Consolidated Financial Statements
KYUDENKO CORPORATION
Years ended March 31, 2016 and 2015

KYUDENKO CORPORATION
Consolidated Balance Sheet
March 31,
2015
2016
(Millions of yen)

AssetsCurrent assets:
Cash on hand and in banks (Notes 6, 17 and 19)
Trade notes and accounts receivable (Note 17)
Short-term investments (Notes 17 and 18)
Costs on uncompleted construction contracts
Merchandise
Raw materials and supplies
Deferred tax assets (Note 13)
Other current assets (Note 6)
Allowance for doubtful accounts
Total current assets¥

Fixed assets:
Property, plant and equipment:
Buildings and structures (Note 6)
Machinery, vehicles, tools, furniture and fixtures(Note 6)
Leased assets
Land
Construction in progress
Accumulated depreciation
Total property, plant and equipment
Intangible assets:
Goodwill (Note 21)
Other intangible assets
Total intangible assets
Investments and other assets:
Investment securities (Notes 6, 17 and 18)
Long-term loans receivable (Note 6)
Asset for retirement benefits (Note 7)
Deferred tax assets (Note 13)
Other (Note 6)
Allowance for doubtful accounts
Total investments and other assets
Total fixed assets
Total assets¥

37,95779,857
197
8,282
1,533
541
3,041
4,376
(4)
135,784¥

28,97390,858
307
6,405
720
538
2,961
4,981
(4)
135,742

2016(Thousands of
U.S. dollars)(Note 4)$

257,132
806,345
2,725
56,8506,393
4,776
26,27844,210(44)
1,204,668

62,131

63,467563,257

30,8796,073
27,863
1,225(46,601)
81,571

33,416
5,957
28,262
2,824(50,648)
83,279296,560
52,868250,82125,063(449,493)
739,077

1,408
1,189
2,598

1,556
1,012
2,568

13,8108,983
22,79329,768
297
235
2,380
3,080
(773)
34,987
119,158
254,942¥

31,903
283,135
483
4,287
188
1,677
4,540
40,291
4,084
36,252(750)(6,656)40,450358,988
126,298
1,120,859
262,040 $ 2,325,528

3

March 31,
2015
2016
(Millions of yen)

Liabilities and net assets
Current liabilities:
Trade notes and accounts payable (Note 17)
Short-term borrowings (Notes 5 and 17)
Income taxes payable (Note 13)
Advances received on uncompleted construction
contracts
Provision for loss on construction contracts
Other current liabilities (Notes 5 and 13)
Total current liabilities¥

Long-term liabilities:
Convertible bond-type bonds with sharesubscription rights (Notes 5 and 17)
Long-term debt (Notes 5 and 17)
Lease obligations (Note 5)
Provision for directors and corporate auditors’
retirement benefits
Liability for retirement benefits (Note 7)
Other long-term liabilities (Notes 8 and 13)
Total long-term liabilities
Total liabilities

68,445
3,282
5,140

¥

68,369
2,957
6,511

2016
(Thousands of
U.S. dollars)(Note 4)$

606,754
26,24957,786

16,166449
6,848
100,332

9,874
52
9,280
97,04587,629464
82,363
861,247

10,00018,047
1,758

9,997
16,213
1,999

88,720143,888
17,744228
18,045
1,871
49,951150,284

241
21,3102,034
51,795
148,841

2,139
189,122
18,056459,672
1,320,919

7,901
7,889
85,537(48)
101,279

7,901
7,891
101,173(611)
116,355

70,12670,033897,885(5,429)1,032,616

4,012

2,117

18,789Commitments and contingencies (Note 15)
Net assets (Note 9):
Shareholders’ equity:
Common stock:
Authorized – 250,000,000 shares
Issued – 66,039,535 shares in 2015 and 2016
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Unrealized holding gain (loss) on securities
Unrealized gain (loss) on hedging instruments(Note 20)
Translation adjustments
Retirement benefit liability adjustments (Note 7)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

¥

(82)
528
(3,119)1,338
2,040
104,658
254,942¥(234)(2,083)319
2,838(7,384)(65,537)(5,182)(45,992)
2,026
17,984
113,199
1,004,608
262,040 $ 2,325,528

See notes to consolidated financial statements.

4

KYUDENKO CORPORATION
Consolidated Profit and Loss Statement
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Net sales (Note 21):
Construction contracts (Note 10)¥
Other
Total net sales
Cost of sales (Note 12):Construction contracts
Other
Total cost of sales
Gross profit:
Construction contracts
Other
Total gross profit
Selling, general and administrative expenses (Notes 11 and
12)Operating profit (Note 21)
Non-operating profit (loss):
Interest income
Dividend income
Interest expenses
Equity in earnings of affiliates
Rent income
Insurance and dividend income
Compensation income
Foreign exchange losses
Extra retirement payments
Other, net
Ordinary profit
Special gains (losses):Gain on sales of fixed assets
Loss on disposal and sales of fixed assets
Gain on sales of investment securities
Gain on bargain purchase
Loss on sales of investment securities
Impairment loss on investment securities
Other, net
Profit before income taxes
Income taxes (Note 13):
Current
DeferredProfitProfit attributable to non-controlling interests¥
Profit attributable to owners of parent

301,916
14,033315,949¥

296,601
14,744
311,346$ 2,632,249
130,851
2,763,100

266,738
12,100278,838

253,460
12,710266,1702,249,382
112,801
2,362,184

35,178
1,932
37,11143,141
2,033
45,175

382,866
18,049400,916

20,353
16,757

19,97725,197

177,292
223,623

76
283
(386)
234
349
364
119
－
(62)
425
18,163

78
514
(379)
358
353
604
331
(83)
(34)
610
27,551

700
4,565(3,368)
3,182
3,134
5,367
2,938
(745)
(302)
5,416
244,513

186
(90)
328
232
－
(9)
－
18,811

69
(242)
98
－
(8)
(84)
(9)
27,374615(2,149)
870
－
(79)
(749)
(84)
242,936

5,453
1,710
11,646
128
11,517

8,775
634
17,96362
17,901

77,877
5,634
159,424554
158,869¥$

See notes to consolidated financial statements.
5

KYUDENKO CORPORATION
Consolidated Statement of Comprehensive Income

ProfitOther comprehensive income (Note 14):
Unrealized holding gain (loss) on securities
Unrealized gain (loss) on hedging instruments
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests¥

Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
11,646¥
17,963 $
159,424
2,439－
424(1,684)(1,911)(87)(244)(4,264)(16,966)(774)(2,166)(37,850)

¥

(84)
1,095
12,741¥(54)(6,562)
11,401 $(483)(58,241)
101,182¥¥

12,559182¥¥

11,38020

101,000
182$$

See notes to consolidated financial statements.

6

KYUDENKO CORPORATION
Consolidated Statement of Changes in Net Assets
For the years ended March 31, 2015 and 2016:
Shareholders’ equity

Accumulated other comprehensive income
Total
Unrealized

Unrealized

accumulated

Total

holding gain

gain (loss) on

CommonCapitalRetained

Treasuryshareholders’(loss) on

hedging

Translation

benefit liability comprehensive

Retirement

other

controlling

NonTotalstock

surplusearnings

stock

equitysecurities

instruments

adjustments

adjustmentsinterests

net assets

income(Millions of yen)
Balance at April 1, 2014

¥

7,901

¥

7,889

¥ 76,691¥(19) ¥ 92,462

¥

1,578

¥

–

¥

153

¥ (1,435) ¥

296

¥

1,679

¥ 94,438

Cumulative effects of(1,483)

accounting changes

7,901

Restated balance

7,889(1,483)75,207(19)(1,188)Cash dividends paid

(1,483)90,978

–

1,578

153

(1,435)

296

1,679

92,954(1,188)(1,188)

Profit attributable toowners of parent for the

11,517

periodPurchase of treasury stock

11,517

11,517

(28)

(28)

(28)

Net changes in items otherthan those in

2,433

(82)

375

(1,684)

1,041

361

1,402

–

–

10,329(28)

10,300

2,433

(82)

375

(1,684)

1,041

361

11,703

7,901

7,889

85,537(48)

101,279

4,012

(82)

528

(3,119)

1,338

2,040

104,658

shareholders’ equity
Total changes during the year
Balance at March 31, 2015
Balance at April 1, 2015

(2,303)

Cash dividends paid

(2,303)(2,303)

Profit attributable toowners of parent for the

17,901

periodPurchase of treasury stock0

Disposal of treasury shares

17,901

17,901

(565)

(565)

(565)

2

3

3

1

1

38

38

Purchase of shares of1

consolidated subsidiaries
Increase in retained
earnings due to change inaccounting period of38

subsidiaries
Net changes in items otherthan those inshareholders’ equity–

Total changes during the year
Balance at March 31, 2016

¥

7,901

¥

1

15,636

7,891¥ 101,173(562)¥

15,075(611) ¥ 116,355¥(1,895)

(151)

(208)

(4,264)(6,520)(14)(1,895)

(151)

(208)

(4,264)(6,520)

(14)

8,540

(7,384) ¥(5,182)

2,026¥ 113,199

2,117

¥

(234)

¥

319

¥

¥

7

(6,534)

For the year ended March 31, 2016:
Shareholders’ equity

Accumulated other comprehensive income
Total
Unrealized

Unrealized

accumulated

Total

holding gain

gain (loss) on

Retirement

other

Non-

CommonCapitalRetained

Treasuryshareholders’(loss) on

hedging

Translation

benefit liability

comprehensive

controlling

Total

stock

surplusearnings

stock

equitysecurities

instruments

adjustments

adjustments

incomeinterests

net assets$ 70,126$ 70,017$ 759,114(Thousands of U.S. dollars) (Note 4)
Balance at April 1, 2015(434) $ 898,824(20,441)

Cash dividends paid
Profit$$ 35,608

$

(736)

$

4,692

$ (27,687) $11,876$18,109$ 928,810(20,441)(20,441)

attributable toowners of parent for the

158,869

periodPurchase of treasury stock3

Disposal of treasury shares

158,869

158,869(5,018)(5,018)(5,018)

23

26

26

13

13

342

342

Purchase of shares of

13

consolidated subsidiaries
Increase in retained
earnings due to change inaccounting period of342

subsidiaries
Net changes in items otherthan those in(16,818)

shareholders’ equity–

Total changes during the year
Balance at March 31, 2016$

70,126 $16

138,770

70,033$ 897,885(4,995)$

133,792(1,347)(16,818)(5,429) $1,032,616 $ 18,789(1,853)(1,347)$(2,083)(1,853)$

2,838(37,850)(57,869)(37,850)(57,869)$ (65,537) $ (45,992)(124)(57,993)(124)

75,798$ 17,984 $ 1,004,608

See notes to consolidated financial statements.

8

KYUDENKO CORPORATION
Consolidated Statement of Cash Flows
Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in liability for retirement benefits andprovision for directors and corporate auditors’ retirement
benefits
Increase (decrease) in provision for loss on construction
contracts
Interest and dividend income
Interest expenses
Foreign exchange loss (gain)
Equity in earnings of affiliates
Loss (gain) on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Impairment loss on investment securities
Loss (gain) on sales of investment securities
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in costs on uncompleted construction
contracts
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in advances received on uncompleted
construction contracts
Increase (decrease) in long-term accounts payable
Increase (decrease) in consumption taxes payable(receivable)
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥¥

18,811
5,262
(125)

¥

27,374 $
5,475
(30)

242,936
48,593(269)(2,996)(2,805)(24,898)

(966)
(360)
386
(105)
(234)
(190)
55
9
(328)
(5,512)

(397)
(593)
379
83
(358)
(69)
108
84
(89)
(10,442)(3,525)(5,265)
3,368
745(3,182)
(614)
960
749
(790)
(92,672)

1,735
(801)
1,147

1,753
816
(693)

15,561
7,245(6,151)

1,676
16(6,012)
28(53,360)
252

456
2,406
20,342365(386)(1,203)
19,117

3,413
30,291120
1,069
18,146
161,041
589
5,232
(379)
(3,368)(7,579)(67,264)
10,776 $ 95,641¥

9

Year ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of subsidiaries’ shares resulting in changes inscope of consolidation
Proceeds from purchase of subsidiaries’ shares resulting inchanges in scope of consolidation
Payments of long-term loans receivableCollection of long-term loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of convertible bond-type bonds
with share subscription rights
Purchase of treasury stock
Proceeds from stock issuance to non-controllingshareholders
Repayments to non-controlling shareholders
Cash dividends paid
Cash dividends paid to non-controlling shareholders
Purchase of subsidiaries’ shares not resulting in changes inscope of consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Increase (decrease) in cash and cash equivalents resulting
from changes in accounting period of consolidated
subsidiaries
Cash and cash equivalents at the end of the year (Note 19)¥¥(2,022)
10(6,817)351(3,995)2,180¥(2,090)2,013(6,344)295(5,811)
746$(18,548)
17,864(56,307)
2,624(51,572)
6,627

(526)

(698)

(6,195)－(30)
101(1,067)(11,816)

69
(511)
201
(1,468)(13,597)618(4,536)
1,786(13,035)(120,674)

(274)
1,760
(2,556)(320)
740(2,767)(2,844)
6,567(24,561)

10,000
(28)

－
(565)

－
(5,018)9(23)(1,190)(2)－(23)(2,295)
(20)

－
(204)
(20,368)(186)－(1,011)
6,680

(0)
(953)
(6,206)(0)(8,460)(55,077)282
14,263
21,668(133)(9,160)35,931(1,185)(81,295)
318,881－
35,931(38)
26,732(342)$ 237,243¥

See notes to consolidated financial statements.

10

KYUDENKO CORPORATION
Notes to Consolidated Financial Statements
1.

Basis of Presentation

KYUDENKO CORPORATION (the “Company”) and its domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, and its foreign subsidiaries maintaintheir books of account in conformity with those of their countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments andExchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conformto the current year’s presentation.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts less than
one million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both in yen and U.S. dollars) do not necessarily agreewith the sum of the individual amounts.
2.

Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments in unconsolidated
subsidiaries and affiliates
The accompanying consolidated financial statements include the accounts of theCompany and any significant companies controlled directly or indirectly by theCompany.
Investments in companies over which the Company exercises significant influence interms of their operating and financial policies have been accounted for by the equity
method.
As of March 31, 2016, the numbers of consolidated subsidiaries and affiliates
accounted for by the equity method were 43 and 5 (40 and 4 in 2015), respectively.
During the year ended March 31, 2016, the Company acquired Kawachi Kogyo Co.
and Shoei Densetu Co. and established Fukusetu Co., which were newly included in
the scope of consolidation. The Company also invested in Saga Ouchi Solar Co.,
which was newly accounted for by the equity method.
The financial statements of Kakusokukeisou Co. and Shoei Densetu Co. areconsolidated by using the financial statements as of December 31 which are preparedsolely for consolidation purposes. Kyulien Environment Improving Co., Ltd, Asia
Projects Engineering Pte. Ltd. and Kyudenko South East Asia Pte. Ltd. areconsolidated using their financial statements as of their respective fiscal year end,
which falls on December 31. Necessary adjustments are made to their financial
statements to reflect any significant transactions from January 1 to March 31.
All significant intercompany balances and transactions have been eliminated inconsolidation.
Investments in subsidiaries and affiliates which are not consolidated or accounted forby the equity method are carried at cost or less. Where there has been a permanent11decline in the value of such investments, the Company has written down theinvestments.
Differences between the cost and the underlying net equity at fair value of investments
in consolidated subsidiaries and in companies which are accounted for by the equity
method (goodwill) have been amortized by the straight-line method over periods notexceeding 20 years. However, immaterial amounts of goodwill and negative
goodwill are charged or credited to profit (loss) in the year of acquisition.
(b) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at
the rates of exchange in effect at the balance sheet date, and differences arising fromthe translation are included in the consolidated statement of income.
The balance sheet accounts and income statement accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in effect at the balance
sheet date, except for the components of net assets excluding non-controlling interests
which are translated at their historical exchange rates. Differences arising from thetranslation are presented as translation adjustments and non-controlling interests in the
consolidated financial statements.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can bewithdrawn at any time and short-term investments with a maturity of three months orless when purchased which can easily be converted to cash and are subject to little riskof change in value.
(d) Inventories
Costs on uncompleted construction contracts are stated at cost by the specificidentification method.
Merchandise and raw materials and supplies are stated principally at the lower of costor market, cost being determined principally by the periodic average method.
(e) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and affiliates areclassified into three categories: trading, held-to-maturity or other securities. Trading
securities are carried at fair value and held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities are carried at fairvalue with changes in unrealized holding gain or loss, net of the applicable income
taxes, included directly in net assets. In cases where an embedded derivative in acompound financial instrument cannot be separately measured, the entire compound
financial instrument is measured at fair value with changes in value charged or
credited to profit (loss). Non-marketable securities classified as other securities arecarried at cost except for investments in limited partnerships that are accounted for by
the equity method. Cost of securities sold is determined by the moving averagemethod.
(f)

Property, plant and equipment and depreciation (excluding leased assets)
12

Depreciation of property, plant and equipment (excluding leased assets) of theCompany and its consolidated subsidiaries is calculated principally by the
declining-balance method based on the estimated useful lives and the residual value inaccordance with the Corporation Tax Law of Japan, except for certain buildings of theCompany and domestic consolidated subsidiaries, which are depreciated by thestraight-line method.
Significant renewals and additions are capitalized at cost. Maintenance and repairs
are charged to profit (loss).
(g) Intangible assets (excluding leased assets)
Intangible assets (excluding leased assets) are amortized by the straight-line method.
Computer software for internal use is amortized by the straight-line method over theestimated useful life of five years.
(h) Leases
Non-cancellable lease transactions that transfer substantially all risks and rewards
associated with the ownership of assets are accounted for as finance leases. All otherlease transactions are accounted for as operating leases and related payments arecharged to profit (loss) as incurred.
(i)

Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal
receivables and on an estimate of collectability of receivables from companies infinancial difficulty.

(j)Allowance for investment loss
Allowance for investment loss is provided at an amount considered to be appropriate
based on an evaluation of the financial condition of the individual investees. The
allowance is directly deducted from each investment account.

(k) Provision for loss on construction contracts
Provision for loss on construction contracts is provided with respect to construction
projects for which anticipated future losses can be reasonably estimated.
(l)Retirement benefits
Accrued retirement benefits and prepaid pension cost for employees have beenrecorded mainly at the amount calculated based on the retirement benefit obligationand the fair value of the pension plan assets as of the balance sheet date. The
expected retirement benefit payment for employees is attributed to each period by thebenefit formula method to estimate the retirement benefit obligation.
Actuarial gain or loss is amortized in the years following the year in which the gain orloss is recognized primarily by the straight-line method over periods within the
average remaining years of service of the employees. Prior service cost is being
amortized as incurred by the straight-line method over periods within the average
13remaining years of service of the employees.
Most of the consolidated subsidiaries use a simplified method for calculating
retirement benefit expenses and liabilities based on the assumption that the benefits
payable, which are calculated as if all eligible employees voluntarily terminated theiremployment at fiscal year-end, approximate the retirement benefit obligation at
year-end.
In addition, accrued retirement benefits for directors and corporate auditors of certain
consolidated subsidiaries are provided at the amount payable at year-end in accordancewith each company’s internal regulations. Retirement benefit expenses for directors
and corporate auditors are charged to profit (loss) when the general shareholders’meeting approves the resolutions for the payments of those benefits.
(m) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial
statements with respect to the differences between the financial reporting and tax
bases of the assets and liabilities, and were measured using the enacted tax rates andlaws which will be in effect when the differences are expected to reverse.
(n) Research and development costs
Research and development costs are charged to profit (loss) as incurred.
(o) Recognizing revenues and costs of construction contracts
Revenues and costs of construction contracts for which contract revenues, contract
costs and the percentage of completion can be reliably estimated are recognized by thepercentage-of-completion method. The percentage of completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method continues to be applied for construction contracts for which thepercentage-of-completion cannot be reliably estimated.
(p) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive ofconsumption taxes.
(q) Derivative financial instruments
The Company and certain affiliates enter into various derivative transactions in orderto manage certain risks arising from adverse fluctuations in foreign currency exchange
rates and interest rates. Derivatives financial institutions are carried at fair value withchanges in unrealized gain or loss charged or credited to profit (loss), except for thosewhich meet criteria for deferral hedge accounting under which unrealized gain or loss
is deferred as a component of net assets.
Deferral hedge accounting is adopted for derivatives which qualify as hedges, underwhich unrealized gain or loss is deferred. Hedging instruments are derivativetransactions and hedged items are primarily interest payments on long-term debt(including foreign currency interest payments) and forecasted transactions andlong-term debt denominated in foreign currencies. Hedge effectiveness is not assessed
if the substantial terms and conditions of the hedging instruments and the hedged
14

items are the same. With regard to interest rate swaps and currency swaps whichmeet certain conditions, the Company applies the special treatment (short-cut method)
assuming no ineffectiveness in the hedging relationship between hedged items andhedging instruments. No evaluation is performed for hedge effectiveness of forward
foreign exchange contracts since the derivative contracts are based on forecasted
transactions which are certain to be executed.
The Company also has compound financial instruments with embedded derivatives aspart of its surplus fund management.
(r) Impairment of fixed assets
The Company and its consolidated subsidiaries base their asset grouping for assessing
impairment losses on fixed assets on their management accounting categories (eachbranch of the Company and each consolidated subsidiary). Leased assets and idle
assets are separately evaluated for impairment.
(t) Accounting standards issued but not yet effective
Implementation Guidance on Recoverability of Deferred Tax Assets
On March 28, 2016, the Accounting Standards Board of Japan (ASBJ) issued“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26).
1) Overview
Regarding the treatment of the recoverability of deferred tax assets, a review was
conducted following the framework of Japanese Institution of Certified Public
Accountants Audit Committee Report No. 66 “Audit Treatment on Determining the
Recoverability of Deferred Tax Assets,” whereby companies are categorized into fivecategories and deferred tax assets are calculated based on each of these categories.
 Treatment of companies that do not satisfy any of the category requirements for(Category 1) through (Category 5)
 Category requirements for (Category 2) and (Category 3)
 Treatment related to future deductible temporary differences which cannot bescheduled in companies that qualify as (Category 2)
 Treatment related to the reasonable estimable period of future pre-adjusted taxable
income in companies that qualify as (Category 3)
 Treatment in cases that companies that satisfy the category requirements for(Category 4) but qualify as (Category 2) or (Category 3)2) Scheduled date of adoption
The Company expects to adopt the revised implementation guidance from the
beginning of the fiscal year ending March 31, 2017.
3) Impact of adopting revised implementation guidance
The Company is currently evaluating the effect of adopting the revised implementation
guidance on its consolidated financial statements.

15

3.

Accounting Changes

Application of revised accounting standards
The Company and its domestic consolidated subsidiaries adopted “Revised AccountingStandard for Business Combinations” (ASBJ Statement No. 21), “Revised AccountingStandard for Consolidated Financial Statements” (ASBJ Standard No. 22), “Revised
Accounting Standard for Business Divestitures” (ASBJ Standard No. 7) and so on,
effective from April 1, 2015. As a result, under these revised accounting standards, theaccounting treatment for any changes in a parent’s ownership interest in a subsidiary when
the parent retains control over the subsidiary and the corresponding accounting for
acquisition-related costs were revised. In addition, the presentation method of profit
attributable to owners of parent was amended, the reference to “minority interests” waschanged to “non-controlling interests,” and accounting treatment for adjustments toprovisional amounts during measurement period was also changed.
In accordance with the transitional treatments, these revised accounting standards forbusiness combinations and others were adopted prospectively from April 1, 2015.
As a result, operating profit and ordinary profit decreased by ¥20 million ($177 thousand)respectively, and profit before income taxes decreased by ¥21 million ($190 thousand), forthe year ended March 31, 2016. Additionally, as of March 31, 2016, capital surplus
increased by ¥1 million ($13 thousand).
In the consolidated statement of cash flows for the year ended March 31, 2016, cash flows
from purchase or sales of subsidiaries’ shares not resulting in changes in scope of
consolidation were classified as cash flows from financing activities, while
acquisition-related costs for purchase of subsidiaries’ shares resulting in changes in scopeof consolidation as well as expenses on purchase or sales of subsidiaries’ shares not
resulting in changes in scope of consolidation were classified as cash flows from operating
activities.
The effect of this change on net assets per share and basic and diluted profit attributable toowners of parent per share was immaterial.
4.

U.S. Dollar Amounts

The accompanying consolidated financial statements are expressed in yen, and solely forthe convenience of the readers, have been translated into U.S. dollars at the rate of¥112.68= US$1.00, the approximate rate of exchange prevailing as of March 31, 2016.
This translation should not be construed as a representation that all amounts shown could
be converted into U.S. dollars at such rate.
5. Short-Term Borrowings, Long-Term Debt, Convertible Bond-type Bonds with
Share Subscription Rights and Lease Obligations
The annual weighted-average interest rates applicable to short-term borrowings (excluding
the current portion of long-term debt) were 1.242% and 2.042% for the years ended March
31, 2015 and 2016, respectively.

16

Long-term debt, convertible bond-type bonds with share subscription rights and leaseobligations at March 31, 2015 and 2016 consisted of the following:

Loans from banks due through 2030
with interest rates ranging from
0.095% to 1.412%¥
Convertible bond-type bonds with sharesubscription rights (non-interest
bearing)
Lease obligations due through 2025
Less current portion
¥

2015
2016
(Millions of yen)

2016
(Thousands of
U.S. dollars)

20,603

10,0002,609
33,213(3,407)29,806¥

18,775$ 166,622

¥

9,997
2,818
31,590(3,380)28,20988,72025,008280,351(29,998)$ 250,352

The aggregate annual maturities of long-term debt, convertible bond-type bonds with sharesubscription rights and lease obligations as of March 31, 2016 are summarized as follows:Year ending March 31,
2017
2018
2019
2020
2021
2022 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)

¥

$

3,380
7,250
16,336
959
864
2,797
31,590¥
6.

29,99864,349144,980
8,519
7,672
24,830280,351$

Pledged Assets

The assets pledged as collateral for long-term debt of the Company’s investees involved in
the renewable energy generation business and/or PFI business at March 31, 2015 and 2016
were as follows:
2015
2016
(Millions of yen)
Cash on hand and in banks
Other current assets – short-term loans
receivable
Buildings and structures
Machinery, vehicles, tools, furniture andfixtures
Investment securities
Long-term loans receivable
Investments and other assets – other
Total

¥

¥

197

¥

2016
(Thousands of
U.S. dollars)

233

$

2,069

9
－

9
10

84
96

1,399
403
111
15
2,136

1,634
2,429
102
15
4,434

14,50521,557907
133
39,353

¥

$

17

7.

Retirement Benefit Plans

The Company has defined contribution plans, and the Company and its consolidated
subsidiaries also have defined benefit plans (corporate pension plans and lump-sum
payment plans) covering substantially all employees who are entitled to lump-sum or
annuity payments, the amounts of which are determined by reference to their basic rates ofpay, length of service, and the conditions under which termination occurs.
The Company and its consolidated subsidiaries may pay additional retirement benefits
under certain circumstances.
For most of the defined benefit plans of consolidated subsidiaries, liabilities and expenses
for retirement benefits are calculated using the simplified method.
Some consolidated subsidiaries have joined the employees’ pension fund system, amultiple-employers pension plan. If the amount of plan assets corresponding to thecontributions of each subsidiary cannot be reasonably calculated, such plans are accounted
for by the same method as that for defined contribution plans.
(a) Defined benefit plans
1) The changes in the retirement benefit obligation for the years ended March 31, 2015
and 2016 were as follows:

Balance at the beginning of the year¥
Cumulative effect of accounting changes
Restated balance at the beginning of theyear
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Prior service cost¥
Balance at the end of the year

2015
2016
(Millions of yen)

2016
(Thousands of
U.S. dollars)

37,825
2,296$

374,612－

42,211
1,496
464
2,565
(4,850)3,749
45,636 $374,612
13,2794,120
22,771(43,043)
33,271
405,012¥40,121
1,362
530
893
(4,552)
3,855
42,211 ¥42,211－

2) The changes in the plan assets for the years ended March 31, 2015 and 2016 were as
follows:
2015
2016(Millions of yen)
Balance at the beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by the Company
Retirement benefit paid
Other
Balance at the end of the year¥¥

23,171 ¥
463
1,758
4,474
(4,314)49
25,602 ¥2016(Thousands of
U.S. dollars)

25,602 $
512
(464)
4,466
(4,365)49
25,800 $227,215
4,544(4,122)
39,635(38,741)438
228,97018

3) The following table sets forth the funded status of the plans and the amounts recognizedin the consolidated balance sheet at March 31, 2015 and 2016 for the Company’s andits consolidated subsidiaries’ defined benefit plans:
2015
2016
(Millions of yen)
Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the
consolidated balance sheet
Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits in the¥
consolidated balance sheet

2016(Thousands of
U.S. dollars)

38,513 ¥(25,602)
12,9103,697

38,138 $ 338,468(25,800)(228,970)
12,338109,498
7,498
66,543

16,608

19,836

176,042

16,608－

19,836－

176,042－

16,608¥

19,836$

176,0424) The components of retirement benefit expenses for the years ended March 31, 2015 and2016 were as follows:
2015
2016
(Millions of yen)
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Amortization of prior service cost
Other
Retirement benefit expenses¥¥

1,313 ¥
530
(463)
1,590
(978)
377
2,370 ¥

2016
(Thousands of
U.S. dollars)

1,446 $
464
(512)
1,542
(817)
34
2,158 $

12,8404,120(4,544)
13,691(7,256)302
19,154

5) The components of retirement benefit liability adjustments included in othercomprehensive income (before tax effect) for the years ended March 31, 2015 and 2016
were as follows:
2015
2016
(Millions of yen)
Prior service cost
Actuarial gain and loss
Total

¥
¥

(4,834)2,455(2,378)¥¥

2016(Thousands of
U.S. dollars)(4,566) $ (40,528)(1,487)(13,202)(6,054) $ (53,731)

6) The components of retirement benefit liability adjustments included in accumulated
other comprehensive income (before tax effect) as of March 31, 2015 and 2016 were as
follows:
2015
2016(Millions of yen)
Unrecognized prior service cost
Unrecognized actuarial gain and loss
Total

¥
¥

171
4,428
4,600

¥
¥

4,738
5,916
10,654

2016(Thousands of
U.S. dollars)$
42,04952,507$
94,556197) The fair value of plan assets, by major category, as a percentage of total plan assets at
March 31, 2015 and 2016 were as follows:
2015
46%
30%
9%
15%
100%

Bonds
StocksGeneral accounts of life insurance
Other
Total

2016
46%
26%
9%
19%
100%

The expected return on assets has been estimated based on the anticipated allocation toeach asset class and the expected long-term returns on assets held in each category.
8) Weighted average assumptions used in accounting for the above plans were as follows:
2015
1.1%
2.0%

Discount rates
Expected rates of return on plan assets

2016
0.6%
2.0%

(b) Defined benefit plans accounted for using the simplified method
1) The changes in liability for retirement benefits calculated using the simplified method
for the years ended March 31, 2015 and 2016 were as follows:
2015
2016
(Millions of yen)
Balance at the beginning of the year
Retirement benefit expenses
Retirement benefit paid
Contributions
Other
Balance at the end of the year¥¥

1,424 ¥
135
(111)
(336)
88
1,200 ¥

2016
(Thousands of
U.S. dollars)

1,200 $
539
(141)
(342)
28
1,284 $

10,652
4,788(1,253)(3,041)257
11,4032) The following table sets forth the funded status of the plans accounted for using thesimplified method and the amounts recognized in the consolidated balance sheet atMarch 31, 2015and 2016 for the defined benefit plans:
2015
2016
(Millions of yen)
Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the
consolidated balance sheet
Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits in the¥
consolidated balance sheet

4,024(3,135)889
311

4,238 $
(3,178)1,060
224

37,617(28,204)
9,412
1,991

1,200

1,284

11,403

1,436
(235)

1,473
(188)

13,080(1,677)

1,200

¥

2016
(Thousands of
U.S. dollars)

¥

1,284

$

11,4033）Retirement benefit expenses calculated using the simplified method amounted to ¥135
million and ¥539 million ($4,788 thousand) for the years ended March 31, 2015 and20

2016, respectively(c) Defined contribution plans
Contributions made to defined contribution plans by the Company and its consolidated
subsidiaries for the years ended March 31, 2015 and 2016 were ¥342 million and ¥344
million ($3,059 thousand), respectively.
(d) Multiple-employers pension plans
With regard to the employees’ pension fund system to which some consolidated
subsidiaries have joined, note on multiple-employers pension plans where contributions arerecognized as retirement benefit expenses is not presented because such contribution
amounts were immaterial.
8.

Asset Retirement Obligations

Asset retirement obligations mainly represent future obligations to restore leased property
to its original condition associated with the removal of the consolidated subsidiaries’
renewable energy generation facilities.
The asset retirement obligations are measured at the present value of the future liabilities
applying discount rates of 1.106% to 1.994% corresponding with 17 years which is theestimated useful life of those facilities from the acquisition date.
The following table indicates the changes in asset retirement obligations for the years ended
March 31, 2015 and 2016:
2015
2016
(Millions of yen)
Balance at the beginning of the year¥
Increase due to acquisition of fixed assets
Adjustment due to passage of time¥
Balance at the end of the year
9.

699
121
14
835

¥
¥

835
74
15
925

2016
(Thousands of
U.S. dollars)
$
$

7,411
663
138
8,212

Net Assets

Under the Corporate Law of Japan (the “Corporate Law”), the entire amount paid for new
shares is required to be designated as common stock, in principle. However, a company
may designate an amount not exceeding 50% of the proceeds of the issuance of new sharesas additional paid-in-capital, which is included in capital surplus.
The Corporate Law provides that an amount equal to 10% of the amount to be distributed
as distributions of capital surplus (other than capital reserve) and retained earnings (otherthan legal reserve) be transferred to capital reserve and legal reserve, respectively, until thesum of capital reserve and legal reserve equals 25% of the stated common stock. Such
distributions can be made at any time by resolution of the shareholders or by the Board of
Directors, if certain conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

21

(a) Shares issued and outstanding / Treasury shares
For the year ended March 31, 2015:
Number ofshares at April
Types of shares
1, 2014
Shares issued:
Common stock
Treasury stock:
Common stock

Increase
Decrease(Number of Shares)

66,039,535－－

66,039,535

36,35825,072－

61,430Details of the increase in treasury stock are as follows:
Increase due to purchase of shares of less than one standard unit
For the year ended March 31, 2016:
Number ofshares at April
Types of shares
1, 2015
Shares issued:
Common stock
Treasury stock:
Common stock

Number ofshares at
March 31, 2015

25,072

Increase
Decrease(Number of Shares)

Number ofshares at
March 31, 2016

66,039,535－－

66,039,535

61,430331,251

1,636

391,045

Details of the increase and decrease in treasury stock are as follows:
Increase due to purchase of shares
309,000
Resolution of the Board of Directors on February 26, 2015
Increase due to purchase of shares of less than one standard unit
22,251
Decrease due to exercise of share subscription rights
1,636
2nd unsecured convertible bond-type bonds with share subscription rights(b) Share subscription rights
For the year ended March 31, 2015

Company
Parent company

Description
2nd unsecured

Type ofsharesCommon stock

Number of sharessubject to share subscription rights
At April 1,
At March
2014
Increase
Decrease
31, 2015(Number of Shares)－ 5,452,562－ 5,452,562

convertiblebond-type bonds
with sharesubscription rights

1. Number of shares subject to share subscription rights represents the number of shares to beissued upon exercise of the share subscription rights.
2. The increase during the year was due to the issuance of the 2nd unsecured convertiblebond-type bonds with share subscription rights. The share subscription rights are included in
the convertible bond-type bonds with share subscription rights in the consolidated balance sheet.
3. The exercise period for the 2nd unsecured convertible bond-type bonds with share subscription

22

rights has not commenced as of March 31, 2015.

For the year ended March 31, 2016

Company
Parent company

Description
2nd unsecured

Type ofsharesCommon stock

Number of sharessubject to share subscription rights
At April 1,
At March
2015
Increase
Decrease
31, 2016(Number of Shares)
5,452,562
5,951
1,636 5,456,877

convertiblebond-type bonds
with sharesubscription rights

1. Number of shares subject to share subscription rights represents the number of shares to beissued upon exercise of the share subscription rights.
2. The increase during the year was due to adjustments to the conversion value, and the decrease
was due to exercise of the share subscription rights. The share subscription rights are included in
the convertible bond-type bonds with share subscription rights in the consolidated balance sheet.

(c) Dividends
1) Dividends paid
For the year ended March 31, 2015:
Total
dividends(Millions ofyen)
Resolution: Meeting of the Boardof Directors on April 28, 2014¥
Cash dividends (¥8 per share)
Resolution: Meeting of the Boardof Directors on October 30, 2014¥
Cash dividends (¥10 per share)

Cut-off
Date

Effective
date

March 31,528
2014

June 6,2014

September
30, 2014

December
1, 2014660

For the year ended March 31, 2016:
Total dividends(Thousands(Millions ofof U.S.
yen)
dollars)
Resolution: Meeting of the Boardof Directors on April 28, 2015
Cash dividends (¥15 ($0.13) per
share)¥
Resolution: Meeting of the Boardof Directors on October 29, 2015
Cash dividends (¥20 ($0.18) per
share)¥

Cut-off
date

Effective
date

989 $

March 31,
8,785
2015

June 5,2015

1,313 $

September
11,65630, 2015

December
1, 20152) Dividends with the cut-off date in the year ended March 31, 2015 and the effective
date in the year ended March 31, 2016:
Cut-off

Effective
23

Totaldividends(Millions ofyen)
Resolution: Meeting of the Boardof Directors on April 28, 2015
Cash dividends (¥15 per share)
Source of dividends: Retained
earnings

¥

989

date

March 31,
2015

date

June 5,2015

24

Dividends with the cut-off date in the year ended March 31, 2016 and the effective
date in the year ending March 31, 2017:

Total dividends(Thousands(Millions ofof U.S.
yen)
dollars)
Resolution: Meeting of the Boardof Directors on April 28, 2016
Cash dividends (¥25 ($0.22) per
share)
Source of dividends: Retained
earnings¥

1,641 $

14,569Cut-off
date

Effective
date

March 31,2016

June 7,2016

10. Net Sales from Construction Contracts Recognized by Percentage-of-Completion
MethodNet sales from construction contracts recognized by the percentage-of-completion method
for the years ended March 31, 2015 and 2016 amounted to ¥140,766 million and ¥138,742
million ($1,231,294 thousand), respectively.
11. Selling, General and Administrative Expenses
Major items included in selling, general and administrative expenses for the years ended
March 31, 2015 and 2016 were as follows:
2015
2016
(Millions of yen)
Salaries and wages
Retirement benefit expenses
Provision for directors andcorporate auditors’ retirement
benefits
Depreciation and amortization

¥

8,283
510

55
875

¥

2016
(Thousands of
U.S. dollars)

8,450
463

47
901

$

74,993
4,115

422
8,002

12. Research and Development Costs
Research and development costs included in cost of sales and selling, general andadministrative expenses for the years ended March 31, 2015 and 2016 amounted to ¥288
million and ¥255 million ($2,271 thousand), respectively.

2513. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated
subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax, which, in theaggregate, resulted in statutory rates of approximately 35.38% and 32.83% for the years
ended March 31, 2015 and 2016, respectively. Income taxes of the foreign consolidated
subsidiaries are based generally on the tax rates applicable in their countries ofincorporation.
The reconciliation between the effective tax rates reflected in the consolidated statement ofincome and the effective statutory tax rates for the years ended March 31, 2015 and 2016
was as follows:2015
Effective statutory tax rate
Effect of:
Non-deductible expenses
Non-taxable dividend income and others
Capita levy on inhabitant tax
Valuation allowance
Effect of changes in the statutory tax rate
Other, net
Effective tax rate

35.38%
1.97(0.37)
0.89(1.49)
2.17(0.46)
38.09%

Note: The note for the year ended March 31, 2016 was not presented because the difference
between the statutory tax rate and the effective tax rate reflected in the consolidated
statement of income was not greater than 5% of the statutory tax rate.

26

The significant components of deferred tax assets and liabilities as of March 31, 2015 and2016 were as follows:

Deferred tax assets:
Liability for retirement benefits
Accrued bonuses
Tax loss carryforwards
Unrealized profits on fixed assets
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets¥

Deferred tax liabilities:
Unrealized holding gain on othersecurities
Reserve for advanced depreciation of
fixed assets
Reserve for special depreciation
Other
Total deferred tax liabilities¥
Net deferred tax assets

2015
2016
(Millions of yen)

2016
(Thousands of
U.S. dollars)

5,895
1,986
931
378
3,119
12,310(1,977)
10,333

$

¥

6,457
1,962
1,058
749
2,512
12,740(1,641)
11,09857,305
17,4159,389
6,655
22,300113,066(14,568)
98,497(1,840)(890)(7,903)(1,343)(1,244)(815)(5,244)
5,088(1,286)(1,022)(630)(3,829)7,268(11,416)(9,071)(5,597)(33,989)
64,507¥$

Note: Net deferred tax assets as of March 31, 2015 and 2016 were reflected in thefollowing accounts in the consolidated balance sheet:
2015
2016
(Millions of yen)
Current assets - deferred tax assets
Investments and other assets - deferred
tax assets
Current liabilities - other current
liabilities
Long-term liabilities - other long-term
liabilities

¥

3,041

¥

2016
(Thousands of
U.S. dollars)
2,961 $
26,278

2,380

4,540

40,291

(0)

(15)

(139)

(332)

(216)

(1,922)Disclosure for the year ended March 31, 2016
With the enactment of the “Act for Partial Amendment of the Income Tax Act, etc.” andthe “Act for Partial Amendment of the Local Tax Act, etc.” on March 29, 2016, theeffective statutory tax rate used for the calculation of deferred tax assets and deferred tax
liabilities has been changed from 32.06% to 30.69% for the temporary differences expected
to be realized or settled in the fiscal years beginning April 1, 2016 and 2017 and to 30.46%
for the temporary differences expected to be realized or settled on or after April 1, 2018.
As a result, deferred tax assets, after offsetting deferred tax liabilities, decreased by ¥268
million ($2,386 thousand), deferred income tax expenses increased by ¥144 million ($1,279
thousand), unrealized holding gain on securities increased by ¥45 million ($401 thousand),retirement benefit liability adjustments decreased by ¥167 million ($1,490 thousand), andunrealized loss on hedging instruments decreased by ¥2 million ($18 thousand) as of and27

for the fiscal year ended March 31, 2016.
14.

Other Comprehensive Income

The following table presents reclassification adjustments and tax effects allocated to eachcomponent of other comprehensive income for the years ended March 31, 2015 and 2016:

Unrealized holding gain (loss) on
securities:
Amount arising during the year
Reclassification adjustments for gains
and losses included in profit (loss)
attributable to owners of parent
Amount before tax effectTax effectUnrealized holding gain (loss) on
securities¥

Unrealized gain (loss) on hedging
instruments:
Amount arising during the year
Reclassification adjustments for gains
and losses included in profit (loss)
attributable to owners of parent
Amount before tax effectTax effectUnrealized gain (loss) on hedging
instruments:
Translation adjustments:
Amount arising during the year
Retirement benefit liability
adjustments:
Amount arising during the year
Reclassification adjustments for gains
and losses included in profit (loss)
attributable to owners of parent
Amount before tax effectTax effect
Retirement benefits liability
adjustments
Share of other comprehensive incomeof affiliates accounted for by theequity method:Amount arising during the year
Total other comprehensive income

¥

2015
2016
(Millions of yen)

2016
(Thousandsof U.S.
dollars)

3,640(2,790)$ (24,762)

(198)
3,441
(1,001)(84)(2,874)
962(747)(25,510)
8,543

2,439

(1,911)(16,966)－(125)(1,112)

－
－
－

－
(125)
38

－
(1,112)
338

－

(87)

(774)

424

(244)

(2,166)(2,940)(6,779)(60,166)561(2,378)694

725(6,054)
1,789

6,434
(53,731)
15,881(1,684)(4,264)(37,850)

(84)
1,095

(54)
(6,562)(483)$ (58,241)

¥

¥

28

15. Commitments and Contingencies
The Company and its consolidated subsidiaries had the following contingent liabilities at
March 31, 2015 and 2016:
Debt guarantees for non-consolidated companies
2015
2016
(Millions of yen)Mizuho Bank, Ltd.
(Atsumi Greenpower Co.)
Development Bank of Japan Inc.
(Nagashima Windhill Co.)
Total

¥

639

¥

322
961

2016
(Thousands of
U.S. dollars)

¥

552

¥

283
836

$

4,900

$

2,519
7,420

Endorsement for transfer of notes receivable
2015
2016
(Millions of yen)
¥

0

¥

5

2016
(Thousands of
U.S. dollars)$
47

The Company has entered into subordinated loan commitment contracts as a subordinatedcreditor in joint financing for companies involved in the PFI business. At March 31, 2015
and 2016, the Company had loan commitment agreements with 9 companies. The unusedbalances under the loan commitment contracts at March 31, 2015 and 2016 were as
follows:
2015
2016(Millions of yen)
Total loan commitments
Aggregated borrowings
Unused balances

¥

146
－
146

¥

¥

146
－
146

¥

2015
(Thousands of
U.S. dollars)
$
1,298
－
$
1,298

16. Amounts Per Share
Per share information as of March 31, 2015 and 2016 and for the years then ended is asfollows:
2015

2016

2016
(U.S. dollars)272.45251.56

$

2.42
2.23

¥ 1,693.45

$

15.03

(Yen)
Profit attributable to owners of parent:
Basic
Diluted¥Net assets¥ 1,555.33

174.54173.44¥

Basic income attributable to owners of parent per share is computed based on the profit
attributable to owners of parent available for distribution to shareholders of common stockand the weighted average number of common stock outstanding during the year, anddiluted profit attributable to owners of parent per share is computed based on the profit
29

attributable to owners of parent available for distribution to the shareholders and theweighted average number of common stock outstanding during each year after giving effectto the dilutive potential of common stock to be issued upon the exercise of sharesubscription rights.
Net assets per share are computed based on the net assets excluding non-controllinginterests and the number of common stock outstanding at the year end.
The bases for calculation are as follows:(a) Basic and diluted profit attributable to owners of parent per share
2015
2016
(Thousands of shares)
Weighted average number of sharesfor basic profit attributable toowners of parent
65,99065,704
Increase in common stock:
Exercise of share subscription rights
419
5,457
Number of shares used for diluted
profit attributable to owners of
66,40971,161parent per share
The entire amount of profit attributable to owners of parent for the years ended March 31,
2015 and 2016 was attributed to common shareholders.
(b) Net assets per share
2015
2016
(Thousands of shares)
Number of common stock used forthe calculation of net assets per
share

65,97865,648

2015
2016(Millions of yen)
Total net assets
Amounts deducted from total net
assets:Non-controlling interests
Net assets attributable to common
stock¥ 104,658

2016(Thousands of
U.S. dollars)¥ 113,199 $ 1,004,608(2,040)(2,026)¥ 102,617¥ 111,172(17,984)$

986,623

17. Financial Instruments(a) Policy for financial instruments
The Company and its consolidated subsidiaries utilize short-term deposits for surplus funds.
In addition, they raise funds through borrowings from financial institutions. Derivativetransactions are only used to reduce risks arising from fluctuations in foreign currency
exchange rates and interest rates, except for certain highly secure embedded derivatives incompound financial instruments used for surplus funds. The Company and its
consolidated subsidiaries do not enter into derivatives for speculative or trading purposes.
The Company and its consolidated subsidiaries execute and manage derivative transactions
30

within the limits of established internal rules and regulations.
(b) Details of financial instruments, related risk and risk management system
Trade receivables, such as trade notes and accounts receivable, are exposed to credit risk inrelation to customers. The Company and its consolidated subsidiaries monitor the due
dates and manage credit risk under the credit management rules to mitigate the risk.
Investment securities mainly consist of equity securities and are exposed to market risk.
The Company and its consolidated subsidiaries review the fair values of listed equity
securities quarterly and the financial condition of the issuing entities.
Trade payables, such as trade notes and accounts payable, have payment due dates mainly
within one year.
Short-term borrowings are taken out mainly to obtain funds for operating activities.
Long-term debt and convertible bond-type bonds with share subscription rights are usedmainly for the purposes of making investments and repurchasing treasury stock.

Trade payables, short-term borrowings and long-term debt are exposed to liquidity risk.
The Company and its consolidated subsidiaries manage the risk by preparing and updating
its cash flow plans monthly. In order to avoid interest rate fluctuation risk and foreignexchange fluctuation risk, the Company uses interest rate swaps for certain loans borrowed
from financial institutions, interest rate and currency swaps are used for all loans
denominated in foreign currencies, and forward foreign exchange contracts are used forcertain forecasted transactions denominated in foreign currencies. The Company executesand manages hedge transactions within the limits of established internal rules andregulations.
The Company and its consolidated subsidiaries reduce credit risk by limiting counterparties
to highly creditworthy financial institutions.
(c) Supplemental explanation on estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, the fair value is reasonably estimated. As
the estimation of the fair value relies on various assumptions and factors, different
assumptions and factors could result in different fair value.

31

Carrying value of financial instruments on the consolidated balance sheet as of March 31,
2015 and 2016 and estimated fair value were as follows:

Carrying
value

Cash on hand andin banks
Trade notes andaccounts
receivable (*1)
Investment
securities
Total assets
Trade notes andaccounts payable
Convertiblebond-type bonds
with sharesubscription
rightsLong-term debt (*2)
Total liabilities
Derivatives¥¥

37,957¥¥

37,957¥－79,85279,852－

16,993
134,804

16,993
134,804－－

68,44568,445－

10,00020,603
99,049–10,18020,671
99,297
–

180
68
248
–

Carrying
value

Cash on hand andin banks
Trade notes andaccounts
receivable (*1)
Investment
securities
Total assets
Trade notes andaccounts payable
Convertible bond-typebonds with sharesubscription rights
Long-term debt (*2)
Total liabilities
Derivatives (*3)

March 31, 2015
Estimated
fair value
Difference(Millions of yen)

28,973¥¥

March 31, 2016
Estimated
Carrying
Estimated
fair value
Difference
value
fair value
Difference(Millions of yen)(Thousands of U.S. dollars)¥

28,973¥－$ 257,132$ 257,132$－

90,85390,853－806,300

806,300－

15,726
135,553

15,726
135,553－－

139,563
1,202,996

139,563
1,202,996－－

68,36968,369－606,754606,754－

9,997
18,775
97,141¥(125)

14,895
18,900102,165
¥
(125)

4,898
125
5,024
–

88,720166,622862,097$ (1,112)

132,193
167,740
906,688$(1,112)

43,472
1,117
44,590–¥$(*1) The allowance for doubtful accounts was deducted from the trade notes and accounts receivable.
(*2) The balances include the current portion of long-term debt.
(*3) The value of assets and liabilities arising from derivatives is shown at net value, and with the amount inparentheses representing net liability position.

Note 1:
Short-term investments (current assets) and short-term borrowings, excluding the current portion of
long-term debt (current liabilities), were not included in the above table because the amounts wereimmaterial.

32

Note 2:
Valuation methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions are as follows:
AssetsCash on hand and in banks
Since all these items are settled in a short period of time, the carrying value approximates fairvalue.
Trade notes and accounts receivable
Since these items are settled in a short period of time, the carrying value approximates fairvalue.
Investment securities
The fair value of equity securities is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices or prices provided by the financial institutions
making markets in these securities. The fair value of investment trusts is based on publicly
available information.
In cases where the fair value of an embedded derivative in a compound financial instrument
cannot be separately measured, the entire compound financial instrument is measured at fairvalue.
For information on securities classified by holding purpose, please refer to Note 18,“Securities.”
Liabilities
Trade notes and accounts payable
Since all these items are settled in a short period of time, the carrying value approximates fairvalue.
Convertible bond-type bonds with share subscription rights
The fair value of convertible bond-type bonds with share subscription rights is based on quoted
market prices.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal andinterest discounted by the interest rate to be applied if similar new borrowings were enteredinto.
Derivative transactions
The fair value of derivative transactions is based on prices provided by the counterparty
financial institutions. The fair value of the interest rate swaps and the interest rate and currency
swaps was included in that of the hedged long-term debt as they are accounted for together with
underlying hedged items under the short-cut method.
Note 3:
Unlisted equity securities of ¥12,774 million and ¥16,177 million ($143,571 thousand) as of March
31, 2015 and 2016, respectively, were not included in the above table because it was extremely
difficult to determine the fair value.

33

(d) Redemption schedule for receivables and marketable securities with maturities at
March 31, 2015 and March 31, 2016 were as follows:

Due inone yearor less
Cash in banks
Trade notes and accounts
receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)Total¥ 37,870

¥

－

¥

－

Due after
ten years¥－

79,857

－

－

－

30

269

－

592

146
¥ 117,904

Due inone yearor less
Cash in banks
Trade notes and accounts
receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)
Total

March 31, 2015
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Millions of yen)

¥ 28,904

¥

141
411

¥

－
－

March 31, 2016
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Millions of yen)
¥

－

¥

－

¥

3,781
4,373

Due after
ten years¥－

90,858

－

－

－

250

1,015

1,101

392

21
¥ 120,035

60
1,076

－
1,101

6,548
6,940

¥

¥

¥

34

Due inone yearor less
Cash in banks
Trade notes andaccounts receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)
Total
(e)

$

March 31, 2016
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of U.S. dollars)

256,518

$

－

$

－

Due after
ten years$－

806,345

－

－

－

2,218

9,016

9,771

3,478

194
$ 1,065,276

539
9,556

－
9,771

58,112$ 61,591$$

The redemption schedule for long-term debt is disclosed in Note 5.

18. Securities(a) Information regarding marketable securities classified as other securities as of March
31, 2015 and 2016 is as follows:
March 31, 2015
Carrying
value

Securities whosecarrying value
exceeds theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Securities whosecarrying value does
not exceed theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Total

¥

¥

14,845633
588
16,068

841
211
48
1,101
17,169Gross
Acquisition unrealized
costgain (loss)(Millions of yen)

¥

¥

9,073
531
453
10,058

956
241
50
1,247
11,305

¥

¥

5,772
102
135
6,009

(114)
(29)
(1)
(146)
5,863

35

Carrying
value
Securities whosecarrying value
exceeds theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Securities whosecarrying value does
not exceed theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Total

¥

¥

9,805
481
180
10,468

3,256
2,180
116
5,554
16,022

March 31, 2016
Gross
Gross
Acquisition unrealized
Carrying
Acquisition
unrealized
costgain (loss)
value
cost
gain (loss)(Millions of yen)(Thousands of U.S. dollars)

¥

¥

6,477
438
116
7,031

¥

3,592
2,242
148
5,983
13,014

$

(335)
(61)
(31)
(428)
3,007

28,904
19,352
1,034
49,290$ 142,193

¥

3,328
42
64
3,436

87,023
4,274
1,603
92,902$

57,4813,894
1,029
62,40531,884
19,8981,315
53,097$ 115,503$$

29,542380
574
30,496(2,979)(546)(281)(3,806)
26,689(b) Information regarding sales of securities classified as other securities for the years
ended March 31, 2015 and 2016 is as follows:
2015
2016
(Millions of yen)

Proceeds from sales
Gains on sales
Losses on sales

¥

2,127
328
－

¥

2016
(Thousandsof U.S.
dollars)

623
98
8

$

5,532
870
79

(c) Impairment losses on securities classified as other securities of ¥9 million and ¥84
million ($749 thousand) were recognized for the years ended March 31, 2015 and2016, respectively.
19. Supplemental Information on Consolidated Statement of Cash Flows
Cash and cash equivalents in the consolidated statement of cash flows for the years ended
March 31, 2015 and 2016 are reconciled to cash on hand and in banks in the consolidatedbalance sheet as follows:

Cash on hand and in banks
Time deposits with maturities ofmore than three months
Cash and cash equivalents

2015
2016
(Millions of yen)

2016
(Thousands of
U.S. dollars)¥

37,957$257,132¥(2,026)35,931$(19,888)237,243¥

28,973¥(2,241)
26,73236

Leased assets and lease obligations related to new finance lease transactions recorded forthe years ended March 31, 2015 and 2016 amounted to ¥632 million and ¥1,058 million($9,393 thousand), respectively. Asset retirement obligations recorded for the years ended
March 31, 2015 and 2016 amounted to ¥121 million and ¥74 million ($663 thousand),
respectively.
20. Derivative Transactions
Summarized below are the notional amounts and the estimated fair value of the derivative
instruments outstanding at March 31, 2015 and 2016, for which hedge accounting has been
applied.
a. Currency-related transactions
March 31, 2016
Method of hedge
accounting
Deferredhedgeaccounting

Hedging instruments
Forwardforeignexchange
contracts

Buy: USD

Hedgeditems
Forecasted
transactions
denominatedinforeigncurrencies

Notional
amounts¥

8,217

Due after
one year(Millions of yen)
¥

7,395

Fair
value
¥ (125)

March 31, 2016
Method of hedge
accounting
Deferredhedgeaccounting

Hedging instruments
Forwardforeignexchange
contracts

Buy: USD

Hedgeditems
Forecasted
transactions
denominatedinforeigncurrencies

Notional
Due after
Fair
amounts
one yearvalue(Thousands of U.S. dollars)$

72,924$65,631$ (1,112)

The fair value was calculated based on prices provided by the counterparty financial
institutions.

37

b. Interest-related transactions
March 31, 2015
Method ofhedge
accounting
Short-cut
methodPrinciple
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: USD
Pay: JPY

Hedgeditems
Long-termdebtLong-termdebtLong-term
debt

Notional
amounts¥

5,000

Due after
one year(Millions of yen)
¥

5,000

Fair
value
¥

-

284

284

(82)

2,510

2,008

-

March 31, 2016
Method ofhedge
accounting
Short-cut
methodPrinciple
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: USD
Pay: JPY

Hedgeditems
Long-termdebtLong-termdebtLong-term
debt

Notional
amounts¥

5,000

Due after
one year(Millions of yen)
¥

5,000

Fair
value
¥

-

2,911

2,911

(147)

2,510

1,757

-

March 31, 2016
Method ofhedge
accounting
Short-cut
methodPrinciple
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: USD
Pay: JPY

Hedgeditems
Long-termdebtLong-termdebtLong-term
debt

Notional
Due after
Fair
amounts
one yearvalue(Thousands of U.S. dollars)$

44,373$ 44,373$-

25,83425,834(1,309)22,275

15,592-

The fair value of the interest swaps and the interest rate and currency swaps was included inthat of the hedged long-term debt as they are accounted for together with underlying hedged
items under the short-cut method.
The principle method was applied to the interest rate swaps used to hedge long-term debt ofaffiliates accounted for by the equity method, and the notional amount and the fair value
were based on the Company’s proportionate share. The fair value was calculated based on
prices provided by the counterparty financial institutions.
21. Segment Information(a) Outline of reportable segments
The reportable segments of the Company and its consolidated subsidiaries (the “Group”)
38are components for which discrete financial information is available and whose operating
results are regularly reviewed by the Board of Directors to make decisions on resource
allocation and to assess performance.
The Group is primarily engaged in the integrated utilities engineering service business,based on mid- to long-term business plans developed in the head office of the Company.
The Company’s regional offices mainly offer services in cooperation with each company of
the Group.
Also, some consolidated subsidiaries operate as independent management units and are
involved in other industries such as the sales business of construction-related materials andequipment, the real-estate sales business and the renewable energy generation business.
Thus, the Group consists of the segments based on business activities, with several
businesses that have essentially identical financial characteristics and contents of services
combined into “Utilities engineering service” as a reportable segment for the purpose of
disclosing appropriate information.
The “Utilities engineering service” segment primarily offers services for the design andconstruction of electrical works, such as power distribution line, indoor wiring, andcommunication, and of heating ventilation and air conditioning mechanical installation
works, such as ventilation, heating and cooling, plumbing, water treatment and sanitationequipment installation.
(b) Method used to calculate net sales, profit or loss, assets, liabilities and other items byreportable segment
The accounting policies of the reportable segments are substantially the same as thosedescribed in “Summary of Significant Accounting Policies.” Segment performance isevaluated based on operating profit or loss. Intersegment sales and transfers are recordedat the same prices used in transactions with third parties.
(c) Net sales, profit or loss and other items by reportable segment for the years ended
March 31, 2015 and 2016 are summarized as follows:Year ended March 31, 2015
Adjustments
andOthersTotaleliminations Consolidated(Millions of yen)

Utilities
engineering
service
Net sales
Sales to third
partiesIntersegment sales
and transfers
Total
Segment profit orloss
Other items
Depreciation andamortization
Amortization of
goodwill¥ 301,916¥

14,033¥ 315,949¥–¥ 315,949

2,529¥ 304,446¥

23,23637,27025,766¥ 341,716(25,766)¥ (25,766)–¥ 315,949¥

16,032¥665¥

16,698¥58¥

16,757

¥

3,038

¥

2,390

¥

5,429

¥

(167)

¥

5,262

¥

1,207

¥

2

¥

1,210

¥

－

¥

1,210

39

Year ended March 31, 2016
Adjustments
andOthersTotaleliminations(Millions of yen)

Utilities
engineering
service
Net sales
Sales to third
parties¥ 296,601
Intersegment sales
3,823
and transfers¥ 300,425
Total
Segment profit or loss ¥ 24,268
Other items
Depreciation andamortization¥
3,005
Amortization of
goodwill¥
241¥ 14,744¥ 311,346¥–¥ 311,346

19,164¥ 33,908¥ 1,015

22,987¥ 334,334¥ 25,284(22,987)¥ (22,987)
¥
(86)

–
¥ 311,346¥ 25,197

¥

2,629

¥

5,635

¥

(159)

¥

5,475

¥

2

¥

244

¥

－

¥

244

Year ended March 31, 2016
Adjustments
andOthersTotaleliminations(Thousands of U.S. dollars)

Utilities
engineering
service
Net sales
Sales to third
parties$ 2,632,249
Intersegment sales
33,932and transfers$
2,666,181
Total
Segment profit or loss $ 215,379
Other items
Depreciation andamortization$ 26,669
Amortization of
goodwill$ 2,145

Consolidated

Consolidated$ 130,851$2,763,100$–$2,763,100

170,078$ 300,930$
9,013

204,011$ 2,967,111$ 224,392(204,011)$ (204,011)
$
(768)

–
$2,763,100$ 223,623$ 23,340$

50,009$(1,415)$ 48,593

$

$

2,169

$

－

24

$

2,169

The disclosure of geographical segment information has been omitted as net sales and total
assets of the foreign operations constituted less than 10% of the consolidated totals for theyears ended March 31, 2015 and 2016.
There was no impairment loss on fixed assets recognized for the years ended March 31,
2015 and 2016.

40

The following table presents the amortization and balance of goodwill and negative
goodwill as of and for the years ended March 31, 2015 and 2016 by reportable segment:

Goodwill:
Amortization
Balance as of March 31
Negative goodwill:
Amortization
Balance as of March 31

Utilities
engineering
serviceYear ended March 31, 2015
Adjustments
andOtherseliminations Consolidated(Millions of yen)

¥
¥

1,207
1,403

¥
¥

2
5

¥
¥

－ ¥
－ ¥

1,210
1,408

¥
¥

0
－

¥
¥

0
－

¥
¥

－ ¥
－ ¥

0
－

Year ended March 31, 2016
Utilities
Adjustments
engineeringandservice
Otherseliminations Consolidated(Millions of yen)
Goodwill:
Amortization
Balance as of March 31
Negative goodwill:
Amortization
Balance as of March 31

Goodwill
Amortization
Balance as of March 31
Negative goodwill
Amortization
Balance as of March 31

¥
¥

241
1,553

¥
¥

2
2

¥
¥

－ ¥
－ ¥

244
1,556

¥
¥

－
－

¥
¥

－
－

¥
¥

－ ¥
－ ¥

－
－

Utilities
engineering
serviceYear ended March 31, 2016
Adjustments
andOtherseliminations Consolidated(Thousands of U.S. dollars)

$
$

2,145
13,786

$
$

24
24

$
$

－ $
－ $

2,169
13,810

$
$

－
－

$
$

－
－

$
$

－ $
－ $

－
－

The following table presents major customer information for the years ended March 31,
2015 and 2016:
2015
2016
(Millions of yen)

2016
(Thousands of
U.S. dollars)Name of customers:
Kyushu Electric Power Co., Inc.

Reportable segment:
Utilities engineering service and Others
Net sales¥ 48,639¥ 50,900$ 451,722

41

22. Related Party Transactions
Consolidated net sales from construction contracts included those involving Kyushu
Electric Power Co., Inc., which has an approximately 25% ownership interest in the
Company, in the amounts of ¥45,809 million and ¥47,625 million ($422,658 thousand) for
the years ended March 31, 2015 and 2016, respectively. The related receivables at March
31, 2015 and 2016 amounted to ¥7,409 million and ¥7,728 million ($68,591 thousand),
respectively. The related advances received at March 31, 2015 and 2016 amounted to ¥19
million and ¥132 million ($1,180 thousand), respectively.
The terms of the transactions referred to above were negotiated and determined on anarm’s-length basis similar to third party transactions.

42