Toyo Engineering Corporation Annual Report 2009

2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
Tel: 81-47-451-1111
Fax: 81-47-454-1800
http://www.toyo-eng.co.jp/

Annual Report 2009
Year ended March 31, 2009©2009 Toyo Engineering Corp.
Printed in Japan

TOYO ENGINEERING CORPORATION   Annual Report 2009

Corporate Profile
Toyo Engineering Corporation (TOYO) is one of the world’s leading engineering contractors. Since its inception in 1961, TOYO
has actively deployed Engineering, Procurement, and Construction (EPC) businesses, and has successfully delivered large andcomplex projects in more than 50 countries. TOYO’s engineeringbusiness focuses on the segments of Energy, Oil Refining, Petrochemicals & Chemicals, Oil & Gas Development, Infrastructure,
Environment, and other manufacturing facilities.
TOYO performs comprehensive engineering businesses withinformation technology (IT) and other cutting-edge technologies
added to and integrated with its reliable engineering proficiency
and project management capabilities. TOYO provides optimum
solutions to the increasingly diversified and individualized
CONTENTS

needs of our clients through five considerable assets: (1) Project

Consolidated Financial Highlights....................................1

management skills, (2) Comprehensive integrated engineering

To Our Shareholders....................................................................2

technologies, (3) High-tech application capabilities, (4) Optimum

Review of Operations.................................................................5

alliance building, and (5) Advanced global networking.

Management System...............................................................10
HSSE + Quality..............................................................................12
Financial Section

We have a globally networked organization named “Global
Toyo,” which makes us capable of executing work based on com-

Consolidated Five-Year Summary...............................................14

mon work standards in close cooperation with our group com-

Management’s Discussion and Analysis.................................16

panies as well as in an optimal formation. The workforce of TOYO

Business Risk and Other Risks.........................................................17

totals 7,000 people at Global Toyo companies and other group

Consolidated Balance Sheets.........................................................18

companies. Global Toyo companies maintain and strengthen

Consolidated Statements of Income........................................20
Consolidated Statements of Changes in Net Assets.......21
Consolidated Statements of Cash Flows................................22

TOYO’s image of reliability and assure clients that projects will bedelivered safely, to a high-quality standard, and on schedule.

Notes to Consolidated Financial Statements.......................23

In 2009, TOYO launched a new group mission entitled “Engi-

Independent Auditors’  Report.....................................................39

neering for Sustainable Growth of the Global Community.” BasedWorldwide Network..................................................................40

on our qualifications and worldwide first-rate engineering capa-

Stock Information.......................................................................41
DEFINITION OF TERMS¡ Fiscal 2008 means the fiscal year ended March 31, 2009.
(April 1, 2008–March 31, 2009).
¡ The word, mark, logo or any sign with a symbol “TM” means that it
is a registered trademark of Toyo Engineering Corporation in Japan.
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS	This annual report includes certain “forward-looking statements.”
These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances.
Actual results may differ due to changes in economic, business,competitive, technological, regulatory, and other factors.

bilities, we offer solutions that fully satisfy the comprehensive
requirements of our clients. Harmonizing the supply of energy
and materials with environmental protection requirements ispart of our genuine attempt to contribute to the realizationof a “Sustainable Global Community.”Consolidated Financial Highlights
Financial Summary

Thousands of
U.S. dollars*Millions of yen

Years ended March 31,
Net sales...................................................................................
New orders.............................................................................
Backlog of contracts at end of the year................
Net income.............................................................................
Total assets..............................................................................
Total net assets.....................................................................
Per share data (in yen and U.S. dollars):
Net income........................................................................
Cash dividends................................................................

2009

2008

2009

¥326,248
119,265
224,416
6,516
199,41358,509¥327,413
268,693444,434
8,029
280,139
57,331$3,321,267¥   33.91
7.00¥   41.76
6.00$     0.35

1,214,144
2,284,594
66,3312,030,060
595,635

0.07* U.S. dollar amounts are stated at ¥98.23 to U.S.$1.00, the exchange rate prevailing on March 31, 2009.

Operational Summary>>> O perating income marked a record high.
>>> N ew order target not reached due to the global financial crisis.

Net Sales(¥ billion)

’09

326.2

’08

327.4

’07

Net Income(¥ billion)

223.8

’06

195.6

’05

197.9

’09

6.5

’08

8.0

’07

5.3

’06

3.4

’05

New Orders(¥ billion)

’09

3.6

119.3

’08

268.7

’07

355.0

’06

257.8

’05

Backlog of Contracts(¥ billion)

’09

192.6

224.4

’08

444.4

’07

499.2

’06
’05

373.5
337.8


To Our Shareholders
An Age of Dramatic Changes—Steadily Achieving a Growth Scenario
In fiscal 2008, ended March 31, 2009, TOYO posteda favorable performance, with operating income
reaching a record high. Contributing to that performance were the high reputation of our work
among our clients, the establishment of excellent
business relationships, and the high-spirited collaboration of workers and associated companies
participating in our projects, demonstrating thecapabilities needed to ensure our clients’ success.
The understanding of our clients and the supportof our shareholders were also important factors inour strong performance.
Nevertheless, our business climate changed
dramatically in the second half of the fiscal year in
the face of global economic turmoil. Under the impact of the sudden global economic recession andrestraint in capital investments, projects have been
postponed across the board as the difficult business environment in the plant business continues.
For the time being, we will devote our full efforts
to securing new orders. We must also make preparations—sometime in the near future the global
economy will begin to show signs of moving out
of its adjustment phase into recovery, and we must
be ready to capitalize on that opportunity.
In addition to formulating a new Mission, Vision,and Value statement shared by our group, we
kicked off a new three-year medium-term management plan on April 1, 2009. Sharing groupwide
objectives, we intend to steadily implement ouraction plan in order to achieve growth.
August 2009

Yutaka Yamada
President and Chief Executive OfficerTOYO ENGINEERING CORPORATION   Annual Report 2009

New MVV Statement
Formulating a Toyo Group MVV Statement
We have formulated a new Mission, Vision, and Value (MVV) statement for the
Toyo Group. The purpose of this new MVV statement is to, amid our rapidlychanging business environment, heighten the Group’s sense of unity through ashared sense of mission and values by the employees of the Group’s companies
around the globe.

Group Mission:

Engineering for Sustainable Growth of the Global Community
Based on our qualifications and global first-rate engineering capabilities, we offer comprehensive solutions that fully meet the various requirements of our clients, and as part of our genuine attempt we wish tocontribute to the realization of a “Sustainable Global Community” by harmonizing the supply of energy andbasic materials with requirements for environmental protection.

Group Vision:

Global Leading Engineering Partner
As a global first-ranked engineering company group, we become a highly trusted, long-term partner to ourclients by solving their problems together with them, from their perspective. We do this by providing ourclients with total value for the project in terms of quality, HSSE, schedule, cost, and other factors.

Group Value:

Integrity, Creativity, Diversity, Learning, Team
Each director and employee of the Toyo Engineering Corporation Group shall share the following groupvalues and act accordingly:
Integrity : To carry out the work in good faith under his or her own responsibility.
Creativity : To create new values in cooperation with our clients or by ourselves by applying our wisdom andcreativity to the greatest extent.
Diversity : To respect the individuality and personality of each person as well as the culture and customs of eachcountry and region.
Learning : To acquire new experiences, skills, and knowledge with an enterprising spirit.
Team: To achieve high performance through team play with our clients and partners as well as within our Group.

To Our Shareholders

Medium-Term Management Plan

Start of the Medium-Term Management Plan (FY2009–FY2011)
On April 1, 2009, TOYO kicked off its
three-year medium-term management
plan. The basic strategies of the plan are
to: 1) respond to changes in businesstype and field, 2) advance Global Toyo,and 3) enhance human resources. .
Addressing the dramatic changes inour business environment and pushing
forward with Global Toyo, we will also
concentrate on enhancing our humanresources, which form the foundation forthe previous two policies.

Basic Policies of Medium-Term Management Plan

Respond to Changes in
Business Type and Field

Advance Global Toyo

Service Type Jobs
Upstream
Infrastructure
Environment

Group Synergy
through Joint
Sales/Project
Execution

Global Leading
Engineering Partner
Enhance Human Resources
Boost up the Powerof Human Capitalthroughout
the Toyo Group

Basic Policy 1:

Respond to Changes in Business Type and Field
Responding to changes in the types of businesses we are pursuing involves taking into consideration the
future direction of the engineering market and correctly dealing with the diverse requirements that the market will have for TOYO. Specifically, we will devote our efforts to answering market needs for service businessprojects as well as projects in the upstream, energy, social infrastructure, and environment fields. Furthermore, within this process, we plan to form deeper cooperative relationships with our partner companies.

Basic Policy 2:

Advance Global Toyo
Under the medium-term management plan, we will further refine and enhance Global Toyo. That conceptrefers to our efforts to build a framework to support close cooperation among all the members of the Toyo
Group in carrying out business. In more concrete terms, this means we will collaborate through a more solidand optimized system in sales, proposals, and projects. Moreover, we will establish an appropriate frameworkto achieve this goal.

Basic Policy 3:

Enhance Human Resources
In targeting the goals of our first two basic policies, we will concentrate on upgrading our human resources—the foundation for those policies. We will return to the origin of engineering business thinking, where“people are assets.” Based on a global perspective, investing in human resources will be a common issue for
the Toyo Group.

Review of Operations

TOYO ENGINEERING CORPORATION   Annual Report 2009

Overcoming Crisis and Targeting Evolution
Operating Environment>>> T he simultaneous stagnation in global
markets had a substantial impact on theplant engineering market in fiscal 2008.
• A drop in crude oil prices and deteriorationin the end-product markets of our clients.
• A decrease in global demand for raw
materials.
（単位：ドル）• A negative impact on financing for new
150
120projects.
• 
Restrained orders in expectation of further
90
declines in material costs.
60
30

4

5

6

7

8

9

10

11

12

H21

▼

H20

▼

0

1

2

3（月）

	Freezing, Postponement, or Cancellationof Clients’ Capital Investment Plans
WTI Crude Oil Chart (Fiscal 2008)(Units: Dollars / barrel)

150
120
90
60
30
2009

▼

2008

▼

0

Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

In the fiscal year under review, the Japanese economy wasaffected by the financial crisis that began in the United Statesand spread rapidly throughout the entire world, impacting
not only financial markets, but also the real economy.
While there was a sharp deterioration in the economies of
the United States and Europe, Asia was less affected. While
the well-performing Chinese economy experienced a decline,
its growth rate remained in the single digit range. There werealso slowdowns in the economies of India and Southeast
Asian countries. Middle East countries saw their economic
growth dulled by lower revenues from oil exports, resulting ina cool off in the robust capital investments being made in theregion. South American countries also experienced a similar
slowdown in their economies.
This rapid change in the world economy produced adramatic change in our operating environment. The global
economic recession particularly affected new orders in theplant engineering market through a drop in crude oil prices(see WTI Crude Oil Chart), deterioration in the end-productmarkets of our clients, a decrease in global demand for raw
materials, a negative impact on financing for new projects
caused by the contraction in financial markets, and restrainedorders in expectation of further declines in material costs.
Against this backdrop, a large number of corporations announced postponements, freezes, or cancellations of largescale energy and petroleum refining projects. In addition to
the reduced number of projects, TOYO faced heated competition for orders from contractors in Korea, Taiwan, and othercountries, resulting in further severity of its operating
environment.

Performance
Outline (Consolidated)（単位：ドル）

4

5

6

7

8

9

10

11

12

▼

▼

150sales ................................................................. ¥326.2 billion (down 0.4%)
Net
120
Operatingincome . ............................................. ¥15.2 billion (up 10.4%)
90
Net income.............................................................
¥6.5 billion (down 18.8%)60
Net income (per share).......................................
¥33.91 (down 18.8%)
30 New orders.................................................. ¥119.3 billion (Achievement rate 54.2%, down 55.6%)>>>>>>0 Year-end
dividend...................................
¥4 (Interim dividend of ¥3, annual dividend of ¥7)
H20
H21
1

2

3（月）

Under these circumstances, we sought to further strengthen
our partnerships with our clients, coped with their need forchanges in products and services, and worked proactively todevelop business. For ongoing projects, we paid attention to
the impact of the deterioration on operating conditions, andendeavored to maintain good relationships with our clientsand partners while focusing on making continued solid

progress. As a result of these measures, TOYO achieved theconsolidated performance shown above.
In contrast, we posted unsatisfactory results for new orders
in fiscal 2008, as also shown above. The drop in new orders
can be attributed to the large decline in the number of projects coming on the market due to companies successively
postponing or freezing plant-related capital investment plans.
Review of Operations
In addition, there was heated competition to win the limited
number of orders on the market.
Looking at the major new orders received, we received
an order from Arkema Daikin Advanced Fluorochemicals(Changshu) Co., Ltd., for construction of an R125 production
plant in China. We also won an order from MODEC Offshore

Production Systems (Singapore) Pte. Ltd., a member of the
Mitsui Ocean Development & Engineering Co., Ltd. (MODEC)
group, for the detailed engineering of a topside facility for a
floating production, storage and offloading (FPSO). In Japan,
we received an order from Tosoh Corporation for the recovery
of salt for an ethylene amine plant.

Fiscal 2009 Performance Forecast (Consolidated)
Items

Fiscal 2009 forecast
New orders...........................................................................................................¥230.0 billion
Net sales ...............................................................................................................¥200.0 billion
Operating income . .............................................................................................. ¥8.0 billion
Net income............................................................................................................... ¥5.0 billion
Net income (per share).................................................................................................. ¥26.03(

Interim dividend of ¥2.5,

Cash dividends (annual)............................................................¥5 year-end dividend of ¥2.5)

Fiscal 2008 results¥119.3 billion¥326.2 billion¥15.2 billion¥6.5 billion¥33.91(Interim dividend of ¥3,¥7 year-end dividend of ¥4)

Note: U. S. dollar amounts are stated at ¥90.00 to U.S. $1.00, the exchange rate prevailing on March 31, 2009.

In fiscal 2009, TOYO will face varied market trends in the following four capital investment fields:• Upstream field
Natural resource development capital investment related topetroleum and natural gas wells• Downstream field
Petroleum refining, gas processing, petrochemical, andfertilizer-related capital investment• Alternative energy field
Dimethyl ether (DME) and gas to liquid (GTL)-related capital
investment• Infrastructure field
Water, power generation, and transportation-related capital
investment centering on railways

To begin with TOYO’s core field, the downstream field, we
believe that, as previously stated in the Performance Outline,
the field will continue to be greatly influenced by the global
economic recession for the time being. However, despite
the severe conditions, our clients will continue to make firm
selective and strategic capital investments based on theirbusiness strategies. Moreover, we see the decline in demandfor our clients’ products bottoming out at some point.
Looking next at the upstream field, against the backdrop
of increased energy consumption by the growing populations of developing countries, demand promises to remainstrong even amid the global economic recession. TOYO already has an extensive and strong record in natural resource
development consulting projects and should continue to be
successful in this field. On the other hand, in the alternative
energy field, TOYO is working on developing technology
for compact GTL facilities and on producing large-scale DME
plants. Along with the drop in oil prices, market demand foralternative energy will remain extremely slow for the time

TOYO ENGINEERING CORPORATION   Annual Report 2009

being, but will still continue at low levels. We believe that thisfield will eventually return to prominence. Finally, we havemade many preparations for activities in the infrastructure
field (water, power generation, and transportation-related
markets). Due to the nature of this field as a political andeconomic policy tool for achieving social stability and overcoming economic stagnation, capital investments should
continue to be relatively firm.
Based on our analysis of market trends, we have set our
new order target for the current fiscal year at ¥230.0 billion.

Having estimated progress with completing our backlog oforders, we are forecasting a consolidated net sales of ¥200.0
billion in fiscal 2009. Accordingly, we are expecting an operating income of ¥8.0 billion and a net income of ¥5.0 billion.
Business performance forecasts have been made based on
management’s expectations using information available atthe time. Actual results could differ accordingly.

Fiscal 2009 Business Issues• Securing immediate new orders• Strengthening marketing organization• Emphasizing proactive approach to cultivate clients’ needs• Thorough cutting down on fixed and project expenses
We believe the business environment faced by TOYO willremain unpredictable. Under these circumstances, we willcontinue to thoroughly manage our ongoing projects toachieve steady progress. Furthermore, we intend to use thefollowing strategies to reach our sales and earnings targets:
Securing Immediate New Orders
While taking all possible measures to ensure that we secureorders for projects on which we have been focusing ourmarketing activities, we will also endeavor to win orders byconcentrating our marketing resources on priority fields.
We will determine these priority fields by looking closely atclients’ projects that are based on surplus cash or institutional
financing, public works projects to expand domestic demand,
new energy development projects which continue to be indemand, and infrastructure projects.
Strengthening Marketing Organization
We will reform our marketing organization with the goals of:1) further reinforcing our regional marketing power, 2) establishing a well-defined structure that can win infrastructure
projects by optimal leveraging of regional marketing power,and 3) aggressively pursuing orders in the natural resourcesand energy development fields.

Emphasizing Proactive Approach to Cultivate Clients’ Needs
Returning to our roots as an engineering company that uses
its knowledge and ingenuity to provide total solutions to awide range of client needs, we will work to keep abreast of thecapital investment plans or activities our clients are planningwith an eye on economic recovery. Stimulating demand fromclients, we plan to win project orders, including software- andservice-related contracts, by making proposals that accurately
meet client needs.
Thorough Cutting Down on Fixed and Project Expenses
We will redouble our efforts to thoroughly review our fixedand project expenses and endeavor to reduce costs.
While determining the above, we also formulated a new
medium-term management plan from a medium- to longterm perspective. The new plan aims to reinforce our businessstructure based on three basic strategies of: 1) responding tochanges in business type and field, 2) advancing Global Toyo,and 3) enhancing human resources. At the same time, we
formulated a new Group MVV statement.
For details, please see pages 3 and 4.

Review of Operations

Major Projects

Russia’s first large-scale grass-roots Liquefied Natural Gas (LNG) plant completed.
Three mega-ethylene projects (India, Thailand, and Singapore) are approaching
their final stages.
Domestic
New Orders
Name of Client

Type

Scope

Tosoh Corp.
Nippon Petroleum Refining Co., LTD.
Tonen General Sekiyu K.K.

Recovery of Salt for Ethylene Amine Plant
MTBE Unit Conversion to ETBE
Kawasaki Bio Fuel Blend Gasoline Project

E.P.C.
E.P.C.
E.P.C.

Name of Client

Type

Scope

Mitsui & Co., Ltd. / Chubu Electric Power Co., Inc.
Maruzen Petrochemical Co., Ltd.

Construction of Transformer Recycling Center
3EP Cracking Heater

E.P.C.
E.P.C.

Name of Client

Type

Country

Scope

Arkema Daikin Advanced Fluorochemicals(Changshu) Co., Ltd.

R125 Production Plant

China

E.P.C.

MODEC Offshore Production Systems(Singapore) Pte. Ltd.

FPSO Topsides

AngolaE.

Name of Client

Type

Country

Scope

Qatar Shell GTL Limited
Indian Oil Corporation Ltd.
PT T Polyethylene Co., Ltd.
PT T Polyethylene Co., Ltd.
Shell Eastern Petroleum (Pte) Ltd.
Petropars Ltd.
Petroquímica De Venezuela S.A. (Pequiven)

GTL Liquid Processing Unit
Ethylene Plant
Ethylene Plant
Polyethylene Plant
Ethylene Plant
Gas Processing Plant
Ammonia / Urea Plant
Modernize Refinery(Coker Naphtha Hydrotreating Unit)

Qatar

Venezuela

E.P.C.
E.P.C.
E.P.C.
E.P.C.
E.Ps.Cm.
E.P.C.
E.P.C.

Brazil

E.P.C.

Name of Client

Type

Country

Scope

Sakhalin Energy Investment Co., Ltd.
Petrochemical Industries Development
Management Company
Bridgestone (Huizhou) Synthetic Rubber Co., Ltd.

LNG Plant

Russia

E.P.C.

Ammonia Plant

Iran

E.P.SC.

Styrene Butadiene Rubber Plant

China

E.P.C.

Completion

Overseas
New Orders

In Progress

Petróleo Brasileiro S.A. (PETROBRAS)

India
ThailandThailandSingapore
Iran

Completion

E: Engineering   P: Procurement   C: Construction   Ps: Procurement service   SC: Supervision of Construction   Cm: Construction management

TOYO ENGINEERING CORPORATION   Annual Report 2009

Ethylene crackers
for Maruzen
PetrochemicalCo., Ltd.
3EP Cracking Heater of Maruzen Petrochemical Co.,Ltd.

TOYO President and CEO
Mr. Yamada at the
groundbreaking ceremony
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Liquids Processing Unit at Pearl GTL project, which is being jointly developed by Qatar Petroleum (QP) and Shell

LNG plant and oil export terminal for Sakhalin Energy Investment Co., Ltd., in Russia

Siloxane project for Dow Corning Corporation in China

Management System

Corporate GovernanceInternal Control System

Risk Management System

The Auditing Department of TOYO, which is under the
direct control of the President, performs audits concerning
the execution of business activities by all divisions andverifies the appropriateness and effectiveness of the internalmanagement structure, including compliance and risk
management. In addition, there are specialized units toperform other internal audits, such as the SQE (Safety, Quality
and Environment) Management Division and the Export
Control Administration Division.
In order to promote the Internal Control System of theGroup, TOYO is making efforts to ensure proper operations
across Toyo Group companies by establishing corporate
procedures to strengthen the corporate administrative
functions of each company.

For risk management concerning project profitability andfinancial matters within TOYO, all business operations areconstantly monitored and supervised, and reports are
submitted to the Board of Directors, the Executive Committee,
and the Board of Corporate Auditors. In addition, matters ofparticular importance concerning individual bidding andprojects undergo a risk analysis overseen by the Commission
for Analysis and Evaluation of Project Risks, and reports are
submitted to the Executive Committee.
TOYO has drawn up the Crisis Management Policy to clearly
set forth risk management procedures to forestall serious risks(crises) that have the potential to seriously affect the operationsof the Company. The Crisis Management Task Team, operating
under the Crisis Management Headquarters, is always working
to prepare for potential crises.

Corporate Governance Structure (As of July 2009)
Shareholders Meeting
Appointment/Removal

Appointment/Removal

Appointment/Removal
Audit

Board of Corporate Auditors
Corporate Auditors(External Corporate Auditors)

ReportBoard of Directors
Directors

Accounting Auditors (CPA)

ReportConsent of Appointment/Removal & Evalution of CPA Auditing
Liaison

Audit

ReportAppointment/
RemovalReportCorporate Planning Committee
Appointment/Removal

President (Chief Exective Officer)

Direction/Report

Executive Committee
Regular Committee
Direction/
ReportAuditing Department

Supporting Committee
Human Capital Development Committee
ReportProposalCommittee
SQE Committee

SQE Promotion Committee
ISMS Committee

Project Committee

Audit
Executive Officers

SQE Committee

ReportAudit

SQE Management
Division

Audit/Guidance

Operation Unit, Centers

10

Risk Control Structure
Project Risk Management Committee
Crisis Management Task Team

General Affairs Division
Export Control
Administration Division

Compliance Committee
Business Development Committee

Seismic Disaster Front Office
ReportSecurity Management DivisionCorporate Disclosure Manager
Risk Hotline System

Group Companies (Subsidiaries, Affiliates)

TOYO ENGINEERING CORPORATION   Annual Report 2009Management

Directors* Representative Director¡ Chairman
Yushi Nagata¡ President
Yutaka Yamada*¡ Directors
Yoshitaka Ogata*
Takuma Hatano
Kazuomi Nishihara*
Kenji Soejima*
Makoto Fusayama
Ken Wakazuki
Isao Ichikawa
Keiichi Matsumoto
Satoshi Kuwahara
Hideki Shiinoki
Auditors¡Senior Corporate Auditor
Kunimichi Gamo
¡Corporate Auditors
Keiji Suda
Takashi Umezu (Outside Auditor)
Yoshiyuki Shinohara (Outside Auditor)

Executive Officers¡Chief Executive Officer
Yutaka Yamada¡Executive Vice Presidents
Yoshitaka Ogata
Takuma Hatano¡Senior Executive Officers
Kazuomi Nishihara
Kenji Soejima
Makoto Fusayama
Ken Wakazuki
Isao Ichikawa
Keiichi Matsumoto
Satoshi Kuwahara
Hideki Shiinoki
Masahiro Suzuki
Yoshiaki Mizoguchi
Kiyoshi Nakao
Kenji Niwa
Akhilesh Kumar
Mitsutoshi Hamamura¡Executive Officers
Makoto Shimagaki
Kazundo Hayashi
Masaru Takezawa
Koji Nagatomi
Kazuharu Murayama
Motoyoshi Kamoshima
Tadashi Hori
Masayuki Uchida
Seiichi Itakura
Katsumoto Ishibashi
Hisashi Osone(As of June 23, 2009)
C

B

A

D

E

F

A Yushi Nagata B Yutaka Yamada
C Yoshitaka Ogata D Takuma Hatano
E Kazuomi Nishihara F Kenji Soejima

11

HSSE + Quality

Safety Takes Priority over Everything Else.
Safety is an integral part of the TOYO brand.
In 2008, TOYO’s Lost Time Incident Rate (LTIR), as defined by
ILO, was 0.18. Although this rate is an improvement from 0.19
in 2007, we are not satisfied with this result, and strive to improve it to the ultimate target of zero. As for continuous nonLTI hours for ongoing domestic and overseas projects, TOYO
has achieved 100 million man-hours as of May 2009, which is
TOYO’s new record for safety.
We are aware that the premises for a corporation that istrusted by the community include paying sufficient attention
to safety. We are confident that our efforts, initiatives, and timeand expenses spent to respect human life must take precedence over all other things. Loss of valuable human life must

absolutely be avoided in the process of TOYO and its groupcompanies’ business evolution, such as plant construction.
Safety is an important brand of TOYO. In order to boost
the brand value of all group companies in the world, we arestrongly promoting safety measures as part of the companywide safety goal for fiscal 2008: “Make Safety Standard Drill
into Global Toyo.”
TOYO will extend the unified construction HSSE standards
to group companies. Moreover, TOYO is developing a standardized work procedure across group companies. Throughpromoting standardization in this manner, the Toyo Group ismaking its best effort to maintain and improve quality as well
as safety.

In-House Safety Education

On-Site Safety Activity

Recognizing that safety is a basic aspect of corporate
activities, TOYO is conducting safety education programs
for all corporate members to raise awareness of the risks
and hazards that might lead to accidents. In order to disseminate safety culture and improve sensitivity toward
safety issues, education about such issues as safety management systems and risk assessment is given to particular members.

Our major goal is to hand over superior facilities to ourclients through construction work that is completed
without any accidents or injuries. For this purpose, eachconstruction site member, together with clients and partners, partakes in daily activities in a planned and positive
manner, with an established management system.

Global Toyo Subcommittee Meeting
As part of the continuous improvement of the Quality
Management System (QMS) of Global Toyo, members incharge of QMS from group companies convene at Global
Toyo Subcommittee Meetings held twice every year. In
fiscal 2008, the meetings were held in Seoul and Shanghai. The subjects of the meetings included a review of theannual plan and the progress of improvement activities
for QMS, Global Toyo Standards, and others.

12

TOYO ENGINEERING CORPORATION   Annual Report 2009Toyo-Japan
Local
Standards

Standards of Global Toyo

Toyo-India
Local
Standards

Toyo-Korea
Local
Standards

Global Toyo
Standards

Toyo-China
Local
Standards

TOYO holds standards of Global Toyo, which have been established on cumulative knowledge and experience gained
from a number of projects TOYO has accomplished aroundthe globe. With standards of Global Toyo consisting of Global
Toyo Standards (GTS) and the Local Standards (LS) of eachgroup company, TOYO guarantees to always provide highend products and services.

Toyo-Malaysia
LocalStandards

TOYO conducts its projects with due consideration for the environment. Examples include the Sakhalin LNG Plant and oil
export terminal project. Prior to the start of construction at the site, we conducted environmental surveys of animals, plants,
water, and other nature at the entire site and in the surrounding areas to obtain baseline data. During the construction period, we continuously monitored environmental impacts by regularly checking over 100 observation points throughout thesite, including the sea.

Fauna: Bird tagging

Vegetation

River monitoring

We surrounded the entire construction site with ditches to lead muddy rainwater to settlement ponds. There, the mud was
deposited and clean rainwater was discharged into rivers and the sea. In addition, we designated a protection zone ranging
50m from both sides of streams running through the plant site in order to conserve nature. As one of the synergetic effectsof these measures, the profuse number of pink salmon that swim up the stream to spawn in autumn is a rare sight at anyother plant site in the world.

Pink salmon swimming up the stream

Settlement pond

13

Financial Section

Consolidated Five-Year Summary
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31

Thousands of
U.S. dollars(Note 1)Millions of yen
2009

2008

2007

2006

2005

2009

Net sales...................................................................

¥326,248¥327,413¥223,844¥195,584¥197,945$3,321,267

Gross profit .....................................................................

34,752

34,424

22,236

17,825

17,770353,778

Operating income ..........................................................

15,16813,742

6,890

4,195

4,540

154,412

13,036

14,909

7,372

4,360

3,698

132,713

Income before income taxes andminority interest ....................................................
Net income...............................................................

6,516

8,029

5,294

3,350

3,598

66,331

Total assets...............................................................

199,413280,139

282,814202,662

209,564

2,030,060

Total net assets.........................................................

58,50957,331

51,55935,64928,442595,635

Long-term debt ........................................................

19,91722,03826,981

19,99036,454

202,754

Purchases of property, plant and equipment .............

513

831

2,752

3,455

2,096

5,227

Depreciation and amortization..................................

2,366

2,511

1,995

1,701

1,453

24,089Common stock .........................................................

18,19918,19918,19913,01813,018185,269

New orders...............................................................

119,265

268,693354,984

257,840

192,600

1,214,144

Backlog of contracts at end of the year.....................

224,416

444,434

499,237

373,518

337,760

2,284,594
U.S. dollars(Note 1)Yen

Per share:
Net income............................................................

¥ 33.91¥ 41.76¥ 27.90¥ 19.11¥ 20.51$0.35

Total net assets......................................................

294.71

283.98255.50191.73

162.16

3.00

Cash dividends ......................................................

7.00

6.00

3.00

3.00

3.00

0.07

“Total net assets” is a newly provided section to conform to Japanese accounting standard revisions. The figures for the year
ended March 31, 2005 were stated as “Total shareholders’ equity” under the previous standards.

Gross Profit

Operating Income(¥ billion)(¥ billion)

Net Income Per Share
15.2

34.4 34.8

(¥)

13.7
41.76
33.91
22.2
27.90

17.8 17.8

’05

14

’06

6.9

’07

’08

’09

4.5

4.2

’05

’06

’07

20.51

’08

’09

’05

19.11

’06

’07

’08

’09

TOYO ENGINEERING CORPORATION Annual Report 2009

2009

2008

2007

2006

2005

Net sales by sector (%):
Chemical fertilizers ....................................................................

6.9%

1.9%

2.9%

7.8%

15.8%

Petrochemicals............................................................................

29.2

Refinery.....................................................................................

14.0

28.7

25.6

24.9

27.4

8.8

12.3

3.0

7.7

Energy-related ...........................................................................

35.1

43.7

36.9

44.2

29.5

General manufacturing facilities andinformation technology ................................................................

10.6

11.8

15.2

14.9

14.7

Others .......................................................................................

4.2

5.1

7.1

5.2

4.9

(Overseas sales) .........................................................................

(78)

(78)

(66)

(68)

(72)

Number of employees ..................................................................

3,769

3,527

3,126

2,668

2,376

Total Assets

Total Net Assets(¥ billion)(¥ billion)

Composition of
Net Sales by Sector (FY2008)
(%)

57.3

282.8 280.1

58.5

4.2

6.9

51.6

10.6
209.6 202.7

199.4

29.2
35.6

35.1

28.4

14.0

’05

’06

’07

’08

’09

’05

’06

’07

’08

’09

■ Chemical Fertilizers■ Petrochemicals■ Refinery■ Energy-Related■ General Manufacturing Facilities
and Information Technology■ Others

15

Financial Section

Management’s Discussion and Analysis
In fiscal 2008, a sharp economic downturn occurred on a global scale, impacting on TOYO’s business operations, especiallynew orders.
New orders
New orders received for the year totaled ¥119.3 billion ($1,214 million). The unsatisfactory results in new orders can be attributed to a large decline in the number of projects due to the postponement and freezing of capital investments caused by thefinancial crisis in the United States and the following economic turmoil worldwide.
Sales and Earnings
Net sales remained at a level of ¥326.2 billion ($3,321 million) as a result of successful progress of projects. Operating income
increased to ¥15.2 billion ($154 million), which represents our highest performance yet. Net income was ¥6.5 billion ($66
million).
Cash Flows
Cash used for operating activities was ¥9.0 billion ($91 million) due to the decrease in advance receipts on uncompleted contracts. Cash used for investing activities was ¥5.0 billion ($51 million). This mainly represented expenditure on purchases ofinvestment securities. Cash used for financing activities was ¥8.3 billion ($85 million), reflecting continued repayment of longterm debt based on the debt reduction plan. The result of the above cash flows was a net decrease of ¥23.8 billion ($242 million) in cash and cash equivalents.

16

TOYO ENGINEERING CORPORATION Annual Report 2009

Business Risk and Other Risks
The following is a list of potential risks associated with the information concerning TOYO’s operating results and financial condition in this annual report that may have a significant bearing on investors' decisions. This is not intended to be a complete
list of these potential risks.
1. Business risk
The nature of our business activities, which mainly involve conducting projects outside Japan, is exposed to the risks listed below.
Any interruption or suspension in work due to these risks could have an adverse effect on our operating results and financial
condition. We are aware of the possibility that these risks may occur and are taking actions to reduce exposure to these risks byusing export credit insurance, maintaining a Risk Management System, Risk Control Structure and taking other steps.
(1) War, civil commotion, riots, revolutions, coup d'état, terrorism and other unusual events in the country where the projectis carried out or in a neighboring country. (2) Regional risks that occur particularly in an area near a project site, such as asurge of political unrest and a serious outbreak of a epidemic disease. (3) Extraordinary natural phenomenon, such as earthquakes, floods, typhoons and other storms as well as unusual weather, such as extreme heat or cold. (4) Drastic changes inindustrial or financial policies in the host country affecting the permission, laws and regulations involving import duties, immigration, foreign exchange, telecommunications, taxation and other items. (5) A sudden and substantial reduction of investments globally in business fields where we are active.
2. Foreign exchange fluctuation
For overseas plant construction contracts denominated in foreign currencies, the appreciation of the yen relative to the applicable foreign currency causes a reduction in the yen equivalent amount received. In addition, the yen’s appreciation makes us
less price competitive when competing for new orders in foreign currencies. This could have an adverse effect on our operating results and financial condition. In response, the group uses foreign exchange forward contracts, procures materials andequipment in foreign currencies, utilizes the resources of its overseas bases and takes all other possible steps to minimize
exposure to foreign exchange risk.
3. Sudden increases in prices of equipment, materials and construction
In turnkey lump-sum contracts, the possibility exists of sudden and steep rises in the cost of equipment and materials, transportation, construction, labor and other items associated with a project, or of problems caused by tight demand and suppliesof these items, due to rapid change in the international situation. The possibility also exists of cost increase caused by a supplier becoming insolvent or failure of quality control or delivery schedule delay by suppliers/sub-contractors. These events may
deteriorate the profitability of a project affected by soaring cost, delivery delay and other problems. Such events may therefore have a detrimental effect on our operating results and financial condition. To reduce our exposure to these risks, we,developing our accountability system to clients and project management system in project execution, utilize our experience toenter into contracts that incorporate measures to offset these risks and gather information on market trends. To avoid an
undue reliance on a particular supplier, we work on placing orders with a large number of suppliers and stringently monitor
the financial condition of suppliers.
We also diversify contract conditions such as cost reimbursement to reduce our risks.

17Financial Section

Consolidated Balance Sheets
Toyo Engineering Corporation and Consolidated Subsidiaries

March 31, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen

Assets

2009

2008

2009

Cash and deposits (Note 17) .......................................................................................

¥ 33,117¥ 34,311$ 337,134

Marketable securities (Note 13)...................................................................................

29,99052,966305,304

Notes and accounts receivable (Note 3).......................................................................

35,85836,313365,044

Less: Allowance for doubtful receivables ..................................................................

(7,808)(8,814)(79,490)

28,05027,499285,554

Contract work in progress.............................................................................................

25,75865,025262,224

Prepaid expenses and other current assets (Note 4) .....................................................

32,18946,494

327,686

Total current assets..................................................................................................

149,104

226,295

1,517,902

Investment securities (Note 13) ...................................................................................

3,602

6,466

36,673

Investments in unconsolidated subsidiaries and affiliates (Note 13)..............................

5,147

3,719

52,398Long-term loans .........................................................................................................

93

150

942

Other .........................................................................................................................

3,765

4,987

38,333

Less: Allowance for doubtful receivables ..................................................................

(484)

(735)

(4,930)Total investments..................................................................................................

12,123

14,587

123,416

Land (Note 3)..............................................................................................................

17,50917,800178,248

Buildings and structures (Note 3) ................................................................................

29,201

31,696297,272

Tools, furniture and fixtures ........................................................................................

3,316

4,066

33,755

Leased assets ..........................................................................................................................

2,240

2,049

22,807

Construction in progress .............................................................................................

5

23

46

Total.....................................................................................................................

52,271

55,634532,128

Less: Accumulated depreciation (Note 3)..................................................................

(17,710)(18,692)(180,290)

Property, plant and equipment, net ......................................................................

34,561

36,942351,838

Other assets (Note 4) ..................................................................................................

3,625

2,315

36,904

Total assets............................................................................................................

¥199,413¥280,139$2,030,060

Current assets:

Investments:

Property, plant and equipment, at cost:

See notes to consolidated financial statements.

18

TOYO ENGINEERING CORPORATION Annual Report 2009

Millions of yen

Liabilities and Net Assets
Current liabilities:
Short-term borrowings ...............................................................................................
Current portion of long-term debt (Note 3).................................................................
Notes and accounts payable .......................................................................................
Income taxes payable .............................................................................................................
Advance receipts on uncompleted contracts ...................................................................
Reserve for anticipated loss on contract work .............................................................
Other current liabilities (Note 4) ..................................................................................
Total current liabilities...........................................................................................

2009

Thousands of
U.S. dollars(Note 1)

2008

2009

¥

2,934
2,571
44,339419
48,658878
10,665
110,464

¥

3,142
6,091
42,277
3,384
126,125684
10,082
191,785$

19,917
2,288
3,853
4,382
30,440140,904

22,038
2,709
3,244
3,032
31,023
222,808

202,754
23,29539,221
44,613309,883
1,434,425

Net assets:
Shareholders’ equity (Note 6)
Common stock
Authorized: 500,000,000 shares in 2009 and 2008
Issued: 192,792,539 shares in 2009 and 2008......................................................
Capital surplus.........................................................................................................
Retained earnings ....................................................................................................
Treasury stock: 672,540 shares in 2009 and 553,293 shares in 2008 .......................
Total shareholders’ equity ..............................................................................................

18,19920,761
19,642(294)
58,30818,19920,762
14,435(214)53,182

185,269
211,346
199,964(2,997)593,582

Valuation and translation adjustments
Net unrealized gain on securities..............................................................................
Deferred hedge loss.................................................................................................
Foreign currency translation adjustments .................................................................
Total valuation and translation adjustments ..........................................................

127(6)(1,809)(1,688)

1,248
(2)
163
1,409

1,297
(61)
(18,417)(17,181)

Minority interest .........................................................................................................
Total net assets.....................................................................................................
Total liabilities and net assets .......................................................................

1,889
58,509¥199,413

2,740
57,331¥280,139

19,234595,635$2,030,060

Long-term liabilities:
Long-term debt (Note 3) .............................................................................................
Lease obligations ........................................................................................................
Accrued retirement benefits (Note 5)...................................................................................
Other long-term liabilities (Notes 4, 5).................................................................................
Total long-term liabilities ................................................................................................
Total liabilities...............................................................................................................

29,864
26,178451,382
4,268
495,348
8,935
108,567
1,124,542

Contingent liabilities (Note 7)

19

Financial Section

Consolidated Statements of Income
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2009 and 2008

Thousands of
U.S. dollars(Note 1)Millions of yen
2009

2008

2009

Net sales (Note 8)........................................................................................................

¥326,248¥327,413$3,321,267

Cost of sales ................................................................................................................

291,496

292,989

2,967,489

Gross profit ..........................................................................................................

34,752

34,424

353,778

Selling, general and administrative expenses (Note 9) ...........................................

19,584

20,682

199,366

Operating income...................................................................................................................

15,16813,742

154,412Interest and dividend income.........................................................................................

1,960

2,787

19,952Equity in earnings of affiliate companies .........................................................................

374

294

3,804

Other income:Gain on sales of investment securities ....................................................................................

—

26

—

Gain on sales of fixed assets ..........................................................................................

199

110

2,030

Other .........................................................................................................................

357

185

3,639

2,890

3,402

29,425

750

871

7,639

Other expenses:
Interest expense..........................................................................................................
Foreign exchange loss .................................................................................................

767

—

7,813

Loss on valuation of investment securities ...................................................................

2,516

11

25,612

Loss on impairment of fixed assets (Note 11) ..............................................................

585

1,101

5,952

Other (Note 10) ..........................................................................................................

404

252

4,108

5,022

2,235

51,124

13,036

14,909132,713

Current.......................................................................................................................

4,698

7,569

47,831

Deferred .....................................................................................................................

1,466(1,152)

14,924

6,164

6,417

62,755

Income before income taxes and minority interest .................................................
Income taxes (Note 4):

Minority interest income............................................................................................

(356)

Net income ..................................................................................................................

¥ 6,516

Per share of common stock:
Net income .................................................................................................................
See notes to consolidated financial statements.

20

(463)
¥

8,029

Yen

¥ 33.91¥ 41.76(3,627)$

66,331

U.S. dollars(Note 1)$

0.35

TOYO ENGINEERING CORPORATION Annual Report 2009

Consolidated Statements of Changes in Net Assets (Note 16)
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2009 and 2008

Millions of yen

Balance at March 31, 2007 ............

Commonstock

CapitalsurplusRetainedearnings(Note 6)

Treasurystock¥18,199¥20,761¥ 6,983¥(159)

Net
unrealized
gain onsecurities

Deferred Foreign
Minorityhedge
currencyinterest
loss
translation
adjustments¥ 3,324 ¥(220)¥ 249¥2,422

Total
netassets¥51,559

Dividends paid to shareholders......

(577)

(577)

Net income .......................................

8,029

8,029

Purchase of treasury stock ..............
Sale of treasury stock ......................

1

(58)

(58)

3

4

Changes of items other thanshareholders’ equity...................
Balance at March 31, 2008 ............

18,19920,762

14,435(2,076)

218

(86)

318

(1,626)

1,248

(2)

163

2,740

57,331(214)

Effect of changes in accounting policies
applied to foreign subsidiaries .........

33

33

Dividends paid to shareholders......

(1,730)(1,730)Net income .......................................

6,516

6,516

Change of scope of consolidation .......

(266)

(266)

Change of scope of equity method .....

654

654

Purchase of treasury stock ..............
Sale of treasury stock ......................

(1)

(102)

(102)

22

21

Changes of items other thanshareholders’ equity...................
Balance at March 31, 2009 ...........

(1,121)¥18,199¥20,761¥19,642¥(294)

¥

127

(4)

(1,972)(851)(3,948)¥ (6)¥(1,809)¥1,889¥58,509

Thousands of U.S. dollars (Note 1)
Commonstock

CapitalsurplusRetainedearnings(Note 6)

TreasurystockNetunrealized
gain onsecurities

Balance at March 31, 2008 ............ $185,269 $211,361 $146,954 $(2,182) $ 12,708

Deferred Foreign
Minorityhedge
currencyinterest
loss
translation
adjustments$(16)$ 1,655$27,893

Total
net
assets$583,642

Effect of changes in accounting policies
applied to foreign subsidiaries .........

340

340

Dividends paid to shareholders......

(17,610)(17,610)Net income .......................................

66,331

66,331

Change of scope of consolidation .......

(2,707)(2,707)

Change of scope of equity method .....

6,656

6,656

Purchase of treasury stock ..............
Sale of treasury stock ......................

(15)(1,035)(1,035)

220

205

Changes of items other thanshareholders’ equity...................
Balance at March 31, 2009 ........... $185,269 $211,346 $199,964 $(2,997) $(11,411)(45)(20,072)(8,659)(40,187)

1,297

$(61)

$(18,417) $19,234$595,635

See notes to consolidated financial statements.

21

Financial Section

Consolidated Statements of Cash Flows
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2009 and 2008

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interest ......................................................
Adjustments to reconcile income before income taxes andminority interest to cash from operating activities:
Depreciation and amortization.................................................................................
Loss on impairment of fixed assets...........................................................................
Loss on sales of marketable and investment securities, net.......................................
Loss on valuation of investment securities ................................................................
Loss on valuation of memberships ...........................................................................
Changes in allowance for doubtful receivables.........................................................
Changes in allowance for anticipated loss on contract work ....................................
Equity in earnings of affiliated companies ................................................................
Changes in accrued retirement benefits ...................................................................
Interest and dividends received ................................................................................
Interest and dividend income ...................................................................................
Interest expense.......................................................................................................
Interest paid ............................................................................................................
Income taxes paid....................................................................................................
Other, net................................................................................................................
Changes in operating assets and liabilities:(Increase) decrease in notes and accounts receivable.............................................
(Increase) decrease in contract work in progress....................................................
(Increase) decrease in other receivables .................................................................
Increase (decrease) in notes and accounts payable ................................................
Increase (decrease) in advance receipts on uncompleted contracts ........................
Cash from (used for) operating activities ............................................................
Cash flows from investing activities:
Purchases of property, plant and equipment ...............................................................
Purchases of other assets ............................................................................................
Purchases of investment securities ..............................................................................
Proceeds from sales of investment securities ...............................................................
(Increase) decrease in loans, net ..................................................................................
Other, net...................................................................................................................
Cash used for investing activities........................................................................
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net .......................................................
Repayment of short-term bank loans ..........................................................................
Proceeds from long-term debt ....................................................................................
Repayment of long-term debt .....................................................................................
Redemption of corporate bonds .................................................................................
Repayment of lease obligations...................................................................................
Cash dividends paid....................................................................................................
Other .........................................................................................................................
Cash used for financing activities .......................................................................
Effect of exchange rate changes on cash and cash equivalents .............................
Net (decrease) increase in cash and cash equivalents..............................................
Cash and cash equivalents, beginning of the year ..................................................
Decrease in cash and cash equivalents resulting fromchange of scope of consolidation...........................................................................
Cash and cash equivalents, end of the year (Note 17).............................................
See notes to consolidated financial statements.

22

Thousands of
U.S. dollars(Note 1)

2009

2008

2009

¥ 13,036¥ 14,909$ 132,713

2,366
585
7
2,516
48
(1,235)
194
(374)
721
3,417
(1,960)750(777)(8,496)
5,256

2,511
1,101
105
11
—
5,216
(773)
(294)
440
3,154
(2,787)871(903)(5,703)(2,237)24,0895,952
76
25,615484(12,569)
1,974(3,804)
7,344
34,786(19,949)
7,639(7,915)(86,495)
53,502(1,756)37,371
10,396
3,429(74,455)(8,961)(4,843)
26,417(8,666)
4,368(7,636)25,261(17,881)
380,447
105,833
34,910(757,971)(91,220)(513)(1,012)(3,136)
48
(484)
108
(4,989)

(831)
(681)
(535)
226
(3,292)(137)(5,250)(5,227)(10,301)(31,924)493(4,931)
1,101(50,789)

1,124(1,300)1,200(6,838)—(661)(1,730)(140)(8,345)(1,514)(23,809)86,533750—
1,200(7,720)(2,000)
(604)
(577)
(136)
(9,087)(47)
10,87775,656

11,444(13,234)
12,216(69,609)—(6,732)(17,610)(1,428)(84,953)(15,414)(242,376)
880,919(1,262)¥ 61,462—¥ 86,533(12,851)$ 625,692

TOYO ENGINEERING CORPORATION Annual Report 2009

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 and prepare their financial statements in accordance with accounting principles generally accepted in Japan,
and its overseas 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 theaccounts prepared by the Company in accordance with the provisions set forth in the Financial Instruments andExchange 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. Certain
reclassifications have been made to present the accompanying consolidated financial statements in a format which isfamiliar to readers outside Japan.
For the convenience of readers, the accompanying consolidated financial statements and the relevant notes havealso been presented in U.S. dollars by translating all Japanese yen amounts at the exchange rate of ¥98.23 to
U.S.$1.00 prevailing on March 31, 2009.

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.
Investment in significant affiliates is accounted for by the equity method. Intercompany accounts and transactions are eliminated in consolidation. The difference between the acquisition cost and the equity in the net assets at the time of acquisitionis amortized in principle within twenty years on a straight-line basis.
(b) Securities
All debt and equity securities are classified into one of three categories: trading, available-for-sale or held-to-maturity
securities. Trading securities are bought and held principally for the purpose of 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 as available-for-sale.
Trading and available-for-sale 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 areincluded in earnings. Unrealized gains or losses on available-for-sale securities are excluded from earnings and are reported,
net of the related tax effect, as a separate component of net assets.
Cost of securities sold is determined by the moving-average method.
(c) Contract Work in Progress
Contract work in progress is stated at cost, determined by the identified-cost method.
(d) Depreciation
Depreciation of property, plant and equipment is principally computed by the declining-balance method based on the estimated useful lives of the assets.
Effective April 1, 2007, the Company and its domestic consolidated subsidiaries have changed their method of depreciation
based on an amendment to the Corporation Tax Law of Japan for property, plant and equipment acquired on or after April 1,
2007. The impact on operating income and income before income taxes and minority interest was immaterial for the year
ended March 31, 2008.
Effective April 1, 2007, the Company and its domestic consolidated subsidiaries have changed their method of depreciation
based on an amendment to the Corporation Tax Law of Japan for property, plant and equipment acquired on or prior to
March 31, 2007. Such assets are to be depreciated based on the difference between the equivalent of 5% of acquisition costand memorandum value over a period of five years once they have been fully depreciated to the limits of their respective
depreciable amounts effective April 1, 2007. The impact on operating income and income before income taxes and minority
interest was immaterial.
(e) Leases
Effective from April 1, 2007, the Company and its consolidated subsidiaries have adopted new accounting standards,“Accounting Standard for Lease Transactions” (“Statement No.13” issued by the Accounting Standards Board of Japan, hereinafter ASBJ, on March 30, 2007) and “Guidance on Accounting Standard for Lease Transactions” (“Guidance No.16” issued
by ASBJ on March 30, 2007) in advance to mandatory adoption.
By applying these standards, depreciation of assets on finance leases which do not transfer ownership of the leased assets
to the lessee are calculated by the straight-line method over the lease period with their residual value zero.

23

Financial Section
As a result, “current assets”, “investments”, ”property, plant and equipment, at cost”, “current liabilities” and “long-term
liabilities” were increased by ¥257 million, ¥1,244 million, ¥1,769 million, ¥561 million and ¥2,709 million, compared withthe amounts which would have been recognized under the previous method of accounting. The adoption of the standards
above had no material effect on the statement of income for the year ended March 31, 2008.
(f) Allowance for Doubtful Receivables
The Company and its consolidated subsidiaries have provided an allowance for doubtful receivables principally at an estimatedamount of probable and reasonably possible bad debts plus an estimated amount computed on the actual percentage of credit losses.
(g) Advance Receipts on Uncompleted Contracts
Advance receipts on uncompleted contracts from customers are shown as a liability, not as a deduction from the amount ofcontract work in progress.
(h) Reserve for Anticipated Loss on Contract Work
Reserve for anticipated loss on contract work is provided in case the material loss is forecasted for a certain large-scale contract work.
(i) Accrued Retirement Benefits
The accrued retirement benefits at the year-end are stated in accordance with the projected plan assets and the projected
retirement benefit obligation. The difference arising from the adoption of the new standard of accounting of ¥3,696 million($37,625 thousand) is amortized over 15 years on a straight-line basis. Actuarial loss is amortized over certain years (9 years
ended March 31, 2009 and 13 years ended March 31, 2008) within the average of the estimated remaining service years
when incurred, starting following the year of recognition. Prior service cost is amortized over certain years (13 years ended
March 31, 2009 and 2008) within the average of the estimated remaining service years when incurred. Effective from April 1,
2008, as the average of the estimated remaining service years was shortened, the above amortization period of actuarial loss
was changed from 13 years to 9 years. As a result, net periodic pension cost was increased by ¥693 million ($7,057 thousand)and operating income and income before income taxes and minority interest were decreased by ¥588 million ($5,983 thousand), respectively.
(j) Derivative Financial Instruments
Derivative financial instruments are carried at fair value under which unrealized gain or loss is recorded to earnings, except for
those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as a separate component of net assets. Receivables and payables hedged by qualified forward foreign exchange contracts are translated at thecorresponding foreign exchange contract rates.
(k) Foreign Currency Translation
Both short-term and long-term receivables and payables in foreign currencies are translated at the exchange rates at the balance sheet date. The balance sheet accounts of the consolidated foreign subsidiaries are translated at the rate of exchange in
effect at their balance sheet date, except for common stock and capital surplus, which are translated at their historicalexchange rates. Revenues, expenses and net income for the year are translated at the rate of exchange in effect at their balance sheet date.
Differences arising from translation are presented as “Foreign currency translation adjustments” in the accompanying consolidated balance sheets.
(l) Recognition of Revenues
Revenues are recognized on the completion of construction work and acceptance by the client, except for the following
contracts.
For contracts with prices equal to or in excess of ¥5 billion ($51 million) and construction periods in excess of eighteenmonths, revenues are recognized by the percentage-of-completion method. According to this method, revenue is computed bymultiplying the contract price by the ratio of costs incurred at the balance sheet date to the total estimated cost.
(m) Per Share Information
Net income per share is computed based on the weighted average number of shares outstanding during each year. Diluted net
income per share is not presented since there was no potential for dilution by the issuance of common stock in 2009 or 2008.
Total net assets per share is computed based on outstanding shares at the balance sheet date.
(n) 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 theenacted tax rates and laws which will be in effect when the differences are expected to be reversed.

24

TOYO ENGINEERING CORPORATION Annual Report 2009(o) Consolidated Tax Return
The Company files a consolidated tax return with certain domestic subsidiaries.
(p) 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 three months or lessto be cash equivalents.
(q) Accounting Standards Adopted by Foreign Subsidiaries
Effective from April 1, 2008, the Company and its consolidated subsidiaries have changed accounting policy by adopting“Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (“Practical Issues Task Force No. 18” issued by ASBJ, on May 17, 2006).
This change had no material effect on the statement of income for the year ended March 31, 2009.

3

LONG-TERM DEBT
Long-term debt at March 31, 2009 and 2008 is summarized as follows:
Millions of yen

Years ended March 31,
Secured Loans ..................................................................................................
Unsecured Loans ..............................................................................................
1.450% bonds, due 2012...........................................................................................
Total long-term debt................................................................................................
Less: Current portion..........................................................................................

Thousands of
U.S. dollars

2009

2008

2009

¥ 8,145
13,3431,000
22,4882,571¥19,917¥ 9,888
17,241
1,000
28,1296,091¥22,038$ 82,917
135,835
10,180228,932
26,178$202,754

The following assets at March 31, 2009 and 2008 were pledged as collateral principally for long-term debt:
Millions of yen

Thousands of
U.S. dollars

Years ended March 31,

2009

2008

2009

Notes and accounts receivable..........................................................................
Land and buildings, net of accumulated depreciation .......................................

¥

¥ 610
18,289¥18,899$—
85,356$85,356—
8,385¥8,385

The following schedule shows the maturities of long-term debt subsequent to March 31, 2009:
Millions of yen
Years ending March 31,
2010 ..................................................................................................................................
¥ 2,571
2011 ..................................................................................................................................
3,347
2012 ..................................................................................................................................
11,6972013 ..................................................................................................................................
1,945
2014 ..................................................................................................................................
774
2015 and thereafter ...........................................................................................................
2,154¥22,488

Thousands of
U.S. dollars$ 26,178
34,071
119,079
19,8007,875
21,929$228,932

In order to maintain access to a stable and effective source of operating capital, the company has entered into commitment-line contracts with seven trading banks.
The balances of unused commitment-line based on these contracts at the end of the consolidated reporting periods are ¥6,500 million ($66,171 thousand) in 2009 and ¥5,000 million in 2008.

25

Financial Section
4

INCOME TAXESThe statutory tax rates applicable to the Company and its domestic subsidiaries for the year ended March 31, 2009
and 2008 were approximately 40.4%. Income taxes of the foreign subsidiaries are based generally on the tax rates
applicable in their countries of incorporation.
(1) The effective tax rates on income before income taxes in the accompanying consolidated statements ofoperations differed from the above-mentioned statutory tax rate for the following reasons:Year ended March 31, 2009
Statutory tax rate in Japan ...........................................................................................................................
Adjustments:
Permanently nondeductible expenses..................................................................................................................
Permanently nontaxable dividends received ........................................................................................................
Temporary differences excluded from calculation of deferred tax assets.............................................................
Difference in tax rates for foreign subsidiaries .....................................................................................................
Other....................................................................................................................................................................
Effective tax rate ...........................................................................................................................................

40.4%
1.7
(1.0)
15.0
(2.0)
(6.8)
47.3%

Year ended March 31, 2008
Statutory tax rate in Japan ...........................................................................................................................
Adjustments:
Permanently nondeductible expenses..................................................................................................................
Permanently nontaxable dividends received ........................................................................................................
Temporary differences excluded from calculation of deferred tax assets.............................................................
Difference in tax rates for foreign subsidiaries .....................................................................................................
Other....................................................................................................................................................................
Effective tax rate ...........................................................................................................................................

40.4%
1.6
(0.3)
10.0
(2.7)
(6.0)
43.0%

(2) Significant components of the deferred income tax assets and liabilities at March 31, 2009 and 2008 are as follows:
Millions of yen
2009

2008

Thousands of
U.S. dollars
2009

Deferred tax assets (gross):
Allowance for doubtful receivables ................................................................
¥ 165¥ 2,318$ 1,676
Accrued retirement benefits ..........................................................................
1,418
1,009
14,437
Reserve for anticipated loss on contract work ................................................
273
255
2,784
Reserve for compensation for completed works.............................................
719
—
7,316
Other ............................................................................................................
1,365
1,930
13,896
Total deferred tax assets (gross) ........................................................................
3,940
5,512
40,109Deferred tax liabilities (gross):
Difference in net unrealized gain on securities ...............................................
(75)
(765)
(766)
Undistributed earnings of subsidiaries and affiliates .......................................
(623)
(455)
(6,339)Depreciation expense ....................................................................................
(96)
(129)
(982)
Other ............................................................................................................
(106)
(132)
(1,075)
Total deferred tax liabilities (gross) ....................................................................
(900)(1,481)(9,162)
Net deferred tax assets..............................................................................................
¥3,040¥ 4,031$30,947
Note: The Company and its subsidiaries had temporary differences excluded from calculation of deferred tax assetsof ¥5,127 million ($52,196 thousand) and ¥3,366 million at March 31, 2009 and 2008, respectively, which areavailable to be offset against future taxable income.

26

TOYO ENGINEERING CORPORATION Annual Report 2009(3) Net deferred tax assets at March 31, 2009 and 2008 are included in the consolidated balance sheets as follows:
Millions of yen

Current assets–prepaid expenses and other current assets ................................
Other assets .....................................................................................................
Other current liabilities .....................................................................................
Other long-term liabilities .................................................................................
Net deferred tax assets .....................................................................................

5

Thousands of
U.S. dollars

2009

2008

2009

¥1,651
1,447
(15)
(43)
¥3,040¥3,773
365
(21)
(86)
¥4,031$16,809
14,730(153)(439)$30,947

RETIREMENT BENEFITSThe Company and certain subsidiaries have defined benefit pension plans which provide for pension annuity payments or lump-sum payments to eligible employees upon retirement.
The Company also has defined contribution pension plan, which was transferred from a portion of defined benefit
pension plan in May, 2003.
(1) Accrued retirement benefits for employees at March 31, 2009 and 2008 consisted of the following:
Millions of yen

Projected benefit obligation..............................................................................
Plan assets........................................................................................................
Unreserved projected benefit obligation ...........................................................
Unamortized obligation at transition.................................................................
Unamortized actuarial loss................................................................................
Unrecognized prior service cost ........................................................................
Accrued retirement benefits for employees.......................................................

Thousands of
U.S. dollars

2009

2008

2009

¥(15,708)
7,958(7,750)1,487
3,726(1,316)¥ (3,853)¥(16,438)
9,016(7,422)
1,733
3,948(1,503)¥ (3,244)$(159,913)
81,018(78,895)
15,13837,933(13,397)$ (39,221)

Effective the year ended March 31, 2008, the Company reclassified directors’ and statutory auditors’ retirement
allowance from “Accrued retirement benefits” to “Other long-term liabilities” under “long-term liabilities”.
(2) Net periodic pension cost for the years ended March 31, 2009 and 2008 consisted of the following:
Millions of yen

Components of net periodic benefit cost:Service cost ...................................................................................................
Interest cost...................................................................................................
Expected return on plan assets ......................................................................
Amortization of unrecognized retirement benefit obligation at transition.......
Amortization of unrecognized actuarial loss...................................................
Amortization of prior service cost ..................................................................
Other ............................................................................................................
Net periodic pension cost .................................................................................
Total.................................................................................................................

Thousands of
U.S. dollars

2009

2008

2009

¥ 794
295
—
246
1,199
(187)
118
2,465
¥2,465¥1,083
302
(13)
246
453
(188)
122
2,005
¥2,005$ 8,087
3,007
—
2,508
12,209(1,908)
1,198
25,101$25,101(3) Basis of calculation of projected benefit obligation for the years ended 2009 and 2008, respectively.
Method of allocation of estimated pension cost
Straight-line method
Discount rate
Mainly 2.0%
Expected rate of return on plan assets
Mainly 0.0%
Amortization period for unrecognized actuarial loss
Mainly 9 years in 2009, mainly 13 years in 2008
Amortization period for unrecognized obligation at transition
15 years
Amortization period for unrecognized prior service cost
13 years

27

Financial Section
6

SHAREHOLDERS’ EQUITYThe Corporation Law of Japan (the “Law”), provides that an amount equal to 10% of the amount to be distributed
as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and thelegal reserve equals 25% of the common stock account. Such distributions can be made at any time by resolution of
the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor thelegal reserve is available for distributions.

7

CONTINGENT LIABILITIESThe Company and its subsidiaries were contingently liable as guarantors of loans to others in the aggregate amountof ¥1,911 million ($19,451 thousand) and ¥3,169 million at March 31, 2009 and 2008, respectively.

8

NET SALESNet sales include revenues recognized by the percentage-of-completion method as described in Note 2 (l).
The following table shows net sales recognized by the percentage-of-completion method:
Millions of yen

Years ended March 31,

9Thousands of
U.S. dollars

2009

2008

2009

¥205,410¥178,343$2,091,108

RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in selling, general and administrative expenses for the years ended March
31, 2009 and 2008 amounted to ¥1,178 million ($11,992 thousand) and ¥1,113 million, respectively.

10

OTHER EXPENSES“Other” in “Other expenses” for the years ended March 31, 2009 and 2008 consisted of the following:
Millions of yen

Years ended March 31,
Loss on valuation of memberships ....................................................................
Loss on sales of investment securities................................................................
Loss on disposal of fixed assets .........................................................................
Other ...............................................................................................................
Total .......................................................................................................

28

2009

¥ 48
8
147
201
¥404

2008

¥ —
131
—
121
¥252

Thousands of
U.S. dollars
2009

$ 484
85
1,495
2,044
$4,108TOYO ENGINEERING CORPORATION Annual Report 200911

IMPAIRMENT OF FIXED ASSETSThe Company and its consolidated subsidiaries adopted the accounting standard for impairment of fixed assets. The
loss on impairment of fixed assets for the year ended March 31, 2009 and 2008 were comprised of the following:
Year ended March 31, 2009
Location: Chiba Prefecture
Major use: Real Estate
Asset category: Building and structure, etc
Amount: ¥585 million ($5,952 thousand)Year ended March 31, 2008
Location: Chiba Prefecture, etc
Major use: Real Estate
Asset category: Land, etc
Amount: ¥1,101 million
The Company and its consolidated subsidiaries have grouped their fixed assets into each company for EPC Business,each object for Real Estate and Idle Assets.
Due to decline in rents’ level and plans for disposals, the Company and its consolidated subsidiaries reduced thebook value of some assets to the recoverable amounts.
The recoverable amounts of the asset groups were measured by applying net selling prices which were assessed
based on the current market price of land and other salable prices or value in use which was computed by discounting estimated cash flow in the future using discount rate of 8.2%.

12

LEASES
Effective the year ended March 31, 2008, the Company and its consolidated subsidiaries have adopted “AccountingStandard for Lease Transactions.”(a) Finance Leases
Finance leases are capitalized, and recorded on the balance sheet based on finance lease contracts.
(b) Operating Leases
Operating leases are not capitalized, but future minimum lease payments and receivables are as follows:(b-1) Operating Leases (as Lessee)
Future minimum lease payments subsequent to March 31, 2009 and 2008 for noncancelable operating leases are
summarized as follows:
Millions of yen

Years ended March 31,
Within one year................................................................................................
Over one year...................................................................................................
Total .......................................................................................................

2009

¥159
337
¥496

2008

¥168
499
¥667

Thousands of
U.S. dollars
2009$1,6153,431$5,046(b-2) Operating Leases (as Lessor)
Future minimum lease receivables subsequent to March 31, 2009 and 2008 for noncancelable operating leases are
summarized as follows:
Millions of yen

Thousands of
U.S. dollars

Years ended March 31,

2009

2008

2009

Within one year................................................................................................
Over one year...................................................................................................
Total .......................................................................................................

¥ 923
7,130
¥8,053¥ 999
8,809¥9,808$ 9,400
72,583$81,98329

Financial Section
13

INVESTMENT SECURITIESThe book value, unrealized gain and loss and the related fair value of held-to-maturity securities at March 31, 2009are summarized as follows:
Millions of yen

At March 31, 2009
Government bonds ...........................................................................

Book
Value

Unrealized
Gain

Unrealized
Loss

¥1

¥(0)

¥29,990

Fair
Value

¥29,991

The cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2009 are summarized as follows:
Millions of yen

At March 31, 2009
Equity securities ................................................................................

Cost¥2,927

Unrealized
Gain

Unrealized
Loss

¥532

¥(30)

Book
Value

¥3,429The contractual maturities of debt securities classified as available-for-sale and held-to-maturity were as follows:
At March 31, 2009

Millions of yen

Thousands of
U.S. dollars¥29,990———¥29,990$305,304———$305,304

Due within one year ...........................................................................................................
Due after one year through five years.................................................................................
Due after five years through ten years ................................................................................
Due after ten years.............................................................................................................
Total .........................................................................................................................

The book value, unrealized gain and loss and the related fair value of held-to-maturity securities at March 31, 2008
are summarized as follows:
Millions of yen

At March 31, 2008
Government bonds ...........................................................................
Corporate bonds...............................................................................

Book
Value

¥25,980
26,985

Unrealized
Gain

Unrealized
Loss

¥1
—

¥(0)
(0)

Fair
Value

¥25,981
26,985The cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2008 are summarized as follows:
Millions of yen

At March 31, 2008
Equity securities ................................................................................

Cost¥5,453

Unrealized
Gain

Unrealized
Loss¥2,326¥(264)

Book
Value¥7,515The contractual maturities of debt securities classified as available-for-sale and held-to-maturity were as follows:
At March 31, 2008
Millions of yen
Due within one year ...............................................................................................................................
¥52,966
Due after one year through five years.....................................................................................................
—
Due after five years through ten years ....................................................................................................
—
Due after ten years.................................................................................................................................
—
Total .............................................................................................................................................
¥52,966

30

TOYO ENGINEERING CORPORATION Annual Report 200914

DERIVATIVE TRANSACTIONSThe Company operates internationally in circumstances which give rise to exposure to market risks from fluctuations inforeign currency exchange rates and interest rates. In order to limit those risks, the Company enters into forward foreignexchange contracts, currency swaps and interest rate swaps, etc. in accordance with the Company’s own internal risk control rules. The Company does not have derivative positions for speculative trading purposes. The Company is subject tocredit risk incurred by the default of counter parties to the derivatives. As the Company enters into such agreements onlywith credible counter parties, the risk of any such default is deemed negligible. The Company’s Finance Division is incharge of entering into and monitoring the Company’s derivative positions in order to ensure risk control.
Forward foreign exchange contracts
The Company has entered into forward foreign exchange contracts to reduce its exposure to adverse fluctuations in foreign exchange rates relating to receivables and payables denominated in foreign currencies. The contract amounts and therelated market values of those contracts without firm commitments related to receivables or payables at March 31, 2009
and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

At March 31,(i) Forward foreign exchange contracts to sell U.S. dollars:
Contract amounts .........................................................................................
Related market value .....................................................................................
Net gain (loss) ...............................................................................................
(ii) Forward foreign exchange contracts to buy U.S. dollars:
Contract amounts .........................................................................................
Related market value .....................................................................................
Net gain (loss) ...............................................................................................

2009

2008

2009

¥1,281
1,525¥ (244)¥——¥—$13,038
15,520$ (2,482)

¥—
—
¥—

¥55
51
¥ (4)

$—
—
$—

The contract and related market value amounts above exclude forward foreign exchange contracts designated ashedges on forecasted transactions with a firm commitment to the hedged items since such contracts are accounted
for in the financial statements in conjunction with the computation of foreign exchange gain and loss by the deferral of gain and loss.
The contract and related market value amounts above do not directly indicate the level of market risk or credit
risk incurred, as these amounts do not indicate the potential risk of the forward foreign exchange contracts.
Interest rate swaps
The Company has entered into interest rate swap agreements to reduce its interest expense or its exposure toadverse fluctuations in interest rates relating to loans payable. The total notional amounts and related market valueof these interest rate swap agreements at March 31, 2009 and 2008 were as follows:
Thousands of
U.S. dollars

Millions of yen

At March 31,

2009

2008

2009

Notional amounts.............................................................................................

¥—

¥200

$—

Related market value ........................................................................................
Net gain ........................................................................................................

—
¥—

¥

0
0

—
$—

The notional amounts and related market value amounts above exclude interest rate swaps agreements designatedas hedges on forecasted transactions with a firm commitment to the hedged items since such agreements are or will
be accounted for in the financial statements as interest on borrowings allocated periodically based on fixed rate.

31

Financial Section
15

SEGMENT INFORMATION(1) Business Segments
Millions of yen

Year ended March 31, 2009
I Net sales and operating income:Net sales(1) Net sales to outside customers ................................
(2) Inter-segment net sales ...........................................
Total ............................................................................
Operating expenses.........................................................
Operating income ........................................................
II Assets, depreciation and capital expenditures:
Assets .............................................................................
Depreciation....................................................................
Capital expenditures........................................................

EPC
BusinessReal
EstateTotal

Eliminations
and Other Consolidated¥322,690
6
322,696308,638
14,058¥ 3,558
266
3,824
2,719
1,105

¥326,248
272
326,520
311,357
15,163¥¥170,597
1,602
1,668

¥24,308765
67¥194,905
2,367
1,735

¥4,508 ¥199,413
(1)
2,366
—
1,735

EPC
BusinessReal
Estate— ¥326,248(272)—(272) 326,248(277) 311,080
5
15,168Millions of yen

Year ended March 31, 2008

Total

Eliminations
and Other Consolidated

I Net sales and operating income:Net sales¥323,575¥ 3,838 ¥327,413¥ — ¥327,413(1) Net sales to outside customers ................................
(2) Inter-segment net sales ...........................................
15
297
312
(312)
—
Total ............................................................................
323,590
4,135
327,725(312) 327,413
Operating expenses.........................................................
310,993
2,997
313,990(319) 313,671
Operating income ........................................................
12,597
1,138
13,735
7
13,742II Assets, depreciation and capital expenditures:¥245,110¥26,842 ¥271,952¥8,187 ¥280,139
Assets .............................................................................
Depreciation....................................................................
1,659
842
2,501
(1)
2,500
Capital expenditures........................................................
2,320
1,367
3,687
—
3,687
Notes: 1.The classification of the business segments adopted is based on the Company segmentation which isdetermined by the similarity of each business.
2.The Companies’ reportable operating segments consist of the following two business groups:
EPC Business — Engineering, procurement and construction for chemical fertilizer, petrochemical andrefinery plants, energy-related businesses, general manufacturing facilities and information technology
Real Estate — Rent and administration of real estate
3.All administrative department expenses of the Company and its consolidated subsidiaries are allocated tothe corresponding business segments.
4.Assets included in “Eliminations and Other” for the years ended March 31, 2009 and 2008 totaling¥4,677 million ($47,612 thousand) and ¥8,384 million primarily consisted of investment in securities.
5.The impairment losses recorded in Real Estate for the years ended March 31, 2009 and 2008 were ¥585
million ($5,952 thousand) and ¥1,101 million, respectively.
6.Effective the year ended March 31, 2008, the Company and its consolidated subsidiaries have adopted“Accounting Standard for Lease Transactions.” As a result, assets, depreciation and capital expenditures forthe year ended March 31, 2008 have increased as follows:• EPC Business: assets ¥584 million, depreciation ¥182 million and capital expenditures ¥778 million• Real Estate: assets ¥2,685 million, depreciation ¥147 million and capital expenditures ¥1,328 million
In addition, increased amount of capital expenditures includes the amounts of leased assets which corresponding lease contracts carried out in or before FY2006.
These amounts are ¥358 million in EPC Business and ¥1,328 million in Real Estate, respectively.

32

TOYO ENGINEERING CORPORATION Annual Report 2009(2) Geographic Segments
Millions of yen

Year ended March 31, 2009
I Net sales and operating income:Net sales(1) Net sales to outside customers ................................
(2) Inter-segment net sales ...........................................
Total ............................................................................
Operating expenses.........................................................
Operating income ........................................................
II Assets:
Assets .............................................................................

Eliminations
and Other Consolidated

Japan

OthersTotal¥308,688
742
309,430
296,270
13,160¥17,560
16,30933,86932,057
1,812¥326,248
17,051
343,299
328,327
14,972¥¥187,634¥20,548¥208,182¥ (8,769) ¥199,413— ¥326,248(17,051)—(17,051) 326,248(17,247) 311,080
196
15,168Millions of yen

Year ended March 31, 2008

Japan

OthersTotal

Eliminations
and Other Consolidated

I Net sales and operating income:Net sales¥307,296¥20,117 ¥327,413 ¥— ¥327,413(1) Net sales to outside customers ................................
(2) Inter-segment net sales ...........................................
223
22,70422,927(22,927)—
Total ............................................................................
307,519
42,821
350,340(22,927) 327,413
Operating expenses.........................................................
296,752
40,087
336,839(23,168) 313,671
Operating income ........................................................
10,7672,734
13,501
241
13,742II Assets:
Assets .............................................................................
¥266,455¥29,454 ¥295,909 ¥(15,770) ¥280,139
Notes: 1.Geographic segmentation is according to geographic proximity.
2.Countries included in Others: Korea, Malaysia, India, Luxembourg, U.S.A. and PR China
3.Net sales and Assets included in “Eliminations and Other” are mainly due to inter-segment transaction.
(3) Sales to Foreign Customers
Millions of yen

Year ended March 31, 2009
Overseas sales (A) ..........................................
Consolidated sales (B) ....................................
Overseas sales ratio (A/B) ............................

Southeast
Southwest Asia,
Russia andCentral andAsia
Middle East and Africa Central Asia South America

OthersTotal¥45,839¥74,361

14.1%

22.8%

¥254,535
326,24878.1%¥15,712¥106,252¥12,371

4.8%

32.6%

3.8%

Millions of yen

Year ended March 31, 2008

Southeast
Southwest Asia,
Russia andCentral andAsia
Middle East and Africa Central Asia South America

Overseas sales (A) ..........................................
¥34,073¥71,586¥35,290
Consolidated sales (B) ....................................
Overseas sales ratio (A/B) ............................
10.4%
21.9%
10.8%
Each area mainly represents the following countries:
Southeast Asia: Thailand and Singapore
Southwest Asia, Middle East and Africa: India, Saudi Arabia, and Qatar
Russia and Central Asia: Russia
Central and South America: Brazil and Venezuela
Others: PR China, Korea and Australia

OthersTotal¥92,831¥22,875

28.4%

7.0%

¥256,655
327,413
78.5%

33

Financial Section
16

SUPPLEMENTARY INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2009(a) Type and number of outstanding sharesYear ended March 31, 2009
Number of shares
Balance at
beginning of year

Type of shares

Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

Issued stock:
Common stock

192,792,539——

192,792,539

Total

192,792,539——

192,792,539

553,293

168,350

49,103

672,540

Treasury stock:
Common stockTotal
553,293
168,350
49,103
672,540
Notes: 1.Treasury stock increased by 168,350 shares due to the repurchase of shares less than one unit.
2.Treasury stock decreased by 49,103 shares due to the sale of shares less than one unit.
(b) Dividends(b-1) Dividends paid to shareholders
Date ofapproval

Resolution
approved byType ofsharesJune 24,2008

Annualgeneralmeeting ofshareholders

November 12,
2008

Board ofDirectors

AmountAmountAmountper share

Amountper share(Yen)(U.S. Dollars)(Millions of yen)(Thousands of
U.S. Dollars)Common
stock

1,153

11,742

6

Common
stock

576

5,867

3

Shareholders’
cut-off date

Effective
date

0.06

March 31,2008

June 25,
2008

0.03

September 30, December 11,
2008
2008

(b-2) Dividends with a shareholders’ cut-off date during the current fiscal year but an effective date subsequent to thecurrent fiscal year

34

Date ofapproval

Resolution
approved byType ofsharesJune 23,2009

Annualgeneralmeeting ofshareholders

Commonstock

AmountAmount(Thousands of(Millions of yen)
U.S. Dollars)

768

7,823

Paid
from
Retainedearnings

Amountper share

Amountper share(Yen)(U.S. Dollars)

4

0.04

Shareholders’
cut-off date

Effective
date

March 31,2009

June 24,
2009

TOYO ENGINEERING CORPORATION Annual Report 2009

For the year ended March 31, 2008(a) Type and number of outstanding sharesYear ended March 31, 2008
Number of shares
Balance at
beginning of year

Type of shares

Increase in shares
during the year

Decrease in shares
during the year

Balance at
end of year

Issued stock:
Common stock

192,792,539——

192,792,539

Total

192,792,539——

192,792,539

474,172

87,027

7,906

553,293

Treasury stock:
Common stock

Total
474,172
87,027
7,906
553,293
Notes: 1.Treasury stock increased by 87,027 shares due to the repurchase of shares less than one unit.
2.Treasury stock decreased by 7,906 shares due to the sale of shares less than one unit.
(b) Dividends(b-1) Dividends paid to shareholders
Date ofapproval

Resolution
approved byType ofsharesAmountJune 26,
2007

Annualgeneralmeeting ofshareholders

Commonstock(Millions of yen)Amountper share

577

(Yen)

Shareholders’
cut-off date

Effective
date

March 31,2007

June 27,20073(b-2) Dividends with a shareholders’ cut-off date during the current fiscal year but an effective date subsequent to thecurrent fiscal year
Date ofapproval

Resolution
approved byType ofsharesJune 24,2008

Annualgeneralmeeting ofshareholders

Commonstock

Amount(Millions of yen)

1,153

Paid
from
Retainedearnings

Amountper share(Yen)

6

Shareholders’
cut-off date

Effective
date

March 31,2008

June 25,
2008

35

Financial Section
17

CONSOLIDATED STATEMENTS OF CASH FLOWS
A reconciliation between the balance of cash and deposits reflected in the accompanying consolidated balance
sheets and that of cash and cash equivalents in the accompanying consolidated statements of cash flows as ofMarch 31, 2009 and 2008 is summarized as follows:
Millions of yen

18

Thousands of
U.S. dollars

Years ended March 31,

2009

2008

2009

Cash and deposits ............................................................................................
Time deposits with maturities over three months ..............................................
Short-term investments with maturities
within three months included in securities ......................................................
Cash and cash equivalents................................................................................

¥33,117(1,645)¥34,311(744)$337,134(16,746)

29,990¥61,462

52,966¥86,533

305,304$625,692

RELATED PARTY TRANSACTIONS(Additional Information)
Effective from April 1, 2008, the Company and its consolidated subsidiaries have adopted “Accounting Standard for
Related Party Disclosures”(“Statement No.11” issued by ASBJ, on October 17, 2006) and “Guidance on AccountingStandard for Related Party Disclosures”(“Guidance No.13” issued by ASBJ, on October 17, 2006).
For the year ended March 31, 2009
Category................................................................................Subsidiary
Name.....................................................................................CCDL CONSTRUCOES DE DUTOS LTDA.
Address .................................................................................Brazil
Capital and investments (thousands of Brazilian real) .............1,139
Business.................................................................................Construction
Ratio of voting rights holding (held) .......................................Direct 60%
Relationship ...........................................................................Loan for operating fund
Summary of transactions........................................................Loan for operating fundTransaction amount (millions of yen)......................................—
Title of account, balance at end of year (millions of yen) ........Short-term loan, 2,141
Note: Interest rate on loan is determined by considering effective market rates.
The Company wrote off ¥2,713 million against the short-term loan above.
The Company reserved ¥363 million of allowance for doubtful accounts at March 31, 2009
against the short-term loan above.

36

TOYO ENGINEERING CORPORATION Annual Report 2009

Category................................................................................Affiliate
Name.....................................................................................NEDL - CONSTRUCOES DE DUTOS DO NORDESTE LTDA.
Address .................................................................................Brazil
Capital and investments (thousands of Brazilian real) .............2,524
Business.................................................................................Construction
Ratio of voting rights holding (held) .......................................Direct 42%
Relationship ...........................................................................Loan for operating fund
Summary of transactions........................................................Loan for operating fundTransaction amount (millions of yen)......................................756
Title of account, balance at end of year (millions of yen) ........Short-term loan, 6,466
Note: Interest rate on loan is determined by considering effective market rates.
The Company recorded ¥3,954 million of provision of allowance for doubtful accounts against the short-termloan above.
As a result, the company reserved ¥5,370 million of allowance for doubtful accounts at March 31, 2009 against
the short-term loan above.
For the year ended March 31, 2008
Category................................................................................Other affiliate
Name.....................................................................................Mitsui & Co., Ltd.
Address .................................................................................Japan
Capital and investments (millions of yen)................................337,543
Business.................................................................................Merchant
Ratio of voting rights holding (held) .......................................Direct (23%)
Relationship ...........................................................................Sales of manufacturing facility / Purchase of raw material
Summary of transactions........................................................Sales of manufacturing facility / Purchase of raw material
Transaction amount (millions of yen)......................................Sales of manufacturing facility, 4,621 / Purchase of raw
material, 1,924
Title of account, balance at end of year (millions of yen) ........Notes and accounts receivable, 290
Advance receipts on uncompleted contracts, 953
Notes and accounts payable, 1,027
Note: Selling price of manufacturing facility is negotiated in accordance with general transaction.
Purchasing price of raw material is determined by negotiation on a case by case basis and considering
effective market price.

37

Financial Section
Category................................................................................Subsidiary
Name.....................................................................................CCDL CONSTRUCOES DE DUTOS LTDA.
Address .................................................................................Brazil
Capital and investments (thousands of Brazilian real) .............1,139
Business.................................................................................Construction
Ratio of voting rights holding (held) .......................................Direct 60%
Relationship ...........................................................................Loan for operating fund
Summary of transactions........................................................Loan for operating fundTransaction amount (millions of yen)......................................1,849
Title of account, balance at end of year (millions of yen) ........Short-term loan, 5,099
Note: Interest rate on loan is determined by considering effective market rates.
Category................................................................................Affiliate
Name.....................................................................................NEDL - CONSTRUCOES DE DUTOS DO NORDESTE LTDA.
Address .................................................................................Brazil
Capital and investments (thousands of Brazilian real) .............2,524
Business.................................................................................Construction
Ratio of voting rights holding (held) .......................................Direct 42%
Relationship ...........................................................................Loan for operating fund
Summary of transactions........................................................Loan for operating fundTransaction amount (millions of yen)......................................1,468
Title of account, balance at end of year (millions of yen) ........Short-term loan, 5,710
Note: Interest rate on loan is determined by considering effective market rates.

38

TOYO ENGINEERING CORPORATION Annual Report 2009

Independent Auditors’ Report39Worldwide Network
Jakarta

Kuala Lumpur

Indonesia● HEAD OFFICE
2-8-1 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-451-1111
Fax: 81-47-454-1800
http://www.toyo-eng.co.jp/

Malaysia◉ Beijing

Shanghai

China

Seoul
Korea

■ Toyo Engineering & Construction Sdn. Bhd.

■ Toyo Engineering India Limited◉ Jakarta

Engineering and construction for plants and facilities“Toyo House,” L.B.S. Marg, Kanjurmarg (West),
Mumbai-400 078, India
Tel: 91-22-2573-7000
Fax: 91-22-2573-7520/7521
http://www.toyoindia.com/◉ DohaProcurement services in Europe
25, Route d’Esch, L-1470, Luxembourg
Tel: 352-497511
Fax: 352-487555◉ Tehran

Unit No. 3, 4th Fl., No. 2, Saba Ave., Africa Ave.,
Tehran, Iran
Tel: 98-21-2204-3808/3869
Fax: 98-21-2204-3776◉ Moscow

Room No. 605, World Trade Center,
Krasnopresnenskaya Nab., 12, Moscow 123610, Russia
Tel: 7-495-258-2064/1504
Fax: 7-495-258-2065
Global Toyo and Group Companies■ Toyo Engineering Korea Limited

Engineering and construction for plants and facilities
Toyo Bldg., 677-17, Yeoksam-1
Dong, Kangnam-ku, Seoul 135-915, Korea
Tel: 82-2-2189-1619
Fax: 82-2-2189-1891
http://www.toyokorea.com/■ Toyo Engineering Corporation, China

Engineering and construction for plants and facilities
17th Fl., Shanghai Zhongrong Plaza, No. 1088
Pudong South Road, Pudong New District,
Shanghai 200122, China
Tel: 86-21-5888-9935
Fax: 86-21-5888-8864/8874■ Toyo Engineering Corporation(China) Procurement
Procurement services in China
17th Fl., Shanghai Zhongrong Plaza, No. 1088
Pudong South Road, Pudong New District,
Shanghai 200122, China
Tel: 86-21-5888-9935
Fax: 86-21-5888-8864/8874■ Toyo-Thai Corporation Pubic Company Limited

Engineering and construction for plants and facilities
28th Fl., Sermmit Tower, 159 / 41-44 Sukhumvit 21,
Asoke Road, North Klongtoey, Wattana, Bangkok
10110, Thailand
Tel: 66-2-260-8505
Fax: 66-2-260-8525/8526
http://www.toyo-thai.com/

Moscow
RussiaLuxembourgJapan◉ Shanghai

Bldg. No. 9, 802 Al Abbas Street,
P.O. Box 24131 Doha, Qatar
Tel: 974-437-8860
Fax: 974-437-8861

40

Beijing

China

E. 7th Fl., Bldg. D, Fuhua Mansion,
Chaoyangmen North Avenue No. 8,
Beijing 100027, China
Tel: 86-10-6554-4515
Fax: 86-10-6554-3212

Midplaza, 8th Fl., Jl. Jendral Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: 62-21-570-6217/5154
Fax: 62-21-570-6215

TehranIranEngineering and construction for plants and facilities
Suite 25.4, 25th Fl., Menara Haw Par,
Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia
Tel: 603-2731-1100
Fax: 603-2731-1110
http://www.toyo-m.com.my/

17th Fl., Shanghai Zhongrong Plaza,No. 1088 Pudong South Road,
Pudong New District, Shanghai 200122, China
Tel: 86-21-5888-9935
Fax: 86-21-5888-8864/8874

Qatar

India

Thailand● TOKYO HEAD OFFICE
11th Fl., Shin-Marunouchi Building,
1-5-1 Marunouchi, Chiyoda-ku,
Tokyo 100-6511, Japan
Tel: 81-3-6268-6611
Fax: 81-3-3214-6011
OfficesDoha

MumbaiBangkok■ Toyo Engineering Europe, S.A.

■ Toyo Canada Corporation

Engineering and construction for plants and facilities#640 Ford Tower, 633, 6th Avenue SW,
Calgary, Alberta T2P 2Y5, Canada
Tel: 1-403-237-8117
Fax: 1-403-237-8385■ Toyo U.S.A., Inc.

Procurement services and market developmentin the U.S.A.
15415 Katy Freeway, Suite 600,
Houston, TX 77094, U.S.A.
Tel: 1-281-579-8900
Fax: 1-281-599-9337■ Toyo Ingeniería de Venezuela, C.A.

Engineering and construction for plants and facilities
Edf. Cavendes, Piso 10, Av. Francisco de Miranda
c/1ra Av., Urb. Los Palos Grandes,
Caracas 1062, Venezuela
Tel: 58-212-286-8696
Fax: 58-212-285-1354

Calgary

Rio de Janeiro

CanadaBrazilHoustonU.S.A.

CaracasVenezuela● Tecno Frontier Co., Ltd.
Environmental engineering and construction of facilities
2-8-1 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-454-1178
Fax: 81-47-454-1550【HEAD OFFICE】
2-2-7 Honcho, Funabashi-shi, Chiba 273-0005, Japan
Tel: 81-47-433-7234●T EC Software &Technical Services Corporation
Staffing services, Job placement services, andTranslation / Interpretation
7-11-5 Honcho, Funabashi-shi,
Chiba 273-0005, Japan
Tel: 81-47-425-8461
Fax: 81-47-425-8464● TEC Air Service Corporation
Travel and insurance services
2-6-7 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel: 81-3-3564-0130
Fax: 81-3-3564-0530■ Toyo do Brasil—Consultoria E Construcoes● TEC Accounting & Consulting Ltd.
Business support and consulting for accounting
and accounting system development
2-8-1 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-454-1690
Fax: 81-47-454-1289

Domestic● Toyo Business Engineering Corporation
System consulting and solutions provider
20th / 17th Fl., KDDI Otemachi Bldg., 1-8-1
Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
Tel: 81-3-3510-1600
Fax: 81-3-3510-1624
http://www.to-be.co.jp/

Industriais Ltda.
Engineering and construction for plants and facilities
Praia de Botafogo, 228-Sala 801C-Ala B, Botafogo,
22250-906 Rio de Janeiro-RJ, Brazil
Tel: 55-21-2551-1829
Fax: 55-21-2551-2048● TEC Estate, Ltd.
Property development and real estate business
2-6-3 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-408-2171
Fax: 81-47-453-3250● Suntec Corporation
Real estate and building maintenance
2-6-3 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-454-1639
Fax: 81-47-454-1842【HEAD OFFICE】
2-2-7 Honcho, Funabashi-shi,
Chiba 273-0005, Japan
Tel: 81-47-433-4511
Fax: 81-47-433-4593● Chiba Data Center Corporation
Data input service, Documentation using word
processors, and Printing
6-5-3 Tendai, Inage-ku, Chiba-shi,
Chiba 263-0016, Japan
Tel: 81-43-284-3611
Fax: 81-43-284-3533● Toyo Transport Engineering Co., Ltd.
Consulting for total transportation solutions
2-8-1 Akanehama, Narashino-shi,
Chiba 275-0024, Japan
Tel: 81-47-454-1660
Fax: 81-47-454-1160(As of August 1, 2009)

Stock Information

TOYO ENGINEERING CORPORATION   Annual Report 2009

(As of March 31, 2009)

Founded:Common Stock:
Stock Exchange Listing:Authorized Shares:
Capital Stock Issued:
Number of Shareholders:
Administrator of
Shareholders’ Register:

May 1, 1961
¥18,199 million
Tokyo Stock Exchange
500,000,000
192,792,539
17,197The Chuo Mitsui Trust and Banking Co., Ltd.
3-33-1 Shiba, Minato-ku, Tokyo 105-8574, Japan

Major Shareholders:

Others0.59

Number of shares(thousands)

Percentage of total(%)

Mitsui & Co., Ltd.

43,77022.70

Mitsui Chemicals, Inc.

25,703

13.33

Japan Trustee Services Bank, Ltd. Trust Account 4G

6,845

3.55

Japan Trustee Services Bank, Ltd. Trust Account

5,773

2.99

Taisei Corporation

4,000

2.07

The Master Trust Bank of Japan, Ltd. Trust Account

3,176

1.64

HSBC Bank Plc-Clients Nontax Treaty

3,070

1.59

Kanto Natural Gas Development Co., Ltd.

2,656

1.37

Sumitomo Mitsui Banking Corporation
Mellon Bank, N.A. as Agent for its Client
Mellon Omnibus US Pension

2,350

1.21

2,212

1.14

Financial institutions
15.23

Less than 5,000 shares
9.94

1,000,000 shares or more
58.35

5,000–49,999 shares
14.40

Individuals
24.36

Number of
Shares Held(%)

Type of
Shareholder(%)

Foreign shareholders
17.87

50,000–499,999 shares
11.01

Domestic companies
41.95

500,000–999,999 shares
6.30

Stock Chart:
(Yen)
1,000

Stock Price

900
800
700
600
500
400
300
200
100
0

(Thousands of Shares)

Trading Volume

100,000
75,00050,00025,000
0

4

5

6

7

8

9 10 11 12 1
FY2006

2

3

4

5

6

7

8

9 10 11 12 1
FY2007

2

3

4

5

6

7

8

9 10 11 12 1

2

3

FY200841

Toyo Engineering Corporation Annual Report 2009

2-8-1 Akanehama,Narashino-shi, Chiba 275-0024, Japan
Tel: 81-47-451-1111
Fax: 81-47-454-1800
http://www.toyo-eng.co.jp/

Annual Report 2009
Year ended March 31, 2009©2009 Toyo Engineering Corp.
Printed in Japan