Consolidated Financial Statements of
JALUX Inc. and Consolidated Subsidiaries
JALUX Inc.
Year ended March 31, 2019with Independent Auditor’s ReportIndependent Auditor’s Report
To the Board of Directors of JALUX Inc.:
We have audited the accompanying consolidated financial statements of JALUX Inc. and its consolidated
subsidiaries, which comprise the consolidated balance sheets as at March 31, 2019 and 2018, and theconsolidated statements of income, statements of comprehensive income, statements of changes in net assets
and statements of cash flows for the years then ended, and a summary of significant accounting policies andother explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statementsin accordance with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgement, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, we consider internal control relevant to the entity’s preparationand fair presentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial positionof JALUX Inc. and its consolidated subsidiaries as at March 31, 2019 and 2018, and their financial performanceand cash flows for the years then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2019 are presented solely for convenience. Our audit also included the translation of yen amounts
into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 4 tothe consolidated financial statements.

KPMG AZSA LLC
July 17, 2019

Tokyo, Japan

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,2019
2018
(Thousands of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 17 and 21)
Trade notes and accounts receivable (Notes 17and 21)
Inventories (Note 5)
Accounts receivable - other (Note 17)
OthersAllowance for doubtful accounts
Total current assets
Property and equipment (Notes 6, 12, 15 and 20):
Buildings and structures
Machinery and vehicles
Land
Construction in process
OthersProperty and equipment, net

2019(Thousands of
U.S. dollars)(Note 4)

¥ 6,050,750
21,328,708
14,371,088
2,994,748
1,674,454(20,916)
46,398,833¥ 6,027,362
15,452,147
13,181,691
2,643,953
1,264,471(24,468)
38,545,156$ 54,511
192,151
129,469
26,98015,085(188)
418,008

1,977,380
1,601,841
407,227
36,784484,977
4,508,210

2,002,569
1,864,218
411,541
8,661
448,758
4,735,748

17,814
14,431
3,669
331
4,369
40,615458,20232,716490,919425,360
33,787459,148

4,128
295
4,423

2,701,645
2,381,271
29,494
150,660
1,979,203
1,971,093
582,190
540,296
75,903
110,690
136,156
144,000(15,556)(24,634)
5,489,037
5,273,378¥ 56,887,000 ¥ 49,013,432

24,339266
17,831
5,245
684
1,227
(140)
49,451$ 512,495

Intangible assets:
Software (Note 12)
OthersTotal intangible assets
Investments and other assets:
Investment securities (Notes 7, 17 and 18)
Long-term loans receivable
Long-term guarantee deposit (Note 17)
Deferred tax assets (Note 13)
Asset for retirement benefits (Note 9)
OthersAllowance for doubtful accounts
Total investment and other assets
Total assets

2March 31,
2019
2018
(Thousands of yen)

Liabilities and net assets
Current liabilities:
Trade notes and accounts payable (Notes 17 and 23)
Short-term borrowings and Current portion of long-term
debt (Notes 8 and 17)
Commercial papers
Accrued income taxes
Accrued expenses (Note 17)
Others (Note 8)
Total current liabilities

2019(Thousands of
U.S. dollars)(Note 4)

¥ 8,687,138¥ 11,362,733$ 78,263

7,741,919
2,999,997
1,001,952
5,767,120
3,130,047
29,328,176

2,094,859―
1,005,360
3,825,901
2,718,159
21,007,014

69,74727,027
9,027
51,95628,199264,218

Long-term liabilities:
Long-term debt (Notes 8 and 17)
Liability for retirement benefits (Note 9)
Deferred tax liabilities (Note 13)
OthersTotal long-term liabilities

940,569
43,9289,577
513,446
1,507,521

3,413,658
39,177
184,463734,582
4,371,882

8,474
396
86
4,626
13,581

Net assets (Note 10):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Common stock in treasury
Total shareholders’ equity

2,558,550
688,723
21,458,367(135,155)
24,570,484

2,558,550
688,723
19,191,298(134,809)
22,303,762

23,0506,205
193,319(1,218)221,356

19,295(17,932)(392,253)(50,884)(441,774)

21,679(67,321)(260,703)(29,217)(335,563)

174
(162)
(3,534)(458)(3,980)1,922,592
26,051,302¥ 56,887,000

1,666,337
23,634,536¥ 49,013,432

17,321
234,696$ 512,495

Accumulated other comprehensive income:Net unrealized gain (loss) on other securities, net oftaxes (Note 18)
Deferred gain or loss on hedges, net of taxes (Note 19)
Translation adjustments
Retirement benefits liability adjustments (Note 9)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

The accompanying notes are an integral part of these statements.

3

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Income
Years ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)(Note 4)
Operating revenues (Notes 22 and 23)
Operating expenses (Notes 22 and 23):
Cost of sales
Selling, general and administrative expenses
Operating income
Non-operating income (expenses):
Interest income
Interest expense
Equity in earnings of affiliates
Others, net (Note 11)
Net Profit before income taxes
Income taxes (Note 13):
Current
Deferred
Net Profit¥ 185,726,096 ¥ 153,404,093$ 1,673,208

159,136,030
21,961,971
181,098,001
4,628,094

128,252,981
20,442,048
148,695,030
4,709,063

1,433,658
197,856
1,631,514
41,695

8,205(155,353)
568,691(53,535)(368,008)
4,996,103

10,779(106,420)
417,758(340,351)(18,234)
4,690,829

74(1,400)5,123(482)(3,315)45,0101,760,665(227,371)
1,533,293
3,462,809

1,643,943(24,002)1,619,941
3,070,887

15,862(2,048)13,81331,196499,908¥ 2,962,900

377,538¥ 2,693,349

4,504$ 26,693

Net Profit attributable to:Non-controlling interests
Owners of the company

The accompanying notes are an integral part of these statements.

4

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)(Note 4)
Net Profit
Other comprehensive income:Net unrealized holding gain (loss) on other securities,
net of taxes
Deferred gain or loss on hedges, net of taxes
Translation adjustments
Retirement benefits liability adjustment, net of tax
Share of other comprehensive income of companies
accounted for by the equity method
Total other comprehensive income (Note 14)
Comprehensive income
Comprehensive income attributable to:
Owners of the company
Non-controlling interests¥ 3,462,809¥ 3,070,887$ 31,196(793)
49,389(86,133)(21,667)

17,346(90,230)(52,798)
31,668

(7)
445
(776)
(195)

(55,088)(114,293)¥ 3,348,516(24,831)(118,845)¥ 2,952,042(496)(1,030)$ 30,167¥ 2,856,689¥ 491,826¥ 2,575,719¥ 376,323$ 25,736$ 4,4315

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets

Balance at March 31, 2017
Cash dividends(Note 10)(¥50 per share)
Net income for the year
ended March 31, 2018
Purchase of common
stock in treasury

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

12,775,000¥ 2,558,550¥ 688,723¥ 17,130,525¥ (134,674)

Balance at March 31, 2018

Total
net assets¥ (183,270)¥ (60,886)¥ 1,420,003¥ 21,445,194

2,693,349

2,693,349(135)

12,775,000¥ 2,558,550¥ 688,723¥ 19,191,298¥ (134,809)(135)
18,364(90,230)(77,433)

31,668

246,334¥ 21,679¥ (67,321)¥ (260,703)¥ (29,217)¥ 1,666,337

12,775,000¥2,558,550¥688,723

2,962,900

2,962,900¥21,458,367¥(135,155)

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

12,775,000$ 23,050$ 6,205$ 172,895$ (1,214)(346)(2,383)49,389(131,549)(21,667)

256,255¥ 19,295¥ (17,932)¥ (392,253)¥ (50,884)¥ 1,922,592¥ 26,051,302

Translation
adjustments

Retirement
benefits
liability
adjustments(Note 9)Noncontrollinginterests

Total
net assets$ (2,349)$ (263)$ 15,012

Net unrealized
holding
gain (loss) on Deferred gainotheror loss
securities,
on hedges,
net of taxes
net of taxes(Note 18)
(Note 19)

$ 195

$ (606)$ 212,924(6,269)26,693

26,693(3)$ 6,205

150,043(6,269)Others$ 23,050¥ 23,634,536(695,831)

Number ofshares ofcommonstock

12,775,000

128,703(695,831)(346)

Cash dividends($0.50 per share)
Net income for the year
ended March 31, 2019
Purchase of common
stock in treasury

Balance at March 31, 2019

¥ 22,908

Noncontrollinginterests(632,576)

OthersBalance at March 31, 2019

¥ 3,314

Translation
adjustments

Retirement
benefits
liability
adjustments(Note 9)(632,576)

OthersBalance at March 31, 2018
Cash dividends (Note 10)(¥55 per share)
Net income for the year
ended March 31, 2019
Purchase of common
stock in treasury

Net unrealized
holding
gain (loss) on Deferred gainotheror loss
securities,
on hedges,
net of taxes
net of taxes(Note 18)
(Note 19)

$ 193,319$ (1,218)

(3)
(21)

445

(1,185)

(195)

2,309

$ 174

$ (162)$ (3,534)$ (458)$ 17,321

1,352$ 234,696

The accompanying notes are an integral part of these statements.

6

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Years ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)(Note 4)
Operating activities
Net Profit before income taxes
Depreciation and amortization
Increase (decrease) in provision for allowance for doubtful accounts
Decrease (increase) in asset for retirement benefits
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense
Exchange loss (gain), net
Equity in earnings of affiliates
Loss (gain) on sales of, and loss on disposal of property and equipment
Impairment losses on fixed assets
Loss (gain) on sales of subsidiary securities (Note 21)
Loss on revaluation of investments in securities
Decrease (increase) in notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable
Decrease (increase) in advance payment
Increase (decrease) in advance received
Decrease (increase) in bad debts on receivables
Others, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities¥ 4,996,103
867,994(12,383)(25,691)
5,043(30,484)
155,353(16,397)(568,691)
53,165
4,472
37,518–(5,894,235)(1,261,245)(2,642,048)(392,905)
59,55812,144
1,983,400(2,669,327)
183,779(156,059)(1,821,796)(4,463,404)¥ 4,690,829
742,160(3,407)(24,073)
2,572(37,042)
106,4207,139(417,758)
17,814
417,003–
4,999(2,152,669)(2,130,381)
1,668,326
420,515
21,799(142)
518,341
3,852,447
134,185(105,114)(1,438,911)
2,442,608$ 45,010
7,820
(112)
(231)
45
(275)
1,400
(148)
(5,123)
479
40
338
–
(53,101)(11,363)(23,802)(3,540)537
109
17,868(24,048)
1,656(1,406)(16,413)(40,211)(509,435)
2,522(248,565)(333)(1,405,921)
8,678(141,056)(301)(4,590)23(2,239)(3)(15,131)(1,910)136,403(140,429)
110,581(39,871)(706,170)–(951)
11,458(185,133)
53,562(49,239)(1,708,905)

(136)
(17)
1,229
(1,265)996(359)(6,362)Financing activities
Increase (decrease) in short-term borrowings, net
Net increase (decrease) in commercial papers
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from share issuance to non-controlling shareholders
Dividends paid to stockholders
Dividends paid to minority stockholders
Others, net
Net cash provided by (used in) financing activities

4,672,826
2,999,997–(1,454,249)–(695,453)(274,359)(37,553)
5,211,207(483,066)–
1,503,678(1,162,602)
56,940(632,080)(180,000)(39,742)(936,873)

42,09827,027–(13,101)–(6,265)(2,472)(338)
46,948

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 the year
Cash and cash equivalents at end of the year (Note 21)(19,903)
21,7296,021,572¥ 6,043,301

10,866(192,303)
6,213,875¥ 6,021,572

(179)
196
54,248$ 54,444

Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible assets
Purchases of investments in securities
Payments from changes in ownership interests in subsidiaries that result inchange in scope of consolidation(Note 21)
Long-term loans receivable madeCollection of long-term loans
Increase in long-term guarantee deposit
Decrease in long-term guarantee deposit
Others, net
Net cash provided by (used in) investing activities

The accompanying notes are an integral part of these statements.

7

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 20191.

Summary of Significant Accounting Policiesa.

Basis of preparation
JALUX Inc. (the “Company”) and its consolidated domestic subsidiaries maintain theiraccounting records and prepare their financial statements in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been compiled from theconsolidated financial statements filed with the Financial Services Agency as requiredby the Financial Instruments and Exchange Law of Japan, certain modifications andinclusion of certain additional financial information are made for the convenience ofreaders outside Japan.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts of lessthan one thousand yen have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S. dollars) do notnecessarily agree with the sum of the individual amounts.

b.

Principles of consolidation and accounting for investments in unconsolidated subsidiaries
and affiliates
The consolidated financial statements include the accounts of the Company andsignificant companies controlled directly or indirectly by the Company. Companies overwhich the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis.
The balance sheet date of fourteen of the consolidated subsidiaries is December 31. Any
significant differences in intercompany accounts and transactions arising from intervening
intercompany transactions during the period from January 1 to March 31 have beenadjusted, if necessary, for the respective years.
All significant intercompany accounts and transactions and unrealized gain or loss onintercompany accounts and transactions have been eliminated.

c.

Securities
Securities except for investments in an unconsolidated subsidiaries and affiliates areclassified as trading securities, held-to-maturity securities or other securities. Trading
securities are carried at fair value. Held-to-maturity securities are carried at amortizedcost. Marketable securities classified as other securities are carried at fair value with any
unrealized gain or loss reported as a separate component of net assets, net of taxes. Nonmarketable securities classified as other securities are carried at cost. Cost of securities
sold is determined principally by the average method.
8

1.

Summary of Significant Accounting Policies (continued)d.

Derivatives
Derivatives are stated at fair value.
Gain or loss on derivatives designated as hedging instruments is deferred until the loss
or gain on the underlying hedged items is recognized. Foreign receivables and payables
are translated at the applicable forward foreign exchange rates if certain conditions are
met. In addition, the related interest differential paid or received under interest-rate
swaps utilized as hedging instruments is recognized over the terms of the swap agreements
as an adjustment of interest expense on the hedged items if certain conditions are met.

e.

Inventories
Inventories are stated at the lower of cost or net selling value, cost being determined asfollows:
Merchandise:
The Company
Subsidiaries––

Real estate held for salef.

by the moving average method
principally by the weighted average method– by the specific identification method
Leasing real estates for sale are depreciated by applying
the method of tangible fixed assets.

Property and equipment
For the Company and the consolidated domestic subsidiaries, depreciation of the shops
in airports and the buildings for rent is computed principally by the straight-line methodand depreciation of other property and equipment is computed principally by the
declining-balance method. The consolidated foreign subsidiaries principally adopt thestraight-line method. The estimated useful lives of the assets are as follows:
Buildings and structures:
Machinery and vehicles:g.

8 to 47 years
4 to 10 years

Software
Computer software intended for internal use is amortized over 5 years by the straightline method based on their estimated useful life.

h.

Leased assets
Leased assets arising from transactions under finance lease agreements which do nottransfer the ownership to the lessee is depreciated to residual value of zero by thestraight-line method over the terms of the agreements.

9

1.

Summary of Significant Accounting Policies (continued)i.

Allowance for doubtful accounts
The allowance for doubtful accounts on specific receivables is provided at the estimateof the unrecoverable amounts. The allowance for doubtful accounts on other receivables
is provided based on the historical rate of losses on receivables.

j.

Retirement benefit
The retirement benefit obligation for employees is attributed to each period by thebenefit formula method over the estimated years of service of the eligible employees.
Actuarial gains and losses are amortized by the straight-line method beginning thefollowing fiscal year over a period of 5 years.
Certain consolidated subsidiaries have adopted the simplified method in the calculationof their retirement benefit obligation and retirement benefit expense.

k.

Cash equivalents
The Company and its consolidated subsidiaries define cash equivalents as highly liquid,
short-term investments with an original maturity of three months or less.

l.

Income tax
The provision for income taxes is based on income for financial statement purposes.
Income taxes comprise corporation tax, enterprise tax and prefectural and municipal
inhabitants’ taxes. The assets and liabilities approach is used to recognize 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.

2.

Unapplied Accounting Standards(Standards and guidance not yet adopted)
The following standard and guidance were issued but not yet adopted.
- “Accounting Standard for Revenue Recognition” (ASBJ Statement No.29, March 30,
2018)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No.30, March 30, 2018)(1) Overview
The above standard and guidance provide comprehensive principles for revenue
recognition.
(2) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are currently in the process ofdetermining the effects of these new standards on the consolidated financial statements.
10

3.

Changes in presentation method(Changes due to adoption of “Partial Amendments to Accounting Standard for Tax EffectAccounting”)
Upon application of “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, February 16, 2018 (hereinafter, “Statement No. 28”))
from the beginning of the current fiscal year, the Company and its domestic subsidiaries
changed the presentation and related notes of deferred tax assets and deferred tax liabilities,
such that deferred tax assets and deferred tax liabilities are classified as part of ‘investments
and other assets’ and ‘non-current liabilities’, respectively.
As a result, deferred tax assets of ¥503,891 thousand ($4,540 thousand) classified as “current
assets” have been included in deferred tax assets ¥540,296 thousand ($4,868 thousand) in“investments and other assets” in the balance sheet as of March 31, 2018.
The notes related to tax effect accounting additionally included those described in notes 8(excluding total amount of valuation reserves) and 9 of “Accounting Standard for Tax
Effect Accounting”, which are required in paragraphs 3 to 5 of Statement No. 28. However,this additional information corresponding to the previous fiscal year is not disclosed, in
accordance with the transitional treatments prescribed in paragraph 7 of Statement No. 28.
4.

U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥111.00 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2019, has beenused. The inclusion of such amounts is not intended to imply that yen have been or could bereadily converted, realized or settled in U.S. dollars at that or any other rate.
5. Inventories
Inventories at March 31, 2019 and 2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies¥ 14,227,793 ¥ 12,325,323
73,297775,892
69,99780,475¥ 14,371,088 ¥ 13,181,691

2019(Thousands of
U.S. dollars)$ 128,178
660
631$ 129,469

Revaluation loss included in “Cost of sales” amounted to ¥1,076,767 thousand($9,701thousand) and ¥243,550 thousand for the years ended March 31, 2019 and 2018.

11

6.

Property and Equipment

The following table sets forth the acquisition costs and related accumulated depreciation ofcertain property and equipment at March 31, 2019 and 2018:
March 31,2019
2018
(Thousands of yen)
Buildings and structures
Machinery and vehicles
Others
Accumulated depreciation

7.

¥ 3,839,752
2,325,443
1,783,139
7,948,334(3,884,136)¥ 4,064,198¥ 3,927,157
2,351,487
1,803,682
8,082,326(3,766,780)¥ 4,315,545

2019(Thousands of
U.S. dollars)$ 34,592
20,95016,06471,607(34,992)$ 36,614

Investments and Other Assets

Investments in unconsolidated subsidiaries and affiliates included in “Investment securities”
as of March 31, 2019 and 2018 amounted to ¥2,219,650 thousand ($19,997 thousand) and¥1,897,854 thousand, respectively.
8.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and Long-term debt at March 31, 2019 and 2018 consisted of thefollowing:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Short-term borrowings:
Short-term borrowings without collateral,with weighted-average interest rate of
1.31%
Commercial papers¥5,498,360
2,999,997¥ 8,498,357¥830,984–¥ 830,984$49,535
27,027$ 76,562

Long-term debt:
Long-term debt without collateral, due 2019
to 2024, with weighted-average interest
rate of 2.35%¥3,184,128 ¥4,677,533
Lease obligations
67,949120,936
3,252,078
4,798,470
Less current portion(2,269,949) (1,305,340)¥ 982,129 ¥ 3,493,130$28,686
612
29,298(20,450)$ 8,84812

8.

Short-Term Borrowings and Long-Term Debt (continued)

The aggregate annual maturities of long-term debt subsequent to March 31, 2019 aresummarized as follows:Year ending March 31,
2020
2021
2022
2023
2024

(Thousands ofyen)(Thousands of
U.S. dollars)¥ 2,243,559
431,509
231,509
69,387208,162¥ 3,184,128$ 20,212
3,887
2,086
625
1,875
$ 28,686

The aggregate annual maturities of lease obligations subsequent to March 31, 2019 aresummarized as follows:Year ending March 31,
2020
2021
2022
2023
2024

(Thousands ofyen)(Thousands of
U.S. dollars)¥ 26,389
19,54913,4597,950
600¥ 67,949

$ 238
176
121
72
5
$ 612

The Company has entered into loan commitment agreements with banks in order to source
funds for its operations smoothly.
The outstanding balance of loan commitment as of March 31, 2019 and 2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Total commitment available
Less amount utilized
Balance available¥4,100,000–¥4,100,000¥3,000,000–¥3,000,000

2019(Thousands of
U.S. dollars)$36,937–$36,93713

9. Retirement Benefit Plan
The Company and certain consolidated subsidiaries have either funded or unfunded defined
benefit plans and defined contribution plans. The Company and certain consolidated
subsidiaries have defined benefit plans covering substantially all employees who are entitledto lump-sum or annuity payments, the amounts of which are determined by reference to theirbasic rates of pay, length of service, and the conditions under which termination occur.
Certain consolidated subsidiaries have adopted the simplified method in the calculation of
their retirement benefit obligation.
Plan excluding that calculated by simplified method
The changes in the retirement benefit obligation during the years ended March 31, 2019 and2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Balance at the beginning of the year
Service cost
Interest cost
Adjustment for actuarial assumptions
Retirement benefit paid
Balance at the end of the year

¥ 2,467,371
122,245
20,232
34,732(160,547)¥ 2,484,034¥ 2,386,806
117,675
19,571
29,797(86,480)¥ 2,467,371

2019(Thousands of
U.S. dollars)$ 22,229
1,101
182
313
(1,446)$ 22,379

The changes in plan assets during the year ended March 31, 2019 and 2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Balance at the beginning of the year
Expected return on plan assets
Adjustment for actuarial assumptions
Contributions by the Company
Retirement benefit paid
Balance at the end of the year

¥2,578,061
64,451(25,745)
103,717(160,547)¥2,559,937¥2,450,249
61,25652,971
100,064(86,480)¥2,578,061

2019(Thousands of
U.S. dollars)$23,226
581
(232)
934
(1,446)$23,06214

9. Retirement Benefit Plan (continued)
The following table sets forth the funded status of the plans and the amounts recognized in
the consolidated balance sheet as of March 31, 2019 and 2018 for the Company’s defined
benefit plans:
March 31,2019
2018
(Thousands of yen)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net asset for retirement benefits in thebalance sheet
Liability for retirement benefits
Asset for retirement benefits
Net asset for retirement benefits in thebalance sheet

2019(Thousands of
U.S. dollars)¥ 2,484,034(2,559,937)(75,903)–¥ 2,467,371(2,578,061)(110,690)–$ 22,379(23,062)(684)–(75,903)–(75,903)(110,690)–(110,690)

(684)
–
(684)

¥ (75,903)¥ (110,690)$ (684)The components of retirement benefit expenses for the years ended March 31, 2019 and 2018
were as follows:
March 31,2019
2018
(Thousands of yen)
Service cost
Interest cost
Expected return on plan assets
Amortization of adjustment for actuarial
assumptions
Retirement benefit expense

2019(Thousands of
U.S. dollars)¥ 122,245
20,232(64,451)¥ 117,675
19,571(61,256)$ 1,101
182(581)

29,248¥ 107,274

22,471¥ 98,462

263
$ 966

The components of retirement benefits liability adjustments included in other comprehensive
income (before tax effect) for the years ended March 31, 2019 and 2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Adjustment for actuarial assumptions
Total¥ 31,229¥ 31,229¥ (45,645)¥ (45,645)

2019(Thousands of
U.S. dollars)
$ 281
$ 281

15

9. Retirement Benefit Plan (continued)
The components of retirement benefits liability adjustments included in accumulated othercomprehensive income (before tax effect) for the years ended March 31, 2019 and 2018 wereas follows:
March 31,2019
2018
(Thousands of yen)
Unrecognized adjustment for actuarial
assumptions
Total¥ 73,341¥ 73,341

2019(Thousands of
U.S. dollars)¥ 42,112¥ 42,112

$ 661
$ 661

The fair value of plan assets, by major category, as a percentage of total plan assets as ofMarch 31, 2019 and 2018 were as follows:
March 31,

Bonds
StocksGeneral account assets
Others
Total

2019

2018

19.0%
23.5
55.2
2.3
100.0%

19.4%
23.9
54.8
1.9
100.0%The expected return on assets has been estimated based on the anticipated allocation to each
asset class and the expected long-term returns on assets held in each category.
The assumption used in accounting for the above plans were as follows:
March 31,
Discount rate
Expected rates of return on plan assets
Salary increase rate

2019

2018

0.8%
2.5%
1.0%～4.7%

0.8%
2.5%
1.0%～4.7%

16

9. Retirement Benefit Plan (continued)
Plan calculated by the simplified method
The changes in the retirement benefit obligation for consolidated subsidiaries adopting thesimplified method during the year ended March 31, 2019 and 2018 were as follows:
March 31,2019
2018
(Thousands of yen)
Balance at the beginning of the year
Retirement benefit expense
Retirement benefit paid
Contribution to pension plans
Translation adjustment
Balance at the end of the year

¥ 39,177
22,658(6,117)(11,210)(580)¥ 43,928¥ 35,429
21,217(5,214)(12,740)
485¥ 39,177

2019(Thousands of
U.S. dollars)
$ 353
204
(55)
(101)
(5)
$ 396

The following table sets forth the funded status of the plans and the amounts recognized in
the consolidated balance sheet as of March 31, 2019 and 2018 for consolidated subsidiaries
adopting the simplified method:
March 31,2019
2018
(Thousands of yen)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits in thebalance sheet
Liability for retirement benefits
Net liability for retirement benefits in thebalance sheet

2019(Thousands of
U.S. dollars)¥ 127,572(117,973)
9,598
34,329¥ 134,201(121,687)
12,513
26,664$ 1,149(1,063)86309

43,92843,92839,177
39,177396
396¥ 43,928¥ 39,177$ 396

Retirement benefit expenses for the simplified method of ¥22,658 thousand ($204 thousand)and ¥21,217 thousand were accounted for the years ended March 31, 2019 and 2018.
Defined contribution plans
Contribution made to defined contribution plans for the years ended March 31, 2019 and2018 were ¥137,754 thousand ($1,241 thousand) and ¥130,252 thousand, respectively.

1710. Net Assets
Under Japanese laws and regulations, the entire amount of the issue price of shares is required
to be accounted for as common stock, although a company may, by resolution of its Boardof Directors, account for an amount not exceeding one-half of the issue price of the newshares as additional paid-in capital.
Under the Japanese Corporate Law, in cases where dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend and excess, if any, of 25% of common
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. Additional paid-in capital is included
in capital surplus and legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a
deficit or may be capitalized by a resolution of the shareholders’ meeting. All additional
paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends. The maximum
amount that the Company can distribute as dividends is calculated based on theunconsolidated financial statements of the Company in accordance with Japanese laws andregulations.
The total number and periodic changes in the number of shares of stock in issue and the total
number and periodic changes in the number of shares of common stock in treasury for theyears ended March 31, 2019 and 2018 were as follows:Year ended March 31, 2019At
March 31,2018
Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2019

12,775––

12,775

131

0

–

131

The increase in common stock in treasury of 0 thousand shares resulted from the Company’spurchase of 0 thousand odd-lot shares of less than one unit at the request of the stockholders.

1810. Net Assets (continued)
Year ended March 31, 2018
At
March 31,2017
Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2018

12,775––

12,775

131

0

–

131

The increase in common stock in treasury of 0 thousand shares resulted from the Company’spurchase of 0 thousand odd-lot shares of less than one unit at the request of the stockholders.
Dividends
Dividends paid
Resolution

Type ofsharesGeneral meeting of Common
stockholders heldstock
on June 15, 2018

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥695,831$6,269Dividends per share(Yen) (U.S. dollars)
¥55.0

$0.50

Cut-off
date

Effective
date

March 31, June 18,
2018
2018

Dividends with the cut-off date in the year ended March 31, 2019 and effective date in theyear ended March 31, 2020.

Resolution

Type ofsharesGeneral meeting of Common
stockholders heldstock
on June 14, 2019

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥822,339$7,408Dividends per share(Yen) (U.S. dollars)
¥65.0

$0.59

Cut-off
date

Effective
date

March 31, June 17,
2019
2019

19

11. Other Income (Expenses)
The components of “Others, net” in “Non-operating income (expenses)” in the period ended
March 31, 2019 and 2018 were as follows:
Years ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Dividends received
Exchange gain (loss), net
Gain on sales of property and equipment
Loss on sales of subsidiary securities
Commission paid
Loss on sales and disposal of property and equipment
Impairment losses on fixed assets
Loss on revaluation of investments in securities
Loss on liquidation of a company
Others, net¥ 22,278(62,030)
1,505(37,518)(8,088)(54,670)(4,472)––
89,462¥ (53,535)¥ 26,263
43,7191,977–(8,880)(19,792)(417,003)(4,999)(28,721)67,085¥ (340,351)

$ 201
(559)
14
(338)
(73)
(493)
(40)
–
–
806
$ (482)

12. Impairment of Fixed Assets
For the year ended March 31, 2019, the Company and a consolidated subsidiary recognizedimpairment losses on fixed assets of ¥4,472 thousand ($40 thousand), and for the year ended
March 31, 2018 the Company recognized impairment losses on fixed asset of ¥417,003
thousand which consisted of the following:
Location

Use

Classification

Hakodate-shi, Hokkaido
Amami-shi, Kagoshima
Chuo-ku, Tokyo
U.S.A.(Las Vegas)
Laos(Sekong)

Airport shops
Airport shops
Business assets
Business assets
Business assets

Furniture
Furniture and other
Buildings and other
Buildings
Buildings, structuresand other
Furniture and other

Kunisaki-shi, Oita

Airport shops

Years ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
–
¥121
–
–
10,031––
219,171––
24,180––¥4,472

163,498––$40

The Company and its consolidated subsidiaries base its grouping for assessing theimpairment losses on fixed assets on the smallest identifiable groups of assets which generatecash inflows and which are largely independent of the cash inflows from other assets orgroups of assets.

20

12. Impairment of Fixed Assets (continued)
Impairment losses on business assets including airport shops were recognized due tosignificant decrease in expected future cash flows on the strategy plan for the years ended
March 31, 2019 and 2018.
The recoverable amount of each group of assets was measured by their usage value andestimated at non-recoverable by the minus of future cash flows for the years ended March
31, 2019 and 2018.
13. Income Taxes
The significant components of deferred tax assets and liabilities at March 31, 2019 and 2018
were as follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued bonuses
Allowance for doubtful accounts
Liability for retirement benefits
Impairment losses on fixed assets
Accrued enterprise tax
Elimination of unrecognized gain on
intercompany accounts and transactions
Loss on revaluation of inventories
Loss on revaluation of investments insecurities
Carryforward tax loss(*)
Deferred gain or loss on hedges

Asset retirement obligation
OthersValuation allowance for carryforward tax
loss(*)
Valuation allowance for deductible
temporary differences
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Accumulated retained earnings ofconsolidated subsidiaries
Asset for retirement benefits
Cost of asset retirement obligation
OthersTotal deferred tax liabilities
Net deferred tax assets¥ 188,615
3,587
27,241
9,536
65,551¥ 182,778
13,735
18,511
114,478
66,606$ 1,699
32
245
86
591

88,690374,696

86,88076,702

799
3,376

8,807
182,857
7,914
47,535
134,342
1,139,375

106
526,91129,71157,457
165,599
1,339,480

79
1,647
71
428
1,210
10,265(170,913)–(1,540)(25,827)(196,741)
942,634–(620,046)
719,433(233)(1,772)
8,492(264,313)(45,698)(29,863)(30,144)(370,020)¥ 572,613(248,485)(46,788)(28,637)(39,689)(363,600)¥ 355,833(2,381)
(412)
(269)
(272)
(3,334)$ 5,15921

13. Income Taxes (continued)(*)Carryforward tax loss and its deferred tax assets by expiration periods(March 31 2019)(Thousands of yen)
2020
2021
2022
2023
2024
2025 andTotal
beyondCarryforward
tax loss (a)25,064
6,966
14,70029,17261,45545,498
182,857
Valuation
allowance(25,064) (6,966) (14,700) (29,172) (49,511) (45,498) (170,913)
Net deferred
tax assets––––
11,943– (b)11,943(March 31 2019)2020
Carryforward
tax loss (a)Valuation
allowance
Net deferred
tax assets

2021

2022

(Thousands of U.S. dollars)
2024
2025 andTotal
beyond

2023

226

63

132

263

554

410

1,647

(226)

(63)

(132)

(263)

(446)

(410)

(1,540)

–

–

–

–

108

–

(b)108(a) Carryforward tax loss shown in the above table is after multiplying the statutory tax rate.
(b) Deferred tax assets of ¥11,943 thousand ($108 thousand) was recognized forcarryforward tax loss of ¥182,857 thousand ($1,647 thousand) (amount multiplied by thestatutory tax rate). The deferred tax assets of ¥11,943 thousand ($108 thousand) was
recognized for carryforward tax loss of ¥11,943 thousand ($108 thousand) by the
consolidated subsidiary JALUX Trust Inc. The carryforward tax loss for which the deferred
tax asset was recognized arose in relation to loss before income taxes of ¥77,273 thousand($696 thousand) having been recorded for the year ended March 31, 2015. No valuation
reserve is recognized for the carryforward tax loss since the amount was determined to be
recoverable based on expected future taxable income.
The difference between the statutory tax rate and the effective tax rate for the years ended
March 31, 2019 and 2018 were as follows:
Years ended March 31,
2019
2018
This note has been
Effective statutory tax rate
30.62%
omitted, as the(Reconciliations)difference between the
Disallowed expenses, including entertainment
effective statutory tax
expenses
0.92
rate and the effective
Inhabitants’ per capita taxes
0.42
income tax rate after
Equity in earnings of affiliates(2.73)
applying tax effectDifferent tax rates applied to consolidated
accounting is 5% or
subsidiaries
1.64
less of the effective
Changes in valuation allowance
3.79
statutory tax rate.
Others(0.13)
Actual tax rate
34.53%

22

14. Other Comprehensive Income
The following table presents reclassifications adjustments and tax effects allocated to eachcomponent of other comprehensive income for the years ended March 31, 2019 and 2018:
March 31,2019
2018
(Thousands of yen)
Net unrealized holding gain (loss) on othersecurities:
Amount arising during the year
Amount before tax effectTax effectNet unrealized holding gain (loss) on othersecurities, net of taxes
Deferred gain or loss on hedges:
Amount arising during the year
Amount before tax effectTax effect
Deferred gain or loss on hedges, net of taxes
Translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses
included in profit attributable to owners of thecompany
Translation adjustments
Retirement benefits liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses
included in profit attributable to owners of thecompany
Amount before tax effectTax effect
Retirement benefits liability adjustments, net oftaxes
Share of other comprehensive income ofcompanies accounted for by the equity method:Amount arising during the year
Total other comprehensive income

2019(Thousands of
U.S. dollars)¥ (1,755)(1,755)961(793)¥ 25,002
25,002(7,655)
17,346

$

(16)
(16)
9
(7)

71,186
71,186(21,797)
49,389(130,167)(130,167)
39,936(90,230)

641
641
(196)
445

(82,173)(52,798)(740)(3,959)–(36)(86,133)(52,798)(776)(60,477)

23,174(545)

29,24822,471

263(31,229)
9,562(21,667)

45,645(13,976)
31,668

(281)
86
(195)

(55,088)¥ (114,293)(24,831)¥ (118,845)(496)$ (1,030)

23

15. Leases
As lessee under operating leases
Future rental expenses under operating leases outstanding at March 31, 2019 and 2018 aresummarized as follows:
March 31,2019
2018
(Thousands of yen)
Within 1 year
Over 1 year

¥ 1,495,241
3,460,296¥ 4,955,538¥ 1,541,519
4,061,620¥ 5,603,139

2019(Thousands of
U.S. dollars)$ 13,471
31,174$ 44,644

As lessor under financing leases
As the impact of financing leases is immaterial, the note is not required to be disclosed.
As lessor under operating leases
Future rental revenues under operating leases outstanding at March 31, 2019 and 2018 aresummarized as follows:
March 31,2019
2018
(Thousands of yen)
Within 1 year
Over 1 year

¥ 1,063,586
2,607,128¥ 3,670,714¥ 1,092,363
2,989,319¥ 4,081,683

2019(Thousands of
U.S. dollars)$ 9,582
23,488$ 33,069

16. Amounts Per Share
Net income per share is computed based on the weighted average number of shares ofcommon stock outstanding during each year. Diluted net income per share is computed basedon the weighted average number of shares of common stock outstanding during each year
after giving effect to the potentially dilutive securities to be issued upon the exercise ofsubscription rights as stock options.
Year ended March 31,
2019
2018
2019
(Yen)
(U.S. dollars)
Net income per share of common stock:Basic¥ 234.34¥ 213.02$ 2.111

Diluted net income per share is not stated in 2018 and 2019 because there are no potential
shares.
24

16. Amounts Per Share (continued)
The following table sets forth the basis of the computation of net income per share ofcommon stock for the years ended March 31, 2019 and 2018:Year ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Net income
Net income available to stockholders ofshares of common stock¥ 2,962,900¥ 2,693,349$ 26,693¥ 2,962,900¥ 2,693,349$ 26,693

Year ended March 31,
2019
2018
(Thousands of shares)
Weighted-average number of shares ofcommon stock outstanding

12,643

12,643

Diluted net income per share is not stated in 2018 and 2019 because there are no potential
shares.
Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.
March 31,
2018

2019
(Yen)
Net assets per share17.

¥ 1,908.38¥ 1,737.48

2019(U.S. dollars)$ 17.193

Financial Instruments

Policy for financial instruments
The Company and its consolidated subsidiaries (the “Group”) manage temporary cash
surpluses mainly through short-term deposits. Further, the Group raises short-term capitalthrough bank borrowings.
Types of financial instruments and related risk
Notes and accounts receivable are exposed to credit risk in relation to customers. In addition,
the Company is exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies. In principle, the foreign currency exchange risks derivingfrom the trade receivables denominated in foreign currencies are hedged by forward foreignexchange contracts.
Marketable securities and investment securities are composed of mainly stocks. Those
securities are exposed to market risk.
25

17.

Financial Instruments (continued)

Long-term guarantee deposit are composed of mainly deposits for rental spaces of the airport
buildings. Those deposits are exposed to credit risk in relation to counterparties.
All notes and accounts payable have payment due dates within one year. Although theCompany is exposed to foreign currency exchange risk arising from those payables
denominated in foreign currencies, foreign exchange contracts are arranged to reduce therisk.
Short-term borrowings and commercial papers are raised mainly in connection with businessactivities, and long-term debt is taken out principally for the purpose of making capital
investments. Long-term debt with variable interest rates is exposed to interest rate fluctuation
risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest
at variable rates, the Company utilizes interest rate swap transactions as a hedging instrument.
Risk management for financial instrumentsa.

Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arisingfrom receivables and long-term guarantee deposit, each related division monitors credit
worthiness of their main customers periodically, and monitors due dates andoutstanding balances by individual customer. In addition, the Group is making efforts
to identify and mitigate risks of bad debts from customers who are having financial
difficulties.
The Group believes that the credit risk of derivatives is insignificant as it enters into
derivative transactions only with financial institutions which have the high credit-rating.

b.

Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates,interest rates and others)
For accounts receivables and payables denominated in foreign currencies, the Company
enters into forward foreign exchange contracts to hedge such risk. In order to mitigate
the interest rate risk for loans payable bearing interest at variable rates, the Company
may also enter into interest rate swap transactions if certain conditions are met.
For marketable securities and investment securities, the Group periodically reviews thefair values of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with the issuers.
In conducting derivative transactions, the division in charge of each derivativetransaction follows the internal policies, which set forth delegation of authority andmaximum upper limit on positions.

c.

Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flowplans on a timely basis to manage liquidity risk.

26

17.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments and estimated fair value on the consolidated balance
sheet as of March 31, 2019 and 2018 are shown in the following table. The following table
does not include financial instruments for which it is extremely difficult to determine the fairvalue.
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value.
March 31, 2019
Estimated
fair value
Difference(Thousands of yen)

Carrying
value
AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable - other
Investment securities
Total assets¥ 6,050,750
21,328,708
2,994,748
279,877¥ 30,654,084

Liabilities
Trade notes and accounts payable
Short-term borrowings
Commercial papers
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥8,687,138¥8,687,138
5,498,360
5,498,360
2,999,997
2,999,997
5,767,120
5,767,120
3,184,128
3,175,044¥ 26,136,745 ¥ 26,127,661¥ (51,071)¥ (51,071)¥ 6,050,750
21,328,708
2,994,748
279,877¥ 30,654,084

–
–
–
–
–

¥

¥

–
–
–
–
(9,084)¥ (9,084)¥–¥

March 31, 2019
Carrying
Estimatedvalue
fair value
Difference(Thousands of U.S. dollars)
AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable- other
Investment securities
Total assets$ 54,511
192,151
26,9802,521$ 276,163$ 54,511
192,151
26,9802,521$ 276,163

$ –
–
–
–
$ –

Liabilities
Trade notes and accounts payable
Short-term borrowings
Commercial papers
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

$ 78,263
49,53527,02751,956
28,686$ 235,466$ (460)$ 78,263
49,53527,02751,95628,604$ 235,384$ (460)

$ –
–
–
–
(82)
$ (82)
$ –
27

17.

Financial Instruments (continued)
March 31, 2018
Carrying
Estimatedvalue
fair value
Difference(Thousands of yen)

AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable - other
Investment securities
Total assets¥ 6,027,362
15,452,147
2,643,953
281,312¥ 24,404,774¥ 6,027,362
15,452,147
2,643,953
281,312¥ 24,404,774¥

Liabilities
Trade notes and accounts payable
Short-term borrowings
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥11,362,733 ¥11,362,733
830,984
830,984
3,825,901
3,825,901
4,677,533
4,681,012¥ 20,697,153 ¥ 20,700,632¥ (50,833)¥ (50,833)

¥

¥

–
–
–
–
–

–
–
–
3,479
¥ 3,479¥–*1. Long-term debt includes current portion of long-term debt.
*2. The value of assets and liabilities arising from derivatives is shown at net value, andwith the amount in parentheses representing net liability position.
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactionsa.

Cash and time deposits, Trade notes and accounts receivable and Other notes andaccounts receivable
Since these items are settled in a short period of time, their carrying value approximatesfair value.

b.

Investment securities
The fair value of stocks is based on quoted market prices. The fair value of investment
trusts and debt securities is based on either quoted market prices or prices provided by
the financial institutions making markets in these securities.

c.

Trade notes and accounts payable, short-term borrowings, commercial papers andaccrued expenses
Since these items are settled in a short period of time, their carrying value approximatesfair value.

d.

Long-term debt
The fair value of long-term debt is based on the present value of the total of principal
and interest discounted by the interest rate to be applied if similar new debt agreements
were entered into.

28

17.
e.

Financial Instruments (continued)
Derivative transactions
Refer to Note 19 Derivative Transactions of the notes to the consolidated financial
statements.

Financial instruments for which it is extremely difficult to determine the fair value
March 31,2019
2018
(Thousands of yen)
Unlisted stocks¥ 2,421,768
1,979,203

Long-term guarantee deposit¥ 2,099,958
1,971,093

2019(Thousands of
U.S. dollars)$ 21,818
17,831

Because no quoted market price is available and it is extremely difficult to determine the fairvalue, the above financial instruments are not included in the above table.
Redemption schedule for receivables and marketable securities with maturities
March 31, 2019
Due after
Due after
Due inone yearfive years
one yearthroughthroughDue afteror less
five years
ten yearsten years(Thousands of yen)
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable-other
Investment securities withmaturities:
Bonds
OthersTotal¥ 6,050,750

¥ –

¥ –

21,328,708
2,994,748

–
–

–
–

–
–

–
–
¥ 30,374,207

–
–
¥ –

–
–
¥ –

–
–
–

¥

¥

–

29

17.

Financial Instruments (continued)

Due inone yearor less
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable-other
Investment securities withmaturities:
Bonds
OthersTotal

Due after
ten years$ 54,511$ –$ –192,151
26,980

–
–

–
–

–
–

–
–
$ 273,642

–
–
$ –

–
–
$ –

–
–
–

Due inone yearor less
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable-other
Investment securities withmaturities:
Bonds
OthersTotal

March 31, 2019
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of U.S. dollars)

March 31, 2018
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)

$

$

–

Due after
ten years¥ 6,027,362

¥ –

¥ –

15,452,147
2,643,953

–
–

–
–

–
–

–
–
¥ 24,123,462

–
–
¥ –

–
–
¥ –

–
–
–

¥

¥

–

30

18. Securities
The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2019 and 2018 are summarized as follows:
March 31, 2019
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
StocksBonds:
OthersOthersTotal¥ 279,877¥ 255,413¥ 24,463––¥ 279,877––¥ 255,413––¥ 24,463

March 31, 2019
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
StocksBonds:
OthersOthersTotal$ 2,521$ 2,301$ 220––$ 2,521––$ 2,301––$ 220

March 31, 2018
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
StocksBonds:
OthersOthersTotal¥ 281,312¥ 255,094¥ 26,217––¥ 281,312––¥ 255,094––¥ 26,217

Non-marketable securities classified as other securities at March 31, 2019 and 2018
amounted to ¥202,117 thousand ($1,821thousand) and ¥202,104 thousand, respectively.

31

19. Derivative Transactions
The Company utilizes forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies.
The notional amounts and the estimated fair value of the forward foreign exchange contracts
outstanding at March 31, 2019 and 2018 for which hedged accounting has not been applied,
are summarized as follows:

Maturing within one year
Sell:
USD
THB
Total

Maturing within one year
Sell:
USD
THB
Total

Maturing within one year

March 31, 2019
Notional amount
Fair value(Thousands of yen)
¥ 1,235,889
40,345¥ 1,276,234¥ (24,166)(947)¥ (25,114)

March 31, 2019
Notional amount
Fair value(Thousands of U.S. dollars)$$

11,134363
11,498

$
$

(218)
(9)
(226)

March 31, 2018
Notional amount
Fair value(Thousands of yen)

Sell:
USD
¥ 1,253,726¥ 46,199
Total¥ 1,253,726¥ 46,199
The notional amounts and the estimated fair value of the forward foreign exchange contracts
outstanding at March 31, 2019 and 2018, for which hedged accounting has been applied, aresummarized as follows:

Maturing within one year
Sell:
USD
EUR
Others
Buy:
USD
EUR
THB
GBP
OthersTotal

March 31, 2019
Notional amount
Fair value(Thousands of yen)
¥ 552,015
72,356
1,774¥ (3,389)
2,226
(5)

4,502,695
823,667
26,525369,389
193,641¥ 6,542,066(8,016)(18,534)
(857)
654
1,965
¥ (25,957)
32

19. Derivative Transactions (continued)

Maturing within one year
Sell:
USD
EUR
Others
Buy:
USD
EUR
THB
GBP
Others
Total

Maturing within one year
Sell:
USD
EUR
Buy:
USD
EUR
THB
GBP
OthersTotal

March 31, 2019
Notional amount
Fair value(Thousands of U.S. dollars)$ 4,973652
16$ (31)
20
040,565
7,420
239
3,328
1,745
$ 58,938

(72)
(167)
(8)
6
18
$ (234)

March 31, 2018
Notional amount
Fair value(Thousands of yen)
¥ 340,765
4,611¥ 4,587(187)

5,275,953
643,948
157,772
25,407
126,917¥ 6,575,373(94,061)(6,613)(1,347)(8)597¥ (97,032)

33

19. Derivative Transactions (continued)
Foreign receivables and payables are translated at the applicable forward foreign exchange
rates if certain conditions are met. The notional amounts of the forward foreign exchange
contracts accounted for as part of accounts receivable or payable outstanding at March 31,
2019 and 2018 are summarized as follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Sell:
USD
EUR
Buy:
USD
EUR
THB
OthersTotal¥ 87,165–¥ 344,494
8,946

$ 785
–

2,040,324
39,032
44,8286,755¥ 2,218,104

1,521,192
54,95650,34831,306¥ 2,011,242

18,381352
404
61$ 19,983

The notional amounts of derivatives are not necessarily indicative of the actual market risk
involved in derivative transactions.
20. Investment and Rental Properties
The Company and a certain consolidated subsidiary own buildings and lands for lease mainlyin Thai land and other areas.
The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2019 are as follows:

March 31, 2019
¥ 963,329

March 31, 2019
$ 8,679

Carrying ValueNet change
March 31, 2018
(Thousands of yen)
¥ (42,846)¥ 1,006,175

Carrying ValueNet change
March 31, 2018
(Thousands of U.S. dollars)$ (386)$ 9,065

Fair Value
March 31, 2019
¥ 982,035
Fair Value
March 31, 2019
$ 8,847

The components of net change in carrying value include decreases mainly due to depreciationof Buildings and structures in the amount of ¥34,666 thousand ($312thousand) and increases
mainly due to acquisitions of real estate in the amount of ¥3,039 thousand ($27 thousand).

34

20. Investment and Rental Properties (continued)
The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2018 were as follows:

March 31, 2018

Carrying ValueNet change
March 31, 2017
(Thousands of yen)

¥ 1,006,175¥ (82,178)¥ 1,088,353

Fair Value
March 31, 2018
¥ 1,025,093

The components of net change in carrying value include decreases mainly due to transfer tomovables from Construction in progress in the amount of ¥378,926 thousand and increases
mainly due to acquisitions of real estate in the amount of ¥251,963 thousand.
The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss. The fair value is mainly estimated in accordance with appraisal
standards for valuing real estate. However, if no material change has occurred in certain
values or indices, the fair values are determined by adjusting such appraised values andindices.
21. Cash Flow Information
The components of cash and cash equivalents are summarized as follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Time deposits with maturities of more than
three months¥ 6,050,750¥ 6,027,362(7,448)(5,789)¥ 6,043,301 ¥ 6,021,572$ 54,511(67)$ 54,444

The following is the summary of assets and liabilities lost through the sales of shares ofAdvance Agriculture Co., Ltd. and Thierry Marx Japan Inc. that result in change in scope of
consolidation for the year ended March 31, 2019, related selling price and net payments dueto the sales:(Thousands of (Thousands ofyen)
U.S. dollars)
Current assets
Fixed assets
Current liabilities
Long-term liabilities
Non-controlling interests
Loss on sales of subsidiary securities

Selling priceCash and cash equivalents
Net payments due to the sales¥78,885
44,143(43,267)(66,046)
38,788(37,518)
14,985(30,116)¥(15,131)

$ 711
398
(390)
(595)
349
(338)
135
(271)
$(136)

35

22. Segment Information
The reportable segments of the Company and its consolidated subsidiaries are components
for which discrete financial information is available and whose operating results are regularly
reviewed by the Board of Directors to make decisions about resource allocation and to assess
performance.
Aviation & airport-related business segment includes aircraft components and aviationrelated business. Life service business segment includes insurance, real estate business andprinting. Retail business segment includes cabin service supply, mail-order sales, airport
shops and gift item business. Food & beverage business segment includes agriculture &marine products, processed foods and wine sales business.
The accounting policies of the segments are substantially the same as those described in thesignificant accounting policies in Note 1. Segment performance is evaluated based on
operating income or loss. Intersegment sales are recorded at the same price used intransactions with third parties.

36

22. Segment Information (continued)
The reportable segments information of the Company and its consolidated subsidiaries forthe years ended March 31, 2019 and 2018 were summarized as follows:Year ended March 31, 2019
Reportable segments
Aviation &airportrelated
business

Consolidated–¥185,726,096

Retailbusiness

Food &
beveragebusiness(Thousands of yen)

¥13,517,035¥63,230,925¥24,534,615¥185,726,096¥

137,911
13,654,946¥ 1,133,470¥ 5,860,889

40,837
63,271,763¥ 3,912,643¥15,796,706

1,135,742
25,670,357¥ 911,186¥11,113,912

1,315,900
187,041,996¥ 6,515,720¥ 54,494,012(1,315,900)–(1,315,900) 185,726,096¥ (1,887,625) ¥ 4,628,094¥ 2,392,988 ¥ 56,887,000

251,976¥

110,211¥

361,494¥

72,624¥

796,306¥

71,688¥867,994

857,281
29,544¥¥

372,844
18,451¥¥

506,221529,995¥¥–
137,075¥ 1,736,347¥
715,066¥¥

422,224
69,696¥¥

2,158,571
784,762

Sales, profits and assets
by reportable segments:
Sales to outside parties ¥84,443,519
Inter-segment sales
and transfers
1,409
Total
84,444,929
Segment profits¥ 558,420
Segment assets¥21,722,503
Other items:
Depreciation andamortization¥
Investment in affiliates
accounted for by theequity method¥
Capital expenditures¥

Adjustments
andeliminations

Life service
business

Total

Year ended March 31, 2019
Reportable segments

Sales, profits and assets
by reportable segments:
Sales to outside parties
Inter-segment sales
and transfers
Total
Segment profits
Segment assets
Other items:
Depreciation andamortization
Investment in affiliates
accounted for by theequity method
Capital expenditures

Aviation &airportrelated
business

Life service
business

Food &
Retailbeveragebusinessbusiness
Total(Thousands of U.S. dollars)

Adjustments
andeliminations$760,752$ 121,775$569,648$221,033$ 1,673,208$

13
760,765$ 5,031$195,698

1,242
123,018$ 10,211$ 52,801

368
570,016$ 35,249$ 142,313

10,232
231,264$ 8,209$ 100,125

$

2,270

$

993

$

3,257

$

654

$
$

7,723
266

$
$

3,359
166

$
$

4,561
4,775

$
$

–
1,235

Consolidated–$1,673,208

11,855
1,685,063$ 58,700$ 490,937(11,855)(11,855)$ (17,006)$ 21,558–
1,673,208$ 41,695$ 512,495

$

$

$

7,174

$ 15,643$ 6,442646$ 3,804
$
628

7,820

$ 19,447$ 7,070

Adjustments and eliminations for segment profits and losses include ¥ 75 thousand ($1thousand) of elimination of inter-segment profit and minus ¥1,887,701 thousand ($17,006
thousand) of corporate general administration expenses which are not allocable to thereportable segments.
Adjustments and eliminations for segment assets include minus ¥175,647 thousand ($1,582
thousand) of elimination of accounts inter-segment receivable and ¥2,568,636 thousand($23,141 thousand) of corporate assets which are not allocable to the reportable segments.
Corporate assets consist primarily of investments in securities and assets belonging to theadministrative part of the Company.
Adjustments and eliminations for capital expenditures consist primarily of investments in thehead office software.
37

22. Segment Information (continued)
Segment profits are adjusted with operating income reported in the consolidated statements
of income.
Year ended March 31, 2018
Reportable segments
Aviation &airportrelated
business

Consolidated–¥153,404,093

Retailbusiness

Food &
beveragebusiness(Thousands of yen)

¥13,414,866¥59,171,481¥23,965,168¥153,404,093¥

135,866
13,550,733¥ 1,134,349¥ 6,338,145

73,85959,245,341¥ 3,721,463¥14,891,245

975,887
24,941,056¥ 795,661¥ 9,397,296

1,197,586
154,601,679¥ 6,436,128¥ 47,560,708(1,197,586)–(1,197,586) 153,404,093¥ (1,727,065) ¥ 4,709,063¥ 1,452,724 ¥ 49,013,432

146,457¥

96,556¥

330,856¥

78,432¥652,302¥89,857¥742,160

598,503768,283¥¥

336,005
264,180¥¥

482,467
537,748¥¥–
47,801¥ 1,416,976¥ 1,618,014¥¥

419,620
89,925¥¥

1,836,596
1,707,939

Sales, profits and assets
by reportable segments:
Sales to outside parties ¥56,852,577
Inter-segment sales
and transfers
11,972
Total
56,864,549
Segment profits¥ 784,654
Segment assets¥16,934,020
Other items:
Depreciation andamortization¥
Investment in affiliates
accounted for by theequity method¥
Capital expenditures¥

Adjustments
andeliminations

Life service
business

Total

Adjustments and eliminations for segment profits and losses include minus ¥ 421 thousandof elimination of inter-segment profit and minus ¥1,726,644 thousand of corporate generaladministration expenses which are not allocable to the reportable segments.
Adjustments and eliminations for segment assets include minus ¥145,050 thousand ofelimination of accounts inter-segment receivable and ¥1,597,775 thousand of corporate
assets which are not allocable to the reportable segments. Corporate assets consist primarilyof investments in securities and assets belonging to the administrative part of the Company.
Adjustments and eliminations for capital expenditures consist primarily of investments in thehead office software.
Segment profits are adjusted with operating income reported in the consolidated statements
of income.
For the years ended March 31, 2019 and 2018, net sales to outside parties in Japan represent
more than 90% of consolidated operating revenues. As a result, net sales to outside parties
by countries or areas grouped according to geographical classification are not required to bedisclosed.

38

22. Segment Information (continued)
Property, plant and equipment by geographical countries or areas at March 31, 2019 and2018 were summarized as follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)Japan¥ 1,552,485¥ 1,476,270$ 13,986

Thailand

1,446,421

1,499,573

13,031

Singapore

1,269,670

1,514,609

11,438239,633¥ 4,508,210

245,294¥ 4,735,748

2,159$ 40,615

Other foreign countries

Net sales to major customers for the fiscal year ended March 31, 2019 and 2018 were as
follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
IHI Corporation¥ 43,245,346 ¥ 34,652,224$ 389,598–

181,107(Aviation & airport-related business)
Mitsubishi Heavy Industries Aero Engines,
Ltd.

20,102,843(Aviation & airport-related business)

Impairment losses on fixed assets by reportable segments for the years ended March 31, 2019and 2018 were summarized as follows:
March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Aviation & airport-related businessLife service business
Retail business
Food & beverage business
Reportable segments total
Adjustments and eliminations

¥

–
–
4,472
–
4,472
–
¥ 4,472––
253,504
163,498
417,003–¥ 417,003
¥

–
–
40
–
40
–
$ 40

$

39

23. Related Party Transactions
The significant transactions between the Company and Japan Airline Co., Ltd., for the years
ended March 31, 2019 and 2018 were summarized as follows:Year ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment
Purchases of merchandise¥ 5,608,588
512,011¥ 5,416,305
325,567

March 31,2019
2018
(Thousands of yen)Accounts receivable
Accounts payable¥ 650,829
95,125¥ 575,922
62,387$ 50,528
4,613

2019
(Thousands of
U.S. dollars)$ 5,863857

The significant transactions between certain consolidated subsidiaries of the Company andJapan Airlines Co., Ltd. for the years ended March 31, 2019 and 2018 were summarized asfollows:
Year ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment¥ 390,008¥ 295,127

March 31,2019
2018
(Thousands of yen)Accounts receivable¥ 34,798¥ 33,057$ 3,514

2019(Thousands of
U.S. dollars)$ 313

24. Contingent liabilities
As guarantors of indebtedness to unconsolidated subsidiaries and affiliates, for the years
ended March 31, 2019 and 2018 were summarized as follows:Year ended March 31,
2019
2018
2019
(Thousands of yen)(Thousands of
U.S. dollars)
MC-Jalux Airport Services Co.,Ltd.

¥ 227,550¥ 217,812$ 2,05040