Consolidated Financial Statements
MODEC, INC. and Consolidated Subsidiaries
For the Years ended December 31,
2014 and 2013
Together with Independent
Auditor’s Report

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS
December 31, 2014 and 2013ASSETS

Millions of Japanese yen
2014
2013
CURRENT ASSETS:
Cash and time deposits (Note 1(t) and 17)
Accounts receivable – trade (Note 16, 17 and 20)
Inventories (Note 2)
Short-term loans receivable (Note 17 and 20)
Deferred tax assets (Note 13)
Other current assets
Less- Allowance for bad debts (Note 1 (j))
Total current assets¥30,632
168,012
5,929
41,008
4,815
10,075(481)
259,992¥21,786
84,695
3,666
－
3,564
7,648
(472)
120,889

PROPERTY AND EQUIPMENT (Note 19):
Buildings and structures
Machinery and equipment (Note 12)
Other property and equipment
Construction in progress (Note 12)
Less- Accumulated depreciation
Net property and equipment

165
39,954
4,148
26(27,370)
16,924124
36,0062,032
524(21,086)
17,602

7,795

7,394

37,38826,543

20,153
5,053
1,824
1,168
(1,824)
63,763¥348,477

38,771
3,521
1,594
952
(1,594)69,788¥215,674

INTANGIBLE ASSETS (Note 4)
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3 and 17)
Long-term loans receivable from unconsolidated subsidiaries andaffiliated companies (Note 17 and 20)
Deferred tax assets (Note 13)
Bankrupt and substantially bankrupt claims (Note 17)
Other investments
Less- Allowance for bad debts (Note 1 (j) and 17)
Total investments and other assets
Total assets

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

1

LIABILITIESMillions of Japanese yen
2014
2013
CURRENT LIABILITIES:
Accounts payable – trade (Note 17 and 20)
Short-term loans payable (Note 5, 7 and 17)
Current portion of long-term loans payable (Note 5, 17 and 20)
Accrued expenses
Income taxes payable (Note 13)
Provision for product warranty (Note 1 (m))
Provision for repairs (Note 1 (n))
Accrued employees’ bonuses
Accrued directors’ bonuses
Advances received
Deferred tax liabilities (Note 13)
Other provisions
Foreign exchange contracts (Note 1 (v))
Other current liabilities (Note 1 (v))
Total current liabilities
LONG-TERM LIABILITIES:Long-term loans payable (Note 5, 17 and 20)
Severance and retirement benefits for employees (Note 10)
Net defined benefit liabilities (Note 1 (u) and 10)
Deferred tax liabilities (Note 13)
Liabilities from application of equity method (Note 1 (v))
Other long-term liabilities (Note 1 (v))
Total long-term liabilities¥160,077
5,967
2,198
8,677
8,521
5,692
1,137
7
15
4,657
32
7
4,119
2,040
203,152¥87,782
9,483
1,405
6,596
3,626
3,195
－
10
11
1,537
11
5
15
1,369
115,050

15,205－
192
615
14,954
4,724
35,693

15,615
176
－
482
1,312
2,592
20,179¥238,845¥135,230

CONTINGENT LIABILITIES (Note 14)
Total liabilities

2

NET ASSETS

Millions of Japanese yen
2014
2013
NET ASSETS :SHAREHOLDERS’ EQUITY (Note 8):
Common stock;
Authorized – 102,868,000 shares
Issued – 56,408,000 and 46,408,000 shares as of December 31,
2014 and 2013, respectively
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders’ equity
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Net unrealized holding gains (losses) on securities
Unrealized losses on hedging derivatives, net of tax
Foreign currency translation adjustments
Retirement liability adjustments for foreign consolidated
subsidiaries
Total accumulated other comprehensive income (loss)
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES
Total net assets
Total liabilities and net assets

3¥30,12230,852
34,338(1)
95,311¥20,185
20,91530,528(1)
71,6281(13,741)
15,402(0)(4,977)
4,306

(197)
1,464
12,855
109,631¥348,477

(145)
(817)
9,633
80,444¥215,674

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2014 and 2013
Millions of Japanese yen
2014
2013
¥378,523¥254,401
356,565
237,688
21,958
16,713

SALES (Note 1 (r), 19 and 20)
COST OF SALES (Note 1(r) and 20)
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 11)
Operating profit

13,391
8,566

13,0093,704

OTHER INCOME (EXPENSES):Interest income and dividend income
Foreign exchange gain, net
Equity in earnings of affiliates and unconsolidated
subsidiaries
Interest expense
Commission fee
Gain (loss) on liquidation of subsidiaries and affiliates
Loss on sales of property and equipment
Loss on disposal of property and equipment
Impairment loss on property and equipment (Note 12)
Provision of allowance for doubtful accounts
Others, net
Total other income (expenses)

2,826
236

2,415
3,849

6,694
(740)
(153)
(214)
－
(1,207)
(604)
(229)
1,137
7,743

5,622
(696)
(120)
101
(39)
(156)
(2,311)(1,594)
885
7,955

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS

16,30911,659INCOME TAXES (Note 13):
Current
Deferred

11,047(1,935)

4,353
577

INCOME BEFORE MINORITY INTERESTS

7,197

6,728

MINORITY INTERESTS

1,775

1,805

NET INCOME¥5,422¥4,922

Japanese yen
Net income per share (Note 9)
Dividends per share (Note 9)¥101.67¥32.50

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

4¥106.07¥30.00MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2014 and 2013

Income before minority interests
Other comprehensive income (loss)
Net unrealized holding gains on securities
Unrealized gains (losses) on hedging derivatives, net oftax
Foreign currency translation adjustments
Retirement liability adjustments for foreign
consolidated subsidiaries
Share of other comprehensive income (loss) ofaffiliates accounted for using equity method
Total
Comprehensive income

Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

Millions of Japanese yen
2014
2013
(Note 15)
(Note 15)
¥7,197¥6,728
1

14

(299)
7,158

1
5,944

(70)

(36)

(3,068)
3,721¥10,919

8,769
14,693¥21,421

Millions of Japanese yen
2014
2013
¥7,703¥18,039¥3,215¥3,382

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

5

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended December 31, 2014 and 2013
Millions of Japanese yen

Commonstock

Balance at January 1,
2013¥20,185

CapitalsurplusRetainedearnings¥20,915¥26,940

Net income
Cash dividends paid

Treasurystock, at costNet
unrealized
holding gains(losses) on
securities

Unrealized
gains (losses)on hedging
derivatives,
net of tax

¥ (1)

¥(14)

¥(8,102)

Foreigncurrencytranslation
adjustments

Retirement
liability
adjustments
for foreign
consolidated
subsidiaries

Minority
interests inconsolidated
subsidiaries¥(5,679)¥(137)¥6,283

4,922(1,334)(1,334)14

Unrealized gains(losses) on hedging
derivatives, net of tax

14

3,124

Adjustments fromtranslation of foreign
currency financial
statements

3,124

9,986

Adjustments fromretirement liability forforeign consolidated
subsidiaries

9,986

(8)

Increase in minority
interests inconsolidated
subsidiaries¥20,185¥20,915

Net income
Cash dividends paid
Issuance of stocks

9,936¥30,528

¥ (1)

¥ (0)

¥(4,977)¥4,306¥(145)

(8)

3,349

3,349

¥9,633¥80,444

5,422

5,422

(1,612)(1,612)
19,873

9,936

Increase (decrease)
due to changes in fairmarket values ofavailable-for-salesecurities

1

Unrealized gains(losses) on hedging
derivatives, net of tax

1(8,763)Adjustments fromtranslation of foreign
currency financial
statements(8,763)

11,095Adjustments fromretirement liability forforeign consolidated
subsidiaries

11,095(52)

Increase in minority
interests inconsolidated
subsidiaries
Balance at December
31, 2014¥30,122¥30,852¥60,389

4,922

Increase (decrease)
due to changes in fairmarket values ofavailable-for-salesecurities

Balance at January 1,
2014

Total net
assets¥34,338¥(1)¥1¥(13,741)¥15,402¥(197)

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

6

(52)

3,222

3,222

¥12,855¥109,631

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2014 and 2013
Millions of Japanese yen
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by (used in) operating
activities:
Depreciation and amortization
Impairment loss on property and equipment
Amortization of goodwill
Increase of allowance for bad debts
Increase of severance and retirement benefits for employees
Increase of net defined benefit liabilities
Increase of accrued directors’ bonuses
Increase of provision for product warranty
Decrease of provision for loss on construction contracts
Increase of provision for repairs
Interest income and dividend income
Interest expense
Foreign exchange (gain) loss
Equity in earnings of affiliates and unconsolidated subsidiaries
Loss on sales of property and equipment
Loss on disposal of property and equipment
Loss (gain) on liquidation of subsidiaries and affiliates
Changes in assets and liabilities:
Decrease (increase) in– Accounts receivable – trade– Inventories– Bankrupt and substantially bankrupt claims
Increase (decrease) in– Accounts payable – trade– Consumption tax payable
Others, net
Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

2013¥16,309¥11,659

5,257
604
399
226
－
16
4
2,040
－
1,137
(2,826)740
884(6,694)
－
1,207
214

4,223
2,311
349
1,634
9
－
0
437
(191)
－
(2,415)696(4,689)(5,622)
39
156
(101)

(74,482)(1,916)(229)(38,897)363(1,594)

63,499(1,179)9,419
14,633
3,693(860)(5,133)¥12,333

21,356(89)(1,300)(11,663)
4,632
(683)
(5,187)¥(12,901)

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

7

Millions of Japanese yen
2014
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and intangible assets
Proceeds from sale on property and equipment and intangible
assetsPurchases of investments in affiliates
Decrease (increase) in short-term loans receivable
Disbursement of long-term loans receivableCollection of long-term loans receivable
Proceeds from liquidation of subsidiaries and affiliates
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of stocks
Cash dividends paid
Cash dividends paid to minority shareholders
Repayments of finance lease obligations
Net cash provided by financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
DECREASE IN CASH AND CASH EQUIVALENTSRESULTING FROM CHANGE OF SCOPE OF
CONSOLIDATIONCASH AND CASH EQUIVALENTS AT END OF YEAR
(Note 1 (t))

8

2013

¥(3,755)¥(8,833)3(3)(4,826)(12,349)
2,876
20(18,033)

28(5,387)5,206(50,798)
40,233－(19,551)(4,584)－(1,935)19,873(1,611)－(29)
11,713

4,149
10,330(1,718)－(1,333)(28)(24)
11,374

2,833

9,596

8,846
21,786(11,482)
33,366－(98)¥30,632¥21,786

MODEC, Inc. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting and Reporting Policies(a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of MODEC, Inc. (“the Company”) havebeen prepared in accordance with the provisions set forth in the Japanese Financial Instruments
and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements of International Financial ReportingStandards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles prevailing in therespective countries of domicile. The accompanying consolidated financial statements havebeen restructured and translated into English with some expanded descriptions from theconsolidated financial statements of the Company prepared in accordance with Japanese GAAP
and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by
the Financial Instruments and Exchange Act. Some supplementary information reported in thestatutory Japanese language consolidated financial statements, but not required for fairpresentation, is not presented in the accompanying consolidated financial statements.
All of the Japanese yen and U.S. dollar amounts presented in the accompanying consolidated
financial statements and notes of the Company are rounded down to the million.
(b) Principles of Consolidation and Equity Method
The accompanying consolidated financial statements include the accounts of the Company and
22 of its subsidiaries for the years ended December 31, 2014 and 2013. Material inter-company
balances, transactions and profits have been eliminated in consolidation.
Investments in significant unconsolidated subsidiaries and affiliates, which were 18 companies
for the years ended December 31, 2014 and 2013 were accounted for using the equity method.
Another 5 subsidiaries for the year ended December 31, 2014 and 4 subsidiaries for the year
ended December 31, 2013 were not consolidated or not applied equity method as they would
not have a material effect on the accompanying consolidated financial statements.
The consolidated financial statements are required to include the accounts of the Company andsignificant companies that are controlled by the Company through substantial ownership ofmore than 50% of the voting rights or through ownership of a high percentage of the voting
rights, even if it is equal to or less than 50%, and existence of certain conditions evidencing
control by the Company of decision-making bodies of such companies.
Investments in significant unconsolidated subsidiaries and affiliates, of which the Company has
ownership of 20% or more but less than or equal to 50%, and of 15% or more and less than 20%
and can exercise significant influences over operating financial policies of investees, have beenaccounted for using the equity method.
All consolidated subsidiaries have the same balance sheet date, December 31, corresponding
with that of the Company.

9(c) Valuation of Assets and Liabilities of Subsidiaries
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries,
including the portion attributable to minority shareholders, were evaluated by using the fairvalue at the time the Company acquired the control of the respective subsidiaries.
(d) Goodwill
The excess of cost over the underlying investments in consolidated subsidiaries is recognized as
goodwill and is amortized using the straight-line method over their estimated useful lives.
The excess of cost over the underlying investments in affiliates accounted for under the equity
method is treated in the same manner.
(e) Securities
In accordance with the Japanese accounting standard for financial instruments, all companies
are required to examine the intent of holding each security and classify those securities as (a)securities held for trading purposes (“trading securities”), (b) debt securities intended to be held
to maturity (“held-to-maturity debt securities”), (c) equity securities issued by unconsolidated
subsidiaries and affiliated companies, and (d) all other securities that are not classified in any of
the above categories (“available-for-sale securities”).
Based on the examination of the intent of holding, the Company classifies its securities as
equity securities issued by unconsolidated subsidiaries and affiliated companies andavailable-for-sale securities. Available-for-sale securities maturing within one year from thebalance sheet date are recorded in current assets. Other securities are recorded in investment
securities. The Company does not have trading securities or held-to-maturity debt securities.
Equity securities issued by unconsolidated subsidiaries and affiliated companies that are notaccounted for by equity method are stated at moving-average cost. Available-for-sale securities
with available fair market values are stated at fair market value as of balance sheet dates.
Unrealized gains and losses on these securities are reported, net of applicable income taxes, as aseparate component of shareholders’ equity. Realized gains and losses on sale of such securities
are computed using moving-average cost. Available-for-sale securities without available fairmarket values are stated at moving-average cost.
(f) Inventories
Both raw materials and costs of uncompleted contracts are stated at cost, determined on an
individual project basis (Balance sheet value reflects downturn in profitability).
(g) Property and Equipment
Property and equipment are stated at cost. Depreciation of Floating Production Storage &Offloading Systems (“FPSOs”) and Floating Storage & Offloading Systems (“FSOs”) ownedby the consolidated overseas subsidiaries are calculated using the straight-line method based on
their lease term or their economic useful lives.
Depreciation of property and equipment other than FPSOs and FSOs are calculated as follows.
The Company depreciates property and equipment using the declining-balance method basedon their useful lives and residual values prescribed by the Japanese corporation tax laws andregulations, except for buildings acquired after March 31, 1998, which are depreciated using
the straight-line method. Consolidated overseas subsidiaries depreciate property and equipmentusing the straight-line method based on their estimated useful lives.

10(h) Intangible Assets
The Company amortizes software costs used internally using the straight-line method over theestimated useful lives mainly of 5 years, and amortizes intangible assets using the straight-line
method based on the useful lives and residual values prescribed by the Japanese corporation tax
laws and regulations. Consolidated overseas subsidiaries amortize intangible assets using thestraight-line method over the estimated useful lives.
(i) Finance Lease Transaction without Transfer of Ownership
Lessee:The method of amortization of the lease assets related to finance lease transactions withouttransfer of ownership is by the straight-line method corresponding to lease period with zero
residual value.
(j) Allowance for Bad Debts
The Company provides for a sufficient allowance for bad debts to cover probable losses oncollection by estimating uncollectable amounts individually in addition to amounts for possible
losses based on actual losses on collection in the past.
(k) Accrued Employees’ Bonuses
The Company accrues employees’ bonuses based on the estimated amounts to be paid in thesubsequent period.
(l) Accrued Directors’ Bonuses
The Company accrues directors’ bonuses based on the estimated amounts to be paid in thesubsequent period.
(m) Provision for Product Warranty
Provision for product warranty is provided based on the estimated amounts for covering theprobable product warranties.
(n) Provision for Repairs
Provision for repairs is provided based on the estimated amounts for foreseeable periodic repair
expenses deemed to correspond to normal wear and tear of plant and equipment as of the end of
the fiscal year to be paid in the subsequent period.
(o) Severance and Retirement Benefits for Employees
The Company and some overseas consolidated subsidiaries have unfunded lump-sum
severance and retirement payment plans for employees. Under these plans, employees whose
employment is terminated or who retire are entitled to benefits which are, in general,
determined on the basis of length of service and basic salary at the time of termination orretirement. If the termination is involuntary, the employees are generally entitled to larger
benefits than in the case of voluntary termination or retirement.
In accordance with the Japanese accounting standard for employees’ severance and pension
benefits, a “simpler method” can be adopted to calculate severance and retirement benefits for
employees if the number of employees is less than 300. Therefore the Company adopts the“simpler method”, and records severance and retirement benefits for employees at the amounts
payable if all employees voluntarily terminated their employment at the balance sheet date.
The Company and some overseas consolidated subsidiaries also adopt defined contribution
pension plans.

11(p) Translation of Foreign Currency Accounts
Foreign currency transactions are translated into Japanese yen using the exchange rate in effectat the time of each transaction or at the applicable exchange rates under forward exchange
contracts.
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at
appropriate year-end current exchange rates, and the resulting gains or losses are recorded inother income (expenses) in the statements of income.
Financial statements of consolidated overseas subsidiaries are translated into Japanese yen
using the exchange rates prevailing at the end of each fiscal year, except the exchange rates in
effect at the date of transactions are used for shareholders’ equity. The Company records
foreign currency translation adjustments as a component of net assets in the balance sheets.
(q) Derivative Transactions and Hedge Accounting
Derivative financial instruments of the Company are stated at fair value and gains or losses arerecognized for changes in the fair value unless derivative financial instruments are used forhedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, theCompany defers recognition of gains or losses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts are used as hedges and meetcertain hedging criteria, forward foreign exchange contracts and hedged items are accounted forin the following manner.
1) If a forward foreign exchange contract is executed to hedge existing foreign currency
receivables or payables,a) the difference, if any, between the Japanese yen amount of the hedged foreign currency
receivable or payable translated using the spot rate at the inception date of the contract
and the book value of the receivable or payable is recognized in the income statement in
the period which includes the inception date, andb) the discount or premium on the contract (that is, the difference between the Japanese
yen amount of the contract translated using the contracted forward rate and thattranslated using the spot rate at the inception date of the contract) is recognized over theterm of the contract.
2) If a forward foreign exchange contract is executed to hedge a future transaction
denominated in a foreign currency, the future transaction will be recorded using thecontracted forward rate, and no gains or losses on the forward foreign exchange contract arerecognized.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net
amount to be paid or received under the interest rate swap contract is added to or deducted fromthe interest on the assets or liabilities for which the swap contract was executed.
Certain consolidated overseas subsidiaries adopt hedge accounting in accordance with
U.S.GAAP.
(r) Revenue Recognition
The Company applied the percentage of completion method to the construction contracts incase that the outcome of construction contracts can be reliably estimated. The percentage ofcompletion is calculated by percentage of cost method or units of work performed method
which is based on physical progress measure. The other construction contracts are recognizedby the completed contract method. Consolidated subsidiary located in the U.S.A. recognizedrevenues on all contracts by the percentage of completion method.

12

(s) Income Taxes
The Company provides income taxes at the amounts currently payable based on taxable income
for tax purposes that may be different from income for the accounting purposes. The Company
recognizes tax effects of temporary differences between the carrying amounts of assets andliabilities for tax and financial reporting purposes. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
(t) Cash Flow Statements
In preparing the consolidated statements of cash flows, cash on hand, readily available deposits
and short-term highly liquid investments with maturities not exceeding three months at the timeof purchase are considered to be cash and cash equivalents.
Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash
and cash equivalents in the consolidated statements of cash flows as of December 31, 2014 and2013 are as follows:
Millions of Japanese yen
2014

2013

Cash and time deposits
Less : Time deposits with maturities exceeding three months¥30,632－¥21,786－

Cash and cash equivalents¥30,632¥21,786

Changes in Accounting Policies:(u) Implementation of Accounting Standard for Retirement Benefits
The Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, “AccountingStandard for Retirement Benefits,” May 17, 2012 (hereinafter, the “Accounting Standard”));
and Guidance on Application of Accounting Standard for Retirement Benefits (ASBJ Guidance
No. 25, “Application Guidelines of Accounting Standards for Business Enterprises,” May 17,
2012 (hereinafter, the “Guidance”)) was applied at the end of the current fiscal year (excluding
rules cited in the main text of Item 35 in the Accounting Standard and Item 67 in the Guidance).
As a result, for the year ended December 31, 2014, net defined benefit liabilities amounted to ¥192 million. This implementation had no effect on previously reported net assets.
Changes in Presentation:(v) Reclassifications
The Company made certain reclassifications to the previously reported fiscal year 2013
amounts to conform to fiscal year 2014 presentation. These reclassifications had no effect onpreviously reported net income or net assets.
2. Inventories
Inventories as of December 31, 2014 and 2013 consisted of the following:
Millions of Japanese yen
Raw materials
Costs of uncompleted contracts

2014¥4,382
1,547¥5,92913

2013¥1,3072,359¥3,666

3. Marketable Securities and Investment Securities
The following tables summarize acquisition costs, book values (fair values) of securities withavailable fair values as of December 31, 2014 and 2013
2014:
Available-for-sale securities:
Securities with book values exceedingacquisition costs:
Equity securities
Securities with book values not exceedingacquisition costs:
Equity securities

Acquisition cost

Total

2013:
Available-for-sale securities:
Securities with book values exceedingacquisition costs:
Equity securities
Securities with book values not exceedingacquisition costs:
Equity securities

Difference

¥64

¥79

¥14

49
¥114

37
¥116

(12)
¥1

Acquisition cost

Total

Millions of Japanese yen
Book value

Millions of Japanese yen
Book value

Difference

¥64

¥73

¥8

49
¥114

41
¥114

(8)
¥(0)

4. Goodwill
Goodwill recorded in intangible assets as of December 31, 2014 and 2013 were ¥3,810 million and¥3,679 million, respectively.
5. Loans Payable
Short-term loans payable represent notes payable to banks due generally in twelve months andbearing an average interest rate of 1.12% and 0.93% as of December 31, 2014 and 2013,
respectively.
Long-term loans payable as of December 31, 2014 and 2013 are summarized below:
Millions of Japanese yen
2014
Loans from banks and others due through 2023
Less: Current portion included in current liabilities, at average rate of 0.45%
Loans from banks and others, at average rate of 0.75% due through 2023
(Excluding current portion)¥17,404(2,198)¥17,021(1,405)¥15,205¥15,615

The aggregate annual maturities of long-term loans payable are summarized below:
Year ending December 31,
2015
2016
2017
2018
2019
2020 and thereafter

Millions of Japanese yen¥2,198
2,563
3,351
6,831
578
1,880
¥17,404

14

2013

6. Asset Retirement Obligation
The Company and its subsidiaries recognized the asset retirement obligation following the officerental contract. The note is not required to disclose due to total amount of this liability is immaterial.
The Company and its subsidiaries estimated the unrecoverable security deposit amount as the asset
retirement obligation. This loss is recognized as the expense instead of the liability.
7. Unused Balance of Overdraft Facilities and Lending Commitment
The Company has a commitment line agreement with a syndicate of six financial institutions, an
overdraft facility agreement with two financial institutions and a notes payable agreement
denominated in U.S. dollars with eight financial institutions for the purpose of efficient providing
operating funds. The commitment line amount is $110 million as of December 31, 2014 and 2013
without any drawdown. The overdraft facility line amount is ¥3,000 million and $30 million
without any drawdown as of December 31, 2014 and with the unused balance of ¥3,150 million asof December 31, 2013. The unused balance of notes payable denominated in U.S. dollars is $253
million as of December 31, 2014 and $149 million as of December 31, 2013.
8. Shareholders’ Equity
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the prices of the new shares as additional paid-in
capital, which is recorded in capital surplus.
Under The Japanese Corporate Law (“the Law”), in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% ofcommon stock over the total of additional paid-in-capital and legal earnings reserve must be set
aside as additional paid-in-capital or legal earnings reserve. Legal earnings reserve is included inretained earnings in the accompanying consolidated balance sheets.
Under the Law, all additional paid-in-capital and all legal earnings reserve may be transferred toother capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on theunconsolidated financial statements of the Company in accordance with the Law.
At the annual shareholders’ meeting held on March 28, 2014, the shareholders approved cash
dividends amounting to ¥696 million for the year ended December 31, 2013.
At the annual shareholders’ meeting held on March 27, 2015, the shareholders approved cash
dividends amounting to ¥916 million. Such appropriations have not been accrued in the
consolidated financial statements as of December 31, 2014. Such appropriations are recognized in
the period in which they are approved by the shareholders.
For the year ended December 31, 2014, the company issued stocks of 10,000,000 shares. 3,096,000
shares were issued through public offering (open to all parties) and 6,439,800 shares were issued
through third-party allotment with Mitsui Engineering & Shipbuilding Co., Ltd. and Mitsui & Co.,
Ltd. as allottees on April 22, 2014. In additions, 464,200 shares were issued through sales of shares(sales through over-allotment) on May 21, 2014.
9. Per Share Data
Net income per share is calculated based on the weighted average number of shares of common
stock outstanding during the fiscal year.
Diluted net income per share reflects the effect of potential dilution that could occur if securities orother contracts to issue common stock were exercised or converted into common stock. There is no
outstanding potential common stock for the years ended December 31, 2014 and 2013.
Cash dividends per share shown for each fiscal year in the accompanying consolidated statements
of income represent dividends declared as applicable to the respective years.

1510. Severance and Retirement Benefits for Employees
The net defined benefit liabilities recorded in the liability section of the consolidated balance sheets
as of December 31, 2014 and the severance and retirement benefits for employees recorded in theliability section of the consolidated balance sheets as of December 31, 2013 consisted of thefollowing:a) Net defined benefit liabilitiesi)

Reconciliation of net defined benefit liabilities recorded in the consolidated balance sheets(simpler method)
Millions of Japanese yen
2014

Balance as of January 1, 2014¥176

Severance and retirement benefit expenses

45

Benefits paid

(29)
¥192

Balance as of December 31, 2014ii) Reconciliation of projected retirement benefit obligation recorded in the consolidated balance
sheetsMillions of Japanese yen
2014
Retirement benefit obligation (Unfunded termination and retirement allowance plan)¥192

Net defined benefit assets/liabilities recorded in the consolidated balance sheets¥192iii) Current service costs
Millions of Japanese yen
2014
¥45

Current service costs (simpler method)

Contribution to pension plans amounted to ¥53 million for the year ended December 31, 2014.
b) Severance and retirement benefits for employees
Millions of Japanese yen
2013
¥176

Projected benefit obligation¥176

Severance and retirement benefits for employees

Severance and retirement benefit expenses recorded in the consolidated statements of income forthe years ended December 31, 2013 consisted of the following:
Millions of Japanese yen
2013
Service costs – benefits earned during the year

¥24
40

Others¥65

Severance and retirement benefit expenses

11. Research and Development Expenses
Research and development expenses recorded in selling, general and administration expenses are ¥150 million and ¥708 million for the years ended December 31, 2014 and 2013, respectively.

1612. Impairment Losses on Property and Equipment
Impairment losses on property and equipment for the years ended December 31, 2014 and 2013
consisted of the following:(a) Overview of the impairment losses on property and equipment
Location
Saga, Japan

Use
Floating wind & current hybrid
power generator

Type of Assets
Construction in progress(Machinery and equipment)(b) Grouping unit
The business assets have been grouped by each company. FPSOs, FSOs and floating wind &current hybrid power generator have been grouped by each cash-generating unit.
(c) The recognition and the amount of the impairment losses
Floating wind & current hybrid power generator is under construction. The Company
conservatively assessed the future cash flow of the asset and realized it is below the book value
because forecast of purchase price of electricity is unpredictable.
As a result, the Company reduced the carrying amount of the asset to the recoverable amountand recognized the impairment loss of ¥604 million and ¥2,311 million for the years ended
December 31, 2014 and 2013, respectively.
(d) The measurement of the impairment losses
The Company measured the recoverable amount based on a value in use and calculated it bydiscounting future cash flow at an interest rate of 2.0%.

17

13. Income Taxes
The statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise andinhabitants taxes is 38% for the years ended December 31, 2014 and 2013, respectively.
1) The following table summarizes the significant differences between the statutory tax rate and theCompany and its consolidated subsidiaries’ effective tax rate for financial statement purposes forthe years ended December 31, 2014 and 2013.
2014

2013

Statutory income tax rates
Difference of statutory tax rate between the Company and overseas subsidiaries
Equity in earnings of affiliates and unconsolidated subsidiaries
Valuation Allowance
Income of foreign subsidiaries taxed at lower than Japanese statutory rate
Income taxes for prior periods
Others

38.0%(6.2)(15.6)
35.2
1.0
0.1
3.3

38.0%
(3.9)
(18.3)
29.7
1.2
(0.5)
(4.0)

Effective tax rates

55.8%

42.2%

2) Significant components of deferred tax assets and liabilities as of December 31, 2014 and 2013
are as follows:
Millions of Japanese yen
2014
2013
Deferred tax assets:
Current assets:
Enterprise tax payable
Accrued employees’ bonuses
Provision for product warranty
Allowance for bad debts
Other provisions
Others
Sub total
Valuation allowance
Offset to deferred tax liabilities (short-term)
Total
Fixed assets:
Unrealized inter-company profit on fixed assets
Tax loss carry forward
Severance and retirement benefits for employees
Net defined benefit liabilities
Depreciation
Long-term foreign tax credit
Temporary difference for investment in subsidiaries
Allowance for bad debts
Impairment loss
Others
Sub total
Valuation allowance
Offset to deferred tax liabilities (long-term)
Total
Total deferred tax assets

18

¥349
3
1,037
172
2,755
2,076
6,395
(353)
(1,226)

¥41
9
611
176
2,353
803
3,996
(4)
(426)

4,815

3,564

4,094
6,925
－
69
87
1,268
956
656
1,542
2,069

3,131
3,526
63
－
127
1,045
978
573
831
859

17,670(9,249)(3,367)
5,053¥9,869

11,138(4,780)(2,836)
3,521¥7,086

Millions of Japanese yen
2014
2013
Deferred tax liabilities:
Current liabilities:
Temporary difference of foreign exchange gain in overseas subsidiaries
Difference on percentage-of-completion method
Others
Sub total
Offset to deferred tax assets (short-term)
TotalLong-term liabilities:
Depreciation
Long-term foreign exchange gain
Difference on percentage-of-completion method
Undistributed earnings of overseas subsidiaries
Others
Sub total
Offset to deferred tax assets (long-term)
Total
Total deferred tax liabilities
Net deferred tax assets－¥(1,070)(188)(1,258)1,226(32)¥(102)
(200)
(135)
(438)
426
(11)

(1,034)(1,725)(1,211)－(10)(3,982)
3,367
(615)
(647)

(1,033)(1,634)
(602)
(31)
(17)
(3,319)
2,836
(482)
(494)

¥9,221¥6,591The Company made certain reclassifications to the previously reported fiscal year 2013 amounts toconform to fiscal year 2014 presentation. These reclassifications had no effect on previously
reported net income or net assets.
3) The revision of the corporate income tax rate after December 31, 2014
The “Act for Partial Revision of Income Tax Act, etc.” (Act No.10 of 2014) was promulgated on
March 31, 2014 and the income tax rate is to be changed accordingly with the effect on fiscal
year beginning on January 1, 2015 onward.
In accordance with the revision, statutory effective tax rates used to calculate the amounts ofdeferred tax assets and liabilities have been applied as follows depending on the timing ofreversal for each temporary item. Applying this revision, income taxes - deferred increased by¥132 million and the long-term deferred tax asset decreased by ¥132 million for the year ended
December 31, 2014.
Tax rate

Timing of reversal for temporary items
January 1, 2014 through December 31, 2014

38.0%

January 1, 2015 onward

36.0%

14. Contingent Liabilities and Commitments
As of December 31, 2014 and 2013, the Company was contingently liable for the following:
Millions of Japanese yen
2014
Guarantees of bank loans and other indebtedness
for unconsolidated subsidiaries and affiliates¥167,569

2013¥58,444

For the years ended December 31, 2014 and 2013, the fair market values of swap contracts areincluded in the consolidated financial statements due to the adoption of “Practical Solution on
Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method”(PITF No.24 issued by the Accounting Standards Board of Japan on March 10, 2008).

19

15. Comprehensive Income
Each component of other comprehensive income for the years ended of December 31, 2014 and2013 was the followings:
Millions of Japanese yen
2014

2013

Net unrealized holding gains on securities:
Amount of generation

¥2

¥22

Amount of rearrangement adjustment－－

Before adjusting the tax effect2

22

Tax effect

(0)

(8)

Net unrealized holding gains on securities

1

14

Amount of generation

(163)

168

Amount of rearrangement adjustment

(250)

(171)

Before adjusting the tax effect

(414)

(2)

Tax effect115

3

Unrealized gains / (losses) on hedging derivatives, net of tax

(299)

1

Amount of generation

7,628

5,844

Amount of rearrangement adjustment

(214)

101

Before adjusting the tax effect

7,413

5,945

Tax effect

(254)

(0)

Foreign currency translation adjustments

7,158

5,944

Unrealized gains / (losses) on hedging derivatives, net of tax

Foreign currency translation adjustments

Retirement liability adjustments for foreign consolidated subsidiaries
Amount of generation

(177)

(137)

Amount of rearrangement adjustment

20

15

Before adjusting the tax effect

(157)

(121)

Tax effect86

84

Retirement liability adjustments for foreign consolidated subsidiaries

(70)

(36)

(2,392)

7,531

(676)

1,237

(3,068)

8,769¥3,721¥14,693

Share of other comprehensive income / (loss) of affiliates accounted for using equity
methodAmount of generation
Amount of rearrangement adjustment
Share of other comprehensive income / (loss) of affiliates accounted for using
equity method
Total

20

16. Leases
Lessor:Future lease receivables related to the non-cancellable operating leases are as follows:
Millions of Japanese yen
2014
Due within one year
Due after one year
Total

2013
¥1,5312,810¥1,338
3,795¥4,342¥5,133

17. Financial Instruments(a) Concerning status of financial instrumentsi) Policies for financial instruments
The Company and its consolidated subsidiaries adopt only short-term financial instruments for
operating funds.
The Company and its consolidated subsidiaries have the policy of procuring bank-loans to raise
funds.
The Company and some of its consolidated subsidiaries transfer funds to each other through aninter-company cash management systems (CMS).
As to derivative financial instruments, the Company and its consolidated subsidiaries utilize
them not for speculation but for hedging purpose only.
ii) Substances and risks of financial instruments and managing of financial instruments
Accounts receivable - trade are exposed to credit risks of customers. The Company and its
subsidiaries research the credit standings and select credit worthy customers, and manage thebalance of accounts receivable - trade at regular intervals to reduce credit risks.
Short-term and long-term loans receivable that are granted to cater the affiliated companies
mainly established to accomplish charter projects are exposed to credit risks of their customers.
The Company reduces the share of risks by arranging project finance or by the cooperation withgeneral trading companies and other business partners.
Majority of accounts receivable - trade and loans receivable are denominated in foreign
currencies and net of these balances with accounts payable - trade and loans payable areexposed to currency fluctuation risks. These risks are basically hedged by using forward foreignexchange contracts.
Investment securities are exposed to market fluctuation risks. The Company and its subsidiaries
have the business relationships with the issuers of most of investment securities andperiodically research the fair market value and financial position of the issuers.
Majority of accounts payable - trade are due within one year. Accounts payable - tradedenominated in foreign currencies arising from overseas procurement of materials are exposed
to currency fluctuation risks, but these accounts payable - trade are controlled not to exceed
accounts receivable - trade in the same foreign currencies.
Short-term and long-term loans payable are mainly raising funds for the affiliated companies.
Majority of loans payable are exposed to currency fluctuation risks, but these loans payable are
not exceed loans receivable in the same foreign currencies. In addition, the Company arranges
the interest rate swap transaction for some of long-term loans payable by each contract to fix theinterest expense and to reduce the interest rate fluctuation risks.

21

Derivative transactions are consisted of mainly forward foreign exchange contracts arranged
for the purpose of hedging currency fluctuation risks arising from foreign currency accounts
receivable - trade and accounts payable - trade, and interest rate swap transaction for the
purpose of interest rate fluctuation risks arising from loans payable.
Accounts payable – trade and loans payable are exposed to the liquidity risks. To manage theliquidity risks, our finance sections appropriately prepare and update the cash management
plan.
iii) Supplementary explanation about fair value of financial instruments
The fair value is based on their fair market value quoted market price, if available, or reasonably
estimated value if market price is not available. Since various assumptions and factors arereflected in estimating the fair value, different assumptions and factors could result in different
fair value. In addition, the notional amount is not indicative of the actual market risk involved inderivative transactions.
As to the contract amount of derivatives transactions, please see the following “(b) Articles
concerning fair value of financial instruments”.
(b) Concerning fair value of financial instruments
Consolidated balance sheets amounts and fair market value of financial instruments, thedifference between for the years ended December 31, 2014 and 2013 are as follows. Financial
instruments in which the fair value is considered to be extremely difficult to recognize are notincluded in the list below.
2014:
Book Value¥30,632
168,01241,008116(1) Cash and time deposits(2) Accounts receivable – trade(3) Short-term loans receivable(4) Investment securities(5) Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies(6) Bankrupt and substantially bankrupt claims
Allowance for bad debts (*1)
Assets total(7) Accounts payable – trade(8) Short-term loans payable(9) Current portion of long-term loans payable(10) Long-term loans payable
Liabilities total(11) Derivative transactions (*2)i) Derivative transactions for which hedge accounting
has not been appliedii) Derivative transactions for which hedge accounting
has been applied
Derivative transactions total

Millions of Japanese yen
Fair Value¥30,632
168,01241,008116

Difference－－－－

20,153
1,824(1,824)－¥259,923

21,283¥1,130－¥261,054－¥1,130¥160,077
5,967
2,198
15,205¥183,449¥160,077
5,967
2,198
15,205¥183,449

－
－
－
－
－

－

－

－

¥(4,473)¥(4,473)¥(4,473)¥(4,473)－－*1: Bankrupt and substantially bankrupt claims are presented net of allowance for bad debts.
*2: Derivative transactions are presented net of receivables and payables, and figures with parenthesis indicate
payables.

22

2013:
Book Value¥21,786
84,695
114(1) Cash and time deposits(2) Accounts receivable – trade(3) Investment securities(4) Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies(5) Bankrupt and substantially bankrupt claims
Allowance for bad debts (*1)
Assets total(6) Accounts payable – trade(7) Short-term loans payable(8) Current portion of long-term loans payable(9) Long-term loans payable
Liabilities total(10) Derivative transactions (*2)i) Derivative transactions for which hedge accounting
has not been appliedii) Derivative transactions for which hedge accounting
has been applied
Derivative transactions total

Millions of Japanese yen
Fair Value¥21,786
84,695114

Difference－－－

38,771
1,594(1,594)－¥145,367

39,358¥587－¥145,955－¥587¥87,782
9,483
1,405
15,615¥114,286¥87,782
9,483
1,405
15,615¥114,286

－
－
－
－
－

－

－

－

¥(518)¥(518)¥(518)¥(518)－－*1: Bankrupt and substantially bankrupt claims are presented net of allowance for bad debts.
*2: Derivative transactions are presented net of receivables and payables, and figures with parenthesis indicate
payables.

(note 1) Articles concerning calculation method of fair value, marketable securities andderivative transaction
Assets(1) Cash and time deposits, (2) Accounts receivable – trade and (3) Short-term loans
receivable
Fair value of these accounts is stated at the balance sheet amounts because they are
considered to be close to the balance sheet amounts and these accounts are settled in
short-term.
(4) Investment securities
Fair value of these accounts is based on available market price. Securities held by intent
are described in the corresponding pages. (Please see Note 3. Marketable Securities andInvestment Securities.)(5) Long-term loans receivable from unconsolidated subsidiaries and affiliated companies
Fair value of these accounts is stated at the present value calculated from the future cash
flows discounted by the premium-added rate on the proper index like yield on thegovernment bonds.
(6) Bankrupt and substantially bankrupt claims
Fair value of these accounts is stated at the balance sheet amounts because the estimatedamounts of bad debts are calculated based on the collectible amounts and fair value of theamounts are considered to be close to the balance sheet amounts.

23

Liabilities(7) Accounts payable – trade, (8) Short-term loans payable and (9) Current portion of
long-term loans payable
Fair value of these accounts is stated at the balance sheet amounts because they are
considered to be close to the balance sheet amounts and these accounts are settled in
short-term.
(10) Long-term loans payable
Fair market value of long-term loans payable with floating interest rate is stated at thebalance sheet date. Considering that floating interest rate reflects latest market conditions
and credit of the Company considered being almost same as before, fair market value of
long-term loans payable is close to the balance sheet amounts.
The exceptional treatment for interest rate swap transaction is applied to some oflong-term loans payable. These principals and interests are discounted by the practicallyestimated interest rates which are applied to when the Company arrange the same loans
payable from the outside.
Derivative Transactions
Please see Note 18. Derivative Transactions of the Company and its consolidated subsidiaries.
(note 2) Financial instruments for which the fair value is considered to be extremely difficult
to recognize are as follows:
Millions of Japanese yen
2014
2013
¥37,271¥26,428

Privately owned equity securities

As to these financial instruments, there is no available fair market value. So these financial
instruments are not included in (4) Investment securities because it is considered to be
extremely difficult to estimate fair market value.
(note 3) The expected redemption amount of monetary credit and securities with maturity
after December 31, 2014 and 2013 are as follows:
2014:
Within one year

Millions of Japanese yen
Over one year but
Over five years but
within five years
within ten years

Over ten years

Cash and time deposits¥30,632－－－

Accounts receivable – trade

168,012－－－

Short-term loans receivable

41,008Long-term loans receivablefrom unconsolidated
subsidiaries and affiliatedcompanies－－¥5,807－¥4,067－¥10,278

2013:
Within one year

Millions of Japanese yen
Over one year but
Over five years but
within five years
within ten years

Over ten years

Cash and time deposits¥21,786－－－

Accounts receivable – trade

84,695Long-term loans receivablefrom unconsolidated
subsidiaries and affiliatedcompanies－－¥26,537－¥3,554－¥8,67924

(note 4) The aggregate annual maturities of long-term loans payable are as follows:
Millions of Japanese yen¥2,563
3,351
6,831
578
1,880
¥15,205

2016
2017
2018
2019
2020 and thereafter
Total

18. Derivative Transactions of the Company and its Consolidated Subsidiaries
The Company and its consolidated subsidiaries utilize forward foreign currency contracts in orderto hedge currency fluctuation risks arising from export of products in addition to hedging throughincreases in overseas production and overseas procurement of materials.
The Company and its consolidated subsidiaries also utilize interest rate swaps as derivativetransactions in order to hedge interest rate risks of bonds and loans payable.
As the derivative transactions are made solely with leading financial institutions, the Company andits consolidated subsidiaries do not expect any credit risks.
The Company follows its internal regulations for derivatives, which stipulates the policy, objective,
scope, organization, procedures, and financial institutions to deal with, and has a reporting systemfor derivative transactions reflecting proper internal control functions.
The following summarizes hedging derivative financial instruments used and items hedged:
Hedging instruments:
Foreign exchange forward contracts

Hedged items:
Foreign currency receivables and payables
including future transactions
Foreign currency receivables and payables
Foreign currency bonds and loans payable

Currency swap contracts
Interest rate swap contracts

The Company evaluates hedge effectiveness on a quarterly basis by comparing the cumulativechanges in cash flows from or the changes in fair value of hedged items with the corresponding
changes in the hedging derivative instruments.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net
amount to be paid or received under the interest rate swap contract is added to or deducted from theinterest on the assets or liabilities for which the swap contract was executed.
Certain consolidated overseas subsidiaries adopt hedge accounting in accordance with U.S.GAAP.
The following tables summarize market value information as of December 31, 2014 and 2013 ofderivative transactions for which hedge accounting has been applied:
Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value

2014:
Currency related derivatives
Type
Forward contract (principle method)
To sell U.S. dollars
Forward contract (principle method)
To buy EuroTo buy Norwegian krone
To buy Japanese yen
To buy STG pounds
To buy Singapore dollars
To buy Switzerland franc

Hedged Items
Accounts receivable –trade and others

Accounts payable –trade and others

25¥19,702－¥(3,494)

3,446
1,359
455
1,117
194
1,012

¥26
－
－
－
－
－

(242)
(237)
(67)
(8)
(0)
(68)
¥(4,119)

Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value

2013:
Currency related derivatives
Type
Forward contract (principle method)
To buy STG pounds
To buy EuroTo buy Norwegian krone

Hedged Items
Accounts payable –trade and others

Hedged Items
Long-term loans payable

¥24
(40)
0
¥(15)

¥4,252¥3,246¥(354)

Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value

2013:
Interest related derivatives
TypeInterest rate swap (principle method)
To receive float, pay fix–¥1,187–

Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value

2014:
Interest related derivatives
TypeInterest rate swap (principle method)
To receive float, pay fix

¥418
2,559
109

Hedged Items
Long-term loans payable26¥4,550¥3,716¥(503)

19. Segment Information(1) Overview of reportable segment
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as single business therefore overview of reportable segment is not presented.
(2) Information by products and services
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as single business therefore information by products and services is not presented.
(3) Information by geographical area(a) Sales
2014:
Millions of Japanese yen
BrazilGhana¥241,873

Oceania¥91,376

Asia¥21,087

Other¥12,156

Total¥12,029¥378,523

2013:
Millions of Japanese yen
BrazilGhana¥184,065

Oceania¥27,531

Asia¥20,336

Other¥13,264

Total¥9,203¥254,401(Note) Sales amount is based on the location of customer and classified by country or geographical area.

(b) Property and equipment
2014:
Millions of Japanese yen
Australia

Vietnam¥7,946

U.S.A.

¥6,087

Other¥1,929

Total¥960¥16,9242013:
Millions of Japanese yen
Australia

Vietnam¥10,003

Other¥5,963

Total¥1,635¥17,602(4) Information by major customer
2014:
Millions of Japanese yen
Customer

Sales

Related Segment

Carioca MV27 B.V.

¥98,604(note 1)

T.E.N. Ghana MV25 B.V.

79,295(note 1)

Cernambi Norte MV26 B.V.

56,083(note 1)

Cernambi Sul MV24 B.V.

38,136(note 1)

2013:
Millions of Japanese yen
Customer

Sales

Related Segment

Cernambi Norte MV26 B.V.

¥70,527(note 1)

Cernambi Sul MV24 B.V.

54,943(note 1)

(note 1) The Company and its subsidiaries construct FPSOs and FSOs and operate their related services as single businesstherefore related segment is not presented.

27

Information about losses on impairment of property and equipment for each reportable segment:
Not applicable.
Information about goodwill amortization amount and year-end balance for each reportable segment:
Not applicable.
Information about gains on negative goodwill for each reportable segment:
Not applicable.
20. Related Party Transactions
Significant related party transactions and corresponding balances between the Company and its
parent company for the year ended December 31, 2014 are as follows:
2014:
Related party

Transactions

Mitsui Engineering & Shipbuilding Co., Ltd.

Allotment of capital increase

Millions ofJapanese yen¥10,105

Significant related party transactions and corresponding balances between the Company andunconsolidated subsidiaries or affiliates for the year ended December 31, 2014 are as follows:
2014:
Related party
Cernambi Sul MV24 B.V.
Cernambi Sul MV24 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.
Tartaruga MV29 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Transactions
Disbursement of loans for working capital
Guarantees of bank Loans
Construction of FPSO (Sales)
Collection of loans for capital expenditure
Guarantees of contract fulfillment
Guarantees of bank Loans
Construction of FPSO (Sales)
Guarantees of bank Loans
Construction of FPSO (Sales)
Disbursement of loans for capital expenditure
Collection of loans for capital expenditure
Guarantees of bank Loans
Construction of FPSO (Sales)
Disbursement of loans for capital expenditure
Construction of FPSO (Cost of sales)

2014:
Related party
Song Doc MV19 B.V.
Gas Opportunity MV20 B.V.
Tupi Pilot MV22 B.V.
Cernambi Sul MV24 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.
Tartaruga MV29 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Consolidated balance sheets accounts
Short-term loans receivable
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Short-term loans receivable
Accounts receivable - trade
Accounts receivable - trade
Accounts receivable - trade
Accounts receivable - trade
Short-term loans receivable
Accounts payable - trade28

Millions ofJapanese yen¥12,349
23,92581,4382,875
6,028
18,518
7,210
55,504
19,11021,011
20,891
57,868
5,667
4,705
10,827

Millions ofJapanese yen¥3,761
4,067
5,883
31,04841,257
11,99020,182
5,667
4,786
964

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and the parent company or major shareholders (corporation only) for the year ended
December 31, 2014 are as follows:
2014:
Related party
Mitsui & Co., Ltd.

Transactions
Repayment of long-term loans payable

2014:
Related party
Mitsui & Co., Ltd.
Mitsui & Co., Ltd.

Consolidated balance sheets accounts
Current portion of long-term loans payable
Long-term loans payable

Millions ofJapanese yen¥642
Millions ofJapanese yen
¥764
2,239

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and unconsolidated subsidiaries or affiliates for the year ended December 31, 2014 are
as follows:
2014:
Related party
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Transactions
Construction of FPSO (Sales)
Construction of FPSO (Sales)
Construction of FPSO (Cost of sales)

2014:
Related party
Guara MV23 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Consolidated balance sheets accounts
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Accounts receivable - trade
Accounts receivable - trade
Accounts payable - trade

Millions ofJapanese yen¥50,796
85,92880,249Millions ofJapanese yen¥6,59910,1273,496
5,292

Significant related party transactions and corresponding balances between the Company andunconsolidated subsidiaries or affiliates for the year ended December 31, 2013 are as follows:
2013:
Related party
Gas Opportunity MV20 B.V.
Tupi Pilot MV22 B.V.
Guara MV23 B.V.
Guara MV23 B.V.
Cernambi Sul MV24 B.V.
Cernambi Sul MV24 B.V.
Cernambi Sul MV24 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Cernambi Norte MV26 B.V.
Cernambi Norte MV26 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Transactions
Disbursement of loans for capital expenditure
Disbursement of loans for capital expenditure
Disbursement of loans for capital expenditure
Collection of loans for working capital
Construction of FPSO (Sales)
Disbursement of loans for capital expenditure
Guarantees of bank Loans
Construction of FPSO (Sales)
Disbursement of loans for capital expenditure
Collection of loans for working capital
Guarantees of bank Loans
Construction of FPSO (Sales)
Disbursement of loans for capital expenditure
Collection of loans for working capital
Guarantees of bank Loans
Construction of FPSO (Sales)
Construction of FPSO (Cost of sales)

29

Millions ofJapanese yen¥681
775
34,95739,762
7,779
7,895
20,91018,370
881
1,478
2,634
10,07282
3,866
29,032
3,606
3,525

2013:
Related party
Espadarte MV14 B.V.
Pra-1 MV15 B.V.
Opportunity MV18 B.V.
Song Doc MV19 B.V.
Gas Opportunity MV20 B.V.
Tupi Pilot MV22 B.V.
Cernambi Sul MV24 B.V.
Cernambi Sul MV24 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Consolidated balance sheets accounts
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Long-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Accounts receivable - tradeLong-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Accounts receivable - tradeLong-term loans receivable from unconsolidated
subsidiaries and affiliated companies
Accounts receivable - trade
Accounts receivable - trade
Accounts payable - trade

Millions ofJapanese yen¥2,118
2,268
2,275
3,287
3,554
5,142
9,529
15,156
12,790
2,887
7,414
3,606
431

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and the parent company or major shareholders (corporation only) for the year ended
December 31, 2013 are as follows:
2013:
Related party
Mitsui & Co., Ltd.
Mitsui & Co., Ltd.

Transactions
Proceeds from long-term loans payable
Repayment of long-term loans payable

2013:
Related party
Mitsui & Co., Ltd.
Mitsui & Co., Ltd.

Consolidated balance sheets accounts
Current portion of long-term loans payable
Long-term loans payable

Millions ofJapanese yen¥864
314
Millions ofJapanese yen
¥367
2,819

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and unconsolidated subsidiaries or affiliates for the year ended December 31, 2013 are
as follows:
2013:
Related party
Cernambi Sul MV24 B.V.
Cernambi Norte MV26 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Transactions
Construction of FPSO (Sales)
Construction of FPSO (Sales)
Construction of FPSO (Cost of sales)

2013:
Related party
Cernambi Sul MV24 B.V.
Cernambi Norte MV26 B.V.
MODEC and TOYO offshore
production systems Pte. Ltd.

Consolidated balance sheets accounts
Accounts receivable - trade
Accounts receivable - trade
Accounts payable - trade30

Millions ofJapanese yen¥46,600
60,56852,978Millions ofJapanese yen¥1,092
4,396
6,216

MODEC, Inc.
2014 Financial Results
Supplementary Presentation

February 10, 2015

2014 Financial Results : Highlight(billion JPY)

2013

2014

Variance

New Orders

518.4

395.7

- 23.7%

Revenue

254.4

378.5

+ 48.8%Operating Profit

3.7

8.5 + 131.3%

Ordinary Profit

15.8

18.3

+ 15.9%Net Income

4.9

5.4

+ 10.2%120.56+ 15.19yen

FX Rate on
Closing Dates($/¥)

105.37

New Orders

RevenueNew orders for 1 FPSO (Petrobras Tartaruga MV29:
EPCI + Charter) and 1 TLP (Hess Stampede: ECM)



Revenue hit a record high of 378.5 billion JPY
 EPCI progressed well on MV25 (Tullow TEN),
MV26 (Petrobras Iracema Norte) and MV27
(Petrobras Carioca); revenue from EPCI was an
all-time high of approx. 290 billion JPYOperating profit, ordinary profit, net income, all hit
record highs

Operating Profit

Ordinary Profit

Net Income

10

20

6

(billion JPY)
600

395.7

400

378.5

400

518.4

300

8.5

18.3

5.4
4.9

15.8
15

254.4

4
5

200

10

3.7

200

2
100

0

5
0

0
2013

2014

2013

2014

0

0
2013

2014

2013

2014

2013

2014

2

2014 Financial Results : Highlight(billion JPY)

2013

2014

Variance

Total Assets

215.6

348.4

+ 61.6%

Total Liabilities

135.2

238.8

+ 76.6%

26.5

23.3

- 11.8%

80.4

109.6

+ 36.3%

70.8

96.7

+ 36.7%

30.00

32.50

+ 2.50yen

Interest-Bearing
Debt
Total Net Assets
EquityDividends
per Share (yen)Equity100

Raised approx. 20 billion JPY by public offering andthird-party allotment; equity increased to 96.7 billion
JPY

Accounts receivable and payable increased by approx.
83 billion JPY and 72 billion JPY respectively, due to
EPCI progress and timing difference between progressrecognition and actual cash settlement

Proposed annual dividends: 32.50 yen per share Dividends increased 10 years in a row

InterestBearing Debt

(billion JPY)
96.7



30

(JPY)
35

26.5
23.3

70.8

Dividends per Share
32.50

30
25

20

20

50

15
10

10
5
2014

2013

2012

2011

2010

2009

2014

2008

2013

2007

2014

2006

2013

2005

0

0

2004

0

3

2015 Financial Forecast

Exchange Rate on Closing Dates ($/¥)
2011

2012

2013

2014

2015(F)

77.74

86.56

105.37120.56110.00

Revenue(billion JPY)
400

Operating Profit(billion JPY)
10

378.5

8.5

300.0
254.4
200

186.8

5

129.9

3.4

3.7

2012

2013

3.0

0.2
0

0
2011

2012

2013

2014

2011

2015(F)

Ordinary Profit(billion JPY)
20

2015(F)Net Income(billion JPY)
6

18.3
15.8

15

4
9.2

10

2014

9.0

5.0

5.1

4.9

5.4

3.0

3.0

2

5
0

0
2011

2012

2013

2014

2015(F)

2011

2012

2013

2014

2015(F)4