Translation

Member of the Financial Accounting Standards Foundation

July 13, 2012

Consolidated Financial Results for the Fiscal Year Ended May 31, 2012
[Japanese GAAP]
Listed company name:
Stock exchange listing:Stock code:
Location of headquarters:
Website:Representative:
Contact:
TEL:
Scheduled date for ordinary general
meeting of shareholders:
Scheduled date for dividend payment:
Scheduled date for submission of
securities report:
Supplementary materials forfinancial summaries:
Financial results briefing:

Toyo Tanso Co., Ltd.
Tokyo Stock Exchange, 1st Section
5310
Osaka, Japan
http://www.toyotanso.co.jp
Junko Kondo, Representative Director and Chairperson & President
Toshimi Boki, Executive Officer, General Manager,
Finance and Accounting Department
81-6-6451-2114 (from overseas)
August 30, 2012
August 31, 2012
August 31, 2012
Yes
Yes (for securities analysts and institutional investors)

1. Consolidated financial results for the fiscal year ended May 31, 2012
(From June 1, 2011 to May 31, 2012)(1) Operating results(Millions of yen, rounded down)(Percentages indicate year-on-year changes.)Net
Recurring profit
incomeOperatingprofitNet sales%
Fiscal year ended
38,714
May 31, 2012
Fiscal year ended
37,557
May 31, 2011
Note:
Comprehensive income:Fiscal 2012
Fiscal 2011

%

%

%

3.1

6,055

3.2

6,062

8.0

3,466

(6.3)

34.5

5,868

160.4

5,614

171.2

3,699

156.5

3,851 million yen (up 14.6%)
3,359 million yen (up 297.2%)

Net income per share

Diluted net income
per share

Equity ratio

Recurringprofit/total assets

Operatingprofit/net sales

yen

yen

%

%

%

-

6.7

8.8

15.6

-

7.5

8.8

15.6

Fiscal year ended
167.20
May 31, 2012
Fiscal year ended
178.43
May 31, 2011
Reference: Equity in earnings of affiliates
May 31, 2012
May 31, 2011

- million yen- million yen

(2) Financial position(Millions of yen, rounded down)
Total assets

EquityEquity ratio

Equity per share%yen

As of May 31, 2012

71,90055,06474.4

2,580.53

As of May 31, 2011

65,191

51,74877.5

2,436.08

Reference:

Shareholders’ equity
May 31, 2012
May 31, 2011

53,505 million yen
50,510 million yen(3) Cash flows(Millions of yen, rounded down)
Cash flows fromoperating activities

Fiscal year ended
May 31, 2012
Fiscal year ended
May 31, 2011

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash equivalents
at end of period

3,964(3,920)

158

7,205

7,301

(5,380)

(550)

7,090

2. Dividends(Millions of yen, rounded down)
Dividends per share (yen)ThirdInterimYearquarter
-end
-end
end
yen
yen
yen

First
quarter
end
yen

Total
(Full
year)
yen

Total
dividends(annual)Payout ratio(consolidated)

Ratio ofdividends tototal assets(consolidated)%%Year ended May 31, 2011

-

-

-

22.00

22.00

456

12.3

0.9

Year ended May 31, 2012
Year ending May 31,
2013 (Forecast)

-

-

-

25.00

25.00

518

15.0

1.0

-

-

-

25.00

25.00

14.8

Consolidated results forecast for the fiscal year ending May 31, 2013
(From June 1, 2012 to May 31, 2013)(Millions of yen, rounded down)(Percentages indicate changes from the same period in the previous fiscal year.)
Net income
Operating profit
Recurring profit
Net income
per share

Net sales%
Cumulative total for thesix months
Fiscal year ending May
31, 2013

%

%

%

yen

17,000(21.1)

1,900(56.9)

1,800(58.7)

1,100(53.9)

53.05

37,000

(4.4)

5,500

(9.2)

5,400

(10.9)

3,500

1.0

168.80* Others(1) Changes in significant subsidiaries during the period:(Changes in specified subsidiaries accompanying changes in scope of consolidation):
New subsidiaries: ___Excluded subsidiaries: ___None(2) Changes in accounting policies and accounting estimates and restatements(i) Changes in accounting policies due to revisions of accounting standards, etc.: Yes(ii) Changes in accounting policies other than (i): None(iii) Changes in accounting estimates: None(iv) Restatements: None
For details, please refer to “Changes in accounting policies” on page 23 and “Additional information” onpage 24 of the Attached Documents.
(3) Number of shares outstanding (common stock)(i) Number of shares outstanding at the end of period (including treasury stock)
As of May 31, 2012
20,750,688 shares
As of May 31, 2011
20,750,688 shares(ii) Number of treasury stock at the end of period
As of May 31, 2012
16,365 shares
As of May 31, 201116,265 shares(iii) Average number of shares during the period
As of May 31, 2012
20,734,397 shares
As of May 31, 2011
20,734,470 shares

Reference: SUMMARY OF NON-CONSOLIDATED FINANCIAL STATEMENTS

1. Non-consolidated financial results for the fiscal year ended May 31, 2012
(From June 1, 2011 to May 31, 2012)(1) Operating results
Net sales(Millions of yen, rounded down)(Percentages indicate year-on-year changes.)
Recurring
Net income
profitOperating profit%

Fiscal year ended
May 31, 2012
Fiscal year ended
May 31, 2011%%

28,437

2.6

2,483

9.1

2,750

21.5

1,310

(1.6)

27,707

32.9

2,276

980.6

2,263

439.8

1,331

238.1

Net income per share

Diluted net income per
share

yen

yen

63.18

-

64.20

-

Fiscal year ended
May 31, 2012
Fiscal year ended
May 31, 2011%

(2) Financial position(Millions of yen, rounded down)
Total assets

EquityEquity ratio%

Net assets per shareyen

As of May 31, 2012

56,19442,61075.8

2,053.75

As of May 31, 2011

52,14541,74780.0

2,012.46

Reference:

Shareholders’ equity
May 31, 2012
May 31, 2011

42,583 million yen
41,727 million yen

* Implementation status of auditing proceduresThis financial results report is not subject to the auditing procedures stipulated by the Financial Instruments andExchange Act. The auditing procedures of the consolidated financial statements were not completed at the timeof the release of this report.
* Disclaimer regarding appropriate use of forecasts and related points of note
(We urge you to be cautious in relying on forward-looking statements.)
The forecasts and forward-looking statements contained in this report are based on information currently
available and on certain assumptions deemed rational as of the date of release. Accordingly, actual results
may differ significantly from these forecasts due to various factors. For more information on thepreconditions of the forecasts and on precautionary notes concerning the usage of these forecasts, pleaserefer to “1. Business Results, (1) Analysis of Business Results” on page 2 of the Attached
Documents.
(How to acquire supplementary materials for financial summaries and information disclosed at our financial
results briefing.)
We are scheduled to hold a financial results briefing for securities analysts and institutional investors on July 23,
2012. The materials distributed at the briefing are scheduled to be disclosed on TDnet and our homepage on thatsame day.

○Attached Documents
1. Business Results ···································································································· 2(1) Analysis of Business Results ··············································································· 2(2) Analysis of Financial Position ············································································· 3(3) Basic Policy for Profit Allocation and Dividends for the Fiscal Year Ended May 31,
2012 and the Fiscal Year Ending May 31, 2013 ························································ 4(4) Key events regarding the premise of a going concern················································· 4
2. Composition of Corporate Group ·············································································· 5
3. Management Policy ······························································································ 12(1) Basic Policies for the Management of the Company ················································· 12(2) Medium to Long-Term Management Strategies and Issues to Address ·························· 12(3) Other important items related to the management of the Company ······························ 13
4. Consolidated financial statements ············································································· 14(1) Consolidated balance sheets ·············································································· 14(2) Consolidated income statement and consolidated comprehensive income statement ·········· 16(3) Consolidated statements of changes in equity ························································· 18(4) Consolidated statements of cash flows ·································································· 20(5) Notes regarding the premise of a going concern ······················································ 21(6) Significant items that form the basis of preparations for consolidated financial
statements ···································································································· 21(7) Changes in accounting policies ··········································································· 23(8) Changes in presentation method ········································································· 23(9) Additional information ···················································································· 24(10) Notes regarding the consolidated financial statements ·············································· 25(Segment information) ···················································································· 25(Per share information) ··················································································· 28(Significant subsequent events) ·········································································· 28(Disclosure omissions) ····················································································· 28
5. Others ··············································································································· 29(1) Orders and sales by product category ·································································· 29(2) Overview ····································································································· 30(3) Changes of executives ······················································································ 31

11. Business Results(1) Analysis of Business Results(i) Business Results for the Fiscal Year Ended May 31, 2012
During the consolidated fiscal period under review, the global economy continued to recover gradually in thefirst half, but in the second half there were growing signs of a global slowdown on the back of Europe’s debt crisisand concerns about sluggish growth in emerging economies. The Japanese economy steadily recovered as
manufacturing activity picked up and capital spending resumed, but the recovery was hampered by theentrenchment of the yen at historically high rates and the global economic slowdown. As a result, the economy islocked in a temporary standstill.
Given these conditions, the Toyo Tanso Group concentrated its efforts on improving and expanding its
performance by more widely broadening its sales reach in general industrial and mechanical sectors in addition to
the environment and energy sectors, and also by reducing costs with steady efforts to enhance productivity.
Nevertheless, this performance momentum lost steam from the third quarter as the solar cell market entered anadjustment phase after a period of sustained rapid growth.
As a result, the Group’s business performance during the consolidated fiscal year under review for net sales
totaled 38,714 million yen (up 3.1% from the same term last year), operating profit 6,055 million yen (up 3.2%),
and recurring profit 6,062 million yen (up 8.0%). Net income for the fiscal year was 3,466 million yen (down
6.3%).
The overall performance of each business segment was as follows. (Please refer to “5. Others” for an
overview of each product category.)Japan
Sales in Japan were solid, particularly in the general industrial and mechanical sectors, as a result of therecovery in the domestic economy. As a result, net sales for the fiscal year in Japan were 19,767 million yen andoperating profit was 3,074 million yen.
United States
Despite the impact of the strong yen, a recovery trend continued mainly in the sales of products forcompound semiconductor applications and solar cell-related products. As a result, net sales for the fiscal year in
the United States were 3,145 million yen and operating profit was to 163 million yen.
EuropeSales in Europe, particularly of industrial furnace and products for small motors, fared relatively well despite
the impact of the strong yen and a stalling of demand for products for solar cell applications. As a result, net sales
for the fiscal year in Europe were 2,949 million yen and operating profit was 401 million yen.
Asia
Given the booming market particularly in China and other emerging countries, business in Asia was strong
overall, with an upsurge in demand for our core products for solar cell applications and expanded sales of products
for metallurgical and other general industrial applications. Sales of products for solar cell applications, a driver ofthis sector’s performance, plunged from the third quarter. As a result, net sales for the fiscal year in Asia were
12,851 million yen and operating profit was 2,655 million yen.
(ii) Outlook for the Fiscal Year Ending May 31, 2013
While there are views that domestic and overseas economic conditions going forward will continue on amoderate recovery trajectory, particularly in the US and emerging economies, concerns about an economic
downturn precipitated by the growing severity of the European debt crisis and slower growth in emerging
economies prevent optimism about the future outlook for the domestic and overseas economies.
Conditions surrounding our Group also make it difficult to make forecasts, due to the impact of the strong2

yen and lack of any signs of a recovery in the solar cell market. We will accordingly make active efforts to expand
sales in a broad range of sectors, including the robust general industrial and machinery application sectors, while
also steadily pursuing our strategies for medium- and long-term growth.
The Group has primarily used the fixed rate method as its depreciation method for tangible fixed assets inJapan, but this will be changed to the straight-line method beginning in the next fiscal period. This change is
expected to reduce depreciation by approximately 2.3 billion yen.
In view of the above conditions, we expect sales of 37 billion yen (down 4.4% from the previous year),
operating profit of 5.5 billion yen (down 9.2%), recurring profit of 5.4 billion yen (down 10.9%) and net incomeof 3.5 billion yen (up 1.0%) in the fiscal year ending May 31, 2013. (Assumed exchange rate: 80 yen/US$, 100
yen/EUR, 12.7 yen/CNY).

(2) Analysis of Financial Position(i) Assets, Liabilities, and Equity
Total assets as of the end of the consolidated fiscal year under review increased by 6,709 million yen fromthe previous consolidated fiscal year. This rise is primarily attributable to a 3,233 million increase in inventories
resulting from customers’ inventory adjustments and a recovery in intermediate stock, which had reachedexcessively low levels, and a 3,048 million increase in tangible fixed assets resulting from the expansion of the
Takuma Division’s production facility.
Total liabilities increased by 3,392 million yen from the end of the previous consolidated fiscal year. Thiswas primarily due to a 3,620 million yen increase in accrued amount payable resulting from the acquisition of
tangible fixed assets and a 667 million yen increase in interest-bearing debt. This eclipsed the 621 million
decrease in trade notes and accounts payable due to a reduction in the value of goods purchased as a result of
fewer orders and the 628 million decrease in income taxes payable.
Total equity increased by 3,316 million yen from the end of the previous consolidated fiscal year. This net
increase was primarily driven by an increase of 3,010 million yen in retained earnings.
(ii) Cash Flows
Cash and cash equivalents (hereinafter referred to as “funds”) in the consolidated fiscal year ended May 31,
2012 increased by 114 million yen from the end of the previous consolidated fiscal year, to 7,205 million yen on aconsolidated basis.
(Cash Flows from Operating Activities)
Funds provided by operating activities decreased 45.7% from the previous year to 3,964 million yen. Amongthe main items, profit before income taxes totaled 6,134 million yen (up 13.8%) and depreciation totaled 4,709
million yen (down 5.8%), while the 3,257 million yen rise in inventories (up 86.6%) and income taxes paid totaled
3,169 million yen (up 512.1%).
(Cash Flows from Investing Activities)
Funds used in investment activities decreased 27.1% from the previous year to 3,920 million yen. Among themain items, expenses for the acquisition of tangible fixed assets decreased to 4,171 million yen (down 20.8%).
(Cash Flows from Financing Activities)
Funds acquired in financing activities amounted to 158 million yen (550 million yen in funds were used forfinancing activities in the previous year). This is largely attributable to the 939 million yen (down by 697 million
yen in the previous year) net increase in short-term borrowings.

3(3) Basic Policy for Profit Allocation and Dividends for the Fiscal Year Ended May 31, 2012 and the
Fiscal Year Ending May 31, 2013(i) Basic Policy
Our basic policy for profit allocation is to make strategic investments in order to strengthen ourcompetitiveness and enhance our value over the long term and return profits to shareholders in a continuous andstable fashion with due consideration of both business results for the fiscal year, funding needs for the future
expansion of our business operations and consolidation of our business foundation. We intend to use internal
reserves for capital expenditures for production facilities, development of new products and investment inresearch and development.
(ii) Dividends for the Fiscal Year Ended May 31, 2012
Based on the above-mentioned policy, we plan to increase our annual dividend by 3 yen to 25 yen per sharefor the fiscal year ended May 31, 2012 in line with our initial dividend forecast. This amount takes into accountthe need to improve shareholders’ returns, the business results in this fiscal year and capital expenditure plans for
future growth.

(iii) Dividends for the Fiscal Year Ending May 31, 2013
We plan to pay a dividend of 25 yen per share for the fiscal year ending May 31, 2013 with the aim ofcontinuing to provide stable shareholder returns. Our dividend policy is based on our quest to increase theCompany’s value through the use of internal reserves for capital expenditures.

(4) Key events regarding the premise of a going concern
None4

2. Composition of Corporate GroupThe Toyo Tanso Group consists of Toyo Tanso Co., Ltd., 10 consolidated subsidiaries, including two
domestic and eight foreign companies, four foreign non-consolidated subsidiaries, and one overseas affiliatedcompany not accounted for by the equity method. The main businesses of the Toyo Tanso Group are the
manufacture, processing and sale of carbon products for high-function applications using isotropic graphite
materials (Note). Carbon products of the Toyo Tanso Group are used in a broad array of areas, and we need to
manufacture a range of products in small quantities since the specifications our customers require range over abroad spectrum.
The Toyo Tanso Group succeeded in pioneering the high-volume production of isotropic graphite materials
in 1974 ahead of competitors in Japan and overseas. This was followed by achievements in growth in size. The
Group has been expanding the applications of these products. We efficiently manufacture carbon materials
centering on these isotropic graphite materials by concentrating production on bases in Japan, and we haveconstructed a system to directly sell these products to local customers by supplying them to processing and sales
bases located in Japan and other countries in North America, Europe and Asia. We have established a stableproduct supply system with a short delivery time through this integrated production and sales system, whichranges from materials to products, and we develop products by promptly absorbing customer needs in acooperative relationship with customers based on our direct sales system.
The Toyo Tanso Group also conducts basic and applied studies based on customer needs and the analysis
data of carbon products, which we have been accumulating for many years as a carbon-specialized producer. As aresult, the applications of our products have been expanding into a wide spectrum of areas from industrial andcommercial applications such as industrial machinery, automobiles, and consumer electronics to cutting-edge
areas such as atomic power, aerospace, medical and energy.
Note:

Isotropic graphite materials
Carbon materials are categorized into graphite materials that are manufactured by high-temperatureprocessing and other carbon materials. Of graphite materials, isotropic graphite materials arecharacterized by the fact that their nature is the same in all three dimensional directions.
To manufacture isotropic graphite materials, it is necessary to apply equal pressure from all directions in
the molding process, and we have established a production method using a hydrostatic molding method(a molding method that applies pressure under water), ahead of competitors in Japan and overseas.
The main characteristics of graphite materials are as follows:(i) High thermal conductivity (*) and electronic conductivity(ii) High resistance to heat and chemicals(iii) Light and workable(iv) Resistance to friction and attrition
In addition to the above, isotropic graphite materials have the following characteristics:(i) Traits such as thermal expansion (*) are the same in all directions.
(ii) High strength with an ultra-fine particle structure and very small material dispersion.
Materials, applications, items, examples and characteristics of each product are as follows.

5Materials/applications/items
For the manufacture of single
crystal silicon
For the manufacture of
Electronics
compound semiconductors
applications
For the manufacture of solar
cells
Special graphite
products

General industries applications

OthersCarbon products
for generalindustries

Product examples
Crucibles and heaters for single crystal growing
furnaces
Susceptors for MOCVD systems, boats for LPE
systems
Crucibles and heaters for single crystal andpolycrystal silicon manufacturing furnaces, carriers
for anti-reflective coating films
Continuous casting dies, EDM electrodes, heaters forvarious industrial furnaces, structural materials

For the manufacture ofadvanced processing
equipment

Electrodes for ion implantation equipment, glass
sealing jigs

For atomic power, aerospaceand medical

Cores for high-temperature gas reactors, wallmaterials for nuclear fusion reactors, rocket parts,
parts for CT scans

Carbon products formechanicalapplications

General industries
applications
For transportation

Carbon products forelectricalapplications

For small motors

Bearings and seals for pumps and compressors
Pantograph sliders, automotive parts
Carbon brushes for vacuum cleaners and wind-power
generators
Large brushes, carbon brushes for wind-power
generators
Susceptors for Si-Epi equipment, wall materials fornuclear fusion reactors, automotive gaskets,
susceptors for MOCVD systems, materials for the
manufacture of solar cells

For large motors

Compound materials and other products(1) Special graphite products
For special graphite products, isotropic graphite materials are mainly used.
(i) Electronics applications(a) For the manufacture of single crystal silicon
Silicon wafers that are manufactured by slicing single crystal silicon are basic materials that help drive thedevelopment of the electronics industry, as a semiconductor substrate such as a high integrated memory device.
Major consumable parts inside a furnace such as crucibles (*) and heaters that are used in a single crystal silicon
growing furnace rely on isotropic graphite products, since these parts require high purity and high thermal
resistance.
With the diameter of single crystal silicon increasing, a manufacturing process using 300 mm wafers has
become the mainstream of the manufacturing process. The Company has the capacity to produce the world’s
largest isotropic graphite materials and to meet demand from customers in Japan and overseas by using its
processing and high purity production facilities.
(b) For the manufacture of compound semiconductors
Compound semiconductors (*), which are used as light emitting devices, telecommunications devices, powerdevices, etc. are also employed as high efficiency light emitting devices for digital consumer electronics such as
mobile phones, DVDs and LCDs, automotive head lamps and fluorescent tubes, taking advantage of their features,such as a long life and electric power saving.
In Japan and overseas, major consumable parts such as heating elements and susceptors for MOCVD
systems (*), which are used in the manufacturing process of these compound semiconductors, rely on the isotropic
graphite products of the Company, as these parts require high purity and high processing accuracy.
(c)

For the manufacture of solar cells
Solar cells are representative of clean energy technology. Their applications are expected to expand on a6

global scale, given the legislation of subsidies for the purchase and installation of residential power generation
systems in countries around the world, and other such national policies.
Major consumable parts in heaters and crucibles utilized in the manufacturing process of single crystal andpolycrystal silicon, the core materials of solar cell elements, as well as carriers for PE-CVD equipment and others
used in the manufacturing process of anti-reflective coating films, use our isotropic graphite products. They areused because such components require high thermal resistance and high durability.
(ii) General industries applications
Isotropic graphite materials have high thermal and chemical resistance and electrical conductivity evenamong graphite materials. Taking advantage of these features, they are used for applications such as metal melting
crucibles, continuous casting dies (*), EDM electrode (*) for manufacturing dies, the sinter of ceramics andpowder metallurgical materials, the annealing of automotive parts and other high temperature heating elements forindustrial furnaces, and construction materials inside a furnace.
The Toyo Tanso Group supplies products for these diverse industry applications in Japan and in othercountries such as China, Southeast Asia, and South America, which are enjoying high economic growth.
(iii) Others(a) For advanced process equipment
A range of isotropic graphite materials are applied for the manufacture of electrodes for ion implantationequipment, used for microfabrication in the manufacturing process of semiconductors and liquid crystals, diodes,
crystal oscillators, and other advanced process equipment. Since the above equipment requires features such as
high thermal resistance, thermal conductivity, purity and strength and processing accuracy, the Company’s
products are widely used by large equipment makers and other customers.
(b) For atomic power, aerospace and medical
The atomic power applications such as cores for high-temperature gas reactors and wall materials for nuclear
fusion reactors require high credibility and quality. The Company’s products are used for these atomic power
applications, as high resistance to radiation and plasma is required, in addition to high thermal resistance and otherfeatures of graphite. Our products are also used for aerospace applications such as rocket parts and medical
applications including CT scans.

(2) Carbon products for general industries applications
Carbon materials that are manufactured by a conventional molding method are primarily used for carbon
products for general industries applications. Isotropic graphite materials are also used for some applications.
(i) Carbon products for mechanical applications(a) For general industries
Taking advantage of such features as abrasion resistance, thermal and chemical resistance and theirself-lubricating nature, we sell a variety of products including sliding parts such as bearings for pumps andcompressors as well as seals for gaseous and liquid bodies such as piston rings (*) and mechanical seals (*) tomachinery manufacturers in Japan and overseas. The Company operates overseas with strong costcompetitiveness by improving the homogeneity of materials and optimizing the material size through theintroduction of a new molding method.
(b) For transportation
We sell pantograph sliders (*) with high self-lubricating nature, electrical conductivity and abrasion
resistance to railroad companies by impregnating copper into carbon with high pressure. Pantograph sliders of theCompany have reduced the abrasion of overhead wires and achieved lower noise compared with conventional
metal sliders.
We also manufacture and sell compressor parts of brakes for the automotive industry.
7

(ii) Carbon products for electrical applications(a) For small motors
We sell carbon brushes for small motors for commercial uses, such as vacuum cleaners and power tools, toconsumer electronics, tool makers, and other customers. The Company’s products are characterized by long life,
high durability and a rectifying property against high-speed rotation. We are also responding to the needs of small
motor manufacturers who have shifted their production to China, by establishing production subsidiaries in China.
(b) For large motors
Our products are used by steel and paper manufacturing companies as carbon brushes for large motors forindustrial applications, taking advantage of their high self-lubricating nature, electrical conductivity andworkability. A carbon brush is a device that enables a stable and sustained supply of electricity while sliding on
rotating bodies and has come to be used for the environment and energy, such as the power collection facilities ofwind-power generation.

(3) Compound materials and other products
In compound materials and other products, we manufacture and sell compound materials coated by othermaterials with isotropic graphite as the base material (SiC coated graphite (*), etc.), materials compounded withcarbon and carbon fiber (C/C composite products (*)), and natural graphite materials (graphite sheets (*)).
(i) SiC coated graphite products
SiC coated graphite products have high thermal and etching resistance (*) and high purity that reduces thegeneration of organic pollutants. Taking advantage of these features, we sell these products to the semiconductor
industry in Japan and overseas as susceptor materials for the thin film manufacturing process in the production
process of silicon and compound semiconductors.
(ii) C/C composite products
C/C composite products are advanced materials that are light and strong and retain a high carbon thermal
quality, and that are used for a wide spectrum of applications in Japan and overseas, such as the manufacturing
process of solar cells and silicon single crystal, materials for vacuum furnaces as well as special applications
including the wall materials of nuclear fusion reactors.
(iii) Graphite sheet products
Graphite sheet products are light sheeted products and are used for automotive parts such as gaskets andmufflers, given their characteristics of being insensitive to other substances even under high temperatures.
Demand for graphite sheet products is also rising for the protection of carbon members in the manufacturing
process of quartz and silicon single crystal. Going forward, applications in areas that require dealing with heatsuch as a heat sink are also expected, leveraging their high thermal conductivity in the face direction.
For words with an asterisk (*), please refer to the glossary below.
This glossary is prepared by the Company based on its understanding and judgment as a reference to enable
investors to have a better understanding of the descriptions in this report.

8

[Glossary][Thermal conductivity]
Conductivity of heat that a substance has.
[Thermal expansion]
The expansion of a substance associated with a rise in temperature.
[Crucible]
A pot-like container for holding heat-temperature liquid.
[Compound semiconductor]
A semiconductor that consists of substances composed of multiple elements. Examples of a compound
semiconductor include gallium arsenide, gallium nitride and silicon carbide. Features which silicon
semiconductors do not have are used.
[Susceptor]
A platform used to develop a thin film on the surface of wafers.
[Continuous casting dies]
A mold to cool and solidify molten metal by touching it in a continuous casting process that casts dissolving metal
by continuously cooling it. Metal products that have the cross-section of this mold will be made continuously.
[EDM electrode]An electrode that will make a pair with a processed material. It generates an electrical discharge between theelectrode and the processed material and transcribes the shape of the electrode on the processed material.
[Self-lubricating nature]
Property in which adhesion barely occurs because of a layered crystal structure and a low friction coefficient.
[Piston ring]
A sealing ring that prevents leakages from a space between a piston and the inner wall of a cylinder in areciprocating compressor.
[Mechanical seal]
A machine part to control leaks from a rotating shaft of fluid or gas equipment, a sidewall due to a reciprocating
motion, or a pressure container, etc. and prevent the intrusion of a different liquid from outside.
[Pantograph slider]
A power collection body that collects electricity by touching an overhead wire and sliding on it to supply power toa train.
[SiC coated graphite]
A product that generates a precise thin film of silicon carbide on the surface of isotropic graphite. This can curb
the generation and reaction of a small amount of gases from graphite.
[C/C composite product]
Graphite reinforced by carbon fibers with features of light weight and high strength.

9[Graphite sheet]
Graphite that is formed into a sheet-like shape by a special production method. This is used for gaskets and otherproducts because of its bendy nature.
[Etching resistance]
Degree of lack of attrition by gaseous and liquid bodies with high reactive property.

10[Business Flow Chart]
The business flow chart of the Toyo Tanso Group is as follows. Only major business relations are indicated in thischart.

Customers
Processing and sales companies
TTTh(Thailand)

TTT(Taiwan)

TTE(Italy)TTF(France)

GTD(Germany)

STT(China)JTT(China)TTU(U.S.A.)

Toyo Tanso Co., Ltd.
KTT(Korea)TTS(Singapore)

Totan Kako Co.,Ltd.
(Japan)TTIn(India)Manufacturing
companies

Ohwada Carbon
Industrial Co., Ltd.
(Japan)YTT(China)Manufacturing
and sales
companies

Sales companies
Consolidated
subsidiary

STI(China)Non-consolidated
subsidiary

Affiliated company

The formal names of the companies represented by the acronyms used in the chart above are as follows:
Company name
(TTU) … Toyo Tanso USA, Inc.
(TTE) … Toyo Tanso Europe S.p.A.
(TTF) … Toyo Tanso France S.A.
(GTD) … GTD Graphit Technologie GmbH
(STT) … Shanghai Toyo Tanso Co., Ltd.
(STI) … Shanghai Toyo Tanso Industrial Co., Ltd.
(JTT) … Jiaxiang Toyo Tanso Co., Ltd.
(TTT) … Toyo Tanso Taiwan Co., Ltd.
(YTT) … Shanghai Yongxin Toyo Tanso Co., Ltd.
(KTT) … Toyo Tanso Korea Co., Ltd.
(TTTh) … Toyo Tanso (Thailand) Co., Ltd.
(TTS) … Toyo Tanso Singapore Pte. Ltd.
(TTIn) … Toyo Tanso India Private Limited

11

3. Management Policy(1) Basic Policies for the Management of the Company
The fundamental management philosophy of Toyo Tanso Company Group is “Contribute to the world
through the pursuit of the possibilities inherent in carbon (C),” and based on the pioneering spirit of “Creating
things that cannot be found elsewhere” that we have embodied since our founding, our basic policy has been toprovide the world with unique, revolutionary, high functionality and specialty products, with carbon as the axis.
As a global industry leader with a high growth rate and robust earnings, we will continue to improve on ourworld-class quality, technology and cost competitiveness, and act to fulfill our responsibilities and make acontribution, as a company that can meet the expectations and justify the trust of its customers, stockholders,
employees and society.
(2) Medium to Long-Term Management Strategies and Issues to Address
In the medium to long-term, as a leader in high-functionality carbons, the Toyo Tanso Group will strive tomaximize corporate value, especially in areas related to the environment and energy, by promoting investment andbusiness strategies with a view to the future. We will focus specifically on the following issues.
(i) Actively expanding the core business and achieving overwhelming superiority
Within an increasingly sophisticated industry, applications and domains that require high quality carbon withhigh functionality are expanding on a global basis, and we expect increasingly challenging requirements to bemade of the Group’s high-functionality carbon products. The Toyo Tanso Group will actively enhance its
production structure and sophistication, both domestic and international, and will take comprehensive action toincrease production efficiency in order to strengthen the Group’s competitiveness.
As for our core product, isotropic graphite, we intend to further improve our production system based on our
cutting-edge Takuma No. 3 plant built in spring 2010. In addition, we will focus on actively developing compoundmaterial products such as coating and C/C composite products. With these products, the Toyo Tanso Groupintends to maintain its unchallenged superiority in both quality and quantity in the industry, armed withoverwhelming deployment capabilities and cost competitiveness, as well as products with high value addition anddifferentiation.
(ii) Accelerating global deployment
The increased demand and expansion of high functional carbon is becoming noticeable, not only in Japan,
but even more so in overseas markets. In addition to the European, U.S. and Asian markets, where the Company
already operates, demand is growing rapidly in emerging economies such as India, Russia and Eastern Europe. In
order to respond to these developments, since 2006 we have established sales subsidiaries in Korea, Shandong
Province in China, and in Thailand, and in recent years in such areas as Singapore and India. At the same time, weare pushing forward an active global strategy through our efforts to, for example, reinforce and upgrade ourexisting bases.
Our plans are to accelerate global expansion, with a focus on China, which continues to be a huge andattractive market, and on emerging economies, while bolstering coordination among each local entity in terms of
production and sales, to achieve our policy of promoting group management that responds to the global market.
(iii) Promoting new products and new business development
Much still needs to be learned about the possibilities of carbon, and the potential applications appear to beunlimited. Carbon is likely to find new uses, especially in the environment and energy, and in other cutting-edge
areas such as atomic power, medicine, next-generation devices and aerospace. It goes without saying that carbon
has potential applications in the renewable energy field related to, for example, solar cells and wind power
generation as well as LED and other energy-saving-related areas.
In addition to developing new products by utilizing our strong partnerships with customers, the Group will
combine products with new materials and new technologies through its far-reaching government and academic
partnerships based on the Group’s advanced and abundant knowledge of elemental technology built up as pioneers
12

in the industry. In this way, the Group will promote unique new products and businesses for the future, as it seeks
further growth.

(3) Other important items related to the management of the Company
Not applicable.

134. Consolidated financial statements(1) Consolidated balance sheets(Thousands of yen, rounded down)
As of May 31, 2011

As of May 31, 2012

AssetsCurrent assets
Cash on hand and in banks

9,283,891

9,136,958

Trade notes and accounts receivable

13,047,069

13,124,833

Merchandise and finished goods

4,761,418

7,315,218Work in process

6,182,218

6,351,260

Raw materials and stores

1,511,288

2,022,085

Deferred tax assets

707,664

901,762

Other

883,757

839,792

Allowance for doubtful accounts(111,741)(133,107)

Total current assets

36,265,565

39,558,803

14,707,804

16,536,559(7,334,386)(7,843,961)

Fixed assets
Tangible fixed assets
Buildings and structures
Accumulated depreciation
Buildings and structures (net)7,373,417

8,692,597

Machinery, equipment, and vehicles

37,586,480

40,371,337

Accumulated depreciation(25,490,350)(28,537,745)

Machinery, equipment, and vehicles (net)12,096,129

11,833,591

5,296,473

5,739,970

655,395

2,162,921

Land
Construction in progress
Other

3,393,067

3,802,297(2,652,267)(3,021,049)

740,800

781,248

26,162,216

29,210,330

785,261

894,851

Investments in securities

199,072

189,214

Deferred tax assets

316,150449,716

Accumulated depreciation
Other (net)Total tangible fixed assets
Intangible fixed assets
Investments and other assets

Other

1,466,194

1,600,845

Allowance for doubtful accounts(2,820)(3,043)

Total investments and other assets

1,978,597

2,236,733

Total fixed assets
Total assets

14

28,926,075

32,341,914

65,191,641

71,900,718

(Thousands of yen, rounded down)
As of May 31, 2011

As of May 31, 2012

Liabilities
Current liabilities
Trade notes and accounts payable

2,950,193

2,328,985

Short-term borrowings

1,406,013

2,267,846

Accrued amount payable

2,538,873

6,159,317

Income tax payable

1,495,600

867,101

Reserve for employees’ bonuses

825,271921,492

Reserve for directors’ and corporate auditors’
bonuses

78,48067,420Other

1,788,486

2,117,588

Total current liabilities

11,082,920

14,729,751

Long-term borrowings

665,014

470,349

Deferred tax liabilities

266,934

286,900

Reserve for employees’ retirement benefits

658,878

602,502

Long-term liabilities

Asset retirement obligations

278,121

270,946

Other

491,408

475,319

2,360,356

2,106,018

13,443,276

16,835,770

Total long-term liabilities
Total liabilities
EquityShareholder’s equity
Common stock

7,692,575

7,692,575

Capital surplus

9,534,686

9,534,686

Retained earnings

35,169,221

38,179,893

Treasury stock - at cost

(57,630)(57,934)

Total shareholders' equity

52,338,853

55,349,222

2,941

5,156

Foreign currency translation adjustments(1,831,083)(1,848,932)

Total accumulated other comprehensive income(1,828,141)(1,843,775)

Accumulated other comprehensive income
Unrealized gains (losses) on available-for-salesecurities

Share warrants

20,08827,900Minority interests

1,217,565

1,531,602

Total equity

51,748,364

55,064,948

65,191,641

71,900,718

Total liabilities and equity15

(2) Consolidated income statement and consolidated comprehensive income statement(Consolidated statements of income)(Thousands of yen, rounded down)
From June 1, 2010 to May 31, 2011

From June 1, 2011 to May 31, 2012

Net sales

37,557,801

38,714,106

Cost of goods sold

25,445,901

25,872,301

Gross profit

12,111,899

12,841,804

Selling, general and administrative expenses

6,243,670

6,786,382

Operating profit

5,868,229

6,055,421

31,59944,221Non-operating income
Interest income
Dividends earned

5,941

11,146

Gain on foreign currency option

63,411

64,840Gain on reversal of accrued legal claim-

58,890Gain on sales of scraps

14,11430,843

Other49,40237,860Total non-operating income

164,467

247,80347,59632,434Non-operating expenses
Interest expenses
Loss on sale of notes payable

2,330

2,313

Valuation loss on investment securities

24,032

12,897

Depreciation-

36,709Foreign exchange loss

289,986

138,281

Other

54,033

18,529Total non-operating expenses

417,979

241,1655,614,718

6,062,059

88,31762,532-

1,200

Subsidies received

1,450

192,032

Total extraordinary profit

89,767

255,764

Recurring profit
Extraordinary profit
Gain on sale of fixed assets
Gain on sale of investment securities

Extraordinary losses
Loss on sale of fixed assets

4,433

1,347

Loss on disposal of fixed assets
Effect of application of the Accounting Standard
for Asset Retirement Obligations
Payment for prior-year custom duties, etc

55,431

65,833

216,240-

23,726

115,659

Loss from disaster

14,826-

Total extraordinary losses

314,658

182,839

Profit before income taxes

5,389,826

6,134,984

Income taxes - current

1,839,077

2,047,543-

540,096

Income taxes - deferred(479,019)(287,106)

Total income taxes

1,360,057

2,300,533

Income before minority interests

4,029,769

3,834,450

330,197

367,6213,699,571

3,466,829

Prior year income tax, etc.

Minority interests
Net income

16

(Consolidated comprehensive income statement)(Thousands of yen, rounded down)
From June 1, 2010 to May 31, 2011

From June 1, 2011 to May 31, 2012

4,029,769

3,834,450

1,098

2,215

Income before minority interests
Other comprehensive income
Unrealized gains (losses) on available-for-salesecurities
Foreign currency translation adjustments(671,503)

14,831

Total other comprehensive income(670,404)

17,0473,359,364

3,851,497

3,100,621

3,451,195

258,743

400,302

Comprehensive income(Breakdown)Comprehensive income attributable to parent
company shareholders
Comprehensive income attributable to minority
interests17

(3) Consolidated statements of changes in equity(Thousands of yen, rounded down)
From June 1, 2010 to May 31, 2011

From June 1, 2011 to May 31, 2012

Balance at beginning of fiscal year

7,692,575

7,692,575

Balance at end of the fiscal year

7,692,575

7,692,575

Balance at beginning of fiscal year

9,534,686

9,534,686

Balance at end of the fiscal year

9,534,686

9,534,686

31,884,339

35,169,221

Dividends from retained earnings(414,689)(456,157)

Net income

3,699,571

3,466,829

Total change in the fiscal year

3,284,881

3,010,671

Balance at end of the fiscal year

35,169,221

38,179,893(57,408)(57,630)

Acquisition of treasury stock

(222)

(303)

Total change in the fiscal year

(222)

(303)

Balance at end of the fiscal year

(57,630)(57,934)

49,054,194

52,338,853

Dividends from retained earnings(414,689)(456,157)

Net income

3,699,571

3,466,829

EquityCommon stock

Capital surplus

Retained earnings
Balance at beginning of fiscal year
Change in the fiscal year

Treasury stock
Balance at beginning of fiscal year
Balance at end of the fiscal year

Total equity
Balance at beginning of fiscal year
Change in the fiscal year

Acquisition of treasury stock

(222)

(303)

Total change in the fiscal year

3,284,659

3,010,368

Balance at end of the fiscal year

52,338,853

55,349,222

18

(Thousands of yen, rounded down)
From June 1, 2010 to May 31, 2011

From June 1, 2011 to May 31, 2012

1,842

2,941

Change in the fiscal year in items other thanshareholders’ equity (net)

1,098

2,215

Total change in the fiscal year

1,098

2,215

Balance at end of the fiscal year

2,941

5,156

(1,231,034)(1,831,083)

Change in the fiscal year in items other thanshareholders’ equity (net)(600,048)(17,849)

Total change in the fiscal year

(600,048)(17,849)

Balance at end of the fiscal year

(1,831,083)(1,848,932)(1,229,192)(1,828,141)(598,949)(15,634)

Accumulated other comprehensive income
Unrealized gains (losses) on available-for-salesecurities
Balance at beginning of fiscal year
Change in the fiscal year

Foreign currency translation adjustments
Balance at beginning of fiscal year
Change in the fiscal year

Accumulated other comprehensive income
Balance at beginning of fiscal year
Change in the fiscal year
Change in the fiscal year in items other thanshareholders’ equity (net)Total change in the fiscal year

(598,949)(15,634)

Balance at end of the fiscal year

(1,828,141)(1,843,775)

6,696

20,088Change in the fiscal year in items other thanshareholders’ equity (net)13,392

7,812

Total change in the fiscal year

13,392

7,812

Balance at end of the fiscal year

20,08827,9001,128,557

1,217,565

89,008314,037

Share warrants
Balance at beginning of fiscal year
Change in the fiscal year

Minority interests
Balance at beginning of fiscal year
Change in the fiscal year
Change in the fiscal year in items other thanshareholders’ equity (net)Total change in the fiscal year

89,008314,037

Balance at end of the fiscal year

1,217,565

1,531,602

48,960,255

51,748,364

Dividends from retained earnings(414,689)(456,157)

Net income

3,699,571

3,466,829

(222)

(303)

Change in the fiscal year in items other thanshareholders’ equity (net)(496,549)

306,214

Total change in the fiscal year

2,788,109

3,316,583

51,748,364

55,064,948

Total equity
Balance at beginning of fiscal year
Change in the fiscal year

Acquisition of treasury stock

Balance at end of the fiscal year19(4) Consolidated statements of cash flows(Thousands of yen, rounded down)
From June 1, 2010 to May 31, 2011

From June 1, 2011 to May 31, 2012

5,389,826
4,999,532
10,906

6,134,984
4,709,038
10,90670,429(51,367)

216,240--(18,700)

112,261
78,48010,801(37,540)
47,596289,986
24,032(88,317)59,865-97,470(11,060)
23,722(55,368)
32,434
138,281
12,897(62,532)
67,180(1,200 )(2,718,394)(9,620)(1,745,793)
784,253
326,010
7,830,177
37,192(48,042)(517,782)
7,301,545(3,257,399)(529,362)(119,180)
7,111,124
55,929(33,009)(3,169,447)
3,964,596(2,649,741)
2,549,927(5,264,400)
167,942(30,872)
53,157(1,199)(50,502)(154,934)(5,380,622)(2,283,485)
2,538,768(4,171,176)
83,992(192,431)(1,199)2,400
102,742(3,920,389)(697,419)
1,187,169(465,740)(23,369)(222)(414,544)(135,923)(550,050)

939,817400,000(654,166)(36,330)(303)(455,869)(34,969)
158,178(82,306)(87,498)

1,288,565
5,802,412
7,090,978114,886
7,090,9787,205,865

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in reserve for employees’ retirement
benefits
Effect of application of the Accounting Standard for Asset
Retirement Obligations
Decrease in long-term accrued amount payable (directors’
retirement benefits)
Increase (decrease) in reserve for employees’ bonuses
Increase (decrease) in reserve for directors’ bonuses
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Foreign exchange loss (gain)
Valuation loss (gain) on investment securities
Gain on sale of fixed assets
Loss on disposal and sale of fixed assets
Loss (gain) on sale of investment securities
Decrease (increase) in notes and accounts receivable –trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable - trade
Other
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for acquisition of tangible fixed assets
Proceeds from sale of tangible fixed assets
Payments for acquisition of intangible fixed assets
Proceeds from sale of intangible fixed assets
Payments for acquisition of investment securities
Proceeds from sale of investment securities
Payments for acquisition of subsidiary’s shares
Other
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayment of long-term borrowings
Repayment of finance lease payables
Payments for acquisition of treasury stock
Payments for dividends
Payments for dividends to minority interests
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period20(5) Notes regarding the premise of a going concern
Not applicable.
(6) Significant items that form the basis of preparations for consolidated financial statements
1. Items concerning the scope of consolidation(1) Number of consolidated subsidiaries: 10
Names of consolidated subsidiaries
Totankako Co., Ltd.
Ohwada Carbon Industrial Co., Ltd.
Toyo Tanso USA, Inc.
Toyo Tanso Europe S.p.A.
Toyo Tanso France S.A.
GTD Graphit Technologie GmBH
Shanghai Toyo Tanso Co., Ltd.
Shanghai Toyo Tanso Industrial Co., Ltd.
Jiaxiang Toyo Tanso Co., Ltd.
Toyo Tanso Taiwan Co., Ltd.
(2) Names of significant non-consolidated subsidiaries
Significant non-consolidated subsidiaries
Toyo Tanso Korea Co., Ltd.
Toyo Tanso (Thailand) Co., Ltd.
Toyo Tanso Singapore Pte. Ltd.
Toyo Tanso India Private Limited(Reason for exclusion from the scope of consolidation)
Non-consolidated subsidiaries were not included in the scope of consolidation because their total assets, net
sales, net income (loss), and retained earnings do not have a material impact on the consolidated financial
statements.
2. Items concerning the application of the equity method
The equity method has not been applied to any subsidiaries or affiliates.
Because non-consolidated subsidiaries and affiliates have very little impact on the net income (loss) or retained
earnings and have no materiality overall, the equity method has not been applied to the investment account forthese companies, and they have instead been valued at cost.
There are five non-consolidated subsidiaries and affiliates that the equity method has not been applied to: Toyo
Tanso Korea Co., Ltd., Toyo Tanso (Thailand) Co., Ltd., Toyo Tanso Singapore Pte. Ltd., Toyo Tanso India
Private Limited, and Shanghai Yongxin Toyo Tanso Co., Ltd.
3. Items concerning the business years of subsidiaries
Excluding Ohwada Carbon Industrial Co., Ltd., Toyo Tanso Europe S.p.A., Shanghai Toyo Tanso Co., Ltd.,
Shanghai Toyo Tanso Industrial Co., Ltd., Toyo Tanso Taiwan Co., Ltd., and Jiaxiang Toyo Tanso Co., Ltd., theconsolidated closing date for all consolidated subsidiaries is the same.
Of these above six companies, the closing date for Ohwada Carbon Industrial Co., Ltd., Toyo Tanso Europe
S.p.A., and Toyo Tanso Taiwan Co., Ltd. is March 31, while the closing date for Shanghai Toyo Tanso Co., Ltd.,
Shanghai Toyo Tanso Industrial Co., Ltd., and Jiaxiang Toyo Tanso Co., Ltd. is December 31. However, aprovisional closing date of March 31 has been assumed for the preparation of the financial statements.
For the preparation of the consolidated financial statements, the current financial statements from this closing
date have been used. However, the required adjustments for consolidation have been made for materialtransactions that have occurred up until the consolidated closing date.

21

4. Items concerning accounting standards(1) Valuation standards and method for significant assets
a. Securities(a) Shares of subsidiaries and affiliates
Stated at cost using the moving average method(b) Other securities
Securities with a readily determinable fair value
Stated at fair value based on market price on the consolidated closing date (valuation differences aretreated through the partial direct net asset adjustment method and sales costs are calculated with themoving average method)
Securities without a readily determinable fair value
Stated at cost using the moving average methodb. Derivatives
Stated at fair valuec. Inventories(a) Merchandise and raw materials
Mainly stated at cost using the moving average method(The carrying amount on the balance sheet is reduced for decreases in profitability)(b) Finished goods and work in process (processed)
Mainly stated at individual cost
(The carrying amount on the balance sheet is reduced for decreases in profitability)(c) Semi-finished goods and work in process (materials)
Mainly stated at cost using the moving average method(The carrying amount on the balance sheet is reduced for decreases in profitability)(d) Stores
Mainly stated at cost based on the last purchase price(The carrying amount on the balance sheet is reduced for decreases in profitability)(2) Depreciation method for significant depreciable assets
a. Tangible fixed assets (excluding lease assets)
The fixed rate method is used for Toyo Tanso Co., Ltd. and subsidiaries in Japan. The straight-line
method is mainly used for consolidated overseas subsidiaries.
However, the straight-line method is used for buildings (excluding building-attached facilities) acquiredby Ohwada Carbon Industrial Co., Ltd. since April 1, 1998.
The main useful lives are as follows.
Buildings and structures: 3 to 50 years
Machinery, equipment, and vehicles: 4 to 9 years
b. Intangible fixed assets (excluding lease assets)
The straight-line method is used for Toyo Tanso Co., Ltd. and subsidiaries in Japan. The straight-line
method is used for software (in-house use) based on the in-house use period (five years). The straight-line
method is mainly used for consolidated overseas subsidiaries.
c. Lease assets
Lease assets in financial lease transactions without transfer of ownership
The straight-line method is applied for useful lives for the lease period, with a residual value of zero.
For financial lease transactions without transfer of ownership whose lease period commenced before thefirst year, the Accounting Standards on Lease Transactions (Financial Accounting Standards No. 13) wasapplied; accounting treatment based on the treatment used for conventional rental transactions shallcontinue to be applied.

22

(3) Criteria for posting significant reserves
a. Allowance for doubtful accounts
To make allowance for losses on uncollectible accounts, the expected uncollectible amount is posted
based on the loss ratio for general receivables and individually examining the collectability of specificdoubtful accounts.
b. Reserves for employees’ bonuses
Toyo Tanso Co., Ltd. and subsidiaries in Japan post the liability amount of expected payments for thecurrent consolidated fiscal year to provide for bonuses paid to employees.
c. Reserve for directors’ bonuses
Toyo Tanso Co., Ltd. posts the expected payment amount to provide for bonuses paid to directors(including executive officers).
d. Reserve for employees’ retirement benefits
Toyo Tanso Co., Ltd. and subsidiaries in Japan post the amount recognized at the end of the current
consolidated fiscal year based on the projected benefit obligations and expected pension assets at the endof the current consolidated fiscal year to provide for employees’ retirement benefits.
Actuarial differences are treated as a lump-sum expense in the following consolidated fiscal year.
(4) Standards for converting significant foreign-denominated assets and liabilities to Japanese yen
Foreign currency-denominated receivables and payables are converted to yen at the spot exchange rate on the
consolidated closing date and the translation adjustment is treated as a profit or loss. The assets and liabilities
of overseas subsidiaries are converted to yen at the spot exchange rate on the consolidated closing date, andrevenue and expenses are converted to yen at the average annual exchange rate. Translation differences arethen posted as part of minority interests and foreign currency translation adjustments in net assets.
(5) The amortization method and amortization period for goodwill
Goodwill and negative goodwill is evenly amortized over five years.
(6) Scope of funds contained within the consolidated statement of cash flows
Cash on hand, deposits that can be withdrawn at any time, and short-term investments with high liquidity thatcan easily be converted to cash and have maturities within three months of acquisition that are exposed toonly a minimal price fluctuation risk are posted.
(7) Other material items relating to the preparation of the consolidated financial statements
Accounting treatment for consumption taxes
The tax-excluded method is used.

(7) Changes in accounting policies(Adoption of the Accounting Standard for Earnings Per Share and others)
From the fiscal year under review, the Company has applied the “Accounting Standard for Earnings Per
Share” (Accounting Standards Board of Japan (ASBJ) Statement No. 2, June 30, 2010); and the “Guidance on
Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4, June 30, 2010).
The Company has changed the method by which it calculates diluted earnings per share for the fiscal year
ended May 31, 2012 as follows. For stock options that vest after a specified service period, the Company now
includes the portion of stock options’ fair value attributable to future services provided to our company whencalculating the cash proceeds assumed to be receivable upon exercise of the stock options.
However, this revision does not have any impact on diluted earnings per share for the fiscal year ended May
31, 2012.
(8) Change in presentation method(Consolidated statements of income)Gain on sales of scrap was included under “Other” in “Non-operating income” in the previous consolidated
fiscal year. However, it will be recorded as a separate category beginning in the current consolidated fiscal year
as it exceeded 10% of total non-operating income. The consolidated financial statements for the previous fiscal
year have been reclassified to reflect this change in presentation.
23

As a result, the 63,516 thousand yen in “Other” posted under “Non-operating income” in the previous fiscal
year’s consolidated statements of income has been reclassified as 14,114 thousand yen in Gain on sales ofscraps and 49,402 thousand yen in “Other.”(Consolidated statements of cash flows)
The “Payment for lease and guarantee deposits” posted under “Cash flows from investing activities,”
posted as a separate category in the previous consolidated fiscal year, was a minimal amount and thus lacked
importance. Accordingly, this category will be classified under “Other” in the current fiscal year. This change
in presentation has been reflected by reclassifying this category in the previous fiscal year’s financial
statements.
As a result, the -44,365 thousand yen in “Payment for lease and guarantee deposits” posted under “Cashflows from investing activities” in the previous fiscal year’s consolidated statements of cash flows has been
reclassified as “Other.”(9) Additional information(Application of the “Accounting Standard for Accounting Changes and Error Corrections”)
The Group has adopted the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Statement No. 24 of December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes
and Error Correction” (ASBJ Guidance No. 24 of December 4, 2009) for accounting changes and correctionsof past errors carried out from the beginning of the consolidated fiscal period under review.
(Impact of changes in income tax rate)“Law to revise part of the income tax law and other laws to rebuild the tax system in response to structuralchanges in the economy and society of Japan” (Law No. 114 of 2011) and the “Law on special measuresrelated to securing financial sources necessary to execute programs for recovery from the Great East Japan
Earthquake” (Law no. 117 of 2011) were officially announced on December 2, 2011. Accordingly, the income
tax rate will be lowered and a special restoration surtax will be imposed from the consolidated fiscal year
beginning on April 1, 2012.
As a result, the effective statutory tax rate to be used to calculate deferred tax assets and deferred tax
liabilities will change for the temporary differences expected to be reversed from the consolidated fiscal year
beginning on June 1, 2012 to the consolidated fiscal year starting on June 1, 2014, and for the temporary
differences expected to be reversed from the consolidated fiscal year beginning on June 1, 2015, from theformer 40.3% to 37.64% and 35.26%, respectively.
As a result of this change to the tax rate, deferred tax assets (the amount excluding deferred tax liabilities)
will decrease 75,829 thousand yen, and unrealized gains (losses) on available-for-sale securities and income
taxes - deferred will increase 401 thousand yen and 76,231 thousand yen, respectively.

24

(10) Notes regarding the consolidated financial statements(Segment information)a.
Reportable segments
Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)
1. Reportable Segments
The reportable segments of the Toyo Tanso Group are business components for which separate financial
information is available and whose operating results are regularly reviewed by the board of directors in orderto decide on the allocation of management resources and evaluate performance.
The Company primarily engages in the manufacture and sale of carbon products, in Japan through Toyo
Tanso and domestic subsidiaries, and abroad through overseas subsidiaries based in the United States,
Europe, and Asia. All overseas subsidiaries are independently managed companies. They conduct businessby formulating their own comprehensive regional strategies for the products they handle.
For this reason, our business is composed of segments that are based on region-based production and sales
frameworks, and is categorized into the four reportable segments of Japan, United States, Europe, and Asia.
2. Calculation methods of net sales, profits, losses, assets, liabilities and other items per reportable segment
The accounting methods of reportable segments are by and large the same as those described in "Changes in thesignificant items that form the basis of preparations for consolidated financial statements."
Profits of reportable segments are recorded on an operating income basis.
Inter-segment sales are based on prices in arms-length transactions.
3. Information on net sales, profits, losses, assets, liabilities and other items per reportable segment
Previous consolidated fiscal year (from June 1, 2010 to May 31, 2011)(Thousands of yen, rounded down)
Reportable segments

Amountrecorded in the
consolidated
incomestatement(Note) 2

Adjusted
amount(Note) 1

Japan

UnitedStatesEurope

Asia

Total

(1) Sales to unaffiliated customers

20,062,677

2,992,915

3,121,717

11,380,490

37,557,801-(2) Intersegment sales or transfers

7,642,395

127,765

11,756116,166

7,898,084(7,898,084)

-

Total

27,705,072

3,120,681

3,133,473

11,496,656

45,455,885(7,898,084)

37,557,801

Sales
37,557,801

Segment profit

2,698,259

33,717421,005

2,351,516

5,504,498

363,7315,868,229

Segment asset

56,821,560

2,408,571

3,178,242

12,304,908

74,713,282(9,521,641)

65,191,641

4,550,816

137,028

87,180229,4625,004,487(4,955)

4,999,532

10,906---

10,906-

10,906

2,078,868

320,128

85,502

719,967

3,204,467(15,374)

3,189,092

Other items(1) Depreciation(2) Amortization of goodwill(3) Increases in tangible andintangible fixed assets(Notes) 1. The adjusted amounts are as follows:(1) Adjusted segment profit mainly takes into account the elimination of inter-segment transactions and unrealized income.
(2) Adjusted segment assets mainly take into account the elimination of inter-segment transactions and unrealized income.
(3) Adjusted increases in the amounts of tangible and intangible fixed assets take into account the elimination ofinter-segment transactions and the elimination of inter-segment unrealized income.
2. Segment profit has been adjusted to reflect the operating profit recorded in the consolidated statement of income.

25

Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)(Thousands of yen, rounded down)Amountrecorded intheconsolidated
incomestatement(Note) 2

Reportable segments
Adjusted
amount(Note) 1

Japan

UnitedStatesEurope

Asia

Total

(1) Sales to unaffiliated customers

19,767,420

3,145,071

2,949,977

12,851,636

38,714,106-(2) Intersegment sales or transfers

8,667,277

335,346

38,871

68,916

9,110,412(9,110,412)

-

Total

28,434,697

3,480,417

2,988,849

12,920,553

47,824,518(9,110,412)

38,714,106

Sales
38,714,106

Segment profit

3,074,561

163,695

401,070

2,655,789

6,295,117(239,695)

6,055,421

Segment asset

61,053,993

2,517,716

3,008,600

14,390,845

80,971,155(9,070,436)

71,900,718

4,201,565

160,841

81,476274,151

4,718,034(8,995)

4,709,038

10,906---

10,906-

10,906

6,918,752

241,791

155,438

724,360

8,040,342(9,626)8,030,715

Other items(1) Depreciation(2) Amortization of goodwill(3) Increases in tangible andintangible fixed assets(Notes) 1. The adjusted amounts are as follows:(1) Adjusted segment profit mainly takes into account the elimination of inter-segment transactions and unrealized income.
(2) Adjusted segment assets mainly take into account the elimination of inter-segment transactions and unrealized income.
(3) Adjusted increases in the amounts of tangible and intangible fixed assets take into account the elimination ofinter-segment transactions and unrealized income.
2. Segment profit has been adjusted to reflect the operating profit recorded in the consolidated statement of income.

b.

Related information
Previous consolidated fiscal year (From June 1, 2010 to May 31, 2011)

1. Information per product and service
This information has been omitted because the entire business of the Company and its subsidiaries falls under the
single business category of carbon product-related business.
2. Information per region(1) Sales(Thousands of yen, rounded down)
Asia
Japan

Sales

1.

EuropeRest of world

Asia(including China)

China only

Total

15,230,777

2,819,543

3,464,413

15,719,381

10,866,119

323,685

37,557,801

40.5

7.5

9.2

41.9

28.9

0.9

100.0

Composition (%)(Notes)North America

Sales are based on the locations of our customers, and are categorized into the relevant country or region segment
according to geographical proximity.
The major countries or regions included in each geographic segment are listed below.
(1) North America: United States(2) Europe: France, Germany, Italy(3) Asia: China, Taiwan, South Korea

2.

(2) Tangible fixed assets(Thousands of yen, rounded down)
Japan

United States

21,571,816

Europe1,030,003

Asia
963,742

Total
2,596,654

26,162,216

3. Information per major customer
This information has been omitted because we do not have any unaffiliated customers that have accounted formore than 10% of sales in the consolidated statement of income.

26

Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)
1. Information per product and service
This information has been omitted because the entire business of the Company and its subsidiaries falls under the
single business category of carbon product-related business.
2. Information per region(1) Sales(Thousands of yen, rounded down)
Asia
Japan

Sales

1.

EuropeRest of world

Asia(including China)

China only

Total

15,461,677

3,051,083

3,367,793

16,597,469

12,349,755

236,082

38,714,106

39.9

7.9

8.7

42.9

31.9

0.6

100.0

Composition (%)(Notes)North America

Sales are based on the locations of our customers, and are categorized into the relevant country or region segment
according to geographical proximity.
The major countries or regions included in each geographic segment are listed below.
(1) North America: United States(2) Europe: France, Germany, Italy(3) Asia: China, Taiwan, South Korea

2.

(2) Tangible fixed assets(Thousands of yen, rounded down)
Japan

United States

24,090,644

Europe1,086,879

Asia
868,533

Total
3,164,272

29,210,330

3. Information per major customer
This information has been omitted because we do not have any unaffiliated customers that have accounted formore than 10% of sales in the consolidated statement of income.
c.

Information on impairment loss for fixed assets per reportable segment
Previous consolidated fiscal year (From June 1, 2010 to May 31, 2011)
Not applicable.
Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)
Not applicable.

d.

Information on the amortization of goodwill and unamortized balance per reportable segment
Previous consolidated fiscal year (From June 1, 2010 to May 31, 2011)(Thousands of yen, rounded down)
Japan

United States

Europe

Asia

Total

Corporate and
elim.

Total

Balance at end of
10,906
10,906
10,906the fiscal year
(Note) Our records regarding amortization of goodwill have been omitted because the same information is described in our segment
information.

Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)
Not applicable.

27

e.

Information on gains on negative goodwill by reportable segment
Previous consolidated fiscal year (From June 1, 2010 to May 31, 2011)
Not applicable.
Current consolidated fiscal year (From June 1, 2011 to May 31, 2012)
Not applicable.

(Per share information)
From June 1, 2010 to May 31, 2011

Net assets per share
Net income per share(Notes)1.
2.

2,436.08 yen
178.43 yen

From June 1, 2011 to May 31, 2012

2,580.53 yen
167.20 yen

Diluted net income per share is not reported as there are no potential common shares with a dilutive effect.
The basis for calculation of net income per share is as follows.
From June 1, 2010 to May 31, 2011
From June 1, 2011 to May 31, 2012

Net income (thousands of yen)Amount not attributed to commonshareholders (thousands of yen)
Net income related to common shares(thousands of yen)
Average outstanding shares during the
fiscal year (shares)
Overview of potential shares that were notincluded in the calculation of diluted net
income per share because they have no
dilutive effects

3,699,571

3,466,829--

3,699,571

3,466,829

20,734,470

20,734,397

Stock options granted at the Ordinary General Meeting of
Shareholders on August 28, 2009
(15,000 common shares)(Significant subsequent events)
Not applicable(Disclosure omissions)
The disclosure of notes related to lease transactions, financial instruments, securities, derivatives transactions,projected benefit obligations, and tax effect accounting has been omitted from the consolidated financial results as
the necessity of disclosure of these items is not believed to be very high.

28

5. Others(1) Orders and sales by product categoryi.

OrdersYear ended May 31, 2011

(Unit: millions of yen)
Year ended May 31, 2012
Fiscal
2Q
3Q
4Q
year
total
5,440
3,265
3,261 18,121

6,158

Fiscalyear
total
20,758

6,154

699

841

2,856

860

740

726

736

3,063

1,003

1,217

967

4,379

1,085

821

1,072

984

3,963

2,462

2,093

2,144

2,549

9,249

2,121

1,880

1,749

1,561

7,312

9,182

8,197

9,347

10,51637,243

10,221

8,882

6,813

6,544

32,460

Products

1Q

2Q

3Q

4Q

Special graphite products
Carbon products forgeneral industries(for mechanicalapplications)
Carbon products forgeneral industries(for electrical applications)Compound materials andother products
Total

4,900

4,413

5,285

628

686

1,190

1Q

ii. Outstanding orders(Unit: millions of yen)
Year ended May 31, 2012

Year ended May 31, 2011
Products

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

Special graphite products
Carbon products for general industries(for mechanical applications)
Carbon products for general industries(for electrical applications)Compound materials and other products
Total

3,336

3,328

3,834

4,787

4,956

4,494

3,712

2,879

418

464

512

648

748

731

706

623

679

648

947

1,030

1,128

1,017

1,176

1,159

4,406
8,840

3,865
8,307

3,799
9,094

3,930
10,397

3,508
10,342

3,055
9,299

2,612
8,208

2,009
6,672

iii. Sales performance by product category

5,598

Fiscalyear
total
19,863

5,972(Unit: millions of yen)
Year ended May 31, 2012
Fiscal
2Q
3Q
4Q
year
total
5,795
4,173
4,400 20,341

2,983

3,506

11,731

3,649

3,565

1,855

2,074

11,144

1,844

1,810

1,846

7,238

2,035

1,946

1,972

1,993

7,947

203

206

237

245

893

287

283

346

332

1,249

625

678

684

741

2,728

793

796

785

848

3,223

1,128

1,063

955

935

4,082

1,012

959

953

919

3,845

2,423

2,648

2,234

2,427

9,734

2,961

2,785

2,401

2,274

10,423

2,124
298
325
9,054

2,257
391
287
9,358

1,838
395
270
9,175

2,070
357
265
9,968

8,290
1,443
1,149
37,557

2,600
361
235
10,976

2,437
348
222
10,559

1,977
424
223
8,538

1,933
341
198
8,640

8,948
1,475
879
38,714

Year ended May 31, 2011
Products

1Q

2Q

3Q

4Q

Special graphite products[Electronics
applications][General industries
applications][Others]
Carbon products forgeneral industries(for mechanicalapplications)
Carbon products forgeneral industries(for electricalapplications)Compound materials andother products[3 major products][Other products]
Related goods
Total

4,551

4,681

5,031

2,611

2,630

1,737

29

1Q

(2) Overview
Special graphite products
In electronics applications, sales of special graphite products for the manufacture of solar cells drove overall
performance as sales continued to expand sharply, particularly in China, through the second quarter to reach arecord high. However, products for solar cell applications entered a major adjustment phase from the third quarterand growth remained flat. In addition, demand for products for the manufacture of single crystal silicon continued
to flag, reflecting the sluggish semiconductor industry.
Demand for special graphite products for general industrial applications remained strong overall, despite
fears over the impact of flooding in Thailand. This was primarily due to the solid performance of core industries
such as the automotive sector on the back of a recovery in the Japanese economy and growth in emerging
economies, and strong demand both domestically and overseas for products for continuous casting, electrodes forelectrical discharge machines (EDM), and industrial furnaces.
Carbon products for general industries
Sales of carbon products for mechanical applications expanded, thanks largely to increased domestic demand
for such products as bearings and seals partly bolstered by the economic upturn as well as our progress in meetingreconstruction-related demand. Demand for sliders for pantographs remained strong.
Among carbon products for electrical applications, stiffer competition in the market for small motors intended
for vacuum cleaners and electric power tools, a key market in China, and the impact of the strong yen made for aharsh business environment.
Compound materials and other products
Orders for SiC (silicon carbide)-coated graphite products increased only slightly overall. Despite signs thatdemand for LED products was bottoming out after a prolonged adjustment, this has not yet developed into afull-scale recovery, and demand for semiconductor products was also sluggish. Orders for C/C composite products
expanded significantly due to strong demand for solar cell applications, semiconductor products, and industrial
furnace products, while orders for several projects also made a contribution. However, toward the end of the fiscal
year, demand for the mainstay products for solar cell applications began to decline. Orders for graphite sheet
products remained weak for semiconductor applications, but the mainstay automotive applications drove overall
strength.

30

(3) Changes of executives
i. Changes of board members
New title

Name

Former title
Representative Director and Chairperson &Representative Director and Chairperson Junko Kondo President
Executive Operating Officer
Representative Director and President
Deputy General Manager of Planning
Akira Noami
Executive Operating Officer
Division
Note: Please refer to the “Notice of Changes to Board Members,” to be released today, for details.
ii. Changes to other executives
Other changes will be announced when decisions have been finalized.

31