Financial Report 2019Year ended March 31, 2019

Consolidated Financial Statements
Consolidated Balance Sheets
Toyo Engineering Corporation and Consolidated Subsidiaries As of March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

Assets

2019

2018

2019

¥ 101,759¥ 111,068

68,19362,057

Current assets:
Cash and deposits (Note 15)
Notes receivable, accounts receivable fromcompleted construction contracts and other$916,747
614,351

—

1,049

—

26,422

31,798238,036

Accounts receivable-other

5,793

7,850

52,189Other

11,187

8,498

100,783

(655)

(970)

(5,900)212,700

221,352

1,916,216

Short-term investments in securities (Notes 4, 18)
Costs on uncompleted construction contracts (Note 7)

Allowance for doubtful accounts
Total current assets

Property, plant and equipment:
Buildings and structures (Note 4)

14,581

16,013

131,360

Machinery, vehicles, tools, furniture and fixtures

5,113

5,296

46,063

Land (Note 4)

6,289

6,601

56,657

Leased assets

44

45

396

Construction in progress

36

4

324

Accumulated depreciation and impairment loss

(14,869)(15,980)(133,954)

Total property, plant and equipment

11,196

11,980100,864

Intangible assets:
Goodwill

—

1

—

Other

983

956

8,855

983

958

8,855

Investments in securities (Notes 3, 18)

5,895

10,335

53,108Long-term loans receivable

4,572

4,572

41,1895,720

Total intangible assets

Investments and other assets:

Net defined benefit asset (Note 20)

635

886

Deferred income taxes (Note 21)

828

1,305

7,459

7,468

5,029

67,279Other (Notes 3, 4)(4,585)(4,560)(41,306)

Total investments and other assets

14,813

17,569133,450

Total non-current assets

26,99330,508243,180¥ 239,694¥ 251,861$ 2,159,405

Allowance for doubtful accounts

Total assets
See notes to consolidated financial statements.

1

TOYO ENGINEERING CORPORATION

Financial Report 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

Liabilities and Net Assets:

2019

2018

2019

¥ 82,509¥ 104,715

13,374

7,125

Current liabilities:
Notes payable, accounts payable for construction
contracts and other
Short-term loans payable (Notes 4, 6, 8)
Income taxes payable
Advances received on uncompleted construction contracts$

743,324
120,486

701

624

6,315

69,29662,492624,288
7,009

Provision for bonuses

778

407

Provision for warranties for completed construction

273

52

2,459

Provision for loss on construction contracts (Note 11)

2,144

13,88919,315

Forward exchange contracts

1,647

1,808

14,837

Other

7,718

7,285

69,531

178,443

198,402

1,607,594

19,29423,659173,819

27

42

243

Deferred income taxes (Note 21)

2,238

1,555

20,162

Net defined benefit liability (Note 20)

1,200

1,323

10,810

440

123

3,963

Total current liabilities
Non-current liabilities:
Long-term loans payable (Notes 4, 6, 8)
Lease obligations

Provision for losses on business of subsidiaries and affiliates

1,691

1,578

15,23424,89328,282

224,261

203,337

226,684

1,831,864

Capital stock (Note 14)18,19818,198

163,945

Capital surplus

25,74910,749231,972

Retained deficit(8,984)(8,165)(80,936)

(445)

(444)

(4,009)34,51920,338

310,981

Other
Total non-current liabilities
Total liabilities
Contingent liabilities (Note 5)
Net assets:
Shareholders’ equity:

Treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income:

(123)

8

(1,108)Deferred losses on hedges(1,463)(801)(13,180)

Foreign currency translation adjustments

2,908

4,835

26,198Remeasurements of defined benefit plans

400

725

3,603

1,722

4,767

15,513

116

71

1,045

Valuation difference on available-for-sale securities

Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

36,35725,176

327,540¥ 239,694¥ 251,861$ 2,159,405

TOYO ENGINEERING CORPORATION

Financial Report 20192

Consolidated Statements of Operations
Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2018

2019

¥ 294,993¥ 335,697$ 2,657,594

Cost of sales (Note 11)284,356

348,219

2,561,765

Gross profit (loss)

Net sales

10,636(12,521)

95,819Selling, general and administrative expenses (Notes 9, 10)

16,25020,429146,396

Operating loss

(5,613)(32,951)(50,567)Interest income

3,714

1,039

33,459Dividends income

190

110

1,711

Non-operating income:

6,408

5,909

57,729

Reversal of allowance for doubtful accounts

280

18

2,522

Miscellaneous income

581

560

5,234

11,175

7,638

100,675

Equity in earnings of affiliates

Total non-operating income
Non-operating expenses:
Interest expenses

342

317

3,081

Foreign exchange losses, net

128

1,579

1,153

Share issuance cost

839

—

7,558

Miscellaneous expenses

824

611

7,423

2,134

2,508

19,225

3,426(27,821)30,864

Total non-operating expenses
Ordinary income (loss)
Extraordinary income:Gain on sales of property, plant and equipment (Note 12)

83

397

747

Gain on sales of investments in securities

—

2,714

—

—

2,349

—

Total extraordinary income

83

5,461

747

Profit (loss) before income taxes

3,510(22,359)

31,621

Income taxes

3,101

1,931

27,936

Income taxes-deferred

1,180

2,500

10,630Total income taxes

4,281

4,431

38,567(771)(26,791)(6,945)Gain on sales of investments in an affiliate

Income taxes (Note 21):Net loss
Net loss attributable to:Non-controlling interests
Owners of parent
See notes to consolidated financial statements.

3

TOYO ENGINEERING CORPORATION

Financial Report 2019

¥

46

55

(818)

¥ (26,846)

414$(7,369)

Consolidated Statements of Comprehensive Loss
Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2018

2019

¥

(771)

¥ (26,791)$ (6,945)

Valuation difference on available-for-sale securities(131)(2,237)(1,180)

Deferred (losses) gains on hedges

(661)

2,049

(5,954)

Net loss
Other comprehensive (loss) income (Note 13)

Foreign currency translation adjustments(1,458)491(13,135)

Remeasurements of defined benefit plans

(325)

730

(2,927)

Share of other comprehensive loss of affiliates accounted
for by the equity method
Total other comprehensive (loss) income
Comprehensive loss

(470)

(1)

(4,234)(3,047)

1,032(27,450)¥ (3,818)¥ (25,758)$ (34,396)(3,863)(25,797)(34,801)

45

39

405

Comprehensive loss attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

TOYO ENGINEERING CORPORATION

Financial Report 20194

Consolidated Statements of Changes in Net Assets
Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2018
Millions of yen

Balance at April 1, 2017

Capitalstock

CapitalsurplusRetained
deficit

Treasurystock,
at cost¥18,198¥10,732¥19,064¥(440)Cash dividends
Loss attributable to ownersof parent(0)

Purchase of shares of
consolidated subsidiary17¥18,198¥10,749¥47,554¥(2,842)¥2,246¥4,319¥(5)

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total
net
assets¥3,718¥58¥51,331

(383)

—

(383)

(26,846)(26,846)—(26,846)

(4)

(4)

—

(4)

0

0

—

0

17

—

17

Net changes of items otherthan shareholders’ equity
Balance at March 31, 2018

Deferred
losses onhedgesRemeaForeign
currency surements
translation of defined
benefitadjustplans
ments

(383)

Purchase of treasury stock
Sale of treasury stock

ValuationdifferenceonavailableTotal
for-saleshareholder’s equity securities¥(8,165)¥(444)—(2,237)

2,040

516

730

1,049

12

1,061

¥20,338¥8¥(801)¥4,835¥725¥4,767¥71¥25,176

RemeaForeign
currency surements
translation of defined
benefitadjustplans
ments

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total
net
assets¥4,767¥71¥25,176

Millions of yen
ValuationdifferenceonavailableTotal
for-saleshareholder’s equity securities

Deferred
losses onhedgesCapitalstock

CapitalsurplusRetained
deficit

Treasurystock,
at cost¥18,198¥10,749¥(8,165)¥(444)

Issuance of shares

7,500

7,500

15,000—15,000Transfer to capital surplus from
capital stock(7,500)

7,500

—

—

—

(818)

—

(818)

(0)

(0)

—

(0)

0

0

—

0

Balance at April 1, 2018

Loss attributable to ownersof parent(818)

Purchase of treasury stock(0)

Sale of treasury stock
Net changes of items otherthan shareholders’ equity
Balance at March 31, 2019¥18,198¥25,749¥(8,984)¥(445)¥20,338¥8¥(801)¥4,835

¥725

—

(131)

(661)

(1,927)(325)(3,045)45(3,000)¥34,519¥(123)¥(1,463)¥2,908¥400¥1,722¥116¥36,357

RemeaForeign
currency surements
translation of defined
benefitadjustplans
ments

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total
net
assets$42,945$639$226,810

Thousands of U.S. dollars (Note 1)

Capitalstock

CapitalsurplusRetained
deficit

Treasurystock,
at cost$(73,558)$(4,000) $183,225$163,945$96,837

67,56767,567135,135—

135,135

Transfer to capital surplus from
capital stock(67,567)

67,567———(7,369)—(7,369)

(0)

(0)

—

(0)

0

0

—

0

Loss attributable to ownersof parent(7,369)Purchase of treasury stock(0)

Sale of treasury stock
Net changes of items otherthan shareholders’ equity
Balance at March 31, 2019

$163,945$231,972

See notes to consolidated financial statements.

TOYO ENGINEERING CORPORATION

Financial Report 2019$(80,936)$72

Deferred
losses onhedgesIssuance of shares

Balance at April 1, 2018

5

ValuationdifferenceonavailableTotal
for-saleshareholder’s equity securities$(7,216)$43,558$6,531—(1,180)(5,954)(17,360)(2,927)(27,432)405(27,027)$(4,009) $310,981$(1,108)$(13,180)$26,198$3,603$15,513$1,045$327,540

Consolidated Statements of Cash Flows
Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

2019
Cash flows from operating activities:
Profit (loss) before income taxes
Depreciation and amortization
Amortization of goodwill
Decrease in allowance for doubtful accounts
Decrease in net defined benefit liability(Decrease) increase in provision for loss on construction
contracts
Interest and dividends income
Interest expenses
Foreign exchange (gains) losses
Gain on sales of property, plant and equipment
Equity in earnings of affiliates
Gain on sales of investments in securities
Gain on sales of investments in an affiliate(Increase) decrease in notes receivable, accounts receivablefrom completed construction contracts
Decrease in costs on uncompleted construction contracts
Decrease (increase) in accounts receivable-other
Decrease in notes and accounts payable-trade
Increase (decrease) in advances received on uncompleted
construction contracts
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities:
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investments in securities
Proceeds from sales of investments in securities
Proceeds from sales of investments in an affiliate
Net (increase) decrease in short-term loans receivable
Other, net
Net cash provided by investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Repayment of finance lease obligations
Proceeds from issuance of preferred stock
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 15)

2018

2019

¥ 3,510
1,233
(9)
(289)
(324)

¥ (22,359)
1,221
(9)
(18)
(334)

$ 31,621
11,108(81)(2,603)(2,918)(11,739)(3,904)
342
(203)
(81)
(6,408)
(0)
—

9,807
(1,149)
317
147
(396)
(5,909)(2,714)(2,349)(105,756)(35,171)
3,081(1,828)(729)(57,729)(0)—(7,134)
5,091
1,569(21,042)

26,202
17,716(1,290)(19,511)(64,270)
45,864
14,135(189,567)

7,250
2,599
(29,540)
6,678
(335)
(2,632)(25,828)(24,548)(251)(25,429)
5,108
(319)
(2,184)(22,824)

65,31523,414(266,126)
60,162(3,018)(23,711)(232,684)

506
(561)
637
(335)
—
500
—
(0)
606
1,354

(1,241)
(504)
810
(245)
(8)
2,928
3,837
1,585
(773)
6,386

4,558
(5,054)
5,738(3,018)
—
4,504
—
(0)
5,459
12,1987,358
1,000(6,581)(7)
15,000—(0)
16,768(923)(8,628)106,536¥ 97,907(1,433)
7,100(6,446)
(7)
—
(383)
(4)
(1,174)
1,445(16,167)
122,703¥ 106,536

66,2889,009(59,288)(63)
135,135—(0)
151,063(8,315)(77,729)
959,783$ 882,045

See notes to consolidated financial statements.

TOYO ENGINEERING CORPORATION

Financial Report 20196

Notes to Consolidated Financial Statements
Toyo Engineering Corporation and Consolidated Subsidiaries

1. BASIS OF PREPARATION
Toyo Engineering Corporation (the “Company”) and its domestic consolidated subsidiaries maintain their accounting records andprepare their financial statements in accordance with accounting principles generally accepted in Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity with those of their respective countries of domicile. The accompanying consolidated financial statements have been compiled from the accounts prepared by the Company in accordancewith the provisions set forth in the Financial Instruments and Exchange Law of Japan and with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International
Financial Reporting Standards.
For the convenience of readers, the accompanying consolidated financial statements and the relevant notes have also beenpresented in U.S. dollars by translating all Japanese yen amounts at the exchange rate of ¥111.00 to U.S.$1.00 prevailing on
March 31, 2019.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both yen and in U.S. dollars) do not necessarily agree with the sum of the individual amounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries.
Investments in significant affiliates are accounted for by the equity method. As of March 31, 2019, the numbers of consolidated
subsidiaries and affiliates accounted for by the equity method were 14 and 5, respectively.
Toyo Engineering Korea Limited, Toyo Engineering Corporation (China) and 6 other subsidiaries are consolidated using theirfinancial statements as of their respective fiscal year end, which falls on December 31, and necessary adjustments are made totheir financial statements to reflect any significant transactions from January 1 to March 31. Intercompany accounts and transactions are eliminated in consolidation. The difference between the acquisition cost and the equity in the net assets at the time ofacquisition is amortized in principle within 20 years on a straight-line basis.
(b) Securities
All debt and equity securities other than equity securities issued by subsidiaries and affiliates are classified into one of three categories: trading, held-to-maturity or available-for-sale securities. Trading securities are bought and held principally for the purposeof selling them in the near term. Held-to-maturity securities are those securities which the Company and its consolidated subsidiaries have the ability and intent to hold until maturity. All securities not included in trading or held-to-maturity are classified asavailable-for-sale securities.
Trading securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accumulation of premiums or discounts. Unrealized gains or losses on trading securities are included in earnings. Other
securities classified as available-for-sale securities are recorded at fair value with changes in unrealized holding gain or loss, netof the applicable income taxes, included directly in net assets. Non-marketable securities classified as available-for-sale securities are recorded at cost.
Cost of securities sold is determined by the moving-average method.
(c) Derivative Financial Instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risk arising from adverse fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are carried atfair value with changes in unrealized gain or loss charged or credited to operations, except for those which meet the criteria fordeferral hedge accounting under which unrealized gain or loss is deferred as a component of net assets.
Deferral hedge accounting is adopted for derivatives which qualify for hedge accounting, under which unrealized gain or loss isdeferred. Hedging instruments are derivative transactions such as foreign exchange forward contract, currency option, currency
swap and interest rate swap, and hedged items are primarily forecast sales and costs denominated in foreign currencies, andreceivables and payables denominated in foreign currencies. Hedge effectiveness is not assessed if the substantial terms andconditions of the hedging instruments and the hedged forecasted transactions are the same. The Company and its consolidated
subsidiaries manage derivative transactions in accordance with their internal “Policies and Procedures for Risk Management”.
(d) Costs on Uncompleted Construction Contracts
Costs on uncompleted construction contracts are stated at cost, determined by the identified-cost method.

7

TOYO ENGINEERING CORPORATION

Financial Report 2019

(e) Depreciation and Amortization
Depreciation of property, plant and equipment is principally computed by the declining-balance method based on the estimateduseful lives of the assets. However, buildings acquired on or after April 1, 1998, and facilities attached to buildings and structuresacquired on or after April 1, 2016 are depreciated on a straight-line method.
The useful lives of property, plant and equipment are as follows:
Buildings and structures:
3 to 50 years
Machinery, vehicles, tools, furniture and fixtures:
2 to 20 years
Amortization of intangible assets of the Company and its consolidated subsidiaries is calculated principally by straight-line
method. Software for internal use is amortized on a straight-line method 5 years of the estimated available period.
(f) Leases
Depreciation of assets on finance leases which do not transfer ownership of the leased assets to the lessee are calculated by thestraight-line method over the lease period with their residual value estimated at zero.
(g) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries have provided an allowance for doubtful accounts at an estimated amount of probable and reasonably possible bad debts and an estimated amount computed on the actual percentage of credit losses.
(h) Provision for Bonuses
Provision for bonuses to employees is provided at the expected payment amount for the fiscal year.
(i) Provision for Warranties for Completed Construction
Provision for warranties for completed construction is provided based on past experience.
(j) Provision for Loss on Construction Contracts
Provision for loss on construction contracts is provided in case the material loss is expected for a certain large-scale contract work.
(k) Provision for Losses on Business of Subsidiaries and Affiliates
Provision for losses on business of subsidiaries and affiliates is provided based on the financial position of the subsidiaries
and affiliates.
(l) Retirement Benefits
Net defined benefit liability at year-end is stated based on the fair value of plan assets and the projected benefit obligation.
As to calculation of the projected benefit obligation, the expected benefit payments at the year-end have been recorded mainly
at the amount calculated based on benefit formula.
Actuarial gain or loss is amortized by the straight-line method within the average of the estimated remaining service years of
the employees (over 9 years) in the year following the year of recognition.
Unamortized actuarial gain or loss is provided with tax effect as a component of remeasurements of defined benefit plans
under accumulated other comprehensive income of net assets.
(m) Foreign Currency Translation
Both short-term and long-term receivables and payables in foreign currencies are translated at the rates of exchange in effect atthe balance sheet date and differences arising from the translation of these accounts are credited or charged to profit or loss.
The balance sheet accounts of the consolidated foreign subsidiaries are translated at the rates of exchange in effect at thebalance sheet date, except for capital stock and capital surplus, which are translated at their historical exchange rates. Revenues,
expenses and net income for the year are translated at the rates of exchange in effect at the balance sheet date. Differences arising from translation of the accounts of foreign subsidiaries and affiliates are presented as “Foreign currency translation adjustments” and “Non-controlling interests” in the accompanying consolidated balance sheets.
(n) Recognition of Revenues
Revenues and costs of construction contracts of which the percentage of completion can be reliably estimated, are recognizedby the percentage-of-completion method. The percentage of completion is calculated at the cost incurred as a percentage of theestimated total cost. The completed-contract method continues to be applied for contracts for which the percentage of completion cannot be reliably estimated.
TOYO ENGINEERING CORPORATION

Financial Report 20198

(o) Cash and Cash Equivalents
For the purposes of the consolidated statements of cash flows, the Company and its consolidated subsidiaries consider all
highly liquid investments with insignificant risk of changes in value purchased with an original maturity of 3 months or less to
be cash equivalents.
(p) Share Issuance Cost
Share issuance cost is recorded at cost.
(q) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(r) Consolidated Tax Return
The Company files a consolidated tax return with domestic fully-owned subsidiaries.
(s) Advances Received on Uncompleted Construction Contracts
Advances received on uncompleted construction contracts from customers are shown as a liability, not as a deduction from theamount of costs on uncompleted construction contracts.
(t) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted
tax rates and laws which will be in effect when the differences are expected to be reversed.
(u) Research and Development Costs
Research and development costs are charged to income when incurred.
(v) Additional Information(Accounting Standards Issued But Not Yet Effective)
Accounting Standard for Revenue Recognition (The Accounting Standards Board of Japan (“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 accounting standard and implementation guidance mainly focus on the recognition of revenue and cash flows arising fromcontracts with customers. Revenue is recognized by applying the following five-step model.
Step 1: Identify the contract
Step 2: Identify performance obligations
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performance obligations
Step 5: Recognize revenue based on progress of performance obligations(2) Effective date
The above accounting standard and implementation guidance are scheduled to be applied from the beginning of the fiscal year
ending March 31, 2022.
(3) Effects of application of the accounting standard and the implementation guidance
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standard and implementation guidance.
Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries, etc. for Consolidated Financial Statements(ASBJ Practical Issues Task Force (“PITF”) No. 18, September 14, 2018)
Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method (ASBJ PITF
No. 24, September 14, 2018)(1) Overview
The new practical solutions require a parent company to recognize income or loss from sales and impairment loss on equity
instruments measured at fair value booked by foreign subsidiaries and associates as income or loss for the period, when foreignsubsidiaries and associates apply “International Financial Reporting Standard (“IFRS”) 9, Financial Instruments” and recognize
subsequent changes of equity instruments measured at fair value in other comprehensive income.

9

TOYO ENGINEERING CORPORATION

Financial Report 2019

(2) Planned date of application
The above accounting standard is scheduled to be applied from the beginning of the fiscal year ending March 31, 2020.
(3) Effects of application of the accounting standard
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standard.

IFRS 16 Leases(1) Overview
The new accounting standard requires that lessees principally account for all leases on the balance sheet under a single model.
(2) Planned date of application
The above accounting standard is scheduled to be applied to overseas consolidated subsidiaries from the beginning of the fiscal year
ending March 31, 2020.
(3) Effects of application of the accounting standard
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from the adoptionof the accounting standard.
(Changes in Presentation)(Partial amendments to Accounting Standard for Tax Effect Accounting)
The Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February
16, 2018) from the beginning of the fiscal year ended March 31, 2019. As such, deferred tax assets and deferred tax liabilities areincluded within investments and other assets and non-current liabilities, respectively, and related income tax disclosures havebeen expanded.
As a result, ¥714 million of deferred tax assets which had been included in “Deferred income taxes” of ¥1,836 million undercurrent assets on the consolidated balance sheet as of March 31, 2018 are reclassified and included in “Deferred income taxes”
of ¥1,305 million under investments and other assets. Deferred tax liabilities of ¥83 million which had been included in “Other”
under current liabilities on the consolidated balance sheet as of March 31, 2018 are reclassified and included in “Deferred income
taxes” of ¥1,555 million under non-current liabilities. In addition, deferred tax assets and deferred tax liabilities of the same legal
entity have been offset. As a result, total assets in the consolidated balance sheet as of March 31, 2018 decreased by ¥1,121
million compared with that previously presented in the consolidated balance sheet.
Also, “Note 21 Income Taxes” in the notes to consolidated financial statements has been expanded in accordance withNote 8 and Note 9 of Interpretive Notes to Accounting for Tax Effect Accounting. However, comparative information for theyear ended March 31, 2018 has not been disclosed in Note 21 in accordance with the transitional provisions set forth in Article
7 of the Partial Amendments.
(Consolidated Statements of Operations)
Foreign withholding taxes, which had been presented separately for the year ended March 31, 2018 is included in “Miscellaneous
expenses” under non-operating expenses for the year ended March 31, 2019 because its materiality has decreased.
To reflect this change in presentation, foreign withholding taxes of ¥332 million, which had been previously presented separately, was reclassified as “Miscellaneous expenses” under non-operating expenses for the year ended March 31, 2018.

3. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
Investments in and advances to unconsolidated subsidiaries and affiliates included in investments in securities and other in the
consolidated balance sheets as of March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Investments in unconsolidated subsidiaries and affiliates
Other

2019

2018

2019

¥ 3,685690¥ 7,447679$ 33,198
6,216

TOYO ENGINEERING CORPORATION

Financial Report 201910

4. PLEDGED ASSETS
The following assets at March 31, 2019 and 2018 were pledged as collateral:Thousands of
U.S. dollars

Millions of yen

As of March 31,
Collateral
Short-term investments in securities
Buildings
Land
Other
Total

2019

2018

2019

¥

¥ 1,049
950
1,112
57
¥ 3,170

$

—
803
969
99
¥ 1,872

—
7,234
8,729
891
$ 16,864

These assets above were mainly pledged for issuing the performance bonds. The amount of liabilities with corresponding obligation as of March 31, 2019 and 2018 is as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Liabilities
Short-term loans payable
Total

2019

2019

2018

¥—
¥—

$—
$—

¥ 266
¥ 266

5. CONTINGENT LIABILITIESContingent liabilities as of March 31, 2019 are as follows:
Guaranteed parties
Toyo Setal Empreendimentos Ltda.
Other
Total

Millions of yen

Thousands of
U.S. dollars¥ 1,601175¥ 1,777$ 14,423
1,576$ 16,009

Details

Refund guarantee
Loan guarantee etc.

6. COMMITMENT LINE CONTRACTS
In order to maintain access to a stable and effective sources of operating capital, the Company has entered into commitment-line
contracts with 9 trading banks. The status of these commitment line contracts as of March 31, 2019 and 2018 is as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Total amount of commitment line contracts
Used amount
Available amount of commitment line contracts

2019

2018

2019

¥ 10,000
1,000¥ 9,000¥ 14,200
1,300¥ 12,900$ 90,090
9,009$ 81,081

7. COSTS ON UNCOMPLETED CONSTRUCTION CONTRACTS
Costs on uncompleted construction contracts and provision for loss on construction contracts related to the construction contracts
with substantial anticipated losses are not offset. Costs on uncompleted construction contracts corresponding to provision forloss on construction contracts as of March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Costs on uncompleted construction contracts

2019
¥ 110

2018

¥ 122

2019
$ 990

8. SHORT-TERM AND LONG-TERM DEBT
The average interest rates on the short-term loans payable outstanding as of March 31, 2019 and 2018 are 0.69% and 2.17%,
respectively.
The average interest rates on the current portion of long-term loans payable outstanding as of March 31, 2019 and 2018 are
1.56% and 1.26%, respectively.
The average interest rates on the long-term loans payable outstanding as of March 31, 2019 and 2018 are 1.24% and 1.26%
respectively.

11

TOYO ENGINEERING CORPORATION

Financial Report 2019

The following schedule shows the maturities of long-term loans payable subsequent to March 31, 2019:Years ended March 31,
2020
2021
2022
2023
2024
2025 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 5,474
10,030
4,270
4,452
540
—

$ 49,315
90,36038,46840,108
4,864—

The following schedule shows the maturities of lease obligations subsequent to March 31, 2019:Years ended March 31,
2020
2021
2022
2023
2024

Millions of yen

Thousands of
U.S. dollars

¥ 13
11
9
5
0

$ 117
99
81
45
0

As of March 31, 2019 and 2018, short-term loans payable and long-term loans payable with financial covenants concerning thefinancial condition or business results of the Company and its consolidated subsidiaries and affiliates amounted to ¥11,240
million ($101,261 thousand) and ¥13,677 million, respectively.

9. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The main components of selling, general and administrative expenses for the years ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Salaries
Provision for bonuses
Retirement benefit expenses
Depreciation
Research and development costs

2019

2018

2019

¥ 7,241
312
994
308
798

¥ 9,952
82
708
324
689

$ 65,234
2,810
8,954
2,774
7,189

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2019 and 2018 amounted to ¥798 million ($7,189 thousand) and ¥689 million, respectively.

11. PROVISION FOR LOSS ON CONSTRUCTION CONTRACTS
The amount of gross increase in provision for loss on construction contracts included in cost of sales in the consolidated statementsof operations for the years ended March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Amount of provision for loss on construction contracts

2019

2018

2019

¥ 2,126¥ 13,833$ 19,153

12. GAIN ON SALES OF PROPERTY, PLANT AND EQUIPMENT
Breakdown of gain on sales of property, plant and equipment is as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
Land
Other
Total

2019
¥ 44
3
35
—
¥ 83

2018

¥ 147
4
221
23
¥ 397

2019
$ 396
27
315
—
$ 747

TOYO ENGINEERING CORPORATION

Financial Report 201912

13. OTHER COMPREHENSIVE INCOME
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Valuation difference on available-for-sale securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Valuation difference on available-for-sale securities
before tax effectTax effect
Valuation difference on available-for-sale securities
Deferred (losses) gains on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Deferred (losses) gains on hedges before tax effectTax effect
Deferred (losses) gains on hedges
Foreign currency translation adjustments:
Amount arising during the year
Foreign currency translation adjustments before tax effectForeign currency translation adjustments
Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustments for gains and losses realized
in profit or loss
Remeasurements of defined benefit plans before tax effectTax effectRemeasurements of defined benefit plans
Share of other comprehensive losses of affiliates accounted
for by the equity method:Amount arising during the year
Total other comprehensive (loss) income

2019

2018

¥

¥

(178)

2019
(77)

$ (1,603)—(3,060)

—

(178)
46
(131)

(3,137)899(2,237)(1,603)414(1,180)

(426)

(251)

(3,837)

(234)
(660)
(0)
(661)

3,252
3,000
(951)
2,049

(2,108)(5,945)(0)(5,954)(1,458)(1,458)(1,458)

491
491
491

(13,135)(13,135)(13,135)

(194)

1,057

(1,747)

(258)
(452)
127
(325)

(26)
1,030
(299)
730

(2,324)(4,072)
1,144(2,927)(470)¥ (3,047)(1)¥ 1,032(4,234)$ (27,450)

14. SUPPLEMENTARY INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2019(a) Type and number of outstanding shares
Number of shares

Type of shares

Issued stock:
Common stock
Class A preferred stock
Total
Treasury stock:
Common stock
Total

Balance at
beginning of year

Increase in shares
during the year

Decrease in shares
during the year

38,558,507—
38,558,507—
20,270,300
20,270,300———

38,558,507
20,270,300
58,828,807

223,648
223,648

1,035
1,035

3
3

224,680
224,680

Note: Issued stock increased by 20,270,300 shares due to the issuance of Class A preferred stock.
Treasury stock increased by 1,035 shares due to the purchase of shares less than one unit.
Treasury stock decreased by 3 shares due to the sale of shares less than one unit.

13

TOYO ENGINEERING CORPORATION

Financial Report 2019

Balance at
end of year

For the year ended March 31, 2018(a) Type and number of outstanding shares
Number of shares

Type of shares

Issued stock:
Common stock
Total
Treasury stock:
Common stock
Total

Balance at
beginning of year

Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

192,792,539
192,792,539——

154,234,032
154,234,032

38,558,507
38,558,507

1,103,172
1,103,172

8,738
8,738

888,262
888,262

223,648
223,648

Note: Issued stock decreased by 154,234,032 shares due to the one-for-five reverse stock split of the Company’s shares effective October 1, 2017.
Treasury stock increased by 8,738 shares due to the purchase of shares less than one unit.
Treasury stock decreased by 886,647 shares due to the one-for-five reverse stock split of the Company’s shares effective
October 1, 2017, and by 1,615 shares due to the sale of shares less than one unit.
(b) Dividends(b-1) Dividends from surplus
Date ofapproval

Resolution
approved byType ofsharesAmount(Millions of yen)Amount per
share
(Yen)

Shareholders’
cut-off date

Effective
date

June 27,2017

Annual general meeting ofshareholders

Common
stock

383

2.0

March 31,2017

June 28,2017

15. CONSOLIDATED STATEMENTS OF CASH FLOWS
A reconciliation between the balance of cash and deposits reflected in the accompanying consolidated balance sheets and thatof cash and cash equivalents in the accompanying consolidated statements of cash flows as of March 31, 2019 and 2018 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Cash and deposits
Time deposits with maturities over 3 months
Cash and cash equivalents

2019

2018

2019

¥ 101,759(3,852)¥ 97,907¥ 111,068(4,532)¥ 106,536$ 916,747(34,702)$ 882,045

16. LEASES(a) Finance Leases
Future minimum lease payments subsequent to March 31, 2019 for finance leases are omitted as being immaterial.
(b) Operating Leases
Operating Leases (as Lessee)
Future minimum lease payments subsequent to March 31, 2019 for noncancelable operating leases are summarized as follows:

As of March 31,
Within 1 year
Over 1 year
Total

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥

$ 5,1444,468$ 9,621571
496¥ 1,068

TOYO ENGINEERING CORPORATION

Financial Report 201914

17. FINANCIAL INSTRUMENTS
1. Condition of Financial Instruments
The Company and its consolidated subsidiaries hold their temporary cash surplus through low-risk financial assets and raise funds
through borrowings from banks.
Derivative financial instruments are utilized for reducing the risk of exchange rate fluctuations, interest rate fluctuations, andcredit. Therefore, there are no derivatives for speculative purposes.
Notes receivable, accounts receivable from completed construction contracts are exposed to credit risks of customers andrisks of exchange rate fluctuations. The Company deals with these risks by organizing careful reviews on awarded contracts,
letters of credit, and export credit insurance. The Company minimizes exchange fluctuation risks by entering into corresponding
forward-exchange contracts, in principle.
Short-term investment securities and investment securities are exposed to volatility risks of market price. The Company manages
these risks by periodic monitoring, as they mainly consist of short-term held-to-maturity bonds and stocks of business partners.
Notes payable, accounts payable for construction contracts and other are mostly due within 1 year.
Borrowings from banks are raised mainly for capital investment or working capital. For some long-term loans payable, theCompany entered into interest swap agreements to minimize risks of interest rate fluctuations.
Regarding derivatives, forward-exchange contracts are used to minimize exchange fluctuation in foreign-currency operations,and interest-swap contracts are used to minimize interest rate fluctuations.
The fair value of financial instruments is based on their quoted market prices, if available, or reasonably estimated amounts if
there is no market price. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in different fair value. In addition, the notional amounts below are not necessarily indicative of the actual
market risk involved in derivative transactions.
2. Fair Value of Financial Instruments
Book value, fair value, and net unrealized gain or loss of financial instruments consist of the following:
The following does not include items for which it is extremely difficult to determine the fair value.
Millions of yen

At March 31, 2019(1)Cash and deposits(2)Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Fair Value¥ 101,759¥ 101,759¥ —67,54567,546

0

5,793
(1)
5,791

5,793

2

906
176,00382,5097,900
24,768115,177906
176,006
82,5137,900
24,831
115,244

—
3
3
—
62
66

(88)
(1,462)(1,551)(88)(1,462)(1,551)——¥ —68,193(648)(3)Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net(4)Investments in securities
Available-for-sale securities
Total of assets(1)Notes and accounts payable for construction contracts and other(2)Short-term loans payable(3)Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

15

TOYO ENGINEERING CORPORATION

Financial Report 2019

Unrealized gain /(loss)

Book Value¥¥Thousands of U.S. dollars

At March 31, 2019(1)Cash and deposits(2)Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Fair Value$ 916,747$ 916,747$ —608,513608,522052,189(9)52,171

52,18918

8,162
1,585,612
743,324
71,171
223,135
1,037,630

8,162
1,585,639
743,360
71,171
223,702
1,038,234

—
27
27
—
558
594

(792)
(13,171)$ (13,972)(792)(13,171)$ (13,972)

—
—
$ —

614,351(5,837)(3)Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net(4)Investments in securities
Available-for-sale securities
Total of assets(1)Notes and accounts payable for construction contracts and other(2)Short-term loans payable(3)Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

Unrealized gain /(loss)

Book Value(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above
are offset by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show
contra-asset account, net liabilities and unrealized loss.
Millions of yen

Unrealized gain /(loss)At March 31, 2018
(1)Cash and deposits(2)Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts (*1)
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book Value

Fair Value¥ 111,068¥ 111,068¥ —61,10061,11918(3)Accounts receivables-otherLess: Allowance for doubtful accounts (*1)
Accounts receivable-other, net

7,850
(1)
7,848

7,848

0

2,126
182,144
104,715566
30,217
135,500

2,126
182,163
104,724
566
30,248135,539

—
19
8
—
30
39

(341)
(802)
(1,144)

(341)
(802)
(1,144)——¥ —(4)Short-term investments in securities and investments in securities
Available-for-sale securities
Total of assets(1)Notes and accounts payable for construction contracts and other(2)Short-term loans payable(3)Long-term loans payable (including current portion)
Total of liabilities
Derivatives (*2)
not designated as hedging instruments
designated as hedging instruments
Total derivatives

62,057(956)¥¥(*1) Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed above
are offset by the corresponding figures of allowance for doubtful accounts listed above.
(*2) Net receivables and payables derived as a result of derivative transactions are presented. Values in parentheses show
contra-asset account, net liabilities and unrealized loss.
TOYO ENGINEERING CORPORATION

Financial Report 201916

(Note 1) Computational method and related issues
Assets(1) Cash and deposits
Book values are used as fair values because they are nearly equal to such book values.
(2) (3) Notes receivables, accounts receivable from completed construction contracts and accounts receivable—otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(4) Short-term investments in securities and investments in securities
Fair value of stock items are based on the market prices and bond items are based on the market prices or their price provided
by financial institutions.
Liabilities(1) Notes payable, accounts payable for construction contracts and otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by an appropriate discount rate coupledwith the remaining maturity and credit risks.
(2) Short-term loans payable
Book values are used as fair values because they are nearly equal to such book values.
(3) Long-term loans payable (including current portion)
The present values of the principal and total interest, discounted by the rate assumed to be applied to the new borrowings under
the same conditions, are used as the fair values.
Derivative Transactions
See “19. DERIVATIVE TRANSACTIONS“.
(Note 2) Financial instruments of which it is extremely difficult to determine the fair value
Unlisted securities that amounted to ¥1,673 million ($15,072 thousand) as of March 31, 2019 and ¥2,195 million as of March
31, 2018 are excluded from the above table because they are deemed extremely difficult to determine the fair values; they do
not have market prices and it is not possible to conduct alternative methods such as the estimation of their future cash flows.
(Note 3) R edemption schedule for monetary assets, and short-term investments and investment securities with maturities
Millions of yen

At March 31, 2019
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 101,759

¥

—

¥—

¥—

67,594
5,105¥ 174,459

599
688¥ 1,287

—
—
¥—

—
—
¥—

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years

—

$—

$—

5,396
6,198
$ 11,594

—
—
$—

—
—
$—

Thousands of U.S. dollars

At March 31, 2019
Cash and deposits
Notes and accounts receivablefrom completed construction contracts
Accounts receivable-other
Total

17

TOYO ENGINEERING CORPORATION

Financial Report 2019$

916,747

608,954
45,990$ 1,571,702$

Millions of yen

At March 31, 2018
Cash and deposits
Notes and accounts receivable fromcompleted construction contracts
Accounts receivable-other
Available-for-sale securities
Total

Within 1 year

After 1 year
through 5 years

After 5 years
through 10 years

After 10 years¥ 111,068

¥

—

¥—

¥—

54,1887,682
1,049¥ 173,990

7,868
167
—
¥ 8,035

—
—
—
¥—

—
—
—
¥—

(Note 4) Schedule for repayment of bonds and long-term loans payable
See “8. SHORT-TERM AND LONG-TERM DEBT”.

18. SHORT-TERM INVESTMENTS IN SECURITIES AND INVESTMENTS IN SECURITIESThe acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2019 are summarized as follows:
Millions of yen

At March 31, 2019
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Total

Book value

At March 31, 2019
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Total

Book value

Acquisition cost

Unrealized gain

¥ 529
¥ 529

¥ 376
¥ 376

¥ 906
¥ 906

Thousands of U.S. dollars

Acquisition cost

Unrealized gain

$ 4,765$ 4,765$ 3,387$ 3,387$ 8,162$ 8,162

Proceeds from and gain on sales of securities for the year ended March 31, 2019 are as follows:
Millions of yen

At March 31, 2019
Equity securities

Proceeds

At March 31, 2019
Equity securities

Proceeds

Gain on sales

¥ 500

¥0

Loss on sales¥—

Thousands of U.S. dollars

Gain on sales$ 4,504$0

Loss on sales$—

Impairment of investments in securities
For the year ended March 31, 2019, the Company recognized ¥13 million ($117 thousand) of impairment loss on unconsolidated subsidiaries.
The acquisition cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2018 are summarized as follows:
Millions of yen

At March 31, 2018
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition costs:
Debt securities
Subtotal
Total

Book value

Acquisition cost

Unrealized gain

¥ 1,076¥ 1,076

¥
¥

529
529

¥ 547
¥ 547

¥ 1,049¥ 1,049¥ 2,126¥ 1,049¥ 1,049¥ 1,579

¥ —
¥ —
¥ 547

TOYO ENGINEERING CORPORATION

Financial Report 201918

Proceeds from and gain on sales of securities for the year ended March 31, 2018 are as follows:
Millions of yen

At March 31, 2018
Equity securities

Proceeds

Gain on sales¥ 3,738¥ 3,060

Loss on sales¥—

19. DERIVATIVE TRANSACTIONS
For the year ended March 31, 2019
1. Derivatives not designated as hedging instruments(1) Currency-related
Millions of yen

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
MYR
Buying
USD
EUR
JPY
Total

All notionalamounts

Notional
amounts due
over 1 year

¥ 2,827
5,147

¥—
—

¥ 47
(123)

¥ 47
(123)

863
123
84
¥ 9,046

7
23
—
¥ 31

(6)
(5)
(1)
¥ (88)(6)(5)(1)¥ (88)All notionalamounts

Notional
amounts due
over 1 year

$ 25,468
46,369

$ —
—

$ 423
(1,108)$ 423(1,108)

7,774
1,108
756
$ 81,495

63
207
—
$ 279

(54)
(45)
(9)
$ (792)

(54)
(45)
(9)
$ (792)

Fair value

Unrealized
gain / (loss)

Thousands of U.S. dollars

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
MYR
Buying
USD
EUR
JPY
Total

19

TOYO ENGINEERING CORPORATION

Financial Report 2019

Fair value

Unrealized
gain / (loss)

2. Derivatives designated as hedging instruments(1) Currency-related
Millions of yen

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SEK
SGD
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
SEK
Buying
USD
EUR
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts

Notional
amounts due
over 1 year

¥ 15,148
5,840¥ 3,324
1,764

39,642
23,321
204
51

15,734
11,428—2

10,188
252
16

—
—
—

1,873
678
¥ 97,218

173—¥ 32,428

Fair value

Computational
method of fairvalue

¥ (895)323

Based onprices offered
164 by financial(1,030) institutions
(25)
0

N/A

Based onforwardexchange
contract prices

Thousands of U.S. dollars

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
SEK
SGD
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
SEK
Buying
USD
EUR
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts

Notional
amounts due
over 1 year

$ 136,468
52,612$ 29,945
15,891

357,135
210,099
1,837
459

141,747
102,954—
18

91,783
2,270
144

—
—
—

16,873
6,108$ 875,837

1,558—$ 292,144

Fair value

Computational
method of fairvalue

$ (8,063)
2,909

Based onprices offered
1,477 by financial(9,279) institutions
(225)
0

N/A

Based onforwardexchange
contract prices

TOYO ENGINEERING CORPORATION

Financial Report 201920

(2) Interest-related
Millions of yen

Transaction type

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Computational
method of fairvalue

Accounting method:
Special method forinterest rate swap

Interest swap
contracts
floating for
fixed rateswap

Long-termloans payable

Total¥ 7,800¥ 7,300¥ 7,800¥ 7,300

N/A

Based onprices offeredby financial
institutions

Thousands of U.S. dollars

Transaction type

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Long-termloans payable$ 70,270$ 65,765

N/A$ 70,270$ 65,765

Computational
method of fairvalue

Accounting method:
Special method forinterest rate swap

Interest swap
contracts
floating for
fixed rate
swap

Total

Based onprices offeredby financial
institutions

For the year ended March 31, 2018
1. Derivatives not designated as hedging instruments(1) Currency-related
Millions of yen

Non-market transaction:
Foreign exchange forward contracts
Selling
USD
Buying
USD
EUR
Total

21

TOYO ENGINEERING CORPORATION

Financial Report 2019

All notionalamounts

Notional
amounts due
over 1 year

¥ 9,548¥ 1,683¥ (347)¥ (347)4556¥ 10,109——¥ 1,683(0)5¥ (341)(0)
5¥ (341)

Fair value

Unrealized
gain / (loss)

2. Derivatives designated as hedging instruments(1) Currency-related
Millions of yen

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward contracts
Selling
USD
EUR
SEK
THB
BuyingUSD
EUR
SEK
Alternative method:
Foreign exchange forward contracts
Selling
USD
EUR
Buying
USD
EUR
KRW
Total

Accounts
receivableandaccounts
payableAccounts
receivableandaccounts
payableAll notionalamounts

Notional
amounts due
over 1 year

¥ 18,305
2,378
410
2,277

¥ 2,520
1,776——¥ (117)
(1)
29
(155)

22,365
3,360
759

3,555
734
263

(507)
(3)
(46)

11,049
167

4,187
—

336
670
190
¥ 62,271———¥ 13,038

Fair value

N/A

Computational
method of fairvalue

Based onprices offeredby financial
institutions

Based onforwardexchange
contract prices(2) Interest-related
Millions of yen

Transaction type

Main hedged
items

All notionalamounts

Notional
amounts due
over 1 year

Fair value

Long-termloans payable¥ 10,420¥ 7,900

N/A¥ 10,420¥ 7,900

Computational
method of fairvalue

Accounting method:
Special method forinterest rate swap
Total

Interest swap
contracts
floating for
fixed rate
swap

Based onprices offeredby financial
institutions

TOYO ENGINEERING CORPORATION

Financial Report 201922

20. RETIREMENT BENEFITSThe Company and certain consolidated subsidiaries have either funded or unfunded defined benefit plans and lump-sum payment
plans and the defined contribution plans.
The Company and certain consolidated subsidiaries provide lump-sum or pension which is based on salary and service timein the defined benefit plans and introduce cash balance-style pension plans in a part of defined benefit plans. In this institution,
hypothetical individual employee accounts which are equal to the source of deposit and pension by each buyer are established.
In these accounts, the interest credit which is based on the movement of market interest rate and the contribution credit which
is based on the salary level are accumulated. In a part of defined benefit plans, etc., retirement benefit trust is established.
In lump-sum payments plans (part of which becomes funded as a result of benefit trust although the system is unfunded), thelump-sum based on the salary and service time as retirement benefits is provided.
Defined contribution plans and lump-sum payments for certain consolidated subsidiaries are accounted for using the simplified method in which calculates retirement benefit liabilities and retirement benefit expenses.
(1) Changes in defined benefit obligations
Thousands of
U.S. dollars

Millions of yen

April 1
Balance at beginning of year
Service cost
Interest cost
Actuarial gains and losses
Benefit paid
Other
March 31

2019

2018

¥ 19,441
19,441
1,004
222
(510)
(1,173)(220)¥ 18,764¥ 19,734
19,734
1,078
218
(359)
(1,309)78¥ 19,441

2019$ 175,144
175,144
9,045
2,000(4,594)(10,567)(1,981)$ 169,045(2) Changes in plan assets
Thousands of
U.S. dollars

Millions of yen

April 1
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefit paid
Other
March 31

2019

2018

¥ 19,004
540
(721)
602
(1,089)(138)¥ 18,198¥ 17,932
415
1,064
619
(1,142)115¥ 19,004

2019$ 171,207
4,864(6,495)
5,423(9,810)(1,243)$ 163,945(3) Reconciliation of defined benefit obligations and plan assets to net benefit liability and asset
The reconciliation of the defined benefit obligations and plan assets to net defined benefit liability and asset recognized in the
consolidated balance sheets as of March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

Funded defined benefit obligations
Plan assets
Subtotal
Unfunded defined benefit obligations
Net amount of liability and asset recognized in consolidatedbalance sheets
Liabilities (net defined benefit liability)
Assets (net defined benefit asset)
Net amount of liability and asset recognized in consolidatedbalance sheets

23

TOYO ENGINEERING CORPORATION

Financial Report 2019

2019

2018

¥ 17,608(18,198)
(589)
1,155

¥ 18,214(19,004)
(789)
1,226

$ 158,630(163,945)(5,306)
10,405

565
1,200
(635)

437
1,323
(886)

5,090
10,810(5,720)

¥

565

¥

437

2019

$

5,090

(4) Retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Other
Total

2019

2018

2019

¥ 1,004
222
(540)
(241)
(72)
¥ 372

¥ 1,078
218
(415)
(392)
(8)
¥ 480

$ 9,045
2,000(4,864)(2,171)(648)$ 3,351(5) Remeasurements of defined benefit plans
Thousands of
U.S. dollars

Millions of yen

2019
Actuarial (losses) gains
Total¥ (452)¥ (452)

2018

2019

¥ 1,030¥ 1,030$ (4,072)$ (4,072)(6) Accumulated remeasurements of defined benefit plans
The unrecognized actuarial gains and losses recognized in accumulated other comprehensive income (amount before income tax
effect) as of March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019
Unrecognized actuarial gains and losses
Total

¥ 570
¥ 570

2018

2019

¥ 1,023¥ 1,023$ 5,135$ 5,135(7) Major breakdown of plan assets

2019
Components of plan assets
Securities
StocksCash and deposits
Other
Total

2018

26%
46%
11%
17%
100%

27%
47%
10%
16%
100%

20% and 23% of total plan assets as of March 31, 2019 and 2018 ,respectively, are included in the retirement benefit trust.
(8) Basis of actuarial calculation
Basis of calculation of projected benefit obligation for the years ended March 31, 2019 and 2018 are as follows:
Discount rate
Expected rate of return on plan assets
Expected salary increase rate

2019

2018

Mainly 0.08%
Mainly 2.5%
Mainly 3.1%

Mainly 0.08%
Mainly 2.0%
Mainly 3.4%

Defined contribution plans
The contributions by the Company and subsidiaries to the defined contribution plans were ¥280 million ($2,522 thousand) and¥235 million for the years ended March 31, 2019 and 2018, respectively.

TOYO ENGINEERING CORPORATION

Financial Report 201924

21. INCOME TAXESThe statutory tax rate applicable to the Company and its domestic subsidiaries for the year ended March 31, 2019 was approximately
30.5%. Income taxes of the foreign subsidiaries are based generally on the tax rates applicable in their countries of incorporation.
(1) Significant components of the deferred income tax assets and liabilities
Thousands of
U.S. dollars

Millions of yen

As of March 31,
Deferred tax assets (gross):
Net operating loss carry forwards (*2)
Accounts payable for construction contracts
Provision of allowance for doubtful accounts
Net defined benefit liability
Interest income receivable
Provision for loss on construction contracts
Deferred losses on hedges
Other
Total deferred tax assets (gross)
Valuation allowance for net operating loss carry forwards (*2)
Valuation allowance for deductible temporary differences
Total valuation allowance (*1)
Total deferred tax assets (gross)
Deferred tax assets-Deferred tax liabilities
Total deferred tax assets

2019

2018

2019

¥ 14,665
3,112
2,220
1,307
660
626
436
2,275
25,304(14,657)(8,051)(22,708)
2,596(1,767)828¥ 6,666
3,782
2,248
1,457
630
4,154
241
2,897
22,078——(19,204)
2,874(1,568)1,305$ 132,117
28,03620,00011,774
5,945
5,639
3,927
20,495
227,963(132,045)(72,531)(204,576)
23,387(15,918)
7,459

Deferred tax liabilities (gross):
Undistributed earnings of subsidiaries and affiliates
Valuation difference on available-for-sale securities
Gain on securities contribution to retirement benefits trust
Other
Total deferred tax liabilities (gross)
Deferred tax assets-Deferred tax liabilities
Deferred tax liabilities
Net deferred tax liabilities

2,202
115
660
1,027
4,006
(1,767)2,238¥ (1,409)

1,452
162
644
864
3,123
(1,568)1,555¥ (249)19,837
1,036
5,945
9,252
36,090(15,918)
20,162$ (12,693)(*1) Deductible temporary differences from provision for loss on construction contracts and other have decreased due to theprogress of US ethylene project. Net operating loss carry forwards increased due to the cost increase of US ethylene project.
(*2) A breakdown of net operating loss carry forwards and valuation allowance by expiry date as of March 31, 2019 is as follows:
Millions of yen

Years ended March 31,
2020
2021
2022
2023
2024
2025 and thereafter
Total

Net operating loss
carry forwards

Valuation
allowance

¥

¥

—
18
—
—
445
14,201¥ 14,665

—
10
—
—
445
14,201¥ 14,657

Deferred tax
assets

¥—
8
—
—
—
—
¥ 8

Millions of U.S. dollars

Years ended March 31,
2020
2021
2022
2023
2024
2025 and thereafter
Total

25

TOYO ENGINEERING CORPORATION

Financial Report 2019

Net operating loss
carry forwards

Valuation
allowance

$

$

—
162
—
—
4,009
127,936$ 132,117

—
90
—
—
4,009
127,936$ 132,045

Deferred tax
assets

$—
72
—
—
—
—
$ 72

(2) The effective tax rate on income before income taxes in the accompanying consolidated statements of operations was notequal to the above-mentioned statutory tax rate for the following reasons for the year ended March 31, 2019.
Year ended March 31,
Statutory tax rate in Japan
Adjustments:
Permanently nondeductible expenses
Permanently nontaxable income
Per capita levy on corporate inhabitant tax
Temporary differences excluded from calculation of deferred tax assets
Difference in tax rates for foreign subsidiaries
Difference in tax base between corporate income tax and enterprise tax
Net operating loss carry forwards etc.
Equity in earnings of affiliates
Adjustment of tax in prior years
Non-income based tax in foreign countries
Undistributed earnings of subsidiaries and affiliates
Other
Effective tax rate

2019

30.5%
3.5%
(1.2%)
0.4%(132.6%)(1.1%)(11.2%)
253.3%(55.6%)
1.4%
10.2%
21.4%
3.0%
122.0%

As loss before income taxes was recorded, the reconciliation of the difference between the statutory tax rate for and the effective tax rate for the year ended March 31, 2018 was omitted.

22. SEGMENT INFORMATION(1) Information by geographical segment based on the locations of projects
Millions of yen

Year ended March 31, 2019
Net Sales

Japan

USA

Indonesia

Malaysia

India

ThailandOther¥ 50,086¥ 49,030¥ 48,859¥ 41,168¥ 40,524¥ 37,765¥ 27,558 ¥ 294,993

Total

Japan

USA

Indonesia

Malaysia

India

Thailand$ 451,225$ 441,711$ 440,171$ 370,882$ 365,081$ 340,225

Year ended March 31, 2019
Property, plant and equipment

Japan

Indonesia

Year ended March 31, 2019
Property, plant and equipment

Japan

Indonesia

Other$ 72,099$ 18,819$ 9,945 $ 100,864

Japan

USA

Indonesia

Malaysia

India

ThailandOther¥ 68,542¥ 40,224¥ 27,258¥ 73,151¥ 42,946¥ 55,596¥ 27,977 ¥ 335,697

Japan

Indonesia

Thousands of U.S. dollars

Year ended March 31, 2019
Net Sales

Other

Total

$ 248,270 $ 2,657,594

Millions of yen¥ 8,003¥ 2,089

Other

Total

¥ 1,104¥ 11,196

Thousands of U.S. dollars

Total

Millions of yen

Year ended March 31, 2018
Net Sales

Total

Millions of yen

Year ended March 31, 2018
Property, plant and equipment¥ 8,915¥ 2,159

Other

¥ 905

Total

¥ 11,980(Changes in presentation)
Indonesia, which had been included in “Other” for the year ended March 31, 2018, is presented separately for the year ended
March 31, 2019 because the corresponding amount exceeded 10% of net sales on the consolidated statement of operations forthe year ended March 31, 2019.
To reflect this change in presentation, ¥27,258 million attributable to Indonesia for the year ended March 31, 2018, which had
been previously included in “Other,” was reclassified and presented separately.

TOYO ENGINEERING CORPORATION

Financial Report 201926

(2) Information by major clients
Millions of yen

Year ended March 31, 2019
Shintech Louisiana, LLC
PRPC REFINERY AND CRACKER SDN. BHD.

Net SalesYear ended March 31, 2019
Shintech Louisiana, LLC
PRPC REFINERY AND CRACKER SDN. BHD.

Net Sales

Segment$ 410,873$ 338,828

EPC
EPC

Year ended March 31, 2018
PRPC REFINERY AND CRACKER SDN. BHD.
Chambal Fertilisers and Chemicals Limited
Setouchi Future Creations, LLC
Shintech Louisiana, LLC

Net Sales

Segment¥ 45,607¥ 37,610

EPC
EPC

Thousands of U.S. dollars

Millions of yen¥ 71,501¥ 40,643¥ 34,436¥ 33,817

Segment

EPC
EPC
EPC
EPC

23. RELATED PARTY INFORMATION
1. Related Party Transactions
For the year ended March 31, 2019
Millions of yen

Name: NEDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
15,153 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fund

Summary of Transaction
transactions amount

Loan for
operatingfund¥—

Thousands of U.S. dollars

Title ofaccount

Accountbalance

Transaction
amountTitle ofaccount

AccountbalanceLong-term
loans
receivable¥ 3,707$—

Long-term
loans
receivable$ 33,396

For the year ended March 31, 2018
Millions of yen

Name: NEDL-CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Category: Affiliate
Address: Brazil
Capital and investments:
13,456 thousands BRL
Business: Construction
Equity ownership percentage:
42.5% directly
Relation with related party:
Loan for operating fund

Summary of Transaction
transactions amount

Loan for
operatingfund¥—

Title ofaccount

AccountbalanceLong-term
loans
receivable¥ 3,707

Notes: 1. Interest rate on loan is determined by considering effective market rates.
2. The Company reserved ¥3,707 million ($33,396 thousand) of allowance for doubtful accounts at March 31, 2019,against the loan above.
3. The Company reserved ¥3,707 million of allowance for doubtful accounts at March 31, 2018, against the loan above.

27

TOYO ENGINEERING CORPORATION

Financial Report 2019For the year ended March 31, 2019
Millions of yen

Name: Toyo Setal Empreendimentos Ltda. Summary of Transaction
Category: Affiliate
Address: Brazil
Capital and investments:
38,904 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Contingent liabilities

transactions

amountTitle ofaccount

Contingent
liabilities¥ 1,601—

Thousands of U.S. dollars

Accountbalance

Transaction
amountTitle ofaccount

Accountbalance¥—$ 14,423—$—

For the year ended March 31, 2018
Millions of yen

Name: Toyo Setal Empreendimentos Ltda. Summary of Transaction
Category: Affiliate
Address: Brazil
Capital and investments:
38,904 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Contingent liabilities

transactions

amountTitle ofaccount

AccountbalanceContingent
liabilities¥ 2,039—¥—

Note: 1. Contingent liabilities are provided for refund guarantee etc. of Toyo Setal Empreendimentos Ltda.
For the year ended March 31, 2019
Millions of yen

Name: Estaleiros do Brasil Ltda.
Category: Affiliate
Address: Brazil
Capital and investments:
57,749 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fund

Summary oftransactions

Transaction
amountLoan for
operating fund¥—Repayment ofloan for
operating fund

2,986

Accured interest
income688

Thousands of U.S. dollars

Title ofaccount

Accountbalance

Transaction
amountShort-term
loans
receivable¥ 5,432$———

Title ofaccount

Accountbalance

Short-term
loans
receivable$ 48,936——

26,900
6,198

TOYO ENGINEERING CORPORATION

Financial Report 201928

For the year ended March 31, 2018
Millions of yen

Name: Estaleiros do Brasil Ltda.
Category: Affiliate
Address: Brazil
Capital and investments:
57,749 thousands BRL
Business: Construction
Equity ownership percentage:
50% indirectly
Relation with related party:
Loan for operating fund

Summary oftransactions

Transaction
amountLoan for
operating fund

¥ 543

Repayment ofloan for
operating fund

4,027

Accured interest
income442

Title ofaccount

Accountbalance

Short-term
loans
receivable¥ 3,902——

Note: 1. Interest rate on loan is determined by considering effective market rates
2. Summary of Financial Statements of Significant Affiliates
For the years ended March 31, 2019 and 2018, the significant affiliates were Moeco Thai Oil Development Co.,Ltd., MODEC and Toyo
Offshore Production Systems Pte.Ltd. and TS Participações e Investimentos S.A. Their condensed financial information is as follows:
Thousands of
U.S. dollars

Millions of yen

As of and for the years ended March 31,
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total net asset deficiencies

2019

2018

¥ 26,178
11,17236,646
5,057¥ (4,351)¥ 40,885
13,20857,0894,732¥ (7,728)$ 235,837
100,648
330,144
45,558$ (39,198)

2019

Net sales
Profit before income tax
Profit¥ 10,461
9,598¥ 7,209¥ 24,247
11,388¥ 10,833$ 94,243
86,468$ 64,945

24. AMOUNTS PER SHARE
Yen

As of and for the years ended March 31,
Net assets per share
Loss attributable to owners of parent per share

U.S. dollars

2019

2018

¥ 554.11(20.51)¥ 654.91(700.30)2019$ 4.99(0.18)

Loss attributable to owners of parent per share is computed based on the loss available for distribution to shareholders ofcommon stock and the weighted average number of shares of common stock outstanding during each year.
Net assets per share are computed based on the number of common stock outstanding and the net assets excluding non-controlling interests at the year end.
For the calculation of “Net assets per share”, residual assets attributable to Class A preferred stock are deducted from total
net assets.
The Company conducted a one-for-five reverse stock split of common shares effective October 1, 2017. The corresponding
figures shown here have been calculated on the assumption that the reverse stock split had been conducted at the beginning of
the previous fiscal year.

25. SIGNIFICANT SUBSEQUENT EVENTSAt the Board of Directors’ meeting held on June 13, 2019, the Company determined to negotiate the transfer of all shares of
Setouchi Future Creations LLC (“Setouchi”) based on the agreement of other investors in Setouchi. On June 21, 2019, theCompany agreed on the transfer of all the shares of Setouchi and entered into a transfer contract. As a result of the transfer, theCompany will record approximately ¥1,700 million ($15,315 thousand) of gain on sales of investments in securities as extraordinary income in the consolidated statement of operations for the year ending March 31, 2020.
The Company was awarded EPC work for the Setouchi mega solar power plant from Setouchi and completed its transfer forthe year ended March 31, 2019.

29

TOYO ENGINEERING CORPORATION

Financial Report 2019

TOYO ENGINEERING CORPORATION

Financial Report 201930

TOYO ENGINEERING CORPORATION
2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
Tel: 81-47-451-1111 Fax: 81-47-454-1800
https://www.toyo-eng.com/