Independent Auditor’s Report
The Board of Directors
JALUX Inc.
We have audited the accompanying consolidated financial statements of JALUX Inc. and its consolidated
subsidiaries, which comprise the consolidated balance sheet as at March 31, 2012, and the consolidated
statements of income, comprehensive income, changes in net assets, and cash flows for the year thenended and a summary of significant accounting policies and other explanatory information, all expressedin Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated financial statements that are free from 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 audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we 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 the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to
express an opinion on the effectiveness of the entity’s internal control, but in making these risk
assessments the auditor considers internal controls relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, 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 forour audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of JALUX Inc. and its consolidated subsidiaries as at March
31, 2012, and their consolidated financial performance and cash flows for the year then ended inconformity with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented
for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements
have been properly translated on the basis described in Note 3.

June 15, 2012
Tokyo, Japan

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,2012
2011
(Thousands of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 15 and 19)
Notes and accounts receivable (Notes 15 and 21):Trade
Affiliates
Other
Allowance for doubtful accounts
Short-term investments (Notes 15 and 19)
Inventories (Note 4)
Deferred income taxes (Note 11)
Other (Note 21)
Total current assets

2012(Thousands of
U.S. dollars)(Note 3)

¥ 5,391,474¥ 5,007,068$ 65,750

9,597,134
18,124
1,483,330(68,984)–
5,919,467
380,574
1,285,025
24,006,148

8,733,779
88,382960,936(110,266)
1,000,000
5,213,580
620,554844,51222,358,547

117,038221
18,089(841)–
72,1894,641
15,671
292,758

1,273,530
279,453
1,552,983

1,843,573
205,415
2,048,988

15,531
3,408
18,939

Accumulated depreciation
Property and equipment, net

1,748,449
3,646,893
186,243909,727
2,704
1,197,373
7,691,392(2,573,031)
5,118,360

2,043,115
4,774,929
66,8692,020,172
4,093
1,147,247
10,056,427(3,719,386)
6,337,041

21,32344,474
2,271
11,09433
14,602
93,797(31,378)
62,419Intangible assets (Note 10):
Software
Other
Total intangible assets

373,965
31,393405,358

665,184
33,820699,004

4,561
383
4,943

170,795
2,044,277
265,691
81,69857,615¥33,702,929

352,536
2,101,785
612,910–78,996¥34,589,811

2,083
24,930
3,240
996
703
$411,011

Investments and advances:
Unconsolidated subsidiaries and affiliates (Note 15)
Other (Notes 15 and 16)
Total investments and advances
Property and equipment (Notes 5 and 10):Land
Buildings and structures
Machinery and vehicles
Flight equipment
Construction in process
Other

Long-term loans
Deposits for business space (Note 15)
Deferred income taxes (Note 11)
Business commencement expenses
Other assets, net

2

March 31,
2012
2011
(Thousands of yen)

Liabilities and net assets
Current liabilities:
Short-term borrowings (Notes 5 and 15)
Current portion of long-term debt (Notes 5 and 15)
Notes and accounts payable (Notes 15 and 21):Trade
Affiliates
Accrued expenses
Accrued income taxes (Note 11)
Other
Total current liabilities

2012(Thousands of
U.S. dollars)(Note 3)

¥ 1,957,249
1,135,766¥

213,597
2,362,300$ 23,869
13,851

8,452,289
120,439
1,796,380
286,3902,978,743
16,727,258

8,380,161
134,124
1,844,389
60,0502,428,900
15,423,526

103,077
1,469
21,9073,493
36,326
203,991

1,827,661

4,724,797

22,289Accrued pension and severance costs (Note 6)

411,248

292,457

5,015

Directors’ and statutory auditors’ retirement benefits

33,22528,275405

Deferred income taxes (Note 11)

201,864

–

2,462

Other

125,866

145,311

1,535

2,558,550
711,250
10,811,239(68,191)2,558,550
711,250
10,482,317(75,687)

31,202
8,674
131,844(832)(7,685)(21,994)(94)

27,730(919,112)
9,882
1,252,141
14,375,804¥33,702,929

17,761(823,396)
13,276
1,113,367
13,975,444¥34,589,811

338(11,209)121
15,270175,315$411,011

Long-term debt (Notes 5 and 15)

Commitments and contingent liabilities (Notes 5 and 13)
Net assets (Note 7):
Common stock, without par value:
Authorized: 20,000,000 shares
Issued: 12,775,000 shares in 2012 and 2011
Capital surplus
Retained earnings
Common stock in treasury
Net unrealized loss on other securities, net of taxes(Note 16)
Net unrealized gain on hedging instruments, net of taxes(Note 17)
Translation adjustments
Subscription rights to shares (Note 8)
Minority interests
Total net assets

The accompanying notes are an integral part of these statements.
3

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Income
Year ended March 31,
2011
2012
2012
(Thousands of yen)(Thousands of
U.S. dollars)(Note 3)Operating revenues (Notes 20 and 21)
Operating expenses (Notes 20 and 21):
Cost of sales
Selling, general and administrative expenses (Note 8)
Operating income¥89,082,950¥95,541,254$1,086,377

70,263,898
17,198,037
87,461,936
1,621,014

74,970,532
19,024,276
93,994,808
1,546,445

856,877
209,732
1,066,609
19,768

10,869(104,938)(81,404)(41,654)(217,128)
1,403,885

14,794(171,985)
71,378(407,144)(492,957)
1,053,487

133(1,280)(993)(508)(2,648)17,121

379,198
287,388666,586
737,298(43,981)
693,317

108,004
468,828
576,833
476,654
16,043492,697

4,624
3,505
8,129
8,991
(536)
8,455

Non-operating income (expenses):
Interest income
Interest expense
Equity in (losses) earnings of affiliates
Other, net (Note 9)
Income before income taxes and minority interests
Income taxes (Note 11):
Current
Deferred
Net income before minority interests
Minority (interests) loss
Net income

¥

¥

$

The accompanying notes are an integral part of these statements.

4

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
March 31,2011
2012
(Thousands of yen)

Income before minority interests
Other comprehensive income:Net unrealized gain (loss) on other securities,
net of taxes
Net unrealized gain on hedging instruments, net oftaxes
Translation adjustments
Share of other comprehensive income of companies
accounted for by the equity method
Total other comprehensive income (Note 12)
Comprehensive income
Comprehensive income attributable to:
Stockholders of JALUX Inc.
Minority interests

2012(Thousands of
U.S. dollars)(Note 3)¥737,298¥ 476,654$ 8,991

8,549(29,502)

104

9,968
(96,107)

15,012(259,484)122(1,172)

6,461(71,127)¥666,171(2,009)(275,984)¥ 200,670

79(867)$ 8,124¥621,879¥ 44,292¥ 220,471¥ (19,801)$ 7,584$ 540

5

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

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

Net unrealized Net unrealized
loss on other gain on hedging
Subscription
securities,
instruments,rights to
net of taxes
net of taxes
Translation
shares(Note 15)
(Note 16)
adjustments(Note 8)

Minority
interests

Total
net assets¥1,193,791¥13,823,518(Thousands of yen)
Balance at March 31, 2010
Net income for the year
ended March 31, 2011
Purchases of common
stock in treasury
Disposal of common
stock in treasury
Other

12,775,000

Balance at March 31, 2011

12,775,000¥2,558,550¥711,499¥(97,872)¥ (1,389)¥ 2,748¥(556,762)¥21,381492,697492,697(32)(249)
2,558,550

711,250

Cash dividends(¥5 per share)
Net income for the year
ended March 31, 2012
Change in scope ofequity method
Purchases of common
stock in treasury
Disposal of common
stock in treasury
Other
Balance at March 31, 2012

¥ 9,991,571(1,951)
10,482,317

Number ofshares ofcommonstock

Commonstock¥711,250

Capitalsurplus(75,687)(20,605)

15,012(266,633)(8,104)(80,423)

20,016(360,755)(21,994)

17,761(823,396)

13,276

1,113,367

13,975,444(63,620)

693,317693,317(2,273)¥2,558,550

22,217(63,620)(298,501)

12,775,000(32)¥10,811,239

Retainedearnings

1,407(297,093)

(139)

(139)

6,227
¥(68,191)

Commonstock intreasury

14,309

9,968(95,715)(3,394)

138,774

3,954
63,942¥ (7,685)¥27,730¥(919,112)¥ 9,882¥1,252,141¥14,375,804

Minority
interests

Total
net assets$13,578$170,432

Net unrealized Net unrealized
loss on other gain on hedging
Subscription
securities,
instruments,rights to
net of taxes
net of taxes
Translation
shares(Note 15)
(Note 16)
adjustments(Note 8)
(Thousands of U.S. dollars) (Note 3)

Balance at March 31, 2011
Cash dividends($0.06 per share)
Net income for the year
ended March 31, 2012
Change in scope ofequity method
Purchases of common
stock in treasury
Disposal of common
stock in treasury
Other

12,775,000

Balance at March 31, 2012

12,775,000$31,202$8,674$127,833$217$(10,041)

$162

(776)

8,455

8,455

(28)
$8,674$(268)(776)(3,640)$31,202$(923)$131,844

17(3,623)

(2)

(2)

76
$(832)

175

122(1,167)

(41)

1,692

48
780

$ (94)$338$(11,209)$121$15,270$175,315

The accompanying notes are an integral part of these statements.

6

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Year ended March 31,

2012
2011
(Thousands of yen)
Operating activities
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization(Decrease) increase in provision for allowance for doubtful accounts
Increase in net provision for accrued pension and severance costs
Interest and dividend income
Interest expense
Exchange loss, net
Equity in losses (earnings) of affiliates
Loss on sales of, and loss on disposal of property and equipment
Impairment losses on fixed assets
Loss (gain) on sales of investments in securities
Loss on revaluation of investments in securities(Increase) decrease in notes and accounts receivable
Decrease in inventories
Increase (decrease) in notes and accounts payable(Increase) decrease in advance payment
Increase in advance received
Decrease (increase) in bad debts on receivables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

2012(Thousands of
U.S. dollars)(Note 3)

¥ 1,403,885¥ 1,053,487$17,121728,340(55,270)
118,878(15,543)
104,938
4,596
81,40463,01658,80842,073
11,028(677,659)
571,082
86,050(438,580)
312,944
11,499(261,394)
2,150,100
52,366(124,322)(238,680)
1,839,462

1,059,910
16,524
105,870(22,288)
171,985
1,941(71,378)
93,415306,161(195,444)
89,2891,971,747
1,008,950(1,049,229)
8,289
18,180(7,127)
698,995
5,259,279
82,042(180,217)(214,402)
4,946,702

8,882
(674)
1,450
(190)
1,280
56
993
768
717
513
134
(8,264)
6,964
1,049(5,349)3,816
140(3,188)26,221639(1,516)(2,911)
22,432

Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Long-term loans receivable madeCollection of long-term loans
Purchases of time deposits
Proceeds from maturity of time deposits
Increase in deposits for business space
Decrease in deposits for business space
Other, net
Net cash (used in) provided by investing activities(273,121)
6,172(128,004)(2,253)5,522(431)
129,646(17,990)
17,430(140,189)
279,893
49,524(73,799)(1,137,284)
1,046,605(94,694)(244)
355,961(17,031)93,008(5,662)–(194,601)
261,714(7,729)300,042(3,331)75(1,561)
(27)
67
(5)
1,581
(219)
213
(1,710)
3,413
604
(900)

Financing activities
Increase (decrease) in short-term borrowings, net
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from minority stockholders
Dividends paid to stockholders
Dividends paid to minority stockholders
Other, net
Net cash used in financing activities

1,747,278
610,000(4,687,110)
98,000(64,172)–(62,524)(2,358,529)(5,167,910)
11,324(2,096,411)–(1,339)(60,000)(20,103)(7,334,440)

21,308
7,439(57,160)
1,195
(783)
–
(762)
(28,763)

Effect of exchange rate changes on cash and cash equivalents
Net 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 19)(21,782)(614,648)
5,999,315¥ 5,384,667(52,380)(2,140,076)
8,139,392¥ 5,999,315(266)(7,496)
73,162$65,667

The accompanying notes are an integral part of these statements.
7

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2012

1.

Summary of Significant Accounting Policiesa.

Basis of preparation
JALUX Inc. (the “Company”) and its consolidated domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial
Reporting Standards. The accompanying consolidated financial statements have been
compiled from the consolidated financial statements filed with the Financial Services
Agency as required by the Financial Instruments and Exchange Law of Japan, certain
modifications and inclusion of certain additional financial information are made for theconvenience of readers outside Japan.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts ofless than 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.
Certain amounts previously reported have been reclassified to conform to the current
year’s classification except for the effects with respect to the adoption of new
accounting standards.

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
over which 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 eight of the consolidated subsidiaries is December 31. Any
significant differences in intercompany accounts and transactions arising fromintervening intercompany transactions during the period from January 1 throughMarch 31 have been adjusted, if necessary, for the respective years.
All significant intercompany accounts and transactions and unrealized gain or loss onintercompany accounts and transactions have been eliminated.

8

1.

Summary of Significant Accounting Policies (continued)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 withany unrealized gain or loss reported as a separate component of net assets, net of taxes.
Non-marketable securities classified as other securities are carried at cost. Cost of
securities sold is determined principally by the average method.

d.

Derivatives
Derivatives positions 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 andpayables are translated at the applicable forward foreign exchange rates if certain
conditions are met. In addition, the related interest differential paid or received underinterest-rate swaps utilized as hedging instruments is recognized over the terms of theswap 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 for sale –f.

by the moving average method
principally by the first-in, first-out methodby 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
method and depreciation of other property and equipment is computed principally by
the declining-balance method. The consolidated foreign subsidiaries principally adopt
the straight-line method based. The estimated useful lives of the assets are as follows:
Buildings and structures:
Machinery and vehicles:
Flight equipment:

10 to 47 years
4 to 10 years
10 years9

1.

Summary of Significant Accounting Policies (continued)g.

Software
Computer software intended for internal use is amortized by the straight-line 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. However, such finance leaseagreements, contracted prior to April 1, 2008 continue to be accounted for by a method
corresponding to that used for ordinary operating lease contracts.

i.

Deferred charges
Business commencement expenses are amortized using the straight-line method over 5
years or less.

j.

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 otherreceivables is provided based on the historical rate of losses on receivables.

k.

Reserve for bonuses to officers
Reserve for bonuses to officers is provided for at the necessary amounts based on theestimated amounts payable at the date of the balance sheet.

l.

Accrued pension and severance costs
To provide for employees’ severance indemnities and pension payments, net periodic
pension and severance costs are computed based on the projected benefit obligationand the pension plan assets.
Past service cost is being amortized by the straight-line method over a period of 5
years.
The adjustment incurred during this fiscal year arising from revisions to the actuarial
assumptions (the “actuarial assumption adjustment”) is to be amortized by thestraight-line method beginning the following fiscal year over a period of 5 years.

m. Directors’ and statutory auditors’ retirement benefits
Reserve for directors’, statutory auditors’ and operating officers’ retirement benefits isprovided at the amount which would have been paid had all directors and statutory
auditors resigned at the year end.
10

1.

Summary of Significant Accounting Policies (continued)n.

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.

2.

Accounting Changes

Effective April 1, 2011, the Company adopted the “Accounting Standard for Accounting
Changes and Error Corrections” (Accounting Standard Board of Japan (ASBJ) Statement
No. 24 issued on December 4, 2009) and the “Guidance on Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Guidance No. 24 issued on December
4, 2009).

3.

U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥82.00 = U.S.$1.00, the approximate exchange rate prevailing on March 31, 2012, has beenused. The inclusion of such amounts is not intended to imply that yen have been or could
be readily converted, realized or settled in U.S. dollars at that or any other rate.

4.

Inventories

Inventories at March 31, 2012 and 2011 were as follows:
March 31,
2011
2012
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies¥4,163,630
1,690,464
65,372¥5,919,467¥4,930,999
175,891
106,688¥5,213,580$50,776
20,615797$72,189

Land, buildings and structures of ¥1,233,944 thousand ($15,048 thousand) were transferred
to real estate held for sale and flight equipment of ¥40,300 thousand ($491 thousand) weretransferred to merchandise and finished products at March 31, 2012 because the Company
changed the purpose of holding those assets.
Revaluation loss included in “Cost of sales” amounted to ¥71,668 thousand ($874
thousand) and ¥87,824 thousand for the years ended March 31, 2012 and 2011.

11

5.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2012 and 2011 consisted of thefollowing:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Short-term Borrowings:
Short-term Borrowings with collateral,
at rates 0.98%
Short-term Borrowings without collateral,
at rates ranging from 0.88% to 1.88%¥

840,000

1,117,249¥ 1,957,249¥–$ 10,244¥

213,597
213,597

13,625$ 23,869

Long-term debt:
Loans with collateral, due 2011 to 2016,
at rates ranging from 1.65% to 1.85%¥– ¥ 3,500,000
Loans without collateral, due 2011 to 2016,
2,846,601
at rates ranging from 1.59% to 4.32%
2,270,774
Other692,652
740,497
2,963,427
7,087,098
Less current portion of long-term debt
(1,135,766) (2,362,300)¥ 1,827,661 ¥ 4,724,797$–

27,692
8,447
36,139(13,851)$ 22,289

The aggregate annual maturities of long-term debt subsequent to March 31, 2012 aresummarized as follows:Year ending March 31,(Thousands ofyen)(Thousands of
U.S. dollars)¥1,135,766
632,499
211,382229,361
754,417¥2,963,427$13,851
7,713
2,578
2,797
9,200
$36,139

2013
2014
2015
2016
2017 and thereafter

Assets pledged as collateral at March 31, 2012 and 2011 are summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Inventories¥1,710,059¥1,867,771$20,854

1,482,483
715,024¥3,907,568

2,113,221–¥3,980,993

18,0798,720$47,65312

5.

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

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, 2012 and 2011 were as
follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Total commitment available
Less amount utilized
Balance available

6.

¥ 7,000,000(1,650,000)¥ 5,350,000¥4,000,000–¥4,000,000$ 85,366(20,122)$ 65,244

Accrued Pension and Severance Costs

An employee whose employment is terminated is entitled, in most cases, to pension
payments or lump-sum severance indemnities, the amounts of which are determined byreference to the basic rate of pay, length of service and the conditions under which thetermination occurs.
The Company and three domestic consolidated subsidiaries adopt lump-sum retirement
plans and defined benefit pension plans. And the Company and overseas consolidated
subsidiaries adopt defined contribution pension plans.
The projected benefit obligation and the funded status of the plans were as follows:
March 31,2012
2011
(Thousands of yen)
Projected benefit obligation
Plan assets
Accrued pension and severance costs
Net unrecognized amount¥(2,790,332) ¥(2,820,147)
2,117,423
2,069,264
411,248
292,457¥ (261,659) ¥ (458,426)

2012(Thousands of
U.S. dollars)$(34,028)
25,822
5,015$ (3,191)

In computing the projected benefit obligation, several simplified methods are permitted forsmall companies, and certain consolidated subsidiaries have adopted such methods.

13

6.

Accrued Pension and Severance Costs (continued)

The net unrecognized amount was as follows:
March 31,
2011
2012
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Actuarial assumption adjustment
Post service cost
Net unrecognized amount¥(201,315)(60,343)¥(261,659)¥(337,739)(120,686)¥(458,426)$(2,455)(736)$(3,191)

The components of net periodic pension and severance costs excluding the employees’
contributory portion were as follows:Year ended March 31,
2011
2012
2012
(Thousands of yen)(Thousands of
U.S. dollars)Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of actuarial assumption
adjustment
Amortization of past service cost
Net periodic pension and severance costs¥171,738
45,310(46,585)¥150,177
45,379(44,776)$2,094553(568)

150,310
60,343¥381,116

126,723
60,343¥337,846

1,833
736$4,648The contributions based on the defined contribution pension plans have been charged toincome as paid.
The assumptions used were as follows:

Discount rate
Expected rate of return on plan assets

2012

2011

1.8%
2.5%

1.8%
2.5%

14

7.

Net Assets

The Corporation Law of Japan provides that an amount equal to at least 10% of the amountto be disbursed as distributions of capital surplus (except for distributions from additional
paid-in capital) and retained earnings (except for distributions from the legal reserve) be
appropriated to additional paid-in capital and the legal reserve, respectively, until the sumof additional paid-in capital and the legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the stockholders, or by the
Board of Directors if certain conditions are met, but neither additional paid-in capital nor
the legal reserve is available for distribution by resolution of the Board of Directors.
The total number and periodic changes in the number of shares of stock in issue and thetotal number and periodic changes in the number of shares of common stock in treasury forthe years ended March 31, 2012 and 2011 were as follows:Year ended March 31, 2012At
March 31,
2011
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 31,2012

12,775––

12,775

61

0

6

54

The increase in common stock in treasury of 0 thousand shares resulted from theCompany’s purchase of 0 thousand odd-lot shares of less than one unit at the request of thestockholders.
The decrease in common stock in treasury of 4 thousand shares resulted from exercise ofsubscription rights as stock options, and 2 thousand shares resulted from change in scope ofequity method.
Year ended March 31, 2011At
March 31,
2010
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 31,2011

12,775––

12,775

77

0

16

61

The increase in common stock in treasury of 0 thousand shares resulted from theCompany’s purchase of 0 thousand odd-lot shares of less than one unit at the request of thestockholders.
The decrease in common stock in treasury of 16 thousand shares resulted from exercise ofsubscription rights as stock options.
15

7.

Net Assets (continued)

Dividends
Dividends paid
Resolution

Type ofsharesGeneral meeting ofCommonstockholders held on stock
June 17, 2011

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥63,620$776

Dividends per share(Yen)(U.S. dollars)
¥5.0

$0.06

Cut off
date

Effective
date

March 31, June 20,
2011
2011

Dividends with the cut off date in the year ended March 31, 2012 and effective date in theyear ended March 31, 2013
Resolution

Type ofsharesGeneral meeting ofCommonstockholders held on stock
June 15, 20128.

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥190,926$2,328Dividends per share(Yen)(U.S. dollars)
¥15.0

$0.18

Cut off
date

Effective
date

March 31, June 18,
2012
2012

Stock Options

The Company adopted the stock option plan under which share subscription rights are
granted to directors and operating officers of the Company in accordance with the
Corporation Law.
The description of stock options for the year ended March 31, 2012 are as follows:2010 Stock Option Plan

2009 Stock Option Plan

Individuals covered by the plan

4 directors of theCompany

7 directors of theCompany
6 operating officers of
the Company

Type and number of shares to be issued
upon the exercise of the share subscription
rights

15,000 shares ofcommon stock

23,600 shares ofcommon stock

Granted date

September 24, 2010

October 29, 2009

Vesting conditions

No provisions

No provisions

Vesting period

No provisions

No provisions

Exercise period

September 25, 2010 –September 24, 2040

October 30, 2009 –October 29, 2039

16

8.

Stock Options (continued)

The changes in the size of stock options for the year ended March 31, 2012 are as follows:2010 Stock Option Plan

2009 Stock Option Plan

Share subscription rights which are not yet
vested (Number of shares)
Outstanding as of March 31, 2011
GrantedForfeited
VestedOutstanding as of March 31, 2012

–
–
–
–
–

–
–
–
–
–

Share subscription rights which havealready been vested (Number of shares)
Outstanding as of March 31, 2011
VestedExercised
Forfeited
Outstanding as of March 31, 2012

15,000–(2,900)(2,900)
9,200

4,900
–
(1,700)–3,200

Exercise price (yen)Weighted average fair value per stock at
the exercising date (yen)Fair value per stock option at the granted
date (yen)¥Exercise price (U.S. dollars)
Weighted average fair value per stock at
the exercising date (U.S. dollars)
Fair value per stock option at the granted
date (U.S. dollars)

$

1

¥

1

703

703

654

1,208

0.01

$

0.01

8.57

8.57

7.98

14.73

Stock option expense included in “Selling, general and administrative expenses” for theyear ended March 31, 2012 and 2011 amounted to ¥555 thousand ($7 thousand) and¥11,766 thousand, respectively.

17

9.

Other Income (Expenses)

The components of “Other, net” in “Non-operating income (expenses)” for each of thethree years in the period ended March 31, 2012 and 2011 were as follows:Year ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Dividends received
Exchange gain, net
Brokerage commission received
Gain on sales of property and equipment
Gain on sales of investments in securities
Gain on reversal of allowance for doubtful
accounts
Gain on liquidation of investment securities
Commission paid
Nondeductible consumption tax
Loss on sales and disposal of property andequipment
Impairment losses on fixed assets
Loss on sales of investments in securities
Loss on revaluation of investments insecurities
Special termination benefits
Amortization of goodwill
Other, net

¥

4,674
157,664
32,289
4,061
–

¥

7,494
149,367
50,004
10,778
195,444

$

57
1,923
394
50
–

–
16,754(45,726)–

8,786–(34,533)(117,218)

–
204
(558)
–

(67,077)(58,808)(42,073)(104,193)(306,161)
–

(818)
(717)
(513)

(11,028)(88,886)–
56,501¥ (41,654)(89,289)(8,192)(161,937)(7,493)¥(407,144)(134)(1,084)–689$ (508)

10. Impairment of Fixed Assets
For the year ended March 31, 2012, the Company recognized impairment losses on fixed
assets of ¥58,808 thousand ($717 thousand), and for the years ended March 31, 2011 theCompany and a consolidated subsidiary recognized impairment losses on fixed asset of¥306,161 thousand which consisted of the following:
Location

Sennan-gun, Osaka
Shinagawa-ku, Tokyo
Omura-shi, Nagasaki
and other 5 shops
Narita-shi, Chiba
California, America

UseClassification

Buildings, furnitureand otherBusiness assets
Buildings, furniture,
software and other
Airport shops
Buildings, furniture,
software and other
Rental properties Buildings and Land
Buildings andBusiness assets
softwareYear ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)

Airport shops¥ 5,514

¥

–

$ 67

53,294

93,917650––

23,251
169,913–––

19,079

–

18

10.

Impairment of Fixed Assets (continued)

The Company and its consolidated subsidiaries base its grouping for assessing theimpairment loss 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.
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, 2012 and 2011. Impairment losses on rental properties were recognized due todecrease in market value for the year ended March 31, 2011.
The recoverable amount of each group of assets was measured by their usage value andfuture cash flows at discount rates of 3.1% for the years ended March 31, 2012 and 2011.

11.

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2012 and2011 were as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued bonuses
Allowance for doubtful accounts
Accrued pension and severance costs
Impairment losses on fixed assets
Accrued enterprise tax
Elimination of unrecognized gain on
intercompany accounts and transactions
Directors’ and statutory auditors’
retirement benefits
Loss on revaluation of inventories
Loss on revaluation of investments insecurities
Tax loss carryforwards
Other¥ 186,093
19,034
154,840
122,035
23,522¥ 203,186
47,126
119,276
563,419
37,706$ 2,269
232
1,888
1,488
287

72,331

69,309882

11,97894,78011,47442,880146
1,156

Valuation allowance
Total deferred tax assets

3,575
142,614
195,646
1,026,453(126,503)
899,950

48,503
254,617300,623
1,698,124(164,454)
1,533,669

44
1,739
2,386
12,518(1,543)
10,975

Deferred tax liabilities:
Accumulated retained earnings ofconsolidated subsidiaries
Depreciation
Other
Total deferred tax liabilities
Net deferred tax assets(58,397)(243,844)(153,307)(455,549)¥ 444,401(80,980)(138,328)(80,894)(300,204)¥1,233,464(712)(2,974)(1,870)(5,555)$ 5,420

19

11.

Income Taxes (continued)

Reconciliations between the statutory tax rate and the effective tax rates for the years ended
March 31, 2012 and 2011 were presented as follows:Year ended March 31,
2012
2011
Statutory tax rate
Disallowed expenses, including entertainment expenses
Non-taxable income, including dividends received
Inhabitants’ per capita taxes
Changes in valuation allowance
Equity in earnings of affiliates
Amortization of goodwill
Decrease in deferred tax assets due to tax rate change
Other
Effective tax rate

40.69%
2.46(0.19)
1.07(1.49)
2.36–
3.37(0.79)
47.48%

40.69%
3.41(1.04)
1.50
6.05(2.76)
7.06–(0.16)
54.75%The “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating
Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114
of 2011) and the “Act for Special Measures for Securing Financial Resources Necessary to
Implement Measures for Reconstruction following the Great East Japan Earthquake” (ActNo. 117 of 2011) were issued on December 2, 2011 and the phasing reduction of thenational corporate tax rate and a special reconstruction corporate tax will apply to corporate
taxes effective for fiscal years beginning on or after April 1, 2012.
As a result, the effective statutory tax rate used to measure the Company’s deferred tax
assets and liabilities was changed from 40.69% to 38.01% for the temporary differences
expected to be realized or settled in the period from April 1, 2012 to March 31, 2015 andfrom 38.01% to 35.64% for temporary differences expected to be realized or settled fromfiscal years beginning April 1, 2015. The effect of the announced reduction of the effective
statutory tax rate was to decrease deferred tax assets, net by ¥47,468 thousand ($579
thousand) and increase deferred income taxes by ¥47,744 thousand ($582 thousand), net
unrealized gain on other securities by ¥922 thousand ($11 thousand) and net unrealized
gain on hedging instruments by ¥1,198 thousand ($15 thousand) as of and for the year
ended March 31, 2012.

20

12.

Other Comprehensive Income

The following table presents reclassifications adjustments and tax effects allocated to eachcomponent of other comprehensive income for the year ended March 31,2012:
Year ended March 31, 2012
(Thousands of (Thousands ofyen)
U.S. dollars)
Net unrealized loss on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses
included in net income
Amount before tax effectTax effectNet unrealized gain on hedging instruments:
Amount arising during the year
Tax effectTranslation adjustments:
Amount arising during the year
Tax effect
Share of other comprehensive income of companies
accounted for by the equity method:Amount arising during the year
Total other comprehensive income¥ 6,482

$

79

9,814
16,296(7,746)
8,549

120
199
(94)
104

14,786(4,817)
9,968

180
(59)
122

(98,568)2,460(96,107)(1,202)30(1,172)

6,461¥(71,127)79$ (867)21

13.

LeasesAs lessee under financing leases contracted prior to April 1, 2008
The following pro forma amounts represent the acquisition costs, accumulated depreciationand net book value of the leased property held under financing accounted for as operatingleases at March 31, 2012 and 2011, and the related depreciation and interest expense for theyears ended March 31, 2012 and 2011, which would have been reflected in the
consolidated balance sheets and the related consolidated statements of income:March 31, 2012
Property andequipment –otherAcquisition costs
Less accumulated depreciation
Net book value

Software(Thousands of yen)

Total

¥135
130
¥ 4

¥953
915
¥ 37

¥818
785
¥ 32

March 31, 2012
Property andequipment –otherSoftware
Total(Thousands of U.S. dollars)
Acquisition costs
Less accumulated depreciation
Net book value

$10
10
$ 0

$2
2
$0

$12
11
$ 0

March 31, 2011
Property andequipment –otherAcquisition costs
Less accumulated depreciation
Net book value¥39,391
35,569¥ 3,821

Software(Thousands of yen)Total

¥2,223
2,052¥ 170¥41,61437,622¥ 3,992

Year ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Depreciation expense¥3,791¥11,499$46

Interest expense

¥

¥

$ 1

46

273

No impairment loss had been recognized on leased property for the years ended March 31,
2012 and 2011.
22

13.

Leases (continued)

As lessee under financing leases contracted prior to April 1, 2008 (continued)
Lease expenses relating to the financing leases accounted for as operating leases amounted
to ¥4,746 thousand ($58 thousand) and ¥13,594 thousand for the years ended March 31,
2012 and 2011.
Future rental expenses under financing leases accounted for as operating leases outstandingat March 31, 2012 and 2011 are summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥57
–
¥57

¥4,746224¥4,971$1–$1

Future rental expenses under operating leases outstanding at March 31, 2012 and 2011 aresummarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥39,997
56,231¥96,229¥ 86,964
179,126¥266,091$ 488
686$1,174As lessor under financing leases
The annual collections of lease receivables subsequent to March 31, 2012 are summarized
as follows:Year ending March 31,
2013
2014
2015
2016
2017

(Thousands ofyen)(Thousands of
U.S. dollars)¥11,936
7,816
5,119
2,319
1,015

$146
95
62
28
12

23

13.

Leases (continued)

As lessor under financing leases (continued)
The annual collections of lease receivables subsequent to March 31, 2011 weresummarized as follows:(Thousands ofyen)Year ending March 31,
2012
2013
2014
2015

¥10,564
10,816
6,353
4,443

As lessor under operating leases
Future rental revenues under operating leases outstanding at March 31, 2012 and 2011 aresummarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 177,674
1,890,132¥2,067,806¥ 264,554
2,581,846¥2,846,401$ 2,167
23,050$25,217

As lessee and lessor under subleases
The Company subleases equipment to a third party, and the lease agreements between thetwo original parties remain in effect. The original and the sublease agreements areoperating leases.
Future rental revenues as lessor under the sublease agreements outstanding at March 31,
2012 and 2011 are summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥1,592,742
4,536,253¥6,128,996¥1,655,421
5,180,451¥6,835,873$19,424
55,320$74,74424

13.

Leases (continued)

As lessee and lessor under subleases (continued)
Future rental expenses as lessee under the original lease agreements outstanding at March
31, 2012 and 2011 are summarized as follows:
March 31,2012
2011
(Thousands of yen)
Within 1 year
Over 1 year14.

¥1,577,967
5,487,372¥7,065,340¥1,609,547
6,683,043¥8,292,591

2012(Thousands of
U.S. dollars)$19,244
66,919$86,163

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
based on the weighted average number of shares of common stock outstanding during eachyear after giving effect to the potentially dilutive securities to be issued upon the exerciseof subscription rights as stock options.
2012
Net income per share of common
stock:
Basic
DilutedYear ended March 31,
2011
2012
(Yen)
(U.S. dollars)¥54.51¥54.45¥38.76¥38.72$0.665
0.664

The following table sets forth the basis of the computation of net income per share anddiluted net income per share of common stock for the years ended March 31, 2012 and2011:
Year ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Net income
Net income available to stockholdersof shares of common stock¥693,317¥492,697$8,455¥693,317¥492,697$8,455

Year ended March 31,
2011
2012
(Thousands of shares)
Weighted-average number of shares ofcommon stock outstanding
Effect of dilutive securities:
Subscription rights to shares

12,71912,710

13

15
25

14.

Amounts Per Share (continued)

Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.

2012
Net assets per share

15.

¥1,030.90

March 31,
2011
(Yen)
¥1,010.65

2012(U.S. dollars)$12.572

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 fromreceivables denominated in foreign currencies. In principle, the foreign currency exchangerisks deriving from the trade receivables denominated in foreign currencies are hedged byforward foreign exchange contracts.
Marketable securities and investment securities are composed of mainly certificate ofdeposit and stocks. Those securities are exposed to market risk.
Deposits for business space 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 are raised mainly in connection with business activities, andlong-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.
A certain subsidiary has the hybrid financial instrument (bond) with embedded derivative.

26

15.

Financial Instruments (continued)

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 deposits for business space, 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 highcredit-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, theCompany enters into forward foreign exchange contracts to hedge such risk. In orderto mitigate the interest rate risk for loans payable bearing interest at variable rates, theCompany may also enter into interest rate swap transactions if certain conditions aremet.
For marketable securities and investment securities, the Group periodically reviews
the fair 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.

27

15.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments and estimated fair value on the consolidatedbalance sheet as of March 31, 2012 and 2011 are shown in the following table. The
following table does not include financial instruments for which it is extremely difficult todetermine the fair value.
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.

Carrying
value

March 31, 2012
Estimated
fair value
Difference(Thousands of yen)

AssetsCash and time deposits¥ 5,391,474
9,615,259
Trade notes and accounts receivable
Investment securities
111,065
Total assets¥15,117,800¥ 5,391,474
9,615,259
111,065¥15,117,800¥

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

¥ 8,572,728
1,957,249
1796,380
2,277,215¥14,603,573¥
15,608¥¥ 8,572,728
1,957,249
1,796,380
2,270,774¥14,597,133¥
15,608

–
–
–
–

¥

–
–
–
6,440
¥6,440¥–March 31, 2012
Estimated
Carrying
value
fair value
Difference(Thousands of U.S. dollars)
AssetsCash and time deposits
Trade notes and accounts receivable
Investment securities
Total assets$ 65,750
117,259
1,354$184,363$ 65,750
117,259
1,354$184,363

$ –
–
–
$ –

Liabilities
Trade notes and accounts payable
Short-term borrowings
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)$104,545
23,86921,907
27,692$178,014$
190$104,545
23,86921,907
27,771$178,092
$
190

$ –
–
–
79
$79
$ –

28

15.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)

Carrying
value

March 31, 2011
Estimated
fair value
Difference(Thousands of yen)

AssetsCash and time deposits¥ 5,007,068
Trade notes and accounts receivable
8,822,161
Investment securities
1,104,270
Total assets¥14,933,501¥ 5,007,068
8,822,161
1,104,270¥14,933,501¥

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

¥ 8,514,286
213,597
1,844,389
6,282,397¥16,854,670¥
29,947¥¥ 8,514,286
213,597
1,844,389
6,346,601¥16,918,875¥
29,947

¥

–
–
–
–

–
–
–
(64,204)¥(64,204)¥–*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,
and with 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
approximates fair 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.
Since the certificate of deposit is settled in a short period of time, the carrying value
approximates fair value.

c.

Trade notes and accounts payable, short-term borrowings and accrued expenses
Since these items are settled in a short period of time, their carrying value
approximates fair value.

2915. Financial Instruments (continued)
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions (continued)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.

e.

Derivative transactions
Please refer to Note 17 Derivative Transactions of the notes to the consolidated
financial statements. The fair value information of embedded derivative of the hybrid
financial instrument is included in Note 16 Securities.

Financial instruments for which it is extremely difficult to determine the fair value
March 31,2011
2012
(Thousands of yen)
Unlisted stocks
Deposits for business space¥1,436,917
2,044,277

2012(Thousands of
U.S. dollars)¥1,939,718
2,101,785$17,523
24,930Because no quoted market price is available and it is extremely difficult to determine thefair value, the above financial instruments are not included in the above table.
Redemption schedule for receivables and marketable securities with maturities

Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

March 31, 2012
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)

Due after
ten years¥ 5,346,330

¥–

¥–

¥

–

9,615,259

–

–

–

–
–
¥14,961,590

–
–
¥–

–
–
¥–

100,000–¥100,00030

15. Financial Instruments (continued)
Redemption schedule for receivables and marketable securities with maturities (continued)

Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

Due after
ten years$ 65,199$–$–

117,259

–

–

–

–
–
$182,458

–
–
$–

–
–
$–

1,220
–
$1,220Due inone yearor less
Cash and time deposits
Trade notes andaccounts receivable
Investment securities
with maturities:
Bonds
Other
Total

March 31, 2012
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of U.S. dollars)

March 31, 2011
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)$–

Due after
ten years¥ 4,969,551¥–¥–

8,822,161

–

–

–

–
1,000,000¥14,791,712

–
–
¥–

–
–
¥–

100,000–¥100,000

¥

–

31

16.

Securities

The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2012 and 2011 are summarized as follows:
March 31, 2012
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
Stocks
Unrealized loss:
StocksBonds:
Other
Other
Total

¥

1,313
1,313

¥

1,116
1,116

¥

197
197

11,006

11,186(179)

85,02013,726
109,752¥111,065

100,000
20,000131,186¥132,302(14,980)(6,273)(21,433)¥(21,236)

March 31, 2012
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
Stocks$

Unrealized loss:
StocksBonds:
Other
Other
Total

16
16

¥

14
14

$

2
2

134

136

(2)

1,037
167
1,338
$1,354

1,220
244
1,600
$1,613

(183)
(77)
(261)
$(259)

Carrying
value
Unrealized loss:
StocksBonds:
Other
Other
Total

$

12,117

77,7101,014,442¥1,104,270

March 31, 2011
Acquisition
Unrealized
costs
gain (loss)(Thousands of yen)¥

21,862¥ (9,745)

100,000
1,020,000¥1,141,862(22,290)(5,557)¥(37,592)

Non-marketable securities classified as other securities at March 31, 2012 and 2011
amounted to ¥163,387 thousand ($1,993 thousand) and ¥96,144 thousand, respectively.
32

16.

Securities (continued)

Proceeds from sales of securities classified as other securities and the aggregate gain andloss for the year ended March 31, 2012 and 2011 were as follows.
March 31,2012
2011
(Thousands of yen)
Sales proceeds:
StocksOther¥¥

Aggregate gain:
StocksOther¥¥

Aggregate loss:
Stocks
Other

¥
¥

2012
(Thousands of
U.S. dollars)–––¥250,800–¥250,800–––¥159,141–¥159,141

$

–
–
–

¥

$

¥

–
–
–

$
$
$

$

–
–
–
–
–
–
–
–
–

The Company recognized ¥9,814 thousand ($120 thousand) of impairment losses on othersecurities for the year ended March 31, 2012.
17.

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, 2012 and 2011, for which deferral hedged accounting
has not been applied, are summarized as follows:
March 31, 2012
Maturing within one year

Notional
amountSell:
USD¥536,094

Fair value(Thousands of yen)¥(29,125)

Unrealizedgain(loss)¥(29,125)

March 31, 2012
Maturing within one year
Sell:
USD

Notional
Unrealized
amountgain(loss)
Fair value(Thousands of U.S. dollars)$6,538$(355)$(355)

33

17.

Derivative Transactions (continued)

The notional amounts and the estimated fair value of the forward foreign exchange
contracts outstanding at March 31, 2012 and 2011, for which deferral hedged accounting
has been applied, are summarized as follows:

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

Maturing within one year

March 31, 2012
Notional amount
Fair value(Thousands of yen)¥

1,146,615
80,252
16,904¥1,249,103

Sell:
USD
Buy:
USD
EUR
Others
Total

¥

(3)

41,3163,159
260¥44,732

March 31, 2012
Notional amount
Fair value(Thousands of U.S. dollars)

Sell:
USD
Buy:
USD
EUR
Others
Total

Maturing within one year

5,332

$

65

$ (0)

13,983979
206$15,233

504
39
3
$546

March 31, 2011
Notional amount
Fair value(Thousands of yen)¥

90,6481,337,963
70,756374,377¥1,873,744

¥

(551)

13,1892,940
14,367¥29,947

34

17.

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,
2012 and 2011, are summarized as follows:
March 31,
2011
2012
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Sell:
USD
Buy:
USD
EUR
OthersTotal¥143,172¥

4,242$1,746

322,432
69,9172,017¥537,538

1,264,898
21,342
4,222¥1,294,704

3,932
853
25
$6,555The Company also utilizes interest rate swap transactions to reduce fluctuation risk
deriving from interest payable for long-term debt bearing interest at variable rates. 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 ofinterest expense on the hedged items if certain conditions are met. The notional amounts of
the interest-rate swaps hedging long-term debt outstanding at March 31, 2012 and 2011,
are summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Maturing within one year
Maturing after one year
Total

¥200,000
20,000¥220,000¥200,000
220,000¥420,000$2,439244$2,683The notional amounts of derivatives are not necessarily indicative of the actual market risk
involved in derivative transactions.

35

18.

Investment and Rental Properties

The Company and a certain consolidated subsidiary own buildings and lands for leasemainly in Tokyo and other areas.
The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2012 are as follows:

March 31, 2012
¥3,206,608

March 31, 2012
$39,105

Carrying ValueNet change
March 31, 2011
(Thousands of yen)¥(783,029)¥3,989,638

Carrying ValueNet change
March 31, 2011
(Thousands of U.S. dollars)$(9,549)$48,654

Fair Value
March 31, 2012
¥2,544,295
Fair Value
March 31, 2012
$31,028

The components of net change in carrying value include decreases mainly due to transfer toreal estate held for sale in the amount of ¥719,303 thousand ($8,772 thousand).
The carrying value in the consolidated balance sheet and corresponding fair value of those
properties for the year ended March 31, 2011 were as follows:

March 31, 2011
¥3,989,638

Carrying ValueNet change
March 31, 2010
(Thousands of yen)¥(1,781,790)¥5,771,428

Fair Value
March 31, 2011
¥3,381,295

The components of net change in carrying value include increases mainly due toacquisitions in the amount of ¥531,302 thousand, and decreases mainly due to depreciationin the amount of ¥1,007,611 thousand.
The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss. The fair value is mainly estimated in accordance withappraisal standards for valuing real estate. However, if no material change has occurred incertain values or indices, the fair values are determined by adjusting such appraised values
and indices.

36

19.

Cash Flow Information

The components of cash and cash equivalents are summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Short-term investments
Time deposits with maturities of more than
three months

20.

¥5,391,474–¥5,007,068
1,000,000$65,750–(6,807)¥5,384,667(7,753)¥5,999,315(83)$65,667

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 allocationand to assess performance.
Aviation-related business segment includes aircraft components and aviation-related
business. Media & life service business segment includes printing, insurance and real estatebusiness. 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.
The reportable segments information of the Company and its consolidated subsidiaries forthe years ended March 31, 2012 and 2011 are summarized as follows:Year ended March 31, 2012
Reportable segments
Media & life
Food &
service
Retailbeveragebusinessbusinessbusiness
Total(Thousands of yen)

Adjustments
andeliminations

Consolidated¥20,241,549¥10,282,926¥41,772,318¥16,786,155¥89,082,950¥–¥89,082,950

19,04020,260,590¥ 775,905¥ 7,314,064

197,961
10,480,888¥ 1,178,373¥ 7,268,621

26,254
41,798,573¥ 791,991¥10,473,429

277,657
17,063,813¥ 898,940¥ 6,283,795

520,91489,603,865¥ 3,645,210¥31,339,909(520,914)(520,914)¥ (2,024,196)¥ 2,363,019–
89,082,950¥ 1,621,014¥33,702,929¥

69,745¥67,482¥

319,421

¥

7,297

¥

463,946¥

264,394¥¥¥

75,33733,183¥¥

284,538
2,092

¥
¥

–
248,741¥¥–
633,884¥¥

359,875
917,901¥¥

897,504
46,668¥ 1,257,380¥ 964,569

Aviationrelated
business
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 expenditures37

728,340

20.

Segment Information (continued)
Year ended March 31, 2012
Reportable segments
Media & life
Food &
service
Retailbeveragebusinessbusinessbusiness
Total(Thousands of U.S. dollars)

Adjustments
andeliminations

Consolidated$ 246,848$ 125,402$ 509,419$ 204,709$1,086,377$–$1,086,377

232
247,080$ 9,462$ 89,196

2,414
127,816$ 14,370$ 88,642

320
509,739$ 9,658$ 127,725

3,386
208,095$ 10,963$ 76,632

6,353
1,092,730$ 44,454$ 382,194(6,353)(6,353)$(24,685)$ 28,817–
1,086,377$ 19,768$ 411,011

$

851

$

823

$

3,895

$

89

$

5,658

$ 3,224

$

8,882

$
$

919
405

$
$

3,470
26

$
$

–
3,033

$
$

–
7,730

$
$

4,389
11,194$ 10,945
$
569

$
$

15,334
11,763Aviationrelated
business
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

Adjustments and eliminations for segment profits and losses include minus ¥5,025
thousand ($61 thousand) of elimination of inter-segment profit and minus ¥2,019,171
thousand ($24,624 thousand) of corporate general administration expenses which are notallocable to the reportable segments.
Adjustments and eliminations for segment assets include minus ¥97,827 thousand ($1,193
thousand) of elimination of accounts inter-segment receivable and ¥2,460,846 thousand($30,010 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
the head office software.
Segment profits are adjusted with operating income reported in the consolidated statements
of income.
Year ended March 31, 2011
Reportable segments
Media & life
Food &
servicebeveragebusiness
Retail businessbusiness
Total(Thousands of yen)

Adjustments
andeliminations

Consolidated¥19,537,229¥12,571,128¥45,681,118¥17,751,776¥ 95,541,254¥–¥ 95,541,254

8,140
19,545,370¥ 948,233¥ 6,723,622

101,117
12,672,245¥ 1,381,434¥ 7,321,205

32,08145,713,200¥ 445,997¥10,633,600

138,591
17,890,368¥ 928,239¥ 5,162,876

279,931
95,821,185¥ 3,703,905¥ 29,841,304(279,931)(279,931)¥(2,157,460)¥ 4,748,507–
95,541,254¥ 1,546,445¥ 34,589,811¥

295,709¥

86,778¥399,630

¥

6,392

¥

788,511¥

271,398¥

1,059,910

¥

–

¥

–

¥

20,894¥–¥20,894¥–¥20,894¥¥

516,978
124,947¥¥

279,237
588,800¥¥–
262,509

¥
¥

–
3,480

¥
¥

796,216
979,738¥ 1,002,687¥ 118,322¥¥

1,798,903
1,098,060

Aviationrelated
business
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
Amortization of
goodwill
Investment in affiliates
accounted for by theequity method
Capital expenditures

38

20.

Segment Information (continued)

Adjustments and eliminations for segment profits and losses include ¥193 thousand ofelimination of inter-segment profit and minus ¥2,157,266 thousand of corporate generaladministration expenses which are not allocable to the reportable segments.
Adjustments and eliminations for segment assets include minus ¥63,803 thousand ofelimination of accounts inter-segment receivable and ¥4,812,310 thousand of corporate
assets which are not allocable to the reportable segments. Corporate assets consist
primarily of investments in securities and assets belonging to the administrative part of theCompany.
Adjustments and eliminations for capital expenditures consist primarily of investments in
the head office building.
Segment profits are adjusted with operating income reported in the consolidated statements
of income.
For the years ended March 31, 2012 and 2011, net sales to outside parties in Japan
represent more than 90% of consolidated operating revenues. As a result, net sales tooutside parties by countries or areas grouped according to geographical classification are
not required to be disclosed.
For the year ended March 31, 2012, property and equipment in Japan represent more than
90% of consolidated property and equipment. As a result, property and equipment bygeographical countries or areas of March 31, 2012 is not required to be disclosed.
Property and equipment by geographical countries or areas at March 31, 2011 aresummarized as follows:
March 31,
2011
(Thousands of yen)Japan
North America
Other overseas countries¥5,187,391
1,069,657
79,992¥6,337,041

Impairment loss on fixed assets by reportable segments for the years ended March 31, 2012
and 2011 is summarized as follows:
March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Aviation-related businessMedia & life service business
Retail business
Food & beverage business
Reportable segments total
Adjustments and eliminations¥––
58,808–58,808–¥58,808¥–
169,913
131,627–

301,540
4,620¥306,161

$

–
–
717
–
717
–
$717
39

20.

Segment Information (continued)

The following table presents the amortization and balance of goodwill as of and for theyear ended March 31, 2011 by reportable segments:

Aviationrelated
business
Amortization
Balance as ofMarch 31

Year ended March 31, 2011
Reportable segments
Media & life
Food &
servicebeverage
Retailbusinessbusinessbusiness
Total(Thousands of yen)

Adjustments
andeliminations

Consolidated

¥

–

¥

–

¥182,832¥–¥182,832¥–¥182,832

¥

–

¥

–

¥

¥

–

¥

¥

–

¥

–

–

–

No amortization and balance of goodwill were recorded for the year ended March 31, 2012.

21.

Related Party Transactions

The significant transactions between the Company and Japan Airline Co., Ltd., for theyears ended March 31, 2012 and 2011 are summarized as follows:
With Japan Airlines Co., Ltd.:Year ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment
Purchases of merchandise¥6,924,543
651,852¥9,388,896
2,175,285

March 31,2011
2012
(Thousands of yen)Accounts receivable
Advance payment
Accounts payable¥933,277
15,566
68,340¥1,157,551
5,296
124,659$84,446
7,949

2012(Thousands of
U.S. dollars)$11,381
190
833

40

21.

Related Party Transactions (continued)

The significant transactions between certain consolidated subsidiaries of the Company andJapan Airlines Co., Ltd. for the years ended March 31, 2012 and 2011 are summarized asfollows:
With Japan Airlines Co., Ltd.:Year ended March 31,
2012
2011
2012
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment and revenue
from leases of aircraft¥364,784¥676,980

March 31,2012
2011
(Thousands of yen)Accounts receivable¥70,026¥33,119$4,4492012(Thousands of
U.S. dollars)$85441