousand $ 3,961,707 thousand

Profit before income taxes¥$

4,498 million
39,805 thousand¥$

6,796 million
60,141 thousand¥$

10,962 million
97,008 thousand¥ 17,248 million$ 152,637 thousand

Profit attributable to owners of parent¥$

2,430 million
21,504 thousand¥$

3,664 million
32,424 thousand¥$

6,153 million
54,451 thousand¥$

9,412 million
83,292 thousand

Earnings per share

¥
$

11.90
0.10

¥
$

17.94
0.15

¥
$

30.12
0.26

¥
$

46.07
0.40

Each quarter
Earnings per shareFirst quarter
¥
$

11.90
0.10

Second quarter
¥
$

6.04
0.05

Third quarter
¥
$

12.18
0.10

Fourth quarter
¥
$

15.95
0.14

Annual Report 201665

Independent Auditors’ Report66Company Profile
History
Time

Notes

Sep. 1944

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

The Tama Branch is established.

Oct. 1949

In accordance with the Construction Business Act, the Company receives ministerial registration No. 250, which it renews every two years.

Jan. 1959

The Osaka (now Kansai) Branch is established.

Sep. 1960

The head office moves to 4-1-18 Yushima, Bunkyo Ward, Tokyo.

July 1961

The Company invests in Oyo Denki Co., Ltd. (now KANKO SYOJI CO., LTD.).

Oct. 1961

The Company’s stock is listed on the Second Section of the Tokyo Stock Exchange (capital: ¥350 million).

May 1962

Kanto Sekizai Kogyo Co., Ltd. (now K Lease Co., Ltd.) is established.

Jan. 1970

The Sendai (now Tohoku) Branch is established.

Feb. 1970

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).

May 1970

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

Aug. 1970

The Sapporo (now Hokkaido) Branch is established.

Apr. 1971

The Company invests in Dai-ichi Kigyo Co., Ltd. (now Kanko Power Techno Co., Ltd.).

June 1973

The Comprehensive Education Center (now the Education & Training Center) is established.

Apr. 1974

Due to revision of the Construction Business Act, the Company receives ministerial permit (Special – 49) No. 3885, which it currently renews every five years.

June 1976

The Company receives ministerial permit (Ordinary – 51) No. 3885, which it currently renews every five years.

July 1979

The nuclear energy-related business is launched.

Oct. 1981

The Singapore Office is established.

Sep. 1984

The Company name is changed to Kandenko Co., Ltd.

Nov. 1984

Kanko Fudousan Kanri Co., Ltd. (now K Asset Management Co., Ltd.) is established.

Jan. 1985

The Company invests in Tokyo Kouji Keibi Co., Ltd.

May 1985

The Company’s first issue of unsecured convertible bonds (¥10 billion) takes place.

July 1987

Kanko Maintenance Service Co., Ltd. (now Kanko Facilities Co., Ltd.) is established.

Dec. 1988

The head office moves to 4-8-33 Shibaura, Minato Ward, Tokyo (its present location).

Apr. 1990

The Nagoya Branch is established.

July 1991

The Kyushu Branch is established.

July 1993

The Tsukuba Technology Research & Development Institute (now the Technology Research & Development Institute) is established.

July 1994

Bay Techno Co., Ltd. is established.

July 1997

The Chuo (now Tokyo) Branch is established.

Oct. 1997

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.

July 1998

Kanagawa K-Techno Co., Ltd., Chiba K-Techno Co., Ltd., and Saitama K-Techno Co., Ltd., are established.

Nov. 2000

NETSAVE Co., Ltd. is established.

Aug. 2001

The Taiwan Branch is established.

Dec. 2001

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.

May 2003

The Company invests in Hankyu Denki Koji Co., Ltd. (now HANDENKO CORPORATION).

June 2004

The Company invests in Transmission Line Construction Co., Ltd.

Apr. 2008

The Company invests in Kawasaki Setsubi Kogyo Co., Ltd. (listed on the Second Section of the Nagoya Stock Exchange).

Oct. 2012

The Company invests in Choshi Wind Development Co., Ltd. (and launches the power generation business).

Mar. 2013

Kama Solar Power Co., Ltd. is established.

Oct. 2014

The regional headquarters system is introduced, and power line engineering work is put under the head office’s direct jurisdiction.

July 2015

The Fukushima Headquarters is established.
The Kanko Fudousan Kanri Co., Ltd. absorbs K Lease Co., Ltd. in a merger operation and changes its trading name to K Asset Management Co., Ltd.

Mar. 2016

The Company issues ¥20 billion of euro-yen convertible bond-type bonds with subscription rights to shares due 2021.

Annual Report 2016

67

Stock Information (As of March 31, 2016)
The shares of common stock of theCompany are listed on the First

Principal Shareholders

Section of the Tokyo Stock Exchange.
On March 31, 2016, there were a totalof 8,363 shareholders.
The following table lists the 10
largest shareholders appearing on theregister at that date.

Name

Number ofshares held

Shares held as a percentage
of total outstanding shares

1

Tokyo Electric Power Company, Incorporated

94,753,552

46.16

2

Japan Trustee Services Bank, Ltd. (Trust Account)

10,788,000

5.26

3

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

8,692,000

4.23

4Mizuho Bank, Ltd.

8,121,839

3.96

5

Kandenko Group Employees Shareholding Association

6,190,755

3.02

6Japan Trustee Services Bank, Ltd. (Trust Account 9)2,756,000

1.34

7CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

2,359,841

1.15

8

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)

1,986,000

0.97

9CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

1,359,983

0.66

10

Takasago Thermal Engineering Co., Ltd.

1,318,000

0.64

138,325,970

67.38

Total

Number of Shares Held by Type of Shareholder

Stock-Related Information

Treasury stock
0.49%(0.48%)

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,
other14.89%(16.22%)Foreigncompanies, etc.
12.20%(11.73%)

Total number of shares issued
205,288,338 shares

Note: Figures in parentheses show
data as of March 31, 2015

Financial
institutions
22.54%(21.53%)

Japanesecompanies
49.88%(50.04%)Monthly Stock Price(Unit : Yen)
1,000

800

600

0

68

Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
2015
2016

Board of Directors and Audit & Supervisory Board Members (As of June 29, 2016)
Chairman

Manabu Yamaguchi

Vice Chairman

Hiroshi Mizue

Senior Managing Directors Shinichiro Kitayama
and Executive Officers
Shigenori Takaoka

President and Executive
Officer

Yoshimi Morito

Shoichiro Kashiwabara

Sumihito Okawa(Outside)

Executive Vice
Presidents

Kiyoshi Goto

Toshio Nakama

Takashi Suetsuna(Outside)Kazuo Nagayama

Shuichi Yamaguchi

Takehiro Yamaguchi(Outside)

Executive Vice President
and Executive Officer

Kenichi Takahashi

Toru Yukimura

Senior Managing
Director

Hiroshi Nomura

Managing Directors andExecutive Officers

Directors (Outside)

Audit & Supervisory Board Haruhiko Terauchi
Members
Hiroyuki Kaneko

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

3-22-15 Negishi, Minami-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 3rd Floor,
1-2-7 Sakae, Naka-ku, Nagoya, Japan

Kyushu Branch

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

Hokkaido Branch

Takeda Resona Building 3rd Floor,
4-1-2 Kitaichijo Nishi, Chuo-ku, Sapporo, Japan

Tohoku Branch

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

Nagano Branch

1629-32 Midoricho, Nagano, Japan

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

Hanoi
Representative
Office17th Floor VIT Tower, 519 Kim Ma Street,
Ba Dinh District, Hanoi, Vietnam

Indonesia
Representative
Office5th Floor, Summitmas II Building, Jl. Jend. Sudirman
Kav. 61-62, Jakarta 12190 Indonesia

Annual Report 2016

69

KANDENKO CO., LTD. Annual Report 2016 For the year ended March 31, 2016

http://www.kandenko.co.jp/en/

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It was also printed using vegetable oil inks.

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