1

To Our Shareholders
Our company faced a challenging year in fiscal 2012, amidst a fiercelycompetitive engineering and construction marketplace. While our net sales
increased, our year-over-year earnings decreased mainly due to losses
among our group companies.
To achieve continued growth, we must realize three basic elements ofthe medium-term business plan—NEXT TOYO 2015—that we introduced
at the beginning of fiscal 2012: integrating our global operations system;
expanding our business into the upstream sector and customer value chain;and developing our global human capital.
In response to our business performance in fiscal 2012, I am positioning“strengthening our group companies” and “pursuing globalization incollaboration among group companies”—two objectives of our businessplan—as top priorities. Already, we are taking action in these areas.
Additional human resources from Japan are being deployed to groupcompanies to establish structures and systems that will strengthen groupcollaboration. We are providing thorough engineering and management
guidance to group companies to improve their profitability. As well, we areworking to expand and reinforce the sales, cost-competitiveness and project
execution capabilities of our group companies, nurturing their ability to
independently execute Engineering, Procurement and Construction (EPC)
projects.
We are leveraging our bases in growth regions around the world to“differentiate TOYO from its competitors,” targeting further growth in thegroup’s engineering capabilities and services. Among our core businesses,
we aim to maintain competitiveness and expand market share for our
proprietary urea technology licensing. We will also focus on the fertilizer
plant market, for which high demand is forecast. In that segment, we willreinforce our service offering to address our customers’ entire value chains—from planning to operation and maintenance.
Another business we aim to strengthen is the energy business,concentrating specifically on enhancing our ability to meet diverse market
needs; boosting our capability to provide alliance services jointly withcustomers or cooperating companies; and increasing our capacity for taking
an investment stake in—or becoming involved with—operations in oil andgas field development projects, such as secondary and tertiary recovery.
In our Floating Production Storage and Offloading (FPSO) business,
we plan to increase our competitiveness by entering the Brazilian module
fabrication market. We also plan to accelerate the commercialization of
newly developed compact Gas to Liquids (Micro-GTL) technology.
Guided by NEXT TOYO 2015, I intend to lead TOYO forward, focusing
overall group power on accelerating our reforms. I look forward to thecontinued support of our shareholders as we pursue our goals and deliver
results.
August 2013

Katsumoto Ishibashi
President and Chief Executive Officer

TOYO ENGINEERING CORPORATION Annual Report 2013

01

02

Consolidated Five-Year Financial Summary
Consolidated Five-Year Financial Summary
Toyo Engineering Corporation and Consolidated Subsidiaries Years ended March 31
2013

2012

2011

2010

Net sales¥228,723¥157,881¥155,696¥173,943

Gross profit

24,20024,91826,57332,983Operating income

1,593

5,341

6,815

13,070

Income before
income taxes

2,982

4,941

6,917

14,236

Net income

1,457

3,728

3,773

7,131

Total assets

240,694

222,415

198,387

190,127

Total net assets

71,091

69,26567,096

65,295Long-term loans payable

26,477

24,582

15,163

21,947

689

1,595

542

508

Depreciation
and amortization

2,570

2,524

2,473

2,237

Capital stock

18,19818,19818,19818,198New orders

290,444

269,188

222,540

132,456

Backlog of contracts
at end of the year

410,492

359,120

224,693

168,179

Purchase of property,
plant and equipment

Per share:
Net income

¥

7.60

¥ 19.43¥ 19.65¥ 37.12

Total net assets

363.15349.42340.43329.54

Cash dividends

5.00

6.00

5.00

7.00

Chemical fertilizers

16.6%

10.0%

6.9%

14.0%

Petrochemicals

18.8

15.3

22.8

23.9

Refinery

7.7

11.5

23.8

27.6

Energy-related

27.0

35.2

18.7

14.4

General manufacturing facilities
and information technology

16.7

20.3

20.0

13.1

Others

13.2

7.7

7.8

7.0

(Overseas sales ratio)

(81)

(73)

(64)

(71)

4,548

4,494

3,956

4,024

Net sales by sector (%):

Number of employees* U.S. dollar amounts are stated at ¥ 94.01 to U.S.$1.00, the exchange rate prevailing on March 31, 2013.

Contents

02 Consolidated Five-Year Financial
Summary

14 Corporate Governance

22 Consolidated Statements of Changes
in Net Assets

15 Business Risk and Other Risks

23 Consolidated Statements of Cash Flows

04 Major Projects

16 Management’s Discussion and Analysis

24 Notes to Consolidated Financial Statements

05 Review of Operations

18 Consolidated Balance Sheets

49 Independent Auditor’s Report

12 HSSE + Quality

20 Consolidated Statements of Income

50 Corporate Information

21 Consolidated Statements ofComprehensive Income

53 Stock Information

01 To Our Shareholders

Financial Section

Consolidated Five-Year Financial Summary

TOYO ENGINEERING CORPORATION Annual Report 2013

Millions of yen

Thousands of
U.S. dollars*

2009

2013

Net sales¥326,248$2,432,972

326.2

34,751

257,426

15,167

16,954

13,036

31,7296,515

15,506

199,4122,560,312

58,509756,212

19,916281,645
7,332

2,366

27,33818,198

193,585

119,265

3,089,505

224,415(¥ billion)

15.1
13.0
173.9

155.6 157.8

6.8
5.3
1.5

`10

`11

6.5

`13

`12

Net income(¥ billion)

`09

`10

`11

`13

`12

Total assets(¥ billion)

7.1
199.4 190.1 198.3

4,366,479
3.7

Yen

Operating income

228.7

`09
513

(¥ billion)

222.4

240.6

3.7

U.S. dollars*¥ 33.91$0.08

294.71

3.86

7.00

0.05

1.4

`09

`10

`11

`13

`12

New orders(¥ billion)

6.9%
29.2

269.1

14.0

`09

`10

`11

`12

Backlog of contracts
at end of the year`13(¥ billion)

410.4

290.4
359.1

222.5

35.1

224.6

224.4

10.6

119.2

4.2

132.4

168.1

(78)
3,769
`09

DEFINITION OF TERMS

`10

`11

`12

CAUTION CONCERNING FORWARD-LOOKING
STATEMENTS

Fiscal 2012 means the fiscal year ended March 31,

This annual report includes certain “forward-looking

2013 (April 1, 2012–March 31, 2013).

statements.” These statements are based on

The word, mark, logo or any sign with a symbol

management’s current expectations and are subject“TM” means that it is a registered trademark of

to uncertainty and changes in circumstances. Actual

Toyo Engineering Corporation in Japan.

results may differ due to changes in economic,
business, competitive, technological, regulatory,
and other factors.

`13

`09

`10

`11

`12

`13

03

04

Major Projects

3
8

10

7

19

13

18

16

17

1

9

6

4
15

2
5
14

12
20
11

New Orders		Name of Client

Type

Location

Scope

Ammonia and Urea Plant

NigeriaEP

1
Indorama Eleme Fertilizer and Chemicals Limited		2
PT. Panca Amara Utama (PAU)			3
TAIF-NK			

Ammonia and Utility Facilities

Indonesia

EPC

Oil Refinery Modernization Project(Heavy Residue Conversion Complex)

RussiaEP

4
Petróleos de Venezuela, S.A. (PDVSA)			El Palito Refinery Modernization Project
Venezuela(Crude Oil Processing Units)		

EPsCm

5

PT Pupuk Sriwidjaja Palembang (PUSRI)

Urea Plant

Indonesia

EPC

6

NOLTEX L.L.C.

Ethylene-vinyl Alcohol Copolymer Plant

U.S.A.

EPC

7South Oil Company (SOC)

Onshore Crude Oil Pipeline Network

Iraq

E

8

BASF India Limited

Chemical Production Complex

India

EPC

9

PETRONAS Gas Berhad (PGB)

Gas Processing Plant Rejuvenation Project

Malaysia

EPC

10

Korea Petrochemical Ind. Co., Ltd. (KPIC)

Ethylene Oxide (EO) and Ethylene Glycol (EG) Plant

Korea

EPC

11

Yacimientos Petroliferos Fiscales Bolivianos (YPFB)

Urea / Granules Plant

Bolivia

LEP

Ongoing
12

Petróleo Brasileiro S.A. (PETROBRAS)

Refinery Utility Complex

BrazilEPC

13

Egyptian Ethylene and Derivatives Company (ETHYDCO)

Ethylene Plant and Butadiene Extraction Unit

Egypt

EPC

14
PT Pupuk Kalimantan Timur (Kaltim)
			
15
Petroquímica de Venezuela, S.A. (Pequiven)

Ammonia and Urea Plants

Indonesia

EPC

Ammonia and Urea Granulation Plants

Venezuela

EPC

16

Energy Optimization Project for Existing Ammonia Plant

Saudi Arabia

EPC

17
GULF JP COMPANY LIMITED			

Small Power Producer Cogeneration Plant(Three projects completed, four ongoing)

ThailandEPC

18

Functional Resins and Chemical Materials

China

EPC

19
Maruzen Petrochemical Co., Ltd.
			

Alcohol Ketone Production Equipment
Earthquake Recovery Support

Japan

Cm

20

FPSO Topsides Units

BrazilEPC

Al-Jubail Fertilizer Company (Albayroni)

Completed

Hitachi Chemical Co., Ltd.

MODEC Offshore Production Systems

EP:
Engineering and Procurement
EPC:
Engineering, Procurement and Construction
EPsCm: Engineering, Procurement service and Construction management
E:
Engineering
LEP:
Licensing, Engineering and Procurement
Cm:
Construction management

Review of Operations

TOYO ENGINEERING CORPORATION Annual Report 2013

Based on our three business pillars ofplants, energy and infrastructure,
TOYO is upgrading the business
operation system and working to
expand orders.

In fiscal 2012, consolidated net sales increased 44.9% year on
year, to ¥228.7 billion. Consolidated new orders increased 7.9%
year on year, to ¥290.4 billion because of the successful winningof large-scale orders in the fertilizers, oil refining, and energy
development fields. Including the new orders of some affiliates
accounted for by the equity method, new orders increased
18.8%, to ¥320.0 billion—exceeding the original goal for neworders of ¥310.0 billion set under the NEXT TOYO 2015 mediumterm business plan (fiscal 2012 to fiscal 2016).
Currently, the global economy is undergoing a historic
structural change. Against the backdrop of the emergence ofadvanced financial and information technology, there is an
ongoing integration of the world’s economies. As a result,companies in all countries are moving production bases
overseas with the goal of producing in and selling to local
markets. In Japan as well, where the domestic market has
been constantly shrinking, many companies are setting up
strategic bases overseas for production. TOYO has taken
steps to respond to these changes in the market environment
and to achieve one of the basic strategies of the NEXT TOYO2015 plan: “maintenance of a group management system tobalance global integration with local adaptation.” In April 2013,
we implemented a fundamental revision of our organizational
structure into three business units: Plant Project, Energy
Business, and Infrastructure Business. Each unit has thefunction of sales and marketing, and project management. We
established this system that allows TOYO to unify domestic andoverseas operations in each of our business fields.
In the following section, we cover the market environment
and TOYO’s activities, new orders for fiscal 2012, and outlooks
for each of these new business units—Plant Project, Energy
Business, and Infrastructure Business Units.

05

06

Review of Operations

Plant Project Unit
Expanding new orders through global
operation system with group companies

Market Environment and TOYO’s Activities—

The recovery trend in the Japanese economy from the end of 2012 did notextend to capital investment. Looking overseas, however, there was vigorous
activity in various markets. In the United States, there was robust capital
investment in the energy, gas chemicals, and fertilizer industries based on
the shale gas revolution. Similarly, in such emerging countries as those inSoutheast Asia, there was an active trend of plant construction against the
backdrop of continuing population growth and the progress of urbanization.
Furthermore, in energy resource-rich countries, the high price of oil supported atrend toward increased capital investment in petrochemical and fertilizer plants.
In response, TOYO continued to develop its sales activities in suchvarious fields as petrochemicals, oil refining, gas processing, fertilizers, andpharmaceuticals. We also strove to establish and expand our global operation
system. We aimed to provide a wide range of services covering customers’
entire value chains, from the planning of project implementation to operationsof the plants after completion. Our plant business is the core that has
underpinned TOYO’s growth for more than 50 years, and can be expected tocontinue being a strong earnings base in the future.

New Orders in Fiscal 2012—

In fiscal 2012, the Plant Project Unit received three EPC orders in the fertilizer
market—a urea and an ammonia plant in Indonesia and one of the world’s
largest fertilizer plants to be constructed in Nigeria. In addition, we signed acontract to supply urea technology licensing and some of the related equipment
for a urea plant being built in Bolivia by the national oil company of Bolivia.
In the petrochemical market, our group companies achieved visible
results. Toyo-Korea independently won an EPC contract to build an Ethylene
Oxide (EO) and Ethylene Glycol (EG) plant in Korea. Toyo-India received an
EPC contract to build a chemical production complex for BASF in India. In
the oil refining and gas processing market, TOYO was awarded contracts in

TOYO ENGINEERING CORPORATION Annual Report 2013

various countries and regions. Among many others, TOYO won a contract
for EPsCm services on a large-scale oil refinery modernization project inVenezuela, a contract for detailed engineering and procurement for the oil
refinery modernization project of a heavy residue conversion complex in
Russia’s Republic of Tatarstan, and an EPC contract for a gas processing plantrejuvenation project in Malaysia mainly executed by Toyo-Malaysia. In thepharmaceutical market, one of TOYO’s Enhancing Business Areas, we wereawarded an EPC contract for a highly potent Active Pharmaceutical Ingredient(API) plant for Shionogi & Co., Ltd., and a contract for validation support
services for Wako Pure Chemical Industries, Ltd.
TOYO also achieved a tangible result in the LNG market. In collaboration
with MODEC, Inc., IHI Corporation, and CB&I Nederland B.V. (CB&I), of theNetherlands, TOYO won a Front End Engineering Design (FEED) contract for a
Floating LNG (FLNG) project by Malaysia’s national oil company.

Outlook—

One of the positive results achieved by the Plant Project Unit in fiscal 2012
was the greater degree of autonomy shown by each group company. One
direction we are aiming for with our medium-term business plan, NEXTTOYO 2015, is enhancing the EPC execution capabilities of our groupcompanies. The above-mentioned Toyo-Korea, Toyo-India and ToyoMalaysia projects are evidence that our EPC business is shifting well to ourglobal bases and that our overseas companies are achieving TOYO quality
in their work. TOYO’s strategy going forward will be to further enhance the
EPC capabilities of our overseas companies and increase the number of
independently won projects.
Another of the noteworthy trends in orders received in fiscal 2012 was
the sharp increase in fertilizer-related projects. Recently, fertilizer plants arebeing built around the world along with the growing fertilizer needs of mainly
emerging countries and the diversification of natural gas utilization methods
among natural resource-rich countries. With our proprietary ACES21® urea
synthesis technology and urea granulation technology, TOYO has the uniqueadvantage of being able to target fertilizer plant projects throughout theplant life cycle. Leveraging this capability, we will aim to expand orders inSoutheast Asia, India, the Americas, Russia and other CIS countries, and SubSaharan Africa.
In the pharmaceutical field, in March 2013, we formed a businessalliance with Middough Inc., U.S.A., an engineering company with abundant
experience in such biological fields as microorganisms, animal cells, andvaccines. Based on this new business alliance, TOYO will be targeting
domestic and overseas orders in the promising bio-pharmaceutical field.

07

08

Review of Operations

Energy Business Unit
Active shift of business resources tohigh-value-added business alliances

Market Environment and TOYO’s Activities—

In the 21st century, possibly one of the greatest issues being faced by
mankind is the development and stable supply of energy. According toforecasts announced by the United Nations, the world’s current populationof 7.2 billion people will increase to 8.1 billion in 2025, and reach 9.6 billion
in 2050. In addition to energy demand expansion along with the population
growth, per-person energy consumption is expected to rise due to theeconomic development and modernization of people’s lifestyles, mainly inemerging countries. For that reason, energy resource-rich countries arepromoting investments actively in deep-sea oil and gas fields and otherenergy development projects.
Based on these future trends, TOYO has increased its efforts tostrengthen its energy development activities. In fiscal 2012, we expanded
general engineering services for oil and gas development projects, won anorder to install topsides units for an FPSO system, entered the final stage forcommercialization of TOYO’s small- to medium-scale Gas to Liquids (MicroGTL) technology for oil-associated natural gas, and made efforts towards
an entrance into the LNG business. We also concentrated on forming anddeveloping strategic partnerships to invest in and be involved with operationsof energy projects.

New Orders in Fiscal 2012—

In April 2012, TOYO entered into a General Engineering Service Agreement(GESA) with South Oil Company (SOC) of Iraq for services in upstream oil
development projects. Based on the agreement, TOYO will, on a long-termbasis, provide comprehensive technical services for oil field development
planning and construction and revamping for each oil field and related
facilities of SOC. Since 2002, TOYO has concluded GESA with the oil andgas companies of many countries. Because of these agreements, TOYO has
worked closely with customers in a wide range of capacities, from feasibility

04

Aaaaaaaaaaaaaaaa

TOYO ENGINEERING CORPORATION Annual Report 2013

studies to planning and preparation for the bidding process. TOYO’s recordand abundant knowledge of the oil and gas fields are highly evaluated by
SOC. Based on the agreement with SOC, TOYO has already received acontract to do a study for an oil pipeline. We are also participating in the
Iraqi government’s national oil and gas field development planning as anengineering partner, and are in the midst of producing a master plan for theindustrial use of associated natural gas from oil production.
In our FPSO operations, in December 2012, MODEC, Inc., and our joint
venture MODEC and TOYO Offshore Production Systems Pte. Ltd. (MTOPS)won an order to install topsides units for an FPSO system to be developed for
an offshore oil field in the Iracema North area located in the pre-salt layer. Thisis the fourth topsides project for FPSO systems awarded to TOYO in Brazil.

Outlook—

Going forward, energy development, particularly oil and gas development,
is expected to expand in countries around the world. At the same time,competition among contractors to win contracts for those projects is also
predicted to further intensify. Under these circumstances, TOYO plans toactively shift our business resources in the engineering alliance business,
including high-value-added services centered on GESAs and FEED-to-EPC
rollover projects. We will stay in close collaboration with energy development
companies and other cooperating companies. Another area we will be aiming
to expand business in is the asset management business of existing oil fields
by applying enhanced recovery process and optimized operation of idle
oil and gas fields through the establishment of new facilities or additional
investment.
We will continue to emphasize our FPSO business. PETROBRAS plans toincrease oil and gas production in Brazil from 2.4 million barrels of oil per day
to 5.2 million barrels of oil per day by 2020 and intends to deploy a number of
FPSO units to develop its offshore resources. TOYO established joint venture
TS Participações e Investimentos S.A. (TSPI) in May 2012, and TSPI’s wholly
owned subsidiary Estaleiros do Brasil Ltda. (EBR) as its local bases to seize
business opportunities provided by PETROBRAS’ active national oil and gas
policy. The first result of this strategy appeared in May 2013, when EBR wasawarded an engineering, procurement, construction and installation contractby PETROBRAS to install an FPSO topsides unit.

09

10

Review of Operations

Infrastructure Business Unit
Focus on expanding investment needs
through technology enhancement

Market Environment and TOYO’s Activities—

Investment in social infrastructure, such as electric power, water treatment,
and transportation system, is in an upward trend. Investment activity is mainly
focused on emerging countries with continuing robust economic growth.
Along with the expansion of domestic electrification and the industrial boom
fueled by rising income levels, electric power consumption will soar. This also
will lead to a large increase in the need for water treatment and transportation
systems that provide the foundation for comfortable lifestyles and industrial
development.
Against this backdrop, there are growing expectations among emerging
countries of the contributions that the engineering and electric powercompanies of Japan, a country with advanced infrastructure, can contributeto the upgrading of their infrastructure. Considering that the development ofsocial infrastructure around the world could be a key advantage for Japan’s
economic recovery, in May 2013, the Japanese government announced
an infrastructure export strategy. In the strategy, the government included
support for the Japanese companies involved with overseas infrastructuredevelopment. The government also indicated an estimated amount of thetotal overseas infrastructure orders expected as a result of the strategy. In
2020, Japanese companies’ share of overseas infrastructure orders in theenergy field, including thermal power generation, nuclear power generation,and oil and gas plants, is estimated to be about ¥9 trillion. The equivalent
2020 order figures are about ¥1 trillion for the living environment field
related to water and recycling; about ¥7 trillion for the transportation field,
including railways and next-generation automobile projects; and about ¥5
trillion for new fields, such as medical services and marine infrastructure
projects.
To position ourselves strongly in this massive market, TOYO isaggressively working to win electric power generation, water treatment,
and transportation system projects. Particularly in thermal electric power
generation, TOYO is aiming to become a power engineering provider. In the
nuclear power field, we will concentrate on acquiring Balance Of Plant (BOP)

Annual Report 201204

Aaaaaaaaaaaaaaaa

TOYO ENGINEERING CORPORATION Annual Report 2013

projects to supply electric power facilities and peripheral machinery andequipment for the main reactors.

Ongoing Projects—

Jointly with Mitsui & Co., Ltd., TOYO is building seven gas-fired combined
cycle electric power plants with total generation capacity of 790 MW at sites
located in the suburbs of Bangkok for Gulf JP Co., Ltd., a local electric power
development company in Thailand, whose majority owner is Electric Power
Development Co., Ltd., in Japan.
The first electric power plant, GKP1, started commercial operationsin January 2013, with five more on stream by July 2013. The final plant isscheduled for completion in October 2013. The electric power generated
will be sold to the Electricity Generating Authority of Thailand (EGAT) on awholesale basis. Electric power, steam, and chilled water will be also solddirectly to companies in neighboring industrial parks.
In the Republic of Azerbaijan as well, TOYO is building a 400 MW
gas combined cycle power plant in cooperation with a local construction
company. The project is for the Azerenerji Joint Stock Company, agovernment-owned power utility company.

Outlook—

Currently, we are working with our group companies and partners to win
orders in various countries and regions. We are targeting gas- and coalfired thermal electric power plant projects in Russia, Southeast Asia, andelsewhere. In Vietnam and Myanmar, our focus is on water treatment andsewage system projects. In India and Southeast Asia, we are concentratingon railway projects.
TOYO does not yet have a particularly strong presence in theinfrastructure market. However, that is starting to change as we are steadily
being recognized by customers in the electric power field and by partners
for our work on electric power stations in Thailand and Azerbaijan. Against
the backdrop of global economic integration and development in emerging
countries and regions, the global infrastructure market should continue toexpand steadily. Along with that trend, infrastructure development demands
are expected to jump to a sophisticated level. Accurately responding to thechanges in the business environment, TOYO plans to expand the scale ofoverall infrastructure operations and ensure profitability. We will do so basedon our record in thermal and nuclear power generation projects, our project
management capabilities and related specialized and essential technologies,
and the local know-how of our overseas companies.

11

12

HSSE + Quality“Safety First” is not simply a slogan.
“Safety” is an integral part of the TOYO brand.
In 2012, in terms of TOYO’s safety record as defined by ILO, Lost Time Incident Rate (LTIR) was 0.09 andTotal Recordable Incident Rate (TRIR) was 0.22. Although our TRIR is slightly improved from 0.24, our
LTIR remains the same as in 2011. We are not satisfied with this result, and shall strive to complete alljobs with no accidents and no harm to people.
We are aware that humans make mistakes, therefore it is important to enhance the quality ofsafety training to facilitate proactive safety actions and to raise sensitivity toward risk and hazards
that might lead to accidents. With the recognition that “Safety takes priority over everything else,” wecontinuously implement safety training programs to foster the safety culture.
TOYO’s group companies have applied unified standards for safety management and moreover,through promoting standardization, TOYO is making its best effort to maintain and improve quality as
well as safety.
Loss of valuable human life must absolutely be prevented by all means in the process of TOYO’s
business solutions, such as plant construction. Our efforts, time and expenses spent to respect humanlife must take precedence over all other things.

SafetyCorporate Safety Training
In order to spread the culture of “safety is the first priority” among our employees,
we carried out safety training for all corporate members in fiscal 2006. The training
was aimed at all employees, not only employees at construction sites. Only
employees trained by the Corporate Safety Training Program are allowed to enter
our construction sites.
In addition to the above, we carried out safety training for all of our project
managers, field managers and construction managers in fiscal 2012 since strong
leadership is a prerequisite to ensure site safety.

Safety Activity at Sites
Our main goal is to hand over superior facilities to our clients through engineering,procurement, construction and commissioning work without any accident or injuries.
For this purpose, construction site workers, together with clients and partners,
participate actively in site safety activities such as tool box meetings, job safety
analyses, and mass safety meetings, with an established management system.

Safety & Environmental Report 2013
TOYO’s Safety & Environmental Report 2013 is available on our website. It introduces
our various activities on safety and the environment during 2012.

HSSE + Quality

TOYO ENGINEERING CORPORATION Annual Report 2013

Quality
TOYO’s Standards
TOYO holds its own standards, which have been established on cumulativeknowledge and experience gained from a number of projects TOYO has
accomplished around the world. With TOYO’s Standards consisting of TOYO-Group
Standards (TGS) and the Local Standards (LS) of each group company, along withdue care of clients’ requirements, TOYO guarantees to always provide high-quality
products and services.

Toyo-Japan
Local
Standards
Toyo-India
Local
Standards

Toyo-China
Local
Standards

TOYO-Group
Standards(TGS)
Toyo-Malaysia
LocalStandards

Toyo-Korea
Local
Standards
Toyo-Canada
LocalStandards

Project SQE (Safety, Quality and Environment)
Management Department
The Project SQE Management Department, established in April 2010 for
improvement of SQE management function in TOYO’s projects, has been training
personnel for performing PQM (Project Quality Manager) and HSSEM (Health,
Safety, Security and Environment Manager) roles. The department facilitatesaccumulation and improvement of SQE know-how, which is applicable to all projects
and proposals of TOYO’s group companies.

Feedback Knowledge Management System (FKMS)
As part of the continual improvement of the Quality Management System,
TOYO has been accumulating feedback and knowledge for about 30 years fromexecuted projects in the FKMS. The FKMS accepts and shares the feedback andknowledge from TOYO’s group companies, thereby the feedback and knowledge
can be extended and utilized among all TOYO’s group companies immediately forsuggestions and preventive actions in all following projects and proposals.

Environment
TOYO’s Energy Saving Urea Synthesis Technology, ACES21®
TOYO developed its propriety urea production technology and has been a leader inthe urea industry.
TOYO offers its own patented urea synthesis technology, named ACES21®,
which maintains the dominant merits of the ACES process with the advantage ofenergy saving features like reduced steam and electric power consumption.
In general, urea plants are witnessing growth in production capacities. Those
plants using ACES21® process with notified capacity of 4,000 tons per day are able
to produce 6,000 tons per day of urea, resulting in a reduced number of supporting
facilities per ton of urea production.

3-D model of an ACES21®
4,000 ton per day urea plant

13

14

Corporate GovernanceInternal Control 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 and verifies the appropriateness andeffectiveness of the internal management structure, including compliance and risk management. In
addition, there are specialized units to perform other internal audits, such as the SQE (Safety, Quality
and Environment) Management Division.
In order to promote the Internal Control System of the group, TOYO is making efforts to ensure
proper operations across TOYO’s group companies by establishing corporate procedures to strengthen thecorporate administrative functions of each company.
Risk Management System
For risk management concerning project profitability and financial matters within TOYO, all business
operations are constantly 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 and projects undergo a risk analysis overseen by
the Project Risk Management Committee, 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 operations of
the Company. The Crisis Management Team is constantly prepared for potential crises.

Corporate Governance Structure (As of April 2013)&&

Sales Committee

Chief STC Officer
Legal Unit

Audit/Guidance

Operation Units

Security
Trade Control(STC)
Audit/
Guidance

Corporate Planning Division

Audit/GuidanceBusiness Risk and Other Risks

TOYO ENGINEERING CORPORATION Annual Report 2013

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.
Business risk
The nature of our business activities, which mainly involve conducting projects worldwide, is exposedto 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 thatthese risks may occur and are taking actions to reduce exposure to these risks by using export credit
insurance, maintaining a Risk Management System, Risk Control Structure and taking other steps.
War, civil commotion, riots, revolutions, coup d’état, terrorism and other unusual events in the
country where the project is carried out or in the neighboring countries.
Regional risks that occur particularly in an area near a project site, such as a surge of politicalunrest and a serious outbreak of an epidemic disease.
Extraordinary natural phenomenon, such as earthquakes, floods, typhoons and other storms aswell as unusual weather, such as extreme heat or cold.
Notable changes in a country’s commerce, trade, manufacturing, and financial policies, such as
license approvals, customs clearance, export and export controls, foreign exchange systems,
communications, and taxes.
A major and global contraction in capital investment activities in the Company’s business fields ora sharp decrease in opportunities to win orders due to intensified competition.
●

●

●

●

●

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 amountreceived. In addition, the yen’s appreciation makes us less price competitive when competing for neworders 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 companies and takes all otherpossible steps to minimize exposure to foreign exchange risk.
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 supplies of these items, due to rapid change in the internationalsituation. The possibility also exists of cost increase caused by a supplier becoming insolvent or failureof 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 to enter into contracts that incorporate measures tooffset these risks and gather information on market trends. To avoid an undue reliance on a particularsupplier, we work on placing orders with a large number of suppliers and stringently monitor thefinancial condition of suppliers. We also diversify contract conditions such as cost reimbursable basis
to reduce our risks.

15

16
16

Management’s Discussion
andandAnalysis
Management’s
Discussion
AnalysisAnnual Report 2012

In fiscal 2012, domestic and overseas business conditions contrasted in TOYO’s core plant market.
In Japan, the recovery trend in the economy did not extend to capital investment, which continued
to decrease. Overseas, however, there was vigorous capital investment planning activity in North
America, targeting the energy, gas chemicals, and fertilizer industries—fields that can make use of
shale gas. In India, Russia, Brazil, and Southeast Asia there was an overall trend toward a growing
need for plant construction, energy development, and infrastructure development. This trend isin response to expanding demand for energy, materials, food, and water prompted by continuing
population growth and the progress of urbanization in these countries and regions. Furthermore, inenergy resource-rich countries such as those in the Middle East and other areas, active planning ofinvestments in plants and in the development of deep-sea oil and gas fields continued, supported by
the high price of oil.
Under these conditions, TOYO initiated its medium-term business plan, NEXT TOYO 2015, in
fiscal 2012. Guided by the plan, TOYO aggressively developed its business based on its Productand Business Areas and Markets Strategies. Under the Product and Business Areas and Markets
Strategies, TOYO implemented various development activities in its business areas.
Core Business Areas include TOYO’s main businesses of refinery and gas processing,petrochemicals, and fertilizers—for which TOYO licenses its proprietary urea technology. In each ofthese areas, we conducted aggressive marketing activities. We also strove to expand and strengthen
our global operations system in the Core Business Areas.
In the Enhancing Business Areas, TOYO is aiming to expand business domains. We proactively
worked to develop the energy business. Among other business activities, we offered generalengineering service agreements for oil and gas development, won an order to install topsides units
for an FPSO system, entered the final stage for commercialization of new Micro-GTL technology,
and took various steps to enter the LNG field including mid-scale LNG, and FLNG. In addition, in thesocial infrastructure field, we focused on winning orders for electric power, water treatment, andtransportation system projects.
Our emphasis in Fostering Business Areas is to carry out business development from a mediumto long-term perspective. Among other actions, we formed strategic partnership agreements aimed atparticipating in investment and facility operation in energy development projects.
Under TOYO’s Business Areas and Markets Strategy, we conducted aggressive marketingstrategies aimed at expanding our activities in Frontier Markets. These activities targeted:
Sub-Saharan Africa, which continues to grow economically against the backdrop of abundant oil
and gas resources,
Russia and other CIS countries, where there is strong potential for capital investment for theeffective utilization of energy resources in refinery and gas processing, chemical, and social
infrastructure,
North America, where the use of unconventional energy resources, such as shale gas and oil,bodes well for greater capital investment in fertilizers, petrochemicals, and energy development,
andIraq, where recovery in demand can be expected for many different types of production facilities.
●

●	

●

●

Looking at project execution in fiscal 2012, among others, we made progress with electric power
plants in Thailand, a fertilizer plant in Indonesia, FPSO topsides (MV24 project) in Brazil, utility
facilities for an oil refinery in Brazil, and a fertilizer plant in Venezuela.
Despite our progress on projects, the declining profitability of the fertilizer plant project inIndonesia, executed in collaboration with overseas group companies during fiscal 2012, and theimpact of goodwill impairment losses booked by a group company affected TOYO’s profitability
performance in fiscal 2012. Combined with the delay of some expected new projects, consolidated
profits fell below those of the previous fiscal year.

Management’s
Discussion
and Analysis
Management’s
Discussion
and Analysis

TOYO ENGINEERING TOYOCORPORATIONENGINEERING
AnnualCORPORATION
Report 2013

Performance Outline (Consolidated)
Net sales¥ 228.7 billion (44.9% up)

Operating income¥

1.5 billion (70.2% down)

Net income¥

1.4 billion (60.9% down)

New orders¥ 290.4 billion (7.9% up)

Cash dividends (annual)

¥

5.00

Fiscal 2012 Business Results
In fiscal 2012, consolidated net sales increased 44.9% year on year, to ¥228.7 billion ($2,432 million).
However, operating income fell 70.2%, to ¥1.5 billion ($16 million) and ordinary income declined
21.0%, to ¥4.0 billion ($42 million). Net income totaled ¥1.4 billion ($15 million), contracting 60.9%
from fiscal 2011.
New orders in fiscal 2012 increased 7.9% year on year, to ¥290.4 billion ($3,089 million). TOYO
focused on strengthening collaboration on sales activities with its group companies and on expanding
business in Frontier Markets, such as Nigeria and Iraq. In addition, we pursued service-type businessin the energy development fields. Taking steps to enter the LNG field, we focused on winning FLNG
projects in Malaysia.
Cash used in operating activities amounted to ¥18.9 billion ($201 million), compared with cash
provided by operating activities of ¥5.7 billion in fiscal 2011. This reversal in cash flows resulted froma 39.6% decline in income before income taxes, to ¥2.9 billion; an increase in notes and accounts
receivable to ¥17.6 billion; and a decrease in advances received on uncompleted construction
contracts.
Cash used in investing activities was ¥1.5 billion ($16 million) compared with an outflow of ¥2.4
billion a year earlier. The major expenditures were ¥1.8 billion on purchase of investment securities.
Cash used in financing activities totaled ¥532 million ($5 million) compared with cash provided byfinancing activities of ¥102 million in fiscal 2011. The principal cash outflow was cash dividends paid of¥1.1 billion.
As a result of the above cash flows, cash and cash equivalents at March 31, 2013, amounted to¥71.6 billion ($762 million), declining ¥18.7 billion year on year. This amount includes a cash deposit
totaling ¥8.5 billion received from TOYO’s joint venture partner on an ongoing construction project.
TOYO’s dividend policy is to endeavor to distribute profits to shareholders in accordance with
operating performance. We also strive to maintain stable dividends from a medium- to long-term
perspective while taking into consideration the need for internal reserves that underpin our businessbase. Our internal reserves are allocated to different reserves for strategic investment in new businessfields, for R&D investment, and in preparation for possible business risk-related losses. In fiscal 2012,
dividends amounted to ¥5.00 per share.
Fiscal 2013 Performance Forecast Outline (Consolidated)
Net sales¥ 300.0 billion

Operating income¥

10.0 billion

Net income¥

5.0 billion

New orders¥ 330.0 billion

Cash dividends (annual)

¥

6.00

Fiscal 2013 Performance Forecast (Consolidated)
TOYO forecasts that the above-mentioned business conditions in fiscal 2012 will continue in fiscal
2013. Furthermore, with the recent trend toward a weaker yen providing a strong boost, we forecast
that TOYO will become more competitive against European, Korean, and other competitors in thebidding.
In consideration of the above, TOYO is aiming for new orders totaling ¥330.0 billion.
Looking at TOYO’s performance forecast for fiscal 2013, as a result of further progress with theconstruction of large-scale projects such as fertilizer plants in Indonesia and Nigeria, TOYO expects
net sales of ¥300.0 billion, operating income of ¥10.0 billion, ordinary income of ¥10.0 billion, and net
income of ¥5.0 billion. Dividends will increase ¥1.00 per share from fiscal 2012, to ¥6.00 per share.

17
17

18

Financial Section
Consolidated Balance Sheets
Toyo Engineering Corporation and Consolidated Subsidiaries

March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen

2013

2012

¥ 52,328¥ 48,041$ 556,631

Notes receivable, accounts receivable fromcompleted construction contracts

54,42335,832578,913

Short-term investment securities (Note 16)

21,37644,499227,387

Costs on uncompleted construction contracts

33,30826,370354,304

Deferred tax assets (Note 19)

3,010

1,655

32,019Accounts receivable—other

22,47814,472

239,112

Other

5,849

3,503

62,222(4,258)(3,530)(45,299)

188,517

170,844

2,005,292

Buildings and structures (Note 5)

26,52528,078282,160

Machinery, vehicles, tools, furniture and fixtures (Note 5)

5,219

4,577

55,517

Land (Note 5)

17,37817,608

184,862

Lease assets

1,852

1,890

19,70875

4797(19,864)(19,996)(211,299)

31,18732,164

331,747

Goodwill

2,570

3,322

27,345

Other

2,918

3,081

31,046

5,489

6,403

58,391

Investment securities (Notes 4, 16)

11,642

9,551

123,846

Long-term loans receivable

4,578

4,575

48,697

Deferred tax assets (Note 19)

1,034

361

11,009Other (Note 4)

3,137

3,510

33,370(4,892)(4,995)(52,042)

Assets2013

Current assets:
Cash and deposits (Note 13)

Allowance for doubtful accounts
Total current assets

Property, plant and equipment:

Construction in progress
Accumulated depreciation and impairment loss
Total property, plant and equipment

Intangible assets:

Total intangible assets

Investments and other assets:

Allowance for doubtful accounts
Total investments and other assets
Total assets
See notes to consolidated financial statements.

15,50013,003

164,881¥240,694¥222,415$2,560,312

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Thousands of U.S.
dollars (Note 1)

Millions of yen

Liabilities and Net Assets

2013

2012

2013

¥ 60,370¥ 50,096$ 642,171

12,712

12,983

135,220

Current liabilities:
Notes payable, accounts payable for construction
contracts and other
Short-term loans payable (Note 5)
Income taxes payable

2,297

355

24,443

Advances received on uncompleted construction contracts

44,487

46,164473,222

Provision for bonuses

1,103

998

11,740

80

596

851

Provision for loss on construction contracts

4,422

1,489

47,037

Other

7,656

5,263

81,448133,130

117,947

1,416,135

26,477

24,582281,645

670

913

7,134

Provision for warranties for completed construction

Total current liabilities
Noncurrent liabilities:
Long-term loans payable (Note 5)
Lease obligations
Deferred tax liabilities (Note 19)
Provision for retirement benefits (Note 18)
Provision for repairs

7

5

82

5,202

5,314

55,340

705

913

7,505

3,408

3,471

36,25536,47235,201

387,964

169,603

153,149

1,804,100

Capital stock (Note 12)18,19818,198

193,585

Capital surplus

20,75920,759220,817

Retained earnings

31,537

31,203

335,471

(383)

(363)

(4,083)

70,111

69,798745,791

665

225

7,082

Other
Total noncurrent liabilities
Total liabilities
Net assets:
Shareholders’ equity

Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

(647)

(45)

(6,883)Foreign currency translation adjustment(468)(2,931)(4,985)(449)(2,751)(4,786)

Total accumulated other comprehensive income
Minority interests

1,429

2,219

15,207

Total net assets

71,091

69,265756,212¥240,694¥222,415$2,560,312

Contingent liabilities (Note 6)
Total liabilities and net assets

19

20

Financial Section
Consolidated Statements of Income
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen

2013

2012

2013

Net sales¥228,723¥157,881$2,432,972

Cost of sales (Note 8)

204,523

132,963

2,175,545

Gross profit

24,20024,918257,426

Selling, general and administrative expenses (Notes 7, 8)

22,606

19,577240,471

Operating income

1,593

5,341

16,954

685

414

7,288

Non-operating income:Interest income
Dividends income
Foreign exchange gains
Equity in earnings of affiliates
Miscellaneous income
Total non-operating income

553

160

5,888

1,297

—

13,796

690

543

7,345

535

347

5,698

3,762

1,466

40,018

1,110

1,064

11,814—151—

Non-operating expenses:
Interest expenses
Foreign exchange losses

212

490

2,265

1,323

1,705

14,079

4,032

5,102

42,893

607

—

6,457

607

—

6,457

Impairment loss

79

—

843

Amortization of goodwill

915

—

9,741

Loss on valuation of investments securities

660

—

7,025

0

160

9

Total extraordinary loss

1,656

160

17,620

Income before income taxes

2,982

4,941

31,729

Income taxes—current

3,949

1,454

42,007

Income taxes—deferred(1,808)(255)(19,242)

Total income taxes

Miscellaneous expenses
Total non-operating expenses
Ordinary income
Extraordinary income:Gain on sales of property, plant and equipment
Total extraordinary income
Extraordinary loss:

Loss on valuation of investments in capital of subsidiaries andaffiliates

2,140

1,198

22,765

Income before minority interests

842

3,743

8,964

Minority interests in income (loss)

(614)

14

(6,541)

Net income (Note 23)
See notes to consolidated financial statements.

¥

1,457

¥

3,728

$

15,506

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Consolidated Statements of Comprehensive Income
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen

2013

2012

2013

¥ 842

¥ 3,743$ 8,964

Valuation difference on available-for-sale securities

439

(245)

4,679

Deferred gains or losses on hedges

(601)

(26)

(6,400)Foreign currency translation adjustment

2,214

(784)

23,555

Income before minority interests
Other comprehensive income:

Share of other comprehensive income of associates accounted forusing equity method
Total other comprehensive income
Comprehensive income (Note 11)

283

(88)

3,011

2,335

(1,145)24,845¥3,178¥ 2,597$33,809

Comprehensive income attributable to:
Owners of the parent

3,759

Minority interests¥ (580)See notes to consolidated financial statements.

¥

2,682

39,989(85)$ (6,179)

21

22

Financial Section
Consolidated Statements of Changes in Net Assets (Note 12)
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2013 and 2012

Millions of yen

Balance at April 1, 2011

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock¥18,198¥20,759¥28,434¥(347)

ValuationdifferenceonDeferredForeignavailable- gains orcurrency
for-sale losses on translation
securities hedges adjustment¥ 471¥ (18)¥(2,157)

Minority
interests

Total
net
assets¥1,756¥67,096

Dividends from surplus

(959)

(959)

Net income

3,728

3,728

Purchase of treasury stock
Disposal of treasury stock

(0)

(16)

(16)

0

0

Net changes of items
other than shareholders’equity

(245)

(26)

(774)

462

(583)

Balance at March 31, 2012

¥18,198¥20,759¥31,203¥(363)¥ 225¥ (45)¥(2,931)¥2,219¥69,265

Balance at April 1, 2012

¥18,198¥20,759¥31,203¥(363)¥ 225¥ (45)¥(2,931)¥2,219¥69,265

Dividends from surplus(1,151)(1,151)

Net income

1,457

1,457

Purchase of treasury stock(0)

Disposal of treasury stock
Change in scopeof consolidation

(21)

(21)

0

0

27

27

Net changes of items
other than shareholders’equityBalance at March 31, 2013 ¥18,198 ¥20,759¥31,537¥(383)

440

(601)

2,463

(789)

1,512

¥ 665

¥(647)¥ (468) ¥1,429¥71,091

Thousands of U.S. dollars (Note 1)

Capitalstock

Capitalsurplus

ValuationdifferenceonDeferredForeignavailable- gains orcurrency
for-sale losses on translation
securities hedges adjustment

Total
net
assetsRetainedearnings

Treasurystock

Balance at April 1, 2012

$193,585 $220,818 $331,918$(3,866)

Dividends from surplus(12,246)(12,246)

Net income

15,506

15,506

Purchase of treasury stock
Disposal of treasury stock
Change in scopeof consolidation(0)

Minority
interests$2,401 $   (482) $ (31,187) $23,606 $736,792

(224)

(224)

7

6

293

293

Net changes of items
other than shareholders’equity4,680

Balance at March 31, 2013 $193,585 $220,817 $335,471 $(4,083)$7,082 $(6,883) $ (4,985) $15,207 $756,212

See notes to consolidated financial statements.

(6,400)26,202(8,398)16,083Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Consolidated Statements of Cash Flows
Toyo Engineering Corporation and Consolidated Subsidiaries

Years ended March 31, 2013 and 2012
Thousands of U.S.
dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Impairment loss
Increase (decrease) in provision for retirement benefits
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in provision for loss on disaster
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Loss (gain) on sales of property, plant and equipment
Equity in (earnings) losses of affiliates
Loss (gain) on valuation of investment securities
Decrease (increase) in notes receivable, accounts receivable fromcompleted construction contracts
Decrease (increase) in costs on uncompleted construction contracts
Decrease (increase) in accounts receivable—other
Increase (decrease) in notes and accounts payable—trade
Increase (decrease) in advances received on uncompleted
construction contracts
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Repayments of finance lease obligations
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting fromchange in scope of consolidation
Cash and cash equivalents at end of period (Note 13)
See notes to consolidated financial statements.

2013

2012

2013

¥ 2,982
2,570
1,572
625
79
(179)
2,918
—
(1,238)
1,110
34
(607)
(690)
661

¥ 4,941
2,524
169
926
—
(209)
812
(95)
(575)
1,064
(43)
(2)
(543)
174

$ 31,729
27,33816,723
6,658
843(1,911)
31,046—(13,177)
11,814366(6,458)(7,345)
7,035(17,645)(6,469)(8,319)9,492(3,848)(6,923)(5,784)
7,835(187,697)(68,819)(88,493)
100,970(2,584)(1,098)(16,785)
1,456(1,119)(2,537)(18,986)

9,892(2,551)7,762
1,035(1,043)(2,044)
5,710(27,494)(11,679)(178,551)
15,497(11,908)(26,996)(201,959)

132
(689)
1,185
(1,132)(1,854)39—
730(1,587)940(1,595)980(1,048)(397)
33(1,737)407(2,417)

1,412(7,332)
12,614(12,050)(19,726)
419
—
7,772
(16,890)(1,075)
6,331(4,115)—(466)(1,151)
(54)
(532)
2,123
(18,983)
90,452

3,557
13,200(14,063)(1,000)
(565)
(959)
(66)
102
(280)
3,115
87,337(11,439)
67,346(43,781)—(4,964)(12,246)(583)(5,668)22,583(201,933)
962,161206¥ 71,675—¥ 90,452

2,195$762,423

23

24

Financial Section

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 the accounts
prepared by the Company in accordance with the provisions set forth in the Financial Instruments and Exchange Law
of Japan and with accounting principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards. Certain reclassifications havebeen made to present the accompanying consolidated financial statements in a format which is familiar 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 ¥94.01 to U.S.$1.00
prevailing on March 31, 2013.

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. As of March 31, 2013, thenumbers of consolidated subsidiaries and affiliates accounted for by the equity method were 14 and 6, respectively.
Toyo Engineering Korea Limited, Toyo Engineering Corporation, China and 4 other subsidiaries are consolidated using
their financial statements as of their respective fiscal year end, which falls on December 31, and necessary adjustments
are made to their financial statements to reflect any significant transactions from January 1 to March 31. Intercompany
accounts and transactions are eliminated in consolidation. The difference between the acquisition cost and the equity inthe net assets at the time of acquisition is amortized in principle within twenty years on a straight-line basis.
(b) Securities

All debt and equity securities other than equity securities issued by subsidiaries and affiliates are classified into oneof three categories: trading, held-to-maturity, or available-for-sale securities. Trading securities are bought and heldprincipally for the purpose of selling them in the near term. Held-to-maturity securities are those securities which theCompany 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 securities.
Trading securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted
for the amortization or accumulation of premiums or discounts. Unrealized gains or losses on trading securities areincluded in earnings. Short-term investment securities classified as available-for-sale securities are recorded at fair value
with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Nonmarketable securities classified as available-for-sale securities are recorded at cost.
Cost of securities sold is determined by the moving-average method.
(c) Derivative Financial Instruments

The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage
certain risk arising from adverse fluctuations in foreign currency exchange rates and interest rates. Derivative financial
instruments are carried at fair value with changes in unrealized gain or loss charged or credited to operations, except
for those which meet the criteria for deferral hedge accounting under which unrealized gain of loss is deferred as acomponent of net assets.
Deferral hedge accounting is adopted for derivatives which qualify as hedges, under which unrealized gain or loss isdeferred. Hedging instruments are derivative transactions such as foreign exchange forward contract and interest rateswap, and hedged items are primarily forecast sales denominated in foreign currencies, and receivables and payables
denominated in foreign currencies. Hedge effectiveness is not assessed if the substantial terms and conditions of thehedge instruments and the hedged forecasted transactions are the same. The Company and its consolidated manages its
derivative transactions in accordance with its internal “Policies and Procedures for Risk Management.”(d) Costs on Uncompleted Construction Contracts

Costs on uncompleted construction contracts is stated at cost, determined by the identified-cost method.
(e) Depreciation and Amortization

Depreciation of property, plant and equipment is principally computed by the declining-balance method based on theestimated useful lives of the assets.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

However, buildings and rental properties acquired after April 1, 1998 are depreciated on a straight-line method.
The useful lives of property, plant and equipment are as follows:		
Buildings and structures:
3 to 50 years
		
Machinery, vehicles, tools, furniture and fixtures: 2 to 20 years
Amortization of intangible assets of the Company and its consolidated subsidiaries is calculated principally by straight-line.
Software is amortized on a straight-line method over 3 to 5 years of the estimated available period.
(f) Leases

Depreciation of assets on finance leases which do not transfer ownership of the leased assets to the lessee are calculatedby the straight-line method over the lease period with their residual value zero.
(g) Allowance for Doubtful Accounts

The Company and its consolidated subsidiaries have provided an allowance for doubtful accounts at an estimated amountof probable and reasonably possible bad debts and an estimated amount computed on the actual percentage of credit
losses.
(h) Provision for Bonuses

Provision for bonuses to employees is provided at the expected payment amount for the fiscal year.
(i) Provision for Warranties for Completed Construction

Provision for warranties for completed construction is provided based on past experience.
(j) Provision for Retirement Benefits

The provision for retirement benefits at the year-end are stated in accordance with the projected plan assets and the
projected benefit obligation. The difference arising from the adoption of the new standard of accounting of ¥3,695 million($39,313 thousand) is amortized over 15 years by the straight-line method. Actuarial gain or loss is amortized by thestraight-line method over 9 years within the average of the estimated remaining service years of the employees in theyear following the year of recognition. Prior service cost is amortized as incurred over 13 years within the average of theestimated remaining service years when incurred.
(k) Provision for Loss on Construction Contracts

Provision for loss on construction contracts is provided in case the material loss is forecasted for a certain large-scale
contract work.
The amounts of loss on costs on uncompleted construction contracts of ¥2,909 million ($30,951 thousand) is included
in provision for loss on construction contracts and shown as a liability, not as a deduction from the amount of costs on
uncompleted construction contracts.
The amount of provision for loss on construction contracts included in cost of sales is ¥4,413 million ($46,944
thousand).
(l) Provision for Repairs

The Company and its consolidated subsidiaries have provided provision for repair at estimated amount for preparing theexpenditure for major repairs.
The Company provides a portion of estimated expenditure equally divided to each fiscal term from decision of repair
plan to end of repair work.
(m) Foreign Currency Translation

Both short-term and long-term receivables and payables in foreign currencies are translated at the rates of exchange in
effect at the balance sheet date and differences arising from the translation are included in the consolidated statements
of income.
The balance sheet accounts of the consolidated foreign subsidiaries are translated at the rates of exchange in effectat the balance sheet date, except for capital stock and capital surplus, which are translated at their historical exchange
rates. Revenues, expenses and net income for the year are translated at the rates of exchange in effect at the balance
sheet date. Differences arising from translation are presented as “Foreign currency translation adjustment” and “Minority
interests” in the accompanying consolidated balance sheets.
(n) Recognition of Revenues

Revenues and costs of construction contracts of which the percentage of completion can be reliably estimated, arerecognized by the percentage-of-completion method. The percentage of completion is calculated at the cost incurred asa percentage of the estimated total cost. The completed-contract method continues to be applied for contracts for which
the percentage of completion cannot be reliably estimated.

25

26

Financial Section(o) Cash and Cash Equivalents

For the purposes of the consolidated statements of cash flows, the Company and its consolidated subsidiaries consider
all highly liquid investments with insignificant risk of changes in value purchased with an original maturity of threemonths or less to be cash equivalents.
(p) Consumption Tax

Transactions subject to consumption tax are recorded at amounts exclusive of consumption taxes.
(q) Consolidated Tax Return

The Company files a consolidated tax return with certain domestic subsidiaries.
(r) Capitalization of Interest Expenses

Interest expenses incurred for real estate development projects conducted by certain subsidiaries have been capitalized
as a part of the development cost of such projects.
(s) Advances Received on Uncompleted Construction Contracts

Advances received on uncompleted construction contracts from customers are shown as a liability, not as a deduction
from the amount of costs on uncompleted construction contracts.
(t) Income Taxes

Deferred tax assets and liabilities are determined based on the differences between carrying amounts of existing assets
and liabilities in the financial statements and their respective tax bases. Deferred tax assets and liabilities are measured
using the enacted tax rates and laws which will be in effect when the differences are expected to be reversed.
(u) 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.
Total net assets per share is computed based on outstanding shares at the balance sheet date.
(v) Research and Development Costs

Research and development costs are charged to income when incurred.
(w) Impairment of Fixed Assets

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.
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 using realestate appraisal value, etc., for the year ended March 31, 2013.
(Accounting standards issued but not yet effective)“Accounting Standard for Retirement Benefits” (ASBJ Statement No.26) and “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No.25) were revised on May 17, 2012. However, these accounting standards have
not yet been adopted as of March 31, 2013.
Under these revised accounting standards, accounting treatment of unrecognized actuarial gain or loss and priorservice cost, calculation method of retirement benefit obligations and service cost and disclosures were mainly revised.
These revisions were made considering the viewpoint of enhancing financial reporting and international convergence ofaccounting standards.
The Company and its domestic subsidiaries will adopt these accounting standards effective the fiscal year ending
March 31, 2014. However, the Company expects to apply the revision of calculation method of retirement benefit
obligations and service cost from the fiscal year beginning April 1, 2014.
At present, the Company is in the process of evaluating the impact on the consolidated financial statements from theadoption of these revised accounting standards.

3. ACCOUNTING CHANGES
There are no significant accounting changes for the year ending March 31, 2013.

4. INVESTMENTS and other assets
Among investment securities and other in investment and other assets, the amounts of shares of unconsolidated
subsidiaries and affiliates as of March 31, 2013 and 2012 are as follows:Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Investments and other assets
Investment securities
Other

2013

2013

2012

¥5,549673¥3,583951$59,032
7,164

5. Short-Term LOANS PAYABLE and Long-term LOANS PAYABLEAt March 31, 2013 and 2012, short-term loans payable and long-term loans payable consisted of the followings:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Short-term loans payable
Loans payable with collateral
Loans from banks and other financial institutions
Loans payable without collateral
Loans from banks and other financial institutions
Current portion of long-term loans payable
Long-term loans payable
Loans payable with collateral
Loans from banks and other financial institutions
Loans payable without collateral
Loans from banks and other financial institutions
Less: Current portion
Total

2013

2012

2013

¥      —

¥ 2,709$       —12,712
3,630
12,712

10,274
3,260
12,983

135,220
38,617135,220

488

—

5,195

29,61930,107
3,630
26,477¥39,189

27,843
27,843
3,260
24,582¥37,566

315,067
320,263
38,617
281,645$416,866

The following assets at March 31, 2013 and 2012 were pledged as collateral principally for long-term loans payable:
Millions of yen

Years ended March 31,
Cash and deposits
Short-term investment securities
Buildings, net of accumulated depreciation
Land
Total

2013
¥    ——
1,135
945¥2,0812012¥2,924
177
1,049
938
¥5,090Thousands of
U.S. dollars

2013$     ——
12,083
10,056$22,139

The following schedule shows the maturities of long-term loans payable subsequent to March 31, 2013:
Years ending March 31,
2014
2015
2016
2017
2018
2019 and thereafter

Millions of yen

Thousands of
U.S. dollars¥3,630
3,328
4,715
5,941
3,110
9,381

$38,61735,41050,156
63,19733,08899,792In 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 ¥17,230 million ($183,283 thousand) in 2013 and ¥9,500 million in 2012.

27

28

Financial Section

6. CONTINGENT LIABILITIESThe Company and its subsidiaries were contingently liable as guarantors of loans to others in the aggregate amount of¥393 million ($4,184 thousand) and ¥541 million at March 31, 2013 and 2012, respectively.

7. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the year ended March 31, 2013 and 2012 are as
follows:
Thousands of
U.S. dollars

Millions of yen

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

2013¥8,161
353
675
600
1,001
1,141

2012
¥8,001
432
428
415
825
575

2013
$86,813
3,761
7,187
6,392
10,651
12,138

8. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses for the years
ended March 31, 2013 and 2012 amounted to ¥1,001 million ($10,651 thousand) and ¥825 million, respectively.

9. Gain on sales of property, plant and equipment
Major components of gain of property, plant and equipment are as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Building
Land

2013
¥383
223

2012
¥—
—

2013
$4,083
2,373

10. AMORTIZATION OF GOODWILL
In accordance with “Practical Guidelines on Accounting Standard for Capital Consolidation Procedures in Preparing
Consolidated Financial Statements” (JICPA Accounting Practice Committee Statement No.7, January 12, 2011), in
recognizing a write-down of its investment in an affiliate, the Company recognized a one-time amortization of goodwillof an affiliate for the year ended March 31, 2013.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

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

Millions of yen

2013

Years ended March 31,
Valuation difference on available-for-sale securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
The amount of valuation on available-for-sale securities before tax effectTax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
The amount of deferred gains or losses on hedges before tax effect:
Tax effect
Deferred gains or losses on hedges
Foreign currency translation adjustment:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
The amount of foreign currency translation adjustment before tax effect:
Tax effectForeign currency translation adjustment
Share of other comprehensive income of associates accounted
for using equity method
Amount arising during the year
Total other comprehensive income

2013

2012

¥ 140
449
589
(149)
439

¥ (438)
2
(435)
190
(245)

$ 1,492
4,777
6,269(1,589)
4,679

(910)
—
(910)
308
(601)

(51)
—
(51)
25
(26)

(9,686)—(9,686)3,285(6,400)

2,214
—
2,214
—
2,214

(784)
—
(784)
—
(784)

23,555—23,555—23,555283¥2,335(88)¥(1,145)

3,011$24,845

12. SUPPLEMENTARY INFORMATION FOR CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the year ended March 31, 2013(a) Type and number of outstanding shares
Number of shares
Balance at beginningof yearType of shares

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

Increase in shares
during the year

Decrease in shares
during the year

Balance at end ofyear

192,792,539
192,792,539

—
—

—
—

192,792,539
192,792,539

910,542
910,542

56,98656,986

1,690
1,690

965,838
965,838

Notes: 1. Treasury stock increased by 56,986 shares due to the repurchase of shares less than one unit.
		 2. Treasury stock decreased by 1,690 shares due to the sale of shares less than one unit.
(b) Dividends(b-1) Dividends from surplus
Date ofapproval

Resolution
approved byType ofsharesAnnualgeneralJune 27, meeting of Common
2012shareholders
stock

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

1,151

12,246

Amount per
share
(Yen)

6.0

Amount per
Shareholders’share
cut-off date
(U.S. Dollars)

Effective
date

March 31,2012

June 28,
2012

0.06

29

30

Financial Section(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 ofsharesPaid fromAmountAmount(Millions of yen)(Thousands of
U.S. dollars)959

10,202

AnnualgeneralJune 26, meeting of Common Retained
2013
shareholders
stock
earnings

Amount per
share
(Yen)

Amount per
Shareholders’share
cut-off date
(U.S. Dollars)

Effective
date

March 31,2013

June 27,
2013

5.0

0.05

For the year ended March 31, 2012(a) Type and number of outstanding shares
Number of shares
Balance at beginningof yearType of shares

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

Increase in shares
during the year

Decrease in shares
during the year

Balance at end ofyear

192,792,539
192,792,539

—
—

—
—

192,792,539
192,792,539

858,030
858,030

54,462
54,462

1,950
1,950

910,542
910,542

Notes: 1. Treasury stock increased by 54,462 shares due to the repurchase of shares less than one unit.
		 2. Treasury stock decreased by 1,950 shares due to the sale of shares less than one unit.
(b) Dividends(b-1) Dividends from surplus
Date ofapproval

Resolution
approved by

AnnualgeneralJune 23, meeting of
2011
shareholders

Type ofsharesAmount(Millions of yen)Amount per
share
(Yen)

Shareholders’
cut-off date

Effective
date

Common
stock

959

5.0

March 31,2011

June 24,2011(b-2) D
 ividends with a shareholders’ cut-off date during the current fiscal year but an effective date subsequent to thecurrent fiscal year
Date ofapproval

Resolution
approved by

AnnualgeneralJune 27, meeting of
2012
shareholders

Type ofsharesCommonstock

Paid fromAmount(Millions of yen)Amount per
share
(Yen)

Shareholders’
cut-off date

Effective
date

Retainedearnings

1,151

6.0

March 31,2012

June 28,
2012

13. CONSOLIDATED STATEMENTS OF CASH FLOWS
A reconciliation between the balance of cash and deposits reflected in the accompanying consolidated balance sheets andthat of cash and cash equivalents in the accompanying consolidated statements of cash flows as of March 31, 2013 and2012 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

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

2013¥52,328(1,651)

2012¥48,041(1,582)

2013$556,631(17,572)

20,998¥71,675

43,994¥90,452

223,364$762,423

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

14. LEASESThe Company and its consolidated subsidiaries have adopted “Accounting Standard 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, 2013 and 2012 for noncancelable operating leases are
summarized as follows:
Millions of yen

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

2013
¥ 718
1,207
¥1,925

2012
¥182
260
¥442

Thousands of
U.S. dollars

2013$ 7,639
12,847$20,486(b-2) Operating Leases (as Lessor)
Future minimum lease receivables subsequent to March 31, 2013 and 2012 for noncancelable operating leases are
summarized as follows:
Millions of yen

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

2013
¥ 827
3,159
¥3,987

2012
¥ 894
4,454
¥5,348

Thousands of
U.S. dollars

2013$ 8,799
33,611$42,411(c) Operating Sub-leases
Future minimum lease payments for noncancelable operating sub-leases are summarized as follows:(c-1) Lease Investment Assets and Lease Receivables
Millions of yen

Years ended March 31,
Current assets
Investment and other assets

2013
¥80
48

2012
¥216
67

Thousands of
U.S. dollars

2013
$858
518

(c-2) Lease Obligations
Millions of yen

Years ended March 31,
Current liabilities
Noncurrent liabilities

2013
¥80
48

2012
¥216
67

Thousands of
U.S. dollars

2013
$858
518

31

32

Financial Section

15. FINANCIAL INSTRUMENTS
For the year ended March 31, 2013
1. Condition of Financial Instruments
The Company and its consolidated subsidiaries hold their temporary cash surplus through low-risk financial assets and raise
funds through borrowing from banks and issuing corporate bonds.
Derivative financial instruments are utilized for reducing the risk of exchange fluctuations, interest fluctuations, and credit.
Therefore, there are no derivatives for speculative purpose.
Notes receivable, accounts receivable from completed construction contracts are exposed to credit risks of customers
and risks of exchange fluctuations. The Company deals with these risks by organizing careful reviews on awarding contracts,
letters of credit, and export credit insurance. The Company minimizes exchange fluctuation risks by organizing theircorresponding forward-exchange contracts, in principle.
Short-term investment securities and investment securities are exposed to volatility risks of market price. The Company
deals with these risks by periodic monitoring, as they mainly consist of short-term held-to-maturity bonds and stocks of ourbusiness partner.
Notes payable, accounts payable for construction contracts and other are mostly due within one year.
Borrowings from banks and corporate bonds are raised mainly for capital investment or working capital. For some longterm loans payable, the Company entered into interest swap agreements to minimize risks of interest rate fluctuations.
Regarding derivatives, forward-exchange contracts are used to minimize exchange fluctuation in foreign-currency
operations, and interest-swap contracts are used to minimize interest rate fluctuations.
The fair value of financial instruments is based on their quoted market prices, if available, or reasonably estimatedamounts if there is no market price. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts below are not necessarily
indicative of the actual market risk involved in derivative transactions.
2. Fair Value of Financial Instruments
Book value, fair value, and net unrealized gain or loss of financial instruments consist of the following:
It does not include items for which it is extremely difficult to determine the fair value.
Millions of yen

At March 31, 2013
(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts
Notes receivable, accounts receivable fromcompleted construction contracts, net

Fair value¥ 52,328¥ 52,328¥ —54,28954,280(8)

22,478(1)
22,47622,476—20,998
4,552
154,647
60,3709,081
30,107
99,56020,998
4,552
154,638
60,367
9,081
30,44299,890

0
—
(8)
(3)
—
334
330

34
(980)
(945)

34
(980)
(945)

—
—
¥ —

54,423(133)(3) Accounts receivable—otherLess: Allowance for doubtful accounts
Accounts receivable—other, net(4) Short-term investment securities and investment securities
Held-to-maturity securities
Available-for-sale securities
Total of assets(1) Notes payable, accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives
not designated as hedging instruments
designated as hedging instruments
Total derivatives

Unrealized
gain / loss

Book value¥¥

Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed
above are offset by the corresponding figures of allowance for doubtful accounts listed above. Net receivables and payables
derived as a result of derivative transactions are presented. Values in parentheses show contra-asset account, net liabilities andunrealized loss.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Thousands of U.S. dollars

At March 31, 2013
(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book value

Fair value

Unrealized
gain / loss

$ 556,631$ 556,631$

578,913(1,423)(3) Accounts receivable—otherLess: Allowance for doubtful accounts
Accounts receivable—other, net(4) Short-term investment securities and investment securities
Held-to-maturity securities
Available-for-sale securities
Total of assets(1) Notes payable, accounts payable for construction contracts and other(2) Short-term loans payable(3) Long-term loans payable (including current portion)
Total of liabilities
Derivatives
not designated as hedging instruments
designated as hedging instruments
Total derivatives—

577,490577,395(95)

239,112(21)
239,091

239,091—

223,364
48,4301,645,007
642,171
96,603
320,263
1,059,038

223,364
48,4301,644,912
642,134
96,603323,819
1,062,556

—
—
(95)
(37)
—
3,555
3,518

365
(10,427)(10,061)365(10,427)(10,061)

—
—
—

$

$

$

Millions of yen

At March 31, 2012
(1) Cash and deposits(2) Notes receivable, accounts receivable fromcompleted construction contracts
Less: Allowance for doubtful accounts
Notes receivable, accounts receivable fromcompleted construction contracts, net

Book value¥ 48,041

Unrealized
gain / loss

¥ 48,041¥ —35,30635,286(20)

14,472(1)
14,47014,470—43,994
4,665
146,478
50,096
9,723
27,84387,66343,993
4,665
146,457
50,093
9,723
28,02887,845

(0)
—
(20)
(2)
—
185
182

1
(69)
(68)

1
(69)
(68)

—
—
¥ —

35,832(525)(3) Accounts receivable—otherLess: Allowance for doubtful accounts
Accounts receivable—other, net(4) Short-term investment securities and investment securities
Held-to-maturity securities
Available-for-sale securities
Total of assets(1) Notes payable, accounts payable for construction contracts and other(2) Short-term loans payable(3) Current portion of bonds
Total of liabilities
Derivatives
not designated as hedging instruments
designated as hedging instruments
Total derivatives

Fair value¥¥

Notes receivable, accounts receivable from completed construction contracts and accounts receivable—other listed
above are offset by the corresponding figures of allowance for doubtful accounts listed above. Net receivables and payables
derived as a result of derivative transactions are presented. Values in parentheses show contra-asset account, net liabilities andunrealized loss.

33

34

Financial Section(Note 1) Computational method and related issues
Assets(1) Cash and deposits
Book values are used as fair values because they are nearly equal to such book values.
(2) (3) Notes receivable, accounts receivable from completed construction contracts and accounts
receivable—otherBook values for items which are settled in a short-term used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by the proper discount rate coupledwith period for settlement and credit risks.
(4) Short-term investment securities and investment securities
Fair value of stock items are based on the market prices and bond items are based on the market prices or their priceprovided by the financial institution.
Liabilities(1) Notes payable, accounts payable for construction contracts and otherBook values for items which are settled in a short-term are used as fair values of these items because they are nearly equal tosuch book values. Fair values of other items are based on the present value discounted by the proper discount rate coupledwith period for settlement and credit risks.
(2) Short-term loans payable
Book values are used as fair values because they are nearly equal to such book values.
(3) Long-term loans payable (including current portion)
The present values of the principal and total interest, discounted by the rate assumed to be applied to the new borrowings
under the same conditions, are used as the fair values.
Derivative Transactions
See “17. DERIVATIVE TRANSACTIONS.”(Note 2) Financial instruments of which it is extremely difficult to determine the fair value
Unlisted securities that amounted to ¥2,468 million ($26,258 thousand) as of March 31, 2013 and ¥2,606 million as ofMarch 31, 2012 are excluded from the above table because they are deemed extremely difficult to determine the fairvalues; they do not have market prices and it is not possible to conduct alternative methods such as the estimation of
their future cash flows.
(Note 3) Redemption schedule for monetary assets with maturity date and short-term investment andinvestment securities
At March 31, 2013
Cash and deposits
Notes receivable, accounts receivablefrom completed construction contracts
Accounts receivable—otherHeld-to-maturity securities
Total

At March 31, 2013
Cash and deposits
Notes receivable, accounts receivablefrom completed construction contracts
Accounts receivable—otherHeld-to-maturity securities
Total

Within one year

Millions of yen
After one year
After five years
through five years
through ten years

After ten years¥ 52,328

¥

—

¥—

¥—

47,66522,47620,998¥143,469

6,758
1—¥6,760

—
—
—
¥—

—
—
—
¥—

Within one year

Thousands of U.S. dollars
After one year
After five years
through five years
through ten years

After ten years$ 556,631

$

—

$—

$—

507,023
239,091
223,364$1,526,109

71,89021—$71,911

—
—
—
$—

—
—
—
$—

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Millions of yen

At March 31, 2012
Cash and deposits
Notes receivable, accounts receivablefrom completed construction contracts
Accounts receivable—otherHeld-to-maturity securities
Totalv

Within one year

After one year
through five years

After five years
through ten years¥ 48,041

¥

—

¥—

¥—

29,075
14,47043,994¥135,581

6,756
1—¥6,758

—
—
—
¥—

—
—
—
¥—

After ten years(Note 4) Schedule for repayment of bonds and long-term loans payable
See “5. SHORT-TERM LOANS PAYABLE AND LONG-TERM LOANS PAYABLE.”

16. INVESTMENT SECURITIESThe book value, unrealized gain and loss and the related fair value of held-to-maturity securities at March 31, 2013 aresummarized as follows:
Millions of yen

At March 31, 2013
Securities whose fair value exceeds their carrying value:
Government bonds
Securities whose fair value does not exceed their carrying value:
Government bonds
Total

Book
Value

Fair
Value

Unrealized
Gain¥15,998¥15,999¥0

4,999¥20,998

4,999¥20,998(0)¥0

Thousands of U.S. dollars

At March 31, 2013
Securities whose fair value exceeds their carrying value:
Government bonds
Securities whose fair value does not exceed their carrying value:
Government bonds
Total

Book
Value

Fair
Value

Unrealized
Gain$170,181$170,185$3

53,182$223,364

53,180$223,365(1)$1

The cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2013 are summarized as follows:
Millions of yen

At March 31, 2013
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition
costs:
Equity securities
Other
Subtotal
Total

Book
Value

Acquisition
Cost

Unrealized
Gain¥3,844¥3,844¥2,478¥2,478¥1,365¥1,365

¥ 330
378
708
¥4,552

¥ 397
378
775
¥3,254

¥

(67)
—
(67)
¥1,29835

36

Financial Section

Thousands of U.S. dollars

At March 31, 2013
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Subtotal
Securities whose carrying value does not exceed their acquisition
costs:
Equity securities
Other
Subtotal
Total

Book
Value

Acquisition
Cost

Unrealized
Gain$40,896$40,896$26,366$26,366$14,529$14,529$ 3,510
4,023
7,533$48,430$ 4,223
4,023
8,246$34,613

$

(713)
—
(713)
$13,816

Loss on other devaluation of investment securities whose fair values are readily determinable for the years ended
March 31, 2013 are ¥448 million (US$4,770 thousand).
The book value, unrealized gain and loss and the related fair value of held-to-maturity securities at March 31, 2012 aresummarized as follows:
Millions of yen

At March 31, 2012
Securities whose fair value exceeds their carrying value:
Government bonds
Securities whose fair value does not exceed their carrying value:
Government bonds
Total

Book
Value

Fair
Value

Unrealized
Gain¥26,996¥26,996¥0

16,997¥43,994

16,996¥43,993(0)¥(0)

The cost, unrealized gain and loss and the related book value of available-for-sale securities with available fair values
at March 31, 2012 are summarized as follows:
Millions of yen

At March 31, 2012
Securities whose carrying value exceeds their acquisition costs:
Equity securities
Other
Subtotal
Securities whose carrying value does not exceed their acquisition
costs:
Equity securities
Other
Subtotal
Total

Book
Value

Acquisition
Cost

Unrealized
Gain¥3,644177¥3,821¥2,790155¥2,946

¥853
21
¥875

¥ 515
328
843
¥4,665

¥ 534
328
862
¥3,808¥ (18)—(18)¥856

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

17. DERIVATIVE TRANSACTIONS
For the year ended March 31, 2013
1. Derivatives not designated as hedging instruments(1) Currency-related
Millions of yen
All notionalamounts

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

Notional
amounts due
over one year

Fair value

Unrealized
gain / loss

¥ 787
0

¥—
—

¥ 0
0

¥ 0
0

526
5
¥1,319

—
—
¥—

34
0
¥34

34
0
¥34

Thousands of U.S. dollars

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

All notionalamounts

Notional
amounts due
over one year

$ 8,371
4

$—
—

$

5,599
56
$14,033

—
—
$—

363
0
$365

Unrealized
gain / loss

Fair value

1
0

$

1
0

363
0
$365

37

38

Financial Section

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

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward
contracts
Selling
USD
BuyingUSD
EUR
Alternative method:
Foreign exchange forward
contracts
Selling
USD
EUR
SEK
CAD
SGD
Buying
USD
EUR
SEK
THB
BRL
CHF
SGD
Total

Accounts
receivable andaccounts
payableAccounts
receivable andaccounts
payableAll notionalamounts

Millions of yen
Notional
amounts due
over one year

¥16,687¥ 3,956

1,944
5,953

855
3,262

33,565
13
717
146
74

9,550
—
—
—
74

7,435
5,351
428
74
19,301280
35¥92,009

173
6
—
—
7,744
—
—
¥25,623

Fair value

Computational
method of fairvalues¥(1,576) Based on prices
offered by thefinancial
57
institution
538

N/A

¥ (980)

Based onforwardexchange
contract prices

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Main hedged
items

Deferral hedge accounting method:
Foreign exchange forward
contracts
Selling
USD
BuyingUSD
EUR
Alternative method:
Foreign exchange forward
contracts
Selling
USD
EUR
SEK
CAD
SGD
Buying
USD
EUR
SEK
THB
BRL
CHF
SGD
Total

Accounts
receivable andaccounts
payableThousands of U.S. dollars
Notional
All notionalamounts due
amountsover one year
Fair value$177,506$ 42,086

20,681
63,324

9,098
34,702357,042
138
7,632
1,558
792

101,591———
795

79,092
56,921
4,555
792
205,313
2,986
376$978,719

1,845
68
—
—
82,374——$272,563

Main hedged
items

All notionalamounts

Millions of yen
Notional
amounts due
over one year

Long-termloans payable¥11,410¥11,150¥11,410¥11,150

Accounts
receivable andaccounts
payableComputational
method of fairvalue$(16,764) Based on prices
offered by thefinancial
611
institution
5,726

N/A

Based onforwardexchange
contract prices$(10,427)(2) Interest-related

Special method for interest rate
swaps:
Interest swap contracts
floating-for-fixed rate swap

Total

Main hedged
items

Special method for interest rate
swaps:
Interest swap contracts
floating-for-fixed rate swap

Total

Long-termloans payable

Fair value

N/A

Thousands of U.S. dollars
Notional
All notionalamounts due
amountsover one year
Fair value$121,370$118,604$121,370$118,604

N/A

Computational
method of fairvalue

Based on prices
offered by thefinancial
institution

Computational
method of fairvalue

Based on prices
offered by thefinancial
institution

39

40

Financial Section

For the year ended March 31, 2012
1. Derivatives not designated as hedging instruments(1) Currency-related
Millions of yen
All notionalamounts

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

Notional
amounts due
over one year

¥ 0
51
0
¥51

¥—
51
—
¥51

All notionalamounts

Millions of yen
Notional
amounts due
over one year

¥ 5,227¥1,708

1,298
1

127
—

20,368
1,412

4,826
825

10,816
5,031
1,678
2,761
3,822
347
636
¥53,404

608
1,438
—
—
—
—
—
¥9,536Main hedged
items

All notionalamounts

Millions of yen
Notional
amounts due
over one year

Long-termloans payable¥10,242¥9,910¥10,242¥9,910Fair value

Unrealized
gain / loss

¥0
1
0
¥1

¥0
1
0
¥1

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

Main hedged
items

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

Accounts
receivable andaccounts
payableAccounts
receivable andaccounts
payableFair value

Computational
method of fairvalues¥(82) Based on prices
offered by thefinancial
12
institution
0

N/A

Based onforwardexchange
contract prices¥(69)(2) Interest-related

Special method for interest rate
swaps:
Interest swap contracts
floating-for-fixed rate swap

Total

Fair value

N/A

Computational
method of fairvalue

Based on prices
offered by thefinancial
institution

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

18. RETIREMENT BENEFITSThe Company and certain consolidated 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) Provision for retirement benefits for employees at March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥(15,599)¥(15,252)$(165,938)

Plan assets

10,8589,390

115,506

Unreserved projected benefit obligation(4,741)(5,862)(50,431)

Unamortized obligation at transition

501

747

5,333

Unamortized actuarial loss

(432)

545

(4,601)

Unrecognized prior service cost

(530)

(714)

(5,640)Net projected benefit obligation(5,202)(5,283)(55,340)

Projected benefit obligation

—

31

—

¥ (5,202)¥ (5,314)$ (55,340)

Prepaid pension cost
Provision for retirement benefits for employees(2) Net periodic pension cost for the years ended March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2013

2012

Components of net periodic benefit cost:Service cost

¥ 785

¥ 599

$ 8,355

Interest cost

298

301

3,176

Expected return on plan assets

(23)

(18)

(250)

Amortization of unrecognized retirement benefit obligation attransition

246

246

2,620

Amortization of unrecognized actuarial loss

334

488

3,552

Amortization of prior service cost

(187)

(187)

(1,999)Other
Net periodic pension cost
Total

103

107

1,098

1,556

1,537

16,553¥1,556¥1,537$16,553(3) Basis of calculation of projected benefit obligation for the years ended 2013 and 2012, respectively.
Method of allocation of estimated pension cost
Discount rate
Expected rate of return on plan assets
Amortization period for unrecognized actuarial loss
Amortization period for unrecognized obligation at transition
Amortization period for unrecognized prior service cost

Straight-line method
Mainly 2.0%
Mainly 0.0%
Mainly 9 years
15 years
Mainly 13 years

41

42

Financial Section

19. INCOME TAXESThe statutory tax rates applicable to the Company and its domestic subsidiaries for the year ended March 31, 2013 and2012 were approximately 37.8% and 40.4%, respectively. 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 of income are
not equal to the above-mentioned statutory tax rate for the following reasons:Year ended March 31,
Statutory tax rate in Japan
Adjustments:
Permanently nondeductible expenses
Permanently nontaxable dividends received
Per capita levy on corporate inhabitant tax
Temporary differences excluded from calculation of deferred tax assets
Amortization of goodwill
Tax credit
Difference in tax rates for foreign subsidiaries
Effective tax rate in the past years
Difference in tax base between corporate income tax and enterprise tax
Operating loss carryforwards for subsidiaries
Other
Effective tax rate

2013

2012

37.8%

40.4%

7.8
(7.0)
0.9
(26.8)
20.0
(6.7)
25.8
0.8
0.6
16.4
2.1
71.7%

3.1
(3.0)
0.5
(23.9)
—
—
1.4
2.8
(1.6)
2.8
1.8
24.3%

(2) Significant components of the deferred income tax assets and liabilities at March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen

2013
Deferred tax assets (gross):
Provision for retirement benefits
Provision for loss on construction contracts
Provision of allowance for doubtful accounts
Provision for bonuses
OthersTotal deferred tax assets (gross)
Deferred tax liabilities (gross):
Undistributed earnings of subsidiaries and affiliates
Valuation difference on available-for-sale securities
OthersTotal deferred tax liabilities (gross)
Net deferred tax assets

2012

2013

¥1,666
846
1,049
316
1,348
5,227

¥1,372
81
265
212
1,031
2,963

$17,727
9,006
11,1593,368
14,34555,608

627
418
143
1,190
¥4,037

562
269
121
953
¥2,010

6,674
4,456
1,531
12,662$42,946

Note: T he Company and its consolidated subsidiaries had temporary differences excluded from calculation of deferred
tax assets of ¥8,148 million ($86,675 thousand) and ¥8,689 million at March 31, 2013 and 2012, respectively,
which are available to be offset against future taxable income.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

(3) Net deferred tax assets at March 31, 2013 and 2012 are reflected in the consolidated balance sheets as follows:
Thousands of
U.S. dollars

Millions of yen

2013¥3,0101,034—(7)¥4,037

Current assets—deferred tax assets
Investments and other assets—deferred tax assets
Current liabilities—otherNoncurrent liabilities—deferred tax liabilities
Net deferred tax assets

2012¥1,655361(0)(5)¥2,0102013$32,019
11,009—(82)$42,946

20. RENTAL PROPERTIESFor the year ended March 31, 2013
The Company and some of its consolidated subsidiaries own their commercial facilities and residences (including land)
for rent in Chiba prefecture and the other areas. For the year ended March 31, 2013, the Company and some of its
consolidated subsidiaries recorded ¥760 million ($8,092 thousand) of rental revenues and ¥607 million ($6,457 thousand)of gain on sales of property, plant and equipment.
Book value, increase (decrease) in value, and fair value of rental properties are listed below.
Millions of yen

Thousands of U.S. dollars

Book value
at March 31,
2012

Increase(decrease)in book value

Book value
at March 31,
2013

Fair value
at March 31,
2013Book value
at March 31,
2012

Increase(decrease)in book value

Book value
at March 31,
2013

Fair value
at March 31,
2013¥16,152¥(1,062)¥15,090¥18,430$171,821$(11,302)$160,518$196,042

Notes: 1. Book value is calculated by deducting accumulated depreciation and accumulated impairment loss from its
acquisition cost.
		
2. The major items in “Increase (decrease) in value” consist of ¥534 million ($5,686 thousand) of sales of rental
offices and ¥435 million ($4,632 thousand) of depreciation of buildings.
		
3. Computational method of fair value		
Mainly based on Real Estate Appraisal Standards.
For the year ended March 31, 2012
The Company and some of its consolidated subsidiaries own their commercial facilities, residences and office buildings(including land) for rent in Chiba prefecture and the other areas. For the year ended March 31, 2012, the Company andsome of its consolidated subsidiaries recorded ¥792 million of rental revenues.
Book value, increase (decrease) in value, and fair value of rental properties are listed below.
Millions of yen
Book value
at March 31,
2011

Increase(decrease)in book value

Book value
at March 31,
2012

Fair value
at March 31,
2012¥17,615¥(1,462)¥16,152¥22,430

Notes: 1. B ook value is calculated by deducting accumulated depreciation and accumulated impairment loss from its
acquisition cost.
		
2. The major items in “Increase (decrease) in value” consist of ¥946 million of sales of rental offices and ¥489
million of depreciation of buildings.
		
3. Computational method of fair value		
Mainly based on Real Estate Appraisal Standards.

43

44

Financial Section

21. SEGMENT INFORMATION
Effective the fiscal year ended March 31, 2013, the Company has adopted new accounting standards for disclosuresabout segments of an enterprise and related information. Segment information for the year ended March 31, 2012 hasbeen restated in accordance with such accounting standards for comparative purposes.
(1) Operating Segments
The operating segments of the group are components for which discrete financial information is available and whose
operating results are regularly reviewed by the Executive Committee to make decisions about resource allocation and toassess performance.
The Companies’ reportable operating segments consist of the following three business groups:
		 EPC Business—	Research and development, design, engineering, procurement, and construction of a variety ofplants, such as oil, gas, petrochemical, and general chemical.
		 IT Business— 	Solution business based on other companies’ ERP package products and product business basedon our subsidiary ERP package products, etc.
		 Real Estate— Rent of commercial facilities and residences, and administration.
Millions of yen

Year ended March 31, 2013
I Net sales and segment profits:
Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profits
II Segment assets
III Others
Depreciation
Amortization of goodwill
Amount invested in equity method
affiliates
Increase of fixed assets

EPC Business

IT Business

Real Estate

Total

Adjustments

Consolidated¥215,505
158
215,664275¥211,554¥10,991
32
11,023344¥ 4,912¥ 2,226
231
2,458
975
¥18,438¥228,723
422
229,146
1,596¥234,906

¥

—
(422)
(422)
(2)
¥5,788¥228,723—
228,723
1,593¥240,694

¥

¥

¥

¥

¥

¥

1,300
1,583
5,190
1,014

713
—
—
602

465
—
—
4

2,479
1,583
5,190
1,620

(0)
—

2,479
1,583

—
(2)

5,190
1,618

Adjustments

Consolidated

Thousands of U.S. dollars

Year ended March 31, 2013
I Net sales and segment profits:
Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profits
II Segment assets
III Others
Depreciation
Amortization of goodwill
Amount invested in equity method
affiliates
Increase of fixed assets

EPC Business

IT Business

Real EstateTotal$2,292,371
1,688
2,294,059
2,935$2,250,343$116,914
342
117,257
3,667$ 52,255$ 23,686
2,464
26,15010,375$196,138$2,432,972
4,495
2,437,467
16,978$2,498,737

$

$

$

$

$

$

13,837
16,83955,212
10,790

7,584
—
—
6,407

4,952
—
—
44

26,373
16,83955,212
17,242— $2,432,972(4,495)—(4,495) 2,432,972(23)
16,954$61,574 $2,560,312(2) $—26,37016,839—(29)

55,212
17,212

Notes: 1. “Adjustments” for Segment profits and Depreciation represent the elimination of inter-segment transactions.
		
2. “Segment profits” represents operating income from Consolidated Statement of Income.
		
3. Segment assets adjustments include (¥293) million (($3,126) thousand) of inter-segment eliminationsand ¥6,082 million ($64,701 thousand) of non-allocated corporate assets, which is chiefly the Company’s
investment securities attributed to the administrative department.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

Millions of yen

Year ended March 31, 2012
I Net sales and segment profits:
Net sales(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profits
II Segment assets
III Others
Depreciation
Amortization of goodwill
Amount invested in equity method
affiliates
Increase of fixed assets

EPC Business

IT Business

Real Estate¥143,017
239
143,256
4,121¥191,198¥12,228
25
12,253318¥ 6,257

¥

¥

1,203
179
2,974
2,124

764
—

Total

Adjustments

Consolidated¥ 2,635
230
2,866
897
¥19,468¥157,881
495
158,376
5,337¥216,924

¥

—
(495)
(495)
3
¥5,491¥157,881—
157,881
5,341¥222,415

¥

¥

¥

¥

—
500

541
—
—
13

2,509
179
2,974
2,637

(0)
—
—
—

2,508
179
2,974
2,637

Notes: 1. “Adjustments” for Segment profits and Depreciation represent the elimination of inter-segment transactions.
		
2. “Segment profits” represents operating income from Consolidated Statement of Income.
		
3. Segment assets adjustments include (¥466) million of inter-segment eliminations and ¥5,957 million of
non-allocated corporate assets, which is chiefly the Company’s investment securities attributed to theadministrative department.
(2) Information by Geographical Segments Based on the Location of Projects
Millions of yen

Year ended March 31, 2013
Net salesJapan

Brazil¥44,414¥35,895

Indonesia¥34,761

Thailand¥28,554

Other

Total

¥85,097¥228,723

Thousands of U.S. dollars

Year ended March 31, 2013
Net salesJapan

BrazilIndonesia

Thailand

Other

Total

$472,448$381,830$369,760$303,739$905,193$2,432,972

Millions of yen

Year ended March 31, 2013
Property, plant and equipment

Japan

Year ended March 31, 2013
Property, plant and equipment

Japan

Other

Total

$290,895$40,851$331,747

Other¥27,347¥3,840

Total¥31,187

Thousands of U.S. dollars

Millions of yen

Year ended March 31, 2012
Net salesJapan

Year ended March 31, 2012
Property, plant and equipment

Japan¥42,327

Thailand¥28,011

China

India

Other

Total

¥18,890¥15,849¥52,804¥157,881

Millions of yen¥28,549

Other¥3,615

Total¥32,16445

46

Financial Section(3) Impairment loss on fixed assets by reportable segment
Millions of yen

Year ended March 31, 2013
Impairment loss

EPC Business

IT Business

Real Estate

¥—

¥—

¥79

Total

Adjustments

Consolidated

¥—

¥79

Adjustments

Consolidated

$—

$843

¥79

Thousands of U.S. dollars

Year ended March 31, 2013
Impairment loss

EPC Business

IT Business

Real Estate

$—

$—

$843

Total

$843

Amortization and unamortized balance of goodwill by reportable segment
The following table presents the amortization and balance of goodwill as of and for the years ended March 31, 2013 and2012 by reportable segments:
Millions of yen

Year ended March 31, 2013
Goodwill
Amortization of goodwill
Balance at March 31, 2013
Negative goodwill
Amortization of negative goodwill
Balance at March 31, 2013

EPC Business

IT Business

Real Estate¥1,583
2,570

—
—

—
—

¥1,583
2,570

10
¥ 128

—
—

—
—

10
¥ 128

Year ended March 31, 2013
Goodwill
Amortization of goodwill
Balance at March 31, 2013
Negative goodwill
Amortization of negative goodwill
Balance at March 31, 2013

EPC Business

IT Business

Real Estate$16,839
27,345————$16,839
27,345116$ 1,367

—
—

—
—

116
$ 1,367

Year ended March 31, 2012
Goodwill
Amortization of goodwill
Balance at March 31, 2012
Negative goodwill
Amortization of negative goodwill
Balance at March 31, 2012

EPC Business

IT Business

Real Estate

¥ 179
3,322

—
—

—
—

¥ 179
3,322

10
¥ 139

—
—

—
—

10
¥ 139

Total

Thousands of U.S. dollars
Total

Millions of yen
Total

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

22. RELATED PARTY TRANSACTIONS
Affiliate
For the year ended March 31, 2013
Name: N EDL CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Address:
BrazilCapital and investments:
2,524 thousand BRL
Business:
Construction
Equity ownership percentage:
Holding 42% directly
Relation with related party:
Loan for operating fund
Summary of transactions:
Loan for operating fund
For the year ended March 31, 2012
Name: N EDL CONSTRUCOES DE
DUTOS DO NORDESTE LTDA.
Address:
BrazilCapital and investments:
2,524 thousand BRL
Business:
Construction
Equity ownership percentage:
Holding 42% directly
Relation with related party:
Loan for operating fund
Summary of transactions:
Loan for operating fundMillions of yen

Thousands of U.S. dollars

Transaction
amountTitle ofaccount

Accountbalance

Transaction
amountTitle ofaccount

Accountbalance—Long-term
loans
receivable¥3,707—Long-term
loans
receivable$39,441—¥3,707—$45,146

Millions of yen
Transaction
amount—Title ofaccount

Long-term
loans
receivable

Accountbalance¥3,707

Notes: 1. Interest rate on loan is determined by considering effective market rates.
		 2. T he Company reserved ¥3,707 million ($39,441 thousand) of allowance for doubtful accounts at March 31,
2013, against the loan above.
		 3. The Company reserved ¥3,707 million of allowance for doubtful accounts at March 31, 2012, against the loan
above.

47

48

Financial Section

Other affiliates subsidiary
For the year ended March 31, 2012
Name: MIT-POWER LIMITED
Address:
Thailand
Capital and investments:
14,019 thousand THB
Business:
Construction
Equity ownership percentage:
N/A
Relation with related party:
Contract for engineering andconstruction
Summary of transactions:Contract for engineering andconstruction

Millions of yen
Transaction
amountTitle ofaccount¥10,210

Advances
received on
uncompleted
construction
contracts
Accounts
receivable

Accountbalance¥5,532—

Note:	“Contract for engineering and construction” is determined by price negotiation based on market price, which issimilar to general transaction. “Transaction amount” does not include consumption tax while “Account balance”
includes consumption tax.
Significant affiliate
The significant affiliate was Moeco Thai Oil Development Co.,Ltd., whose condensed financial information is as follows:
Thousands of
U.S. dollars

Millions of yen

Years ended March 31,
Total current assets
Total noncurrent assets
Total current liabilities
Total noncurrent liabilities
Total net assets

2013¥ 7,868
5,468
1,318
1,280
10,7362012¥ 7,463
4,916
1,032
1,004
10,342

2013$ 83,694
58,164
14,02913,624
114,205

Net sales
Income before income taxes
Net income

6,089
4,435
¥ 2,113

5,618
3,717
¥ 1,723

64,77547,178$ 22,484

23. AMOUNTS PER SHARE
Yen

Years ended March 31,
Net income per share
Net assets per share
Dividends per share2013¥ 7.60363.15
5.00

U.S. dollars

2012¥ 19.43
349.42
6.00

2013
$0.08
3.86
0.05

Net income per share is computed based on the net income available for distribution to shareholders of common stockand the weighted average number of shares of common stock outstanding during each year.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to therespective years.
Net assets per share are computed based on the net assets excluding minority interests and the number of common
stock outstanding at the year end.

Financial Section

TOYO ENGINEERING CORPORATION Annual Report 2013

49

50

Corporate Information
Corporate Data
Corporate Name:		 Toyo Engineering Corporation (TOYO)Founded:		 May 1, 1961
Number of Employees:		 4,548 (Consolidated, As of March 31, 2013)
Corporate Philosophy: 		 Mission: Engineering for Sustainable Growth of the Global Community

		 Vision: Global Leading Engineering Partner
		 Values: Integrity, Creativity, Diversity, Learning, Team
Business Activities:		 Engineering and Construction for Industrial Facilities

	R&D support, design, engineering, procurement, construction, commissioning,		 technical assistance for industrial facilities: oil, gas, oil & gas development,		 petrochemicals, chemicals, water treatment, transportation systems,
		 power generation, nuclear power, advanced production systems, pharmaceutical,
		 fine chemical, distribution systems, biotechnology, environment and others
	IT engineering services and system software supply●●

History
1961●

TOYO was established. Capital: 300 million yen

1985

●

Toyo-Thai Corporation Ltd. established.

An agreement for engineering service and		 technical assistance was concluded with
		 Lummus Co. (U.S.A.).

Toyo U.S.A., Inc. established.
Toyo Engineering & Construction Sdn. Bhd.
		 established in Malaysia.

The first overseas contract for a fertilizer plant		 with The Fertilizer Corporation of India Ltd.
		 was awarded.

1987

●

Toyo Engineering Korea Limited established.

1989

●

Capital: 12,219 million yen

1962

1963

●

●

The first urea plant contract in the former
		 Soviet Union was awarded.
1964●

TOYO was awarded its first ethylene plant contract		 (Osaka, Japan).
1965●

TOYO was awarded the contract for the first		 ammonia plant in the former Soviet Union.
1969●

TOYO was awarded the contract for two ammonia
		 plants in the former East Germany.
1970●

1972 International Procurement & Service Corporation
		 (Currently Toyo Engineering Europe, S.r.l.)		 established.

1986

●

●

1990 Head Office/Engineering Center (Baytec Building)		 started operation in Narashino, Chiba.
●

1993

●

Capital: 13,017 million yen

1994

●

TOYO received ISO 9001 registration.

Toyo do Brasil Consultoria e Construções
		 Industriais Ltda. established.
1998

●

1999

●

2004

●

●

Toyo Business Engineering Corporation established.
TOYO received ISO 14001 registration.
Toyo Engineering Corporation (China) established.

●

1973

●

A contract for a urea plant for China was awarded.

1975

●

Capital: 1,890 million yen

1976

●

Toyo Engineering India Limited established.

Construction of the Research Center completed		 in Mobara, Chiba Prefecture.
1977

●

1978

●

Capital: 2,970 million yen

Capital: 3,300 million yen
TOYO was listed on the second section of the Tokyo
		 Stock Exchange.
1980

●

●

Capital: 5,040 million yen
TOYO was listed on the first section of the Tokyo
		 Stock Exchange.
1982

●

●

2006

●

Capital: 18,198 million yen

2007

●

Relocation of Tokyo head office.

2008

●

TOYO invested in Atlatec, S.A. de C.V. in Mexico.

2009 TOYO formulated the Group MVV (Mission, Vision,
		 Values).
●

TOYO acquired Tri Ocean Engineering Limited
		 in Calgary, Alberta, Canada.
2010●

The 50th Anniversary
TOYO invested in PT. Inti Karya Persada
		 Tehnik (IKPT) in Indonesia.
2011

●

●

Medium-Term Business Plan (FY2012–FY2015)
		 started.
Katsumoto Ishibashi was elected as President		 and CEO.
TOYO group logo developed.
2012

●

●

●

Corporate Information

TOYO ENGINEERING CORPORATION Annual Report 2013

Board of Directors, Corporate Auditors and Executive Officers

Board of Directors

Corporate Auditors

Chairman

Senior Corporate Auditor

Yushi Nagata

Makoto Shimagaki

President & CEO

Corporate Auditors

Katsumoto Ishibashi*1

Hideaki Kinoshita
Yoshio Kometani*3
Yoshiyuki Shinohara*3

Executive Vice President

Makoto Fusayama*1
Directors /Senior Executive Officers

Hideki Shiinoki*1
Keiichi Matsumoto
Takaya Naito
Kiyoshi Nakao
Satoshi Kuwahara
Masayuki Uchida
Masaaki Yamaguchi*2

Executive Officers
Senior Executive Officers

Akhilesh Kumar
Tadashi Hori
Masaru Takezawa
Hisashi Osone
Shoji Koshikawa*1 : Representative Director*2 : CFOCB

A

A Yushi Nagata
B Katsumoto Ishibashi
C Makoto Fusayama
D Hideki ShiinokiD*3 : Outside Auditor

Executive Officers

Kazuharu Murayama
Motoyoshi Kamoshima
Seiichi Itakura
Yutaka Kita
Takayoshi Imanishi
Hiroshi Sato
Koji Kojima
Masayuki Yoshizawa
Ryuji Oka
Itsuya Yanagi
Tomohisa Abe
Masahiko Kita
Haruo Nagamatsu
Eiichi Ide(As of June 26, 2013)

51

52 Corporate Information

Worldwide Network

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HEAD OFFICE / ENGINEERING CENTER
Chiba, Japan■

Toyo Engineering India Limited
Mumbai, India●

TOKYO HEAD OFFICETokyo, Japan■

Saudi Toyo Engineering Company
Al Khobar, Saudi Arabia

TEC Air Service Corporation
Travel and insurance services■

Toyo Engineering Europe, S.r.I.
Milan, Italy■

Toyo Engineering Canada Ltd.
Calgary, Canada

TEC Business Services Corporation
Staffing service, contracted business service,translation and interpretation service,facility management service■

Toyo U.S.A., Inc.
Houston, U.S.A.

■

Toyo Ingeniería de Venezuela, C.A.
Caracas, Venezuela■

Toyo do Brasil Consultoria e Construções
Industriais Ltda.
Rio de Janeiro, Brazil

—
—
—
—
—
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—
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—
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Overseas Offices●

Beijing, China●

Jakarta, Indonesia●

Dubai, United Arab Emirates●

Tehran, Iran●Moscow, Russia

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OVERSEAS GROUP COMPANIES
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■

Toyo Engineering Korea Limited
Seoul, Korea■

Toyo Engineering Corporation (China)
Shanghai, China■

PT. Inti Karya Persada Tehnik (IKPT)Jakarta, Indonesia■

Toyo Engineering & Construction Sdn. Bhd.
Kuala Lumpur, Malaysia

OTHER AFFILIATES■TS Participações e Investimentos S.A.
Sao Paulo, Brazil■

Toyo-Thai Corporation Public Company Limited
Bangkok, Thailand■

Atlatec, S.A. de C.V.
Monterrey, Mexico

DOMESTIC GROUP COMPANIESTEC Project Services Corporation
EPC for plants and facilities
Chiba Data Center Corporation
Website planning and its production &maintenance, data entry, and commercial printing
TEC Estate, Ltd.
Property development and real estate businessToyo Business Engineering Corporation
System consulting and solutions provider
TEC Accounting & Consulting Ltd.
Business support and consulting
for accounting and accounting systems

Stock Information

TOYO ENGINEERING CORPORATION Annual Report 2013

(As of March 31, 2013)————————————————————————— ————————————————————————————————————————————————

Capital Stock¥18,198 million

Stock Exchange Listing

Tokyo Stock Exchange

Authorized Shares

500,000,000

Capital Stock Issued

192,792,539

Number of Shareholders

12,998Administrator of
Shareholders’ Register

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan————————————————————————— ————————————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————

Number of shares(thousands)

Major Shareholders:

Percentage of total(%)

Mitsui & Co., Ltd.

43,77022.70

Japan Trustee Services Bank, Ltd.

25,70313.33(Mitsui Chemicals, Inc. Retirement Benefit Trust Account re-entrusted by Chuo Mitsui Asset Trustand Banking Company, Ltd.)The Master Trust Bank of Japan, Ltd. Trust Account14,489

7.51

The Nomura Trust & Banking Co., Ltd. Trust Account

5,553

2.88

Japan Trustee Services Bank, Ltd. Trust Account

5,228

2.71

Taisei Corporation

5,000

2.59

Trust and Custody Services Bank, Ltd. Pension Trust Account

4,925

2.55

Japan Trustee Services Bank, Ltd. Trust Account 9

4,880

2.53

Sumitomo Mitsui Banking Corporation

2,350

1.21

CBHK CBLDN - FUND 135 T&D ASSET MANAGEMENT LIMITED

1,423

0.73

Others0.87

Individuals
18.52
Foreign shareholders
12.44

Financial institutions
40.13

Type of
Shareholder(%)

Domestic companies
28.04

Stock Chart:
(Yen)
500

400

Stock Price

300

200

100

0

Trading Volume (Thousands of Shares)

50,00025,000

0

4

5

6

7

8

9 10 11 12 1
FY2010

2

3

4

5

6

7

8

9 10 11 12 1
FY2011

2

3

4

5

6

7

8

9 10 11 12 1
FY20122

353