Think Globally, Act Locally

Staying Focused
An n u al R epo r t

2 011
Year Ended March 31, 2011

Profile

Taiyo Nippon Sanso Corporation is the fruit of the merger of Nippon Sanso Corporation and Taiyo Toyo Sanso
Co., Ltd., on October 1, 2004. The Company is drawing on the capabilities of its two predecessors in its drive to
become a leading player in Asia and around the world.
Management Philosophy“Market-driven collaborative innovation: improving the future through gases”
Financial Highlights

Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Years ended March 31, 2011 and 2010

Thousands of
U.S. dollars*1

Millions of yen

Operating results
Net sales
Net income

2011

2010

2011

¥483,620
12,736¥433,390
15,748$5,816,236
153,169

yen

U.S. dollars*1

2011
Per share data:
Net income*2
Cash dividends

¥

31.86
12.00

2010
¥

39.39
12.00

Corporate position
Total assets
Total shareholders’ equity

11.5%(19.1)%
Percentagechange

2011
$

0.38
0.14

Thousands of
U.S. dollars*1

Millions of yen

Percentagechange

2011

2010

2011

¥617,676
220,068¥617,215
212,068$7,428,455
2,646,639(19.1)%—
Percentagechange0.07%
3.7%

Notes: 1. U.S. dollar amounts have been translated, solely for convenience, at the rate of ¥83.15=U.S.$1, the approximate rate of exchange
at March 31, 2011.
2. Net income per share is computed based on the weighted average number of shares of common stock outstanding during eachyear, as adjusted retroactively for free share distributions made during the period.

Disclaimer Regarding Forward-Looking Statements
This annual report contains forward-looking statements regarding the future plans, strategies, activities and performance of Taiyo Nippon Sanso Corporation. Forward-looking
statements reflect management’s assumptions and beliefs based on information available as of the date of this document‘s publication and inherently involve risks and uncertainties.
Actual results may thus differ substantially from these statements. Risks and uncertainties include, but are not limited to, changes in general economic and specific market conditions,currency exchange rate fluctuations and evolving trends in demands for the Company’s products and services.

Contents

To Our Stakeholders

2

Perception of the Business Climate in Key Markets

4

Special Feature: Putting Strategies in Action

6» An Interview with Hirosuke Matsueda, Chairman, andYasunobu Kawaguchi, President

8

Taiyo Nippon Sanso at a Glance17

Our Businesses

18

Board of Directors, Corporate Auditors and Corporate Oﬃcers

26

Six-Year Summary

27

Management’s Analysis of Operating Results and Financial Position

28

Consolidated Financial Statements

32

Notes to Consolidated Financial Statements

37

Report of Independent Auditors

55

Investor Information

56

1

To Our Stakeholders

Hirosuke Matsueda
ChairmanYasunobu Kawaguchi
President

We must begin by expressing our regrets for any

Despite the impact of such issues as the credit

inconvenience caused as a result of certain events incrisis in Europe and political instability in the Middle

recent months. In January 2010, Japan’s Fair TradeEast, global economic conditions were generallyCommission conducted an inspection of major

favorable in fiscal year 2011, ended March 31, 2011,

Japanese industrial gases manufactures, including

bolstered by the monetary policies of key nations andTaiyo Nippon Sanso, with which we continued there-

economic growth in emerging economies. In Japan,

inafter to cooperate fully. On May 26, 2011, theeconomic conditions were encouraging at theCommission took the decision to issue a cease-and-beginning of the period, owing to firm export demanddesist order against Taiyo Nippon Sanso regarding anfrom China and other countries in Asia, as well as toalleged pricing cartel for air separator gases (liquid oxy-

the Japanese government’s economic stimulus

gen, liquid nitrogen and liquid argon), along with ameasures. However, growth began to slow in thesurcharge payment order, i.e., a fine, of ¥5,144 million.

autumn, reflecting the conclusion of the government’s

Recognizing the gravity of this occurrence, the man-economic stimulus measures and the appreciation ofagement and employees of Taiyo Nippon Sanso pledge

the yen.

to do everything in our power to prevent a recurrence,In this environment, we reported an 11.6%

as well as to regain the trust of all stakeholders.

increase in consolidated nets sales, to ¥483,620

2

million, supported by stable demand from coretime being. Based on a careful examination of thecustomers in the steel, petrochemicals, electronics andimpact of the earthquake, we are preparing and willother industries against a background of robust

announce targets at an appropriate time in the nearexports. Operating income advanced 28.7%, tofuture. We can say that we will focus on, among¥35,468 million.

others, enhancing compliance, reinforcing safety andquality control procedures, raising efficiency,

We would also be remiss if we did not mention

strengthening R&D and pursuing ongoing positive

the Great East Japan Earthquake, which struck on

investments. At the same time, we will reinforce

March 11, 2011. On behalf of everyone of the Taiyo

strategies aimed at global expansion and rally the

Nippon Sanso Group, we extend our deepest sympa-

strengths of the entire Taiyo Nippon Sanso Group to

thies to all who were affected by this catastrophe andfortify our corporate structure.

continue to keep you in our thoughts.
In these and all our efforts, we look forward to
Our production and logistics facilities in Miyagi,

continuing to earn the support of all stakeholders in

Aomori and other prefectures in the Tohoku andthe years ahead.

Kanto regions sustained extensive damage. However,thanks to the understanding and cooperation ofAugust 2011

customers, freight forwarders and other relevant
parties, we were able to prioritize supplies of crucial
medical-use oxygen and nitrogen, the latter being
indispensable to process safety at customers’
manufacturing facilities and plant operations. We also

Hirosuke Matsueda, Chairman

donated ¥100 million to help victims of the disasterand participated in relief efforts to the best of ourability, in line with our commitment to fulfill our
duty to society as a responsible corporate citizen.

Having celebrated our 100th anniversary in

Yasunobu Kawaguchi, President

2010, in the current fiscal year we have embarked
upon a new three-year medium term business plan.
However, owing to the impact of the Great East
Japan Earthquake we have resolved to forego
publishing quantifiable targets for the plan for the3Perception of the Business Climate
in Key Markets
Japan
The Great East Japan Earthquake, which struck near the end of fiscal year 2011, had only a minor impact on sales inJapan for the period.
In the steel industry, one of the primary users of piped gases, output was approximately 15% higher than in theprevious fiscal year, despite flagging demand from the domestic construction industry, owing to an increase in exports.
In the chemicals industry, another major user of piped gases, sales of petrochemical products, basic chemicals and otheritems were robust, driven by demand from other Asian countries, particularly China. As a consequence, demand for
piped gases remained solid.
In the steel, chemicals and electronics industries—the principal customer industries for liquid gases—the pace ofgrowth appeared to be on the verge of decelerating in someareas as government economic stimulus measures concluded.

Total Sales and Operating Income in Japan

However, sales of liquid gases to all three industries were up

Years ended March 31 (Millions of yen)from the preceding period.

500,000 CAGR

35,000Total sales 9.2%
Operating income 12.8%
400,000

28,000300,000

21,000panels and solar cells were firm. Of particular note, as Japan’s

200,000

14,000

leading manufacturer of metal organic vapor deposition

100,000

7,000(MOCVD) equipment, used in the production of compoundIn the area of specialty materials gases for electronics
materials, sales for use in semiconductors, liquid crystal (LC)002004 2005 2006 2007 2008 2009 2010 2011
Total sales

2012(Estimate)

Operating income

Note: Compound annual growth is calculated based on actual total sales and operating
income ﬁgures for the years ended March 31, 2004—2011 and estimates for the year
ending March 31, 2012.

semiconductors for light-emitting diodes (LEDs) and powerdevices, we succeeded in steadily expanding sales. In the
period under review, sales of MOCVD equipment wereapproximately 2.2 times the level in the previous fiscal year.

North America
Economic growth in the United States slowed in the first half of fiscal year 2011, reflecting such factors as a persistently
high unemployment rate, which caused consumer spending to flounder, and the European financial crisis. However,thanks to additional steps by the Federal Reserve Board to loosen monetary policy and Congress’ passing of provisions
for income tax relief, growth picked up in the second half.
In this environment, we continued to actively capitalize on promising investment and M&A opportunities with theaim of facilitating further growth for existing businesses, as well as to press forward with key projects, namely, theacquisition of Western International Gas and Cylinders, Inc., a leading U.S. supplier of acetylene gas, and the start up

4

Total Sales and Operating Income in North America
As of July 2011 (Millions of yen)of operations at a new plant in San Antonio, Texas. Looking

100,000 CAGR

12,000ahead, we will continue working to enhance the efficiency of

Total sales 13.0%
Operating income 12.2%
80,0009,600

60,0007,200

as part of a strategy to ensure sustainable expansion and

40,0004,800

growth.

20,0002,400

our U.S. operations to maximize the benefits of M&A deals todate, as well as to seek out attractive new M&A opportunities,

002004 2005 2006 2007 2008 2009 2010 2011
Total sales

2012(Estimate)

Operating income

Note: Compound annual growth is calculated based on actual total sales and operating
income ﬁgures for the years ended March 31, 2004—2011 and estimates for the year
ending March 31, 2012.

Asia
The overall economy of Asia, including China, continues to see

Total Sales and Operating Income in Asia

outstanding growth in the neighborhood of 10% annually.

Years ended March 31 (Millions of yen)

Demand for gases centers on steel, petrochemicals and other

35,000 CAGR

2,500

heavy industry markets. We are also seeing notable growth inTotal sales 12.9%
Operating income 4.5%
28,0002,000

21,0001,500

We are currently taking decisive steps to expand our

14,0001,000

operations in Asia, including China, Taiwan, South Korea,

7,000

500

Singapore, Vietnam, the Philippines, Thailand and Malaysia.

0demand from electronics markets, such as LC panels, solar cells
and LEDs.

major investment opportunities, among others, we plan to02004 2005 2006 2007 2008 2009 2010 2011

Through efforts to build on our established base and seek out

Total sales

2012(Estimate)

Operating income

Note: Compound annual growth is calculated based on actual total sales and operating
income ﬁgures for the years ended March 31, 2004—2011 and estimates for the year
ending March 31, 2012.

further expand and grow our Asian operations.

Major recent investments in Asia

Market Share in Vietnam

Vietnam:Established joint venture with local gas producer andVietnam Japan Gas Co., Ltd.
(Taiyo Nippon Sanso joint venture)31%

completed new air separation plant (Hanoi, northern Vietnam)

43%

2008

Concluded agreements to supply industrial gases to major blast

2011

furnace steelmaker, as well as to major overseas steelmakers
newly setting up local operations and completed new air
separation plant (Ba Ria-Vung Tau, in southern Vietnam)

Sales of Leading Competitors in the Philippines(Nm3/h)30,000Philippines:

Current market share
36.4%
Onsite Plant

20,000Currently building new air separation plant (Mindanao)

Onsite Plant
Onsite Plant

10,000China:
Completed plant for Dalian Changxing Island Taiyo Nippon
Sanso Gas Co., Ltd.

5Air Separator Gases(LIN&LOX)Air Separator Gases(LIN&LOX)

0
Ingasco Inc.
(subsidiary)

Competitor B

Air Separator Gases(LIN&LOX)

Competitor C

Special Feature

Putting Strategies
in Action
In 2011, its 101st year in business, Taiyo Nippon Sanso outlined a new
medium-term business plan designed to create a foundation for growth overthe next 50–100 years. In the following pages, Chairman Hirosuke Matsueda
and President Yasunobu Kawaguchi answer questions on the Company’s performance under its previous medium-term business plan and the vision for
the future outlined in its new plan.

Sales Performance

Operating Income Performance(Billions of yen)
Full-year basis(Billions of yen)
Full-year basis

600

Global 5000
507.7

500

50

Stage 10
495.7

483.6

458.5

Global 5000

40

36.4

433.3
400

38.7
35.4

397.3
357.7

Stage 10

29.1

30

364.9

26.7

27.5

23.7
300

20

200

10

100

0

0

18.7

-10
FY2004
Before merger

FY2005

FY2006

Japan

North America

FY2007

FY2008FY2009FY2010FY2011Asia* The ﬁgure for FY2004 is a simple sum of performance ﬁgures before merger
The ﬁgure for FY2005 = Taiyo Nippon Sanso (year ended March 2005) +Taiyo Toyo Sanso(year ended September 2004) – internal transactions between the two companies

FY2004
Before merger

FY2005

FY2006

Japan

North America

FY2007Asia

FY2008FY2009FY2010FY2011Elimination* The ﬁgure for FY2004 is a simple sum of performance ﬁgures before merger
The ﬁgure for FY2005 = Taiyo Nippon Sanso (year ended March 2005) +Taiyo Toyo Sanso(year ended September 2004) – internal transactions between the two companies

6Future Vision of New Medium-Term Business Plan
New Medium-Term Business Plan (Fiscal Year 2012 to Fiscal Year 2014)
Strengthen global strategies
Build a stronger financial position

Strengthen business foundation
to facilitate further development

Medium- to long-term target:

Sales of ¥1 trillion
Capital Expenditure and Equity Investment

Net Interest-Bearing Debt and Net D/E Ratio(Billions of yen)(Billions of yen)

150

300

(Times)
1.18

1.2
1.10

125

250

0.92

118.4

211.8

100

200

150

73.8

50

47.6

42.4

54.2
46.6

100

24.1

25

0.8

0.73
0.58
103.5

165.5

0.68

0.67
75

1.0

235.1

137.6

147.8

0.6

103.5

0.4

50

0

0.2

0
FY2005

FY2006

Capital expenditure

FY2007

FY2008FY2009FY2010FY20110
FY2005Equity investment

FY2006

Net interest-bearing debt

7

FY2007

FY2008FY2009FY2010Net D/E ratio (times)

FY2011An Interview with Hirosuke Matsueda, Chairman,
and Yasunobu Kawaguchi, President
Review of Performance Under Previous Medium-Term Business Plan
(Fiscal Years 2009–2011)

Q

Two of the key strategies of Taiyo Nippon Sanso’s previous medium-term businessplan were to concentrate resources in growth markets and enhance your position inpromising geographic markets. What was the reasoning behind these strategies andwhat is your perception of the Company’s current position?

stunning rates of previous decades. In contrast, in the

Mr. Matsueda
Basically, our view has always been that if a company

United States, the industrial gas market has continued

cannot achieve steady growth it will be left behind. So

to grow steadily by between 3% and 5% annually.

the question we had to ask ourselves was, what do we

While this is low compared with China’s industrial gas

need to do to ensure we continue growing. Our

market, which continues to see double-digit annual

business centers on the production of industrial gases,

growth, it means that there is a solid foundation to

including oxygen, nitrogen and argon, which are

pursue attractive M&D opportunities. For us,

essential basic materials for industry. Accordingly, the“promising geographic markets” are markets in which

geographic markets where principal demand industries

we can make solid inroads and, through M&A deals,

are seeing growth also naturally offer significant

expand our presence and achieve substantial growth.
Much the same reason is behind our ongoing

business opportunities for us.
Unfortunately, growth rates in Japan over the lastinvestment in China, as well as in other countries in

10 to 20 years—often called the lost years for JapaneseAsia, over the past 10 or so years. Look at China, forindustry—have lagged considerably behind theexample. Often referred to as “the world’s factory”—
much like Japan and South Korea were in years past—
China has achieved outstanding market growth inrecent years. That growth has brought an increase indemand for gases from a broad range of industries.
Southeast Asian countries, including the Philippines,
Singapore, Vietnam and Thailand, also continue tooffer considerable potential for investment. Both
China and Vietnam were late starters economically,
compared with other Asian countries. For thisreason, at this point in time, attractive
investment opportunities abound in bothcountries. In India, which also continues tosee robust economic growth, U.S. subsidiary
Matheson Tri-Gas, Inc., acquired a local
helium and mixed gas supplier, which was

8

Sales in North America

Sales in Asia

(Millions of dollars)(Billions of yen)

1,500

30

1,250

25

Collapse of Lehman Brothers

Acquired Valley National Gases LLC
1,000

Shanghai Taiyo Nippon Sanso
Co., Ltd., commenced operations

20
Acquired helium business
Acquired Linweld Inc.

750

15
Acquired businesses
in six U.S. locations

500

Asian currency crisis
10
Took an equity stakein Ingasco, Inc.

Acquired Tri-Gas, Inc.
250

5

Acquired Matheson
Gas Products, Inc.

0

National Oxygen Pte. Ltd.
commenced operations

0
1983 1985 1987 1989 1991 1993 1995 1997 2001 2003 2005 2007 2009 20111984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Note: Translated into Japanese yen using the actual rate for 2010

subsequently renamed Matheson K-Air India Private

importance to us, as it is a principal user of oxygen,

Limited. With the aim of supplying general industrial

nitrogen and other chemical gases. To begin with, suchgases, we are currently building a new plant, which isgases are essential to manufacturing processes forscheduled to begin operating in 2013.

semiconductors, liquid crystal display (LCD) panels
and solar cells. We thus recognize these as major growth

Regarding the concentration of resources in growthmarkets.

markets, the electronics industry is of crucial

Q

What is your assessment of the ambitious M&A strategy you have pursued over the
past three years?
When we ﬁrst started out in the United States,

Mr. Matsueda
Our industrial gases business consists of actually three

our focus was on the packaged gases business. We

distinct business models. The ﬁrst is our upstream

expanded our marketing reach primarily throughonsite business, which involves the construction of

M&A deals, achieving a certain amount of success inplants on sites adjacent to the production facilities ofterms of volume supplied. At this point, we beganmajor users and the supply of gases to those customers

leveraging our proprietary technologies to establish

via pipeline. The second is liquid gases, that is,

production facilities, positioning ourselves to provide

oxygen, nitrogen and argon in liquid form, which we

products all along the supply chain. This approach has

supply to medium-sized customers. The third, at theunderpinned our success to date and will continue toother end of the supply chain, is packaged gases,

be a valuable tool for growing our business in thedownstream products we provide to small- to

United States, as well as in other regions; as willmedium-sized users. These are eﬀectively interacting

expanding our production capacity in existingeach others to bring us greater opportunities andbusinesses and capitalizing on advantageous M&A

synergy effects in our business development inopportunities in high-growth geographic markets,

overseas market.

including China, Southeast Asian countries and India.

9

Q

Another core strategy of your previous medium-term business plan was to expand
upstream businesses. Can you tell us about the background to this strategy and give
us a status update?
Recent achievements under our previous medium-

Mr. Matsueda
I think I need to first explain a little more about ourterm business plan include the start of joint production

upstream business strategy. Traditionally, industrial gasof monosilane gas, which is used in the manufacture of

suppliers have produced air separator gases. In contrast,thin-film silicon solar cells and LCD panels, withfor semiconductor materials gases, in particular

Evonik Degussa Japan Co., Ltd., an affiliate of Evonikchemical gases—used, as I said earlier, by the high-Industries AG of Germany. We also began producing

growth electronics industry—the role of industrial gas

and supplying hydrogen selenide, which is used insuppliers has always centered on trading. As such, ourcopper indium gallium selenide (CIGS) compound

performance is easily swayed by a variety of factors. For

solar cells. Semiconductor materials gases are almost

this reason, we are shifting our focus to producing theunlimited in terms of variety. Our emphasis willgases we sell to customers, by establishing a solid

continue to be on value-added specialty gases.

position as a manufacturer of key specialty products.

Taiyo Nippon Sanso’s Electronics Business
Gases and other products forelectronics applications

General industrial gases

Business development

GlobalUsed where manufactured

Product lifecycle

Short

Long

Market growth potential

High

Low to medium (linked to GDP)

Risks

High

Low

Formulate global-level management vision and business strategies
Accelerate decision making
Shorten the time needed to realize returns on investments

Positioning of New Medium-Term Business Plan (Fiscal Years 2012–2014)
and Vision for the Future

Q

What sort of a future does the new medium-term business plan envisage for Taiyo
Nippon Sanso?

formulating a new medium-term business plan that

Mr. Kawaguchi
In our 101st year in business, we sought to reexamine

would strengthen our operating foundation, as well as

our domestic business and get back to basics,

our fundamentals, in preparation for our next 50–100

10our globalization strategy will be crucial to making up

years—the next phase of our evolution.
Since the merger in 2004 that created the current

the difference. Today, sales in the domestic market

Taiyo Nippon Sanso, we have allocated more thanaccount for 75% of consolidated sales, while overseas¥400 billion to capital investment. While thesesales are only 25%. Given such trends as the graying

investments have yielded considerable benefits, theyof Japanese society, as well as the economic impact of

have also resulted in an increase in interest-bearing

the Great East Japan Earthquake, and considering

debt. Our operating environment continues to bethat major demand industries are increasingly shifting

dominated by the global wave of realignment that is

production offshore, our projection for annual growthtransforming the industrial gases industry. For thisin domestic sales is about 2%–3%, while in overseas

reason, we are committed to reinforcing both ourmarkets we expect sales to rise by 5%–6%.

financial footing and our operating foundation, as

Accordingly, with the aim of achieving our net sales

well as to using income thus generated to fund new

target at the earliest possible date, we will focus on

investments with the aim of accelerating our marchreinforcing our operating foundation in Japan. At theforward.

same time, in other, high-growth geographic markets,

We have set a medium- to long-term target for

we will capitalize on organic growth and expand ourconsolidated net sales of ¥1,000 billion, which we

operations through assertive capital investment andhope to achieve within 10 years. Our annual net sales

M&A programs.

are currently in the area of ¥500 billion. Bolstering

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11

Q

Can you elaborate on your comment about getting back to basics? You have said
that this is the key concept behind your new medium-term business plan.

products we supplied and, with the hope of it leading

Mr. Kawaguchi
Our industrial gases business began with sales of gas

to increased sales, placed a consistently high priority

in cylinders. We subsequently switched our focus toon customer care.

sales of liquid gases via tanker truck, which enabled us

In other words, the reason we continue to value

to transport a significantly greater volume. Later on,

our cylinder business is because there is a world of

to reduce costs we began supplying gases onsite via

information on a broad range of customers there. It ispipeline from major plants. When all is said andbecause of our solid local foundation that we havedone, however, our industrial gases business today

been able to pursue an ambitious global M&A

owes its success to our beginnings as a supplier of gas

program and establish extensive overseas operations.

in cylinders. When we started out, demand was not

In Japan, we have approximately 450 bases,

tens of thousands of cubic meters like it is today. The

including those belonging to affiliated companies. In

turning point came because cylinders are also used inaddition to strengthening each of these bases, we will

research facilities—because back then we took care toalso promote rationalization where we can with thelearn how even the smallest customers used theaim of enhancing our overall operating prowess.

Q

What prompted you to set expanding sales in overseas markets as a crucial
Companywide task and what do you hope to achieve through your efforts in this area?

Nippon Sanso—Matheson Tri-Gas’s net sales were

Mr. Kawaguchi
Any discussion of our overseas businesses must begin$344 million. In fiscal year 2011, the company

with our U.S. subsidiary Matheson Tri-Gas. In fiscal

reported net sales of $1.1 billion—testament to theyear 2004—prior to the merger that created Taiyo

tremendous growth it has achieved.
have invested assertively in the United States
We havIn the years ahead, we will takein recent years.
ysteps to improve the efficiency of ourdecisive st
operations tthere, as well as to realize new synergies, as
we prepare to begin reaping the full benefits of theseinvestments.
investments
production capacity for air separator gases in
Our prothe United States has increased to the extent that it isclose to our capacity in Japan. However, with demand
products soaring in the U.S. market, we curfor these pr
rently have plans to build several new plants. As thisindicates, tthe U.S. market still offers considerable
returns. What this means is that we will
potential reto enhance the efficiency of ourcontinue workingw

12Expansion and Growth of U.S. Operations 2011

Liquefied gas production bases
Headquarters
Air separation units
Production and sales bases

On another front, we are promoting the expansion

operations in the United States, as well as to realizeof our Thermos vacuum bottle business in overseas

new synergies.
In Asia, we will focus on fortifying our current

markets. We currently have plants in Malaysia and inoperating base, although in the high-growth Chinese

China. In late March 2011, we commenced

market our emphasis will be on expanding ouroperations at a second plant in China with the aim ofoperations by, among others, pursuing new M&A

bolstering our global market share, thus reinforcing

opportunities. In India, as already mentioned, we are

our production configuration in that market.

in the process of building a new plant. Through such
efforts, we will work to expand our businesses inoverseas markets including the Middle East.

Q

You have also identified fortifying your operating foundation in existing businesses
and promoting continued assertive investment as crucial Companywide tasks. What
was the reasoning behind this and what do you hope to achieve?
with sales agents is also very important. From thisMr. Kawaguchi
In the industrial gases business, interaction withperspective, we will work to deepen our relationships

customers is a particularly important consideration.

with customers in markets around the world.

Accordingly, it is essential that we promote systematic

We will also continue to promote assertive invest-

efforts that bring our head office, as well as our branchments to maintain healthy growth in existing busi-

offices and sales offices, closer to our customers. As we

nesses. To ensure the optimum effectiveness ofknow from our cylinder business, reinforcing relations

investments, we will of course conduct detailed13

advance investigations. Equally important, we must

foundation in existing businesses and promoting

draw on our expertise and experience to guarantee theongoing assertive investment, we will continue toefficiency of such investments being equal to or greater

enhance corporate value.

than expectations. By reinforcing our operating

Strategies for Sustainable Growth

Q

The new medium-term business plan basically carries forward the same strategies as
the previous plan. One of these, enhancing Group management, depends a great deal
on effective corporate governance. What are your thoughts on this?
senior management and executive positions. In

Mr. Matsueda
In addition to facilitating proper internal controls for

addition to taking into account dissimilar working

the parent company, effective corporate governance isenvironments, as well as religious, cultural andessential from an administrative perspective—

linguistic differences, the key challenge facing us is toespecially given the increasingly global scale of our

make sure individuals in such positions understandoperations—to bolster the momentum of Groupthe Taiyo Nippon Sanso philosophy and values. To

companies.

this end, we are, for example, working to ensure roles
and expectations are communicated clearly to staff in

The conventional approach of dispatching staff

different regions.

from Japan to manage overseas operations is one thatno longer has currency, if for no other reason than the

One of our stated goals is to become an Asian-fact that our supply of personnel is limited. Weborn major player in the global industrial gases

recognize the need to promote locally hired staff toindustry. One of the unique features of the industrial

Promote Awareness of Management Policies
Differing languages, cultures,
business customs

Core business areas
Japan, United States, Asia

Common Group management policies
Corporate philosophy: “Market-driven collaborative innovation: improving the future through gases”
Objective: Major global player
Corporate philosophy + objective

Compliance

Safety and security

Provision of new technologies and products

14gases business is that the extent of a company’s market

addition to a representative from each geographic

coverage in a given region largely determines its ability

market, this entity would encompass relevant

to respond effectively to demand. Similarly, securing

enterprise-wide support functions, namely, finance,

market share in countries where we have establishedplanning and personnel, as well as technology, andoperations depends on our ability to make swift

would be responsible for making decisions regarding

management decisions which, in turn, requires thatthe prioritization of investments.
In my opinion, we are currently at a stage when

we delegate authority to local staff.
We do recognize that should sales in overseas

our management could accurately be termedmarkets increase to more than 50% of sales, we would

multinational. My vision is to eventually create a well-need to establish a global corporate headquarters tobalanced global management organization responsible

optimize management of the overall Group. In

for the entire Group, including operations in Japan.

Becoming a Major Global Player

Global Headquaters

North America
Japan

Asia

1. Expand sales generated in overseas
ass markets to more
mor thanan 50% off
consolidated net sales
2. Establish global corporate headquarters
arters3. Promote unified management strategies
tegies for the globallcorporate headquarters
4. Expand local hiring in overseas markets
arkets and increase interaction
interaaction
with local communities
5. Develop consistent global standards
ds for production technologies
and services, among others

15

Q

You have set a medium- to long-term target of consolidated net sales of¥1,000 billion. Can you tell us a bit more about this?

At the same time, our efforts to introduce ourMr. Matsueda
Our annual consolidated net sales are currently in theaccumulated proprietary gas manufacturing, supply

area of ¥500 billion, so simply speaking this target

and application technologies in the U.S. and Asian

represents a doubling of our sales. We estimate thatindustrial gas markets are proceeding apace. Customer

achieving this target through organic growth would

recognition of the value these technologies offer istake anywhere from five to 10 years, so a global M&A

growing and yielding new demand. We thus anticipate

program is definitely necessary if we hope to acceleratethat the combination of these two strategies—anrealization. Our increasingly robust financial condition

ambitious M&A program and the promotion of ourmeans we are well-positioned to take advantage ofdistinctive technological capabilities—will be highly

promising M&A opportunities that arise.

effective in helping us attain our target.

Q

What is your policy on shareholder returns?

stocks as a way to increase share value.

Mr. Matsueda
Our basic policy is to maintain a minimum annual

The productivity of the average Japanese company

consolidated dividend payout ratio of 25%, although if

is considerably lower than that of companies in the

our income performance were to improve, we would

United States and Europe. We recognize that there isnaturally raise dividends. That said, because the current

still room for improvement in our productivity.

Taiyo Nippon Sanso was created through a merger, weAddressing this challenge is one crucial key to thehave a significant number of shares on the market.

success of our efforts to improve profitability andAccordingly, we intend to continue repurchasing ourenhance returns to shareholders.

Q

In closing, can you tell us about your so-called “triple 10” challenge, that is, youreffort to bolster growth, profitability and efficiency by at least 10%?

This is only natural—we should expect to work hard if

Mr. Matsueda
Enhancing growth and profitability is the eternal

we intend to reach our goal of becoming an Asian-bornchallenge for any company. Our medium- to long-term

major global player. To ensure growth, we will continue

target for growth is to increase our share of the global

to promote ambitious investments and seek out

industrial gases market to at least 10%. For profitability,

advantageous M&A opportunities in promising business

we aim to increase the ratio of operating income to sales

and geographic markets to expand our operations, while

to at least 10%. For efficiency, our goal is to achieve ato enhance profitability and efficiency we will maintain areturn on capital employed (ROCE) of at least 10%.

keen eye on expected returns. I am confident that byfocusing our efforts and working as one, we will succeed

Attaining these targets will require the dedicationin achieving our “triple 10” targets.

and efforts of the entire Taiyo Nippon Sanso Group.

16

Taiyo Nippon Sanso at a Glance
Operating Segments
Effective April 1, 2010, Taiyo Nippon Sanso revised its operating segments to better reﬂect its actual products, services and end-user
markets. Figures for ﬁscal year 2010 have been restated to reﬂect this change.

Industrial Gas Business

Share of SalesYear ended March 31

We supply oxygen, nitrogen, argon and a host of other industrial gases that are indispensable¥288 billion

to the advanced production activities of modern industry, including cutting, welding,combusting, melting, chilling and freezing, in a number of safe forms, including via pipeline,
tanker truck and cylinder. We are also a leading name in the construction of cryogenic air
separation plants, which we ship to customers around the world for on-site construction.

60.0%

For more detailed information, please see page 18

Electronics Business

Share of SalesYear ended March 31

We provide a variety of products to customers in the electronics industry, including¥126 billion

manufacturers of semiconductors and LCDs, in markets around the world. In Japan, we
have grown this business by supplying a comprehensive range of gases, including highpurity nitrogen and electronic materials gases, to two LCD panel production facilities thatare among the largest in the world.

26.0%
For more detailed information, please see page 20

Energy Business

Share of SalesYear ended March 31

LP gas is highly valued as a clean energy source, with applications ranging from industrial to¥37 billion

home power generation. An environment-friendly alternative to chlorofluorocarbons, LP gas
is also used as an aerosol gas and as fuel for taxi fleets. With residential-use fuel cells and highefficiency hot water heaters expected to achieve increased market penetration, LP gas—which
is used to fuel cells—is attracting increasing attention as an environment-friendly energy.

8.0%

For more detailed information, please see page 22

Other Businesses

Share of SalesYear ended March 31

Medical BusinessOur nationwide production and sales network enables us to provide stable supplies of¥30 billion

medical oxygen and other high-quality medical gases to a broad range of medical institutions.

Thermos Business
The beginnings of Thermos K.K., recognized as a pioneer in the stainless steel vacuum bottle
industry, can be traced to the application of technologies cultivated by Nippon Sanso Corporation.
For more detailed information, please see page 24

17

6.0%

Our Businesses

Industrial Gas BusinessIndustrial Gas
BusinessW

e supply oxygen, nitrogen, argon and a host of other industrial gasesthat are indispensable to the advanced production activities ofmodern industry, including cutting, welding, combusting, melting, chilling

Years ended March 31(Billions of yen)and freezing, in a number of safe forms, including via pipeline, tanker truck
288

300

and cylinder. We are also a leading name in the construction of cryogenic air

261

separation plants, which we ship to customers around the world for on-site

225

construction.
Having built a strong technological base over many years, gaining

150

particular expertise in low temperature, high-pressure, separation, vacuum andgas control technologies, we continue to draw on our advanced capabilities to75

provide a diverse range of equipment for the manufacture, supply, transport
0
2010

2011

and storage of various types of gases. In these ways, we help industrial
customers enhance their productivity and quality while supporting efforts toimprove the environment. We also supply a wide range of testing equipment,
including space simulation chambers, which replicate the conditions of outerspace, for use in basic physics and the discovery of new functional materials,
among others.
In addition to maintaining the largest industrial gas supply network inJapan, we are expanding our manufacturing and supply bases in the UnitedStates as well as in China and other parts of Asia.

18

Principal products and operations
Oxygen, nitrogen, argon, carbon dioxide, hydrogen, helium and other industrial gases
Gas supply (filling, transport, storage) equipment, facilities installation and construction
Gas equipment (including for cutting, welding, combustion and freezing)
Plant business
Cryogenic air separation plants, pressure swing adsorption air separation plants, cryogenic vacuum/space simulation equipment, otherchemical equipment

Market needs
Optimal, stable, economic supply of gases
Use of gases to raise productivity, enhance quality, save energy and enhance the environment
Manufacture and installation of high-performance plants

Competitive advantages
Japan’s largest and strongest industrial gas producer, offering increased cost advantages and price competitiveness» Production and sales capabilities
Balanced, nationwide network of production bases
Liquid gas production capacity equivalent to 35% of the domestic market» Logistics capabilities
Approximately 200 filling stations, or 40% of the estimated 500 such stations across Japan
Tanker truck fleet and extensive network of shipping bases
Growing marketing network, including around 250 sales agents» High domestic market share for other industrial gases
In Japan, number 1 in carbon dioxide, number 1 in helium and number 2 in acetylene» Our own plant business, facilitating the provision of support for both plants and engineering on a global scale, drawing on our capabilities
as a manufacturer of industrial gases
Capable of optimizing facilities and operating efficiency
Current focus on securing new demand for gases and expanding sales in overseas markets; expanding scale by reducing plant costs perunit of production

Fiscal year 2011 highlights
Asia
Built a new plant in China’s Dalian Changxing Island Harbor Industrial Zone (construction completed in July 2010)
Recently established air separation plants in the north (Hanoi) and south (Ba Ria-Vung Tau) of Vietnam
Hanoi: Commenced operations in April 2011
Ba Ria-Vung Tau: Scheduled to begin operating in September 2012
Building up our first air separation plant in India, in Pune, in the state of Maharashtra (scheduled to commence operations in 2013)
North America
Acquired Western International Gas and Cylinders, Inc. (wholesale producer and supplier of acetylene gas) in May 2010
Scheduled to complete air separation plant in Tampa, Florida in March 2012
Formulated plans to begin joint production of helium gas with Air Products of the United States in fall 2011
Japan
Built new large-scale cryogenic air separation plants for major domestic steel industry
Completed eighth unit for Nagoya Sanso Center and 15th unit for JFE Sanso Center, and promoted the introduction of radio frequency
identification (RF) tags for cylinder management and for control systems

19

Our Businesses

Electronics Business

W

Electronics
Business

e provide a variety of products to customers in the electronics
industry, including manufacturers of semiconductors and LCDs, inmarkets around the world. In Japan, we have grown this business by supplying

Years ended March 31(Billions of yen)a comprehensive range of gases, including high-purity nitrogen and electronic160

materials gases, to two LCD panel production facilities that are among the126
120

largest in the world.

110

Having pursued an upstream business strategy, we have established asolid position in the Japanese market as a manufacturer of specialty gases,

80

namely, monosilane gas and hydrogen selenide. Leveraging our domestic
market position, we are expanding our presence in the high-growth solar cell

40

market, targeting Asia-based manufacturers, notably those in South Korea,
0
2010

2011

Taiwan and China.
In the area of MOCVD equipment for manufacturing compound
semiconductors, we are capitalizing on rising demand in the LED market tobolster sales of both equipment and materials gases. We are also benefiting the
expanded market for compound semiconductors used in power devices for
consumer electronics and automotive applications. To date, customers for our
MOCVD equipment have been primarily in Japan. At present, however, weare taking steps to expand sales channels in South Korea, Taiwan and China.

20

As part of this effort, we recently established an
MOCVD equipment manufacturing and sales
company in South Korea in a joint venture with alocal partner.
In R&D, our joint project with International Business Machines Corp.
(IBM) to develop next-generation electronics materials gases is nearing conclusion. By building on our wealth of expertise and experience, we will continue
striving to grow this business by providing total gas solutions—encompassing
gases, equipment and quality control services—to customers in the electronics
industry.

Principal products and operations
High-purity nitrogen and argon
Electronic materials gases, including Safe Delivery Source® (SDS)
MOCVD equipment
Gas puriﬁcation, abatement and other systems
High-purity gas supply facility installation and construction

Market needs
Comprehensive gas supplies
Total gas and equipment solutions

Competitive advantages
Strong ties with domestic and Asian electronics manufacturers» Close relationships with users who employ advanced technologies» Superior marketing strength through the provision of total solutions, encompassing gas, equipment and installation» Highly experienced engineering department and gas center network» Supply structure covering key world markets—Japan, East Asia (South Korea, China and Taiwan), Southeast Asia, the United Statesand Europe

Fiscal year 2011 highlights
Developed UR26K, a state-of-the-art large-scale MOCVD system
Began supplying monosilane gas through joint venture with Evonik Degussa Japan Co., Ltd.
Established new production base for hydrogen selenide, used in copper indium gallium selenide (CIGS) solar cells, enabling us to commence
production of this material—which we already produce in the United States—in Japan
Established Kunitomi Gas Center in Japan to supply a wide range of products and services to a solar cell production facility
Established TNSK Corporation, an MOCVD manufacturing and sales joint venture, in South Korea

21

Our Businesses

Energy Business

L

EnergyBusiness

P gas is highly valued as a clean energy source, with applications
ranging from industrial to home power generation. An environment-

friendly alternative to chlorofluorocarbons, LP gas is also used as an aerosol gas

Years ended March 31(Billions of yen)

and as fuel for taxi fleets. With residential-use fuel cells and high-efficiency hot
40

37
32

water heaters expected to achieve increased market penetration, LP gas—which
is used to fuel cells—is attracting increasing attention as an environment-

30

friendly energy.
In addition to wholesaling LP gas to leading dealerships, we sell LP gas for20

use in plants, as well as for other industrial applications. We supply LP as anaerosol propellant and as autogas for taxis, as well as for restaurants and other10

commercial applications and for residential use. We also sell LP gas to approxi0
2010

2011

mately 100,000 residential users in Japan through our network of direct sales
outlets.

22

Principal products and operations
Propane, butane and other liquid gases
Related equipment and devices (air conditioners, hot water heaters)
Construction of LP gas supply facilities, air-conditioning facilities

Market needs
Stable supply of LP gas to 25 million households across Japan
Increased market penetration of energy-efﬁcient equipment, spurred by the need to reduce CO2 emissions
Shift in preference from oil to LP gas, particularly for industrial and commercial use

Competitive advantages
420,000-ton LP gas supply capacity nationwide (ranked eighth in Japan)

Fiscal year 2011 highlights
Integrated local sales companies and established a new subsidiary to strengthen and expand our operating foundation in Japan’s
Chugoku region

23

Our Businesses

Other Businesses

Medical Business

Other
Businesses

O

Years ended March 31(Billions of yen)ur nationwide production and sales network enables us to provide
stable supplies of medical oxygen and other high-quality medical gases

to a broad range of medical institutions. We help improve the safety and40

reliability of medical treatment, as well as the quality of life of patients, by
30

29

30

developing medical support equipment and devices for home oxygen therapy(HOT), as well as through such services as regular inspection of equipment
and operation of remote monitoring systems.

20

In addition to actively promoting the establishment of special-purpose
production facilities for medical gases and technical service centers for medical

10

equipment, we are also capitalizing on our wealth of advanced gas-related tech0
2010

2011

nologies to manufacture and sell stable isotopes for advanced diagnostics andtreatment, as well as specialty gases and freezing and storage systems forbiological use.

Thermos BusinessT

he beginnings of Thermos K.K., recognized as a pioneer in the stainlesssteel vacuum bottle industry, can be traced to the application of tech-

nologies cultivated by Nippon Sanso Corporation—a predecessor of Taiyo
Nippon Sanso—to develop the world’s first vacuum-insulated stainless steel
bottle. Today, Thermos leverages its world-renowned proprietary technologies
to plan, develop, manufacture and sell Thermos-brand products, earning a reputation for its unconditional commitment to quality and highly innovative
products, as well as the trust of customers in more than 120 countries and aleading global market share. Going forward, Thermos will continue to leverage
the reliable technological capabilities that underpin its operations to provide products that support
comfortable, environment-friendly lifestyles.

24

Principal products and operations
Medical business
Medical-related oxygen and other gases
HOT and other home medical care devices, portable oxygen cylinders, freezing and storage systems
Stable isotopes
Thermos business
Stainless steel vacuum bottles
Insulated pots and other cooking implements

Market needs
Medical business
Quality control and assurance for medical-use gases
Secure supplies of stable isotopes to accommodate the increasing use of positron emission tomography (PET) in cancer diagnostics
Thermos business
Practicality, outstanding insulation, durability, attractive design

Competitive advantages
Medical business
Reliable systems for the manufacture and sale of pharmaceutical productsContinue to gather safety information and data
Manufacturing and sales capabilities for Water–18O, a pharmaceutical ingredient for reagents used in PET diagnostics
Manufacture of Water–18O that is among the top in the world in terms of quality; supply to approximately 100 medical institutions in Japan andexport to approximately 20 countries
Thermos business
A leading market share both in Japan and worldwide
Superb planning and R&D capabilities that support the conception and development of approximately 100 new products annually

Fiscal year 2011 highlights
Medical business
Expanded sales of stable isotopes and continued to seek out M&A opportunities aimed at strengthening medical gas and equipment business
Thermos business
Commenced production at newly built second factory in China (Jiangsu province)25

Board of Directors, Corporate Auditors and Corporate Officers

Board of Directors

Corporate Auditors

Corporate Officers
Masami Sakaguchi

Chairman

Shigeto Umatani

Susumu Naka

Hirosuke Matsueda

Kiyoshi Fujita

Yoshihide Kenmochi

Keiichi Kiyota

Shigenobu Somaya

Shigeru Koyama*2

Masahiro Sakamoto*2

President

Takashi Fukano

Yasunobu Kawaguchi

Masahiko Kitabatake

Executive Vice President

Corporate Officers

Executive Directors /Advisors

Mikio Yamaguchi
Hiroyuki Tanizawa

Fumio Hara

Executive Corporate
Officers

Tadashi Higashino
Atsuhiro Fujita

Hiroshi Katsumata

Toshiaki Yamazaki

Konosuke Ose

Kinji Mizunoe

Hiroshi Nagae

Hiroshi Taguchi

Masanori Zaima

Takeki Hata

Shin-ichiro Hiramine

Kazushige Arai

Senior Managing Directors

Akihiko Umekawa

Norikazu Ishikawa

Ken-ichi Kasuya

Keiki Ariga

Shinji Tanabe

Masahiro Imagawa

Kunishi Hazama

Tetsuya Nakayama

Tadashige Maruyama

Yuki Hajikano
Jun Ishikawa

Managing Directors

Takashi Tatsumi

Yoshikazu Yamano
Masayuki Tanino
Yujiro Ichihara
Shigeru Amada

Executive Directors
Ryuichi Tomizawa*1
William J. Kroll

Notes: *1 Outside Director
Notes: *2 Outside Corporate Auditor

26(As of June 29, 2011)

Six-Year Summary
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Years ended March 31

2011

2010

Millions of yen
2009
2008

2007

2006

¥483,620¥433,390¥495,746¥507,718¥458,587¥397,308

Operating income

35,46827,55629,16438,78336,48826,788Net income

12,736

15,748

16,533

21,93020,094

14,444

Net sales

Selling, general and administrative
expenses/Net sales (%)

26.1%

27.5%

24.7%

23.1%

23.2%

24.0%

Return on equity (%)

6.5%

8.3%

8.6%

10.8%

10.6%

8.7%

Return on assets (%)

2.1%

2.4%

3.1%

4.0%

3.6%

3.1%

Capital expenditures

31,99138,366

66,01036,26035,891

22,176

Depreciation and amortization

32,16730,14328,33925,506

21,21018,982

Research and development
3,924

4,137

3,936

2,903

2,713

2,223

Interest-bearing debt

250,409259,111

191,074

159,500

152,232

122,196

Total net assets

207,416

212,396

194,250

217,813

216,068

178,055

Total assets

617,676

617,215534,350547,237

547,791

471,602

expenses

Yen

Per share data:
Net income1¥31.86¥39.39¥41.21¥54.48¥49.93¥35.45

Cash dividends

12.00

12.00

12.00

12.00

12.00

10.00

Price earnings ratio

21.75

23.20

15.55

14.65

21.31

24.54

Times

Notes: 1. Net income per share is computed based on the weighted average number of shares of common stock outstanding during eachyear, as adjusted retroactively for free share distributions made during the period.
2. Figures given for total net assets prior to fiscal 2007 are for total shareholders’ equity.

27

Management’s Analysis of Operating Results and Financial Position
Scope of Consolidation and Application of the Equity Method
As of March 31, 2011, Taiyo Nippon Sanso
Corporation had 75 consolidated subsidiaries (47based in Japan and 28 based overseas), including
newly acquired Western International Gas andCylinders, Inc. and Matheson K-Air India Pte.
Ltd., a consolidated subsidiary from fiscal year
2011; and 25 equity-method affiliates (10 based inJapan and 15 based overseas).

A total of 50 consolidated subsidiaries and
15 equity-method affiliates are accounted forin the Industrial Gas segment. The Electronics
segment and the Energy segment comprise 13 andfour consolidated subsidiaries, respectively. The
Other segment encompasses eight consolidated
subsidiaries and 10 equity-method affiliates.

Operating Results
In fiscal year 2011, ended March 31, 2011, consolidated net sales rose 11.6%, to ¥483,620 million.
Cost of sales increased 12.3%, to ¥321,885 million. Selling, general and administrative expenses
were also up, rising 5.8%, to ¥126,265 million,
owing principally to an increase in expenses forsalaries and to packing and freight expenses foroutbound freight. Reflecting these and other factors, operating income climbed 28.7%, to ¥35,468
million. The ratio of operating income to sales
improved by 0.9 percentage point, to 7.3%.
Other income declined 93.6%, to ¥177 million, attributable primarily to the absence of a gainon sales of subsidiaries’ stocks, a major contributor
in fiscal year 2010. In contrast, owing to a provision to cover a surcharge payment order issued
by Japan’s Fair Trade Commission, included as“provision of allowance for government surcharge,”

Net Sales

other expenses soared 363.5%, to ¥7,593 million. As a consequence, net income declined
19.1%, to ¥12,736 million. Net income per sharewas ¥31.86, while return on equity (ROE) was
6.5%, 1.8 percentage points lower than in theprevious fiscal year. At the general meeting of theCompany’s shareholders on June 29, 2011, a proposal to pay a full-term dividend of ¥12.00 per
share for the period under review was approved.
Capital expenditures, including the cost of
construction, totaled ¥31,991 million in the period
under review, approximately ¥6,375 million lower
than in fiscal year 2010. In contrast, depreciation and amortization rose ¥2,024 million, to¥32,167 million. Investment in R&D declined¥213 million, to ¥3,924 million, equivalent toapproximately 0.8% of net sales.

Operating Income

Net Income(Billions of yen)(%)(Billions of yen)(%)(Billions of yen)

500

30

50

35

25

55

400

24

40

28

20

44

300

18

30

21

15

33

200

12

20

14

10

22

100

6

10

7

5

11

0

0

0

0

0

(Yen)

0

2007 2008 2009 2010 20112007 2008 2009 2010 20112007 2008 2009 2010 2011

Industrial gas
Electronics
EnergyOther
Overseas sales as a percentage of
total (right scale)Industrial gas
Electronics
EnergyOther
Overseas operating income as apercentage of total (right scale)

Net income per share (right scale)28

Results by Segment
Effective from fiscal year 2011, the Company
reorganized its operations into four reportablesegments—Industrial gas, Electronics, Energy
and Other—based on the markets in which theCompany’s products are sold, with the aim offacilitating the more effective allocation of management resources, accelerating decision making
and accurately assessing operating performance.
Operating results for each segment in fiscal year
2011 are outlined below. Segment results for theprevious fiscal year have been restated for the
purpose of comparison.

and from semiconductor and related manufacturers. We also saw an increase in demand from
customers overseas, particularly South Korea- andTaiwan-based semiconductor and related manufacturers, from manufacturers of LCD panels, as wellas brisk demand for argon for use in single crystal
silicon production.
Results for electronics-related equipment andinstallation projects were largely in line with projections. Shipments of metal organic chemical
vapor deposition (MOCVD) equipment for manufacturing LED chips and power devices reached arecord high, pushing sales in this business above
the level of the previous fiscal year.
Owing to the aforementioned factors, segment
sales to third parties increased 14.3%, to ¥126,495
million. Operating income advanced 28.4%, to¥8,453 million.

Industrial Gas

Demand for oxygen and nitrogen supplied bypipeline from steel and chemicals companies, theprincipal users of these gases, rose substantially,
while demand for liquefied oxygen and nitrogenremained firm from small and medium-sized users
both in Japan and overseas. Owing to these results,
as well as to the positive impact of M&A deals inNorth America, segment sales were up from theprevious fiscal year.
Sales of cutting and welding equipment andof materials also increased, bolstered by improved
economic conditions in the United States, as well
as by a recovery in demand from the automotive,
shipbuilding and construction industries in Japan.
Sales in the gas-related equipment and engineeringbusiness climbed substantially, reflecting favorable results for large-scale engineering projects for,among others, cryogenic air separation plants.
As a consequence of these and other factors,
sales to third parties in the Industrial gas segmentrose 10.6%, to ¥288,644 million. Operating
income climbed 34.2%, to ¥24,128 million.

EnergyAgainst a backdrop of steeply rising purchaseprices for imports, sales of LP gas were significantly higher than in fiscal year 2010, reflecting
an improvement in demand for industrial applications. As a consequence, segment sales to third
parties rose 16.4%, to ¥37,643 million. Operating
income, at ¥1,400 million, was up 10.7%.
Other

Sales in the medical business increased, bolsteredby firm demand for medical-use oxygen and homeuse oxygen concentrators. Sales were also up in the
Thermos business, owing to increased shipments,
attributable to extraordinarily hot summer weather
and a resulting increase in sales of sports-use vacuum bottles and portable mugs, and to an autumn
sales promotion.
Sales for the two major businesses accounted
for in this segment to third parties amounted
to ¥30,836 million, an increase of 4.9%, while
operating income declined 8.0%, to ¥3,041 million.

Electronics

Segment sales rose significantly. This result
reflected robust demand for mainstay electronicsrelated gases in Japan from LCD panel manufacturers, including the Green Front Sakai complex,
Financial Position
As of March 31, 2011, total assets amounted
to ¥617,676 million, an increase of 0.07%.
Approximately ¥22,400 million of this total reflects
a ¥10.61 increase in the value of the yen against
the U.S. dollar as of the last day of the fiscal year.
The current ratio was 122%, down 15.0 points
from the fiscal 2010 year-end.

Property, plant and equipment, net, dipped
1.3%, to ¥256,494 million. Total investments
and other assets declined 7.2%, to ¥140,953 million, owing to declines in investment securities
and goodwill, the former attributable to plummeting stock prices and the latter to the impact of
yen appreciation on goodwill in subsidiaries
outside Japan.

29

Total current liabilities rose 20.7%, to¥180,527 million, reflecting a ¥16,573 million
increase in short-term loans payable, as well as toa provision for government surcharge of ¥5,193
million. Total noncurrent liabilities fell 10.0%,
to ¥229,732 million, attributable to declines inlong-term loans payable, a result of the shift ofloans due within one year to current liabilities, andin deferred tax liabilities, attributable to a decreasein unrealized gains on investment securities. As
a consequence, interest-bearing debt fell ¥233
million, to ¥2,118 million.

Total net assets decreased ¥4,980 million,to ¥207,416 million. This result was despite an¥8,013 million increase in retained earnings,
adjusted for net income and dividends, and wasdue to a ¥4,452 million decline in valuation differences on available-for-sale securities, reflecting adecrease in unrealized gains on securities of listedcompanies held for investment purposes, and foreign currency translation adjustments of ¥33,621
million, owing to the appreciation of the yen. The
net asset ratio slipped 1.1 percentage points, to¥31.2%, while net assets per share slipped ¥16.21
to ¥481.71.

Cash Flows
In fiscal year 2011, net cash provided by operating
activities amounted to ¥65,897 million, an increaseof ¥25,167 million. The main factors at work here
included depreciation and amortization of ¥32,167
million, a ¥4,869 million decrease in notes andaccounts receivable–trade and a ¥4,006 million
decrease in notes and accounts payable–trade. Theinterest coverage ratio improved 4.1 points, to13.5 times.
Net cash used in investing activities, at ¥44,834
million, was down ¥58,863 million. This result
reflected the application of ¥10,672 million topurchases of investments in subsidiaries resulting
in a change in the scope of consolidation and¥29,915 million to purchases of property, plantand equipment, both significantly less than in theprevious fiscal year.
Net cash used in financing activities came to¥3,343 million, compared with net cash provided
by such activities in fiscal year 2010. The principal
factors contributing to this result included proceeds from long-term loans payable of ¥27,106
million and the application of ¥30,157 million to
the repayment of long-term loans payable.
As a consequence of the Company’s operating,investing and financing activities in fiscal year
2011, cash and cash equivalents at end of period
totaled ¥43,877 million, an increase of ¥20,154
million from the fiscal 2010 year-end.

Total Assets

EquityReturn on Equity (ROE) and
Return on Assets (ROA)(Billions of yen)(Billions of yen)

(%)

(%)

750

250

40

15

600

200

32

12

450

150

24

9

300

100

16

6

150

50

8

3

0

0

0

0
2007 2008 2009 2010 20112007 2008 2009 2010 20112007 2008 2009 2010 2011

Equity ratio (right scale)

ROE
ROA

30

Business Risks
Management Policies, Business-Related Risks
Purchase of Property, Plant and Equipment

Product Defects

The Company sells high-pressure gas-related
products and handles toxic and flammable gases
used in electronics manufacturing (semiconductors, LC panels, solar cells). While the Company
strives to ensure the effective management ofrelated risks, it cannot guarantee that all of its
products are free of defects.

The Company maintains large-scale gas supply
facilities for major customers and needs to spend
heavily to maintain and upgrade these facilities.
Accordingly, interest rate trends could have amaterial impact on the Company’s businessperformance.
Reliance on Specific Industries

Financial Risks and Other Factors
Foreign Exchange Risk

The Company supplies gases to a wide range ofindustries and its exposure to risks from relianceon specific industries is thus low. Nevertheless,changes in key electronics markets (semiconductors, liquid crystal (LC) panels, solar cells) could
have a significant impact on the Company’sbusiness performance.

The Company exports products for sale outsideof Japan. The Company strives to hedge foreignexchange risks by entering into forward exchange
contracts and other derivatives transactions.
However, the Company may not be able torespond to sudden fluctuations in currency rates,
which therefore may have an adverse impact on its
business performance.

Manufacturing Costs

Electricity is the major component of thecost of manufacturing such core products as
oxygen, nitrogen and argon. Accordingly, a sharp
increase in the price of crude oil could result in a
substantial increase in electricity charges, which theCompany may be unable to reflect in the pricing
of its products in a timely manner.

Retirement Benefit Liabilities

A sudden deterioration in retirement plan returns
resulting in an increase in retirement benefit costs
may have an adverse impact on the Company’sbusiness performance.

Overseas Factors

Natural Disasters

The Company maintains operations overseas,
particularly in the United States and in other partsof Asia, including China, where the Company has
substantial gas operations. Political and economicchanges in countries where the Company has
operations may have an adverse impact on its
business performance.

The occurrence of earthquakes or othernatural disasters in areas where the Company has
manufacturing facilities may damage facilities. In
particular, damage to the Company’s large-scale
manufacturing facilities may lead to a significant
decline in production capacity and incur major
recovery costs. Such factors may adversely affect
the Company’s business performance.

Technological and Safety Factors
Technological Development

Legal Issues

Unanticipated changes to existing laws andthe introduction of new laws—particularly incountries overseas where the Company maintains
operations—may adversely affect the Company’sbusiness performance. Revisions to environmental
laws that result in a tightening of restrictions may
result in an increase in costs to ensure compliance,
which may also adversely affect the Company’sbusiness performance.

The creation of new products and technologies
entails various uncertainties, owing to theCompany’s reliance on technological developmentin such areas as compound semiconductors, theenvironment and energy.
Intellectual Property

The Company’s business depends on proprietary
technological development. The Company
endeavors to obtain intellectual property rights asnecessary for its proprietary technologies. However,there are no guarantees that its technologies arecompletely protected.

Medium-Term Business Plan

A number of factors—including changes in theoperating environment—could render impossible the achievement of targets set forth in the
Company’s medium-term management plan.

31

Consolidated Balance Sheets
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen
2011

March 312010

Thousands of
U.S. dollars(Note 4)
2011

AssetsCurrent assets:
Cash and deposits (Notes 15 and 22)
Notes and accounts receivable–trade (Notes 6 and 15)
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets (Note 10)
Other
Allowance for doubtful accounts
Total current assets¥ 44,549 ¥ 24,029 $ 535,767
126,207
127,687
1,517,823
16,75016,227201,443
9,295
12,474
111,786
7,848
7,353
94,3846,390
6,359
76,8499,873
12,158
118,737(689)(976)(8,286)220,227
205,3132,648,551

Property, plant and equipment (Notes 8, 9 and 21)
Accumulated depreciation
Property, plant and equipment, net

635,455(378,961)
256,494

Investments and other assets:
Investment securities (Notes 5 and 15)
Long-term loans receivable
Goodwill
Other intangible assets
Prepaid pension cost (Note 13)
Deferred tax assets (Note 10)
Other
Valuation allowance for investments
Allowance for doubtful accounts
Total investments and other assets
Total assets

53,56962,178644,245
5,387
2,921
64,78743,34347,441
521,263
18,647
20,772
224,257
11,427
11,230137,426
2,221
2,248
26,711
8,475
7,780
101,924(1,277)(1,357)(15,358)(839)(1,278)(10,090)
140,953
151,938
1,695,165¥ 617,676 ¥ 617,215 $ 7,428,455

See notes to consolidated financial statements.

32

616,202(356,239)
259,9637,642,273(4,557,559)
3,084,714

Millions of yen

Thousands of
U.S. dollars(Note 4)

2011

2010

2011

Liabilities and net assets
Current liabilities:
Notes and accounts payable–trade (Note 15)
Short-term loans payable (Notes 7 and 15)
Income taxes payable (Note 10)
Provision for loss on disaster
Provision for government surcharge
Other
Total current liabilities¥ 66,896
64,002
8,173
1,263
5,193
34,997
180,527¥ 67,926
47,4297,051——
27,174
149,583$ 804,522
769,717
98,292
15,18962,453420,890
2,171,100

Noncurrent liabilities:
Long-term loans payable (Notes 7 and 15)
Pension and severance indemnities (Note 13)
Deferred tax liabilities (Note 10)
Negative goodwill
Lease obligations (Note 7)
Other
Total noncurrent liabilities

182,398
5,003
27,740
757
6,563
7,268
229,732

201,197
5,051
32,305
1,181
8,957
6,541
255,236

2,193,602
60,168
333,6149,104
78,93087,4082,762,862

Contingent liabilities (Note 14)
Total liabilities

410,259

404,819

4,933,963

27,03944,910150,439

27,03944,910142,426

325,183
540,108
1,809,248(2,321)
220,068(2,307)
212,068(27,913)2,646,639

6,428
(163)
(33,621)(140)(27,496)
14,845
207,416¥617,676

10,88027(23,773)(124)(12,990)
13,317
212,396¥617,215

77,306(1,960)(404,342)(1,684)(330,679)
178,533
2,494,480$7,428,455

March 31

Net assets (Notes 11 and 23):
Shareholders’ equity:
Common stock:
Authorized—1,600,000,000 shares
Issued—403,092,837 shares
Capital surplus
Retained earnings
Treasury stock, at cost—
3,326,579 shares in 2011 and 3,268,919 shares in 2010
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation differences on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Pension liability adjustment of foreign subsidiaries
Total accumulated other comprehensive income (loss)
Minority interests
Total net assets
Total liabilities and net assets

33

Consolidated Statements of Income
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen
Years ended March 31

Net sales
Cost of sales (Note 17)
Gross profit
Selling, general and administrative expenses (Note 17)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Amortization of negative goodwill
Gain on sales of noncurrent assets (Note 18)
Gain on extinguishment of tie-in shares
Compensation income
Loss on sales and retirement of noncurrent assets (Note 18)
Foreign exchange losses
Loss on valuation of investment securities
Loss on valuation of golf club memberships
Gain on sales of subsidiaries’ stocks
Loss on sales of subsidiaries’ stocks
Gain on sales of subsidiaries and affiliates’ stocks
Equity in earnings of affiliates
Impairment loss (Note 19)
Provision of valuation allowance for investments
Reversal of valuation allowance for investments
Reversal of allowance for doubtful accounts
Provision of allowance for government surcharge
Loss on disaster
Environmental expenses
Other
Income before income taxes and minority interests
Income taxes (Note 10):
Current
DeferredIncome before minority interests
Minority interests in income
Net income

Amounts per share:
Net assets
Net income
Cash dividends

Thousands of
U.S. dollars(Note 4)

2011

2010

2011

¥483,620
321,885
161,734
126,265
35,468¥433,390
286,529
146,861
119,305
27,556$5,816,236
3,871,137
1,945,087
1,518,521
426,554

1,080(4,873)
616
57
—
—
(374)
(182)
(608)
(55)
—
—
—
1,541
(94)
(40)
120
—
(5,193)(1,600)—891(8,717)26,751928(4,352)
750
151
332
264
(1,146)
—
(1)
(68)
1,225
(18)
49
1,385
(570)
(240)
32
716
—
—
(108)
1,305
634
28,191

12,989(58,605)
7,408
686
—
—
(4,498)(2,189)(7,312)(661)———
18,533(1,130)
(481)
1,443
—
(62,453)(19,242)—
10,716(104,835)
321,720

13,756
11,155(963)
146
12,792
11,301
13,95916,8901,222
1,142¥ 12,736 ¥ 15,748

165,436(11,581)
153,842
167,877
14,696$ 153,169

Yen

U.S. dollars(Note 4)¥481.71
31.86
12.00

¥497.92
39.39
12.00

$5.79
0.38
0.14

Millions of yen

Thousands of
U.S. dollars(Note 4)

See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Year ended March 31

2011

2011

Income before minority interests
Other comprehensive income (Note 20):
Valuation differences on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Pension liability adjustment of foreign subsidiaries
Share of other comprehensive income of associates accounted
for using the equity method
Total other comprehensive income (loss)
Comprehensive income (loss)
Total comprehensive income (loss) attributable to (Note 20):
Owners of the Company
Minority interests¥ 13,959$ 167,877(4,433)(191)(9,137)(15)(53,313)(2,297)(109,886)
(180)

(631)
(14,408)¥ (449)(7,589)(173,277)$ (5,400)¥ (1,770)
1,320$ (21,287)
15,875

See notes to consolidated financial statements.

34

Consolidated Statements of Changes in Net Assets
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen

Number ofshares ofcommonstock

Commonstock

Shareholders’ equity

Accumulated other comprehensive income

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityValuationdifference
PensionTotal
onDeferredForeignliability
accumulated
available- gains orcurrency
adjustment
otherfor-sale losses on translationof foreign comprehensive
securities hedges adjustments subsidiaries income (loss)

Minority
interests

Total net
assets¥44,910¥131,478¥(2,181)¥201,247¥ 3,076¥(111)¥(23,011)¥(163)¥(20,209)¥13,212¥194,250

Balance at
March 31, 2009

403,092,837 ¥27,039

Disposal oftreasury stock

—

—

0

—

14

14

—

—

—

—

—

—

14

Change of scopeof equity method

—

—

—

—

(40)

(40)

—

—

—

—

—

—

(40)

Dividends fromsurplus———(4,799)—(4,799)

—

—

—

—

—

—

(4,799)Net income

—

—

—

15,748—15,748

—

—

—

—

—

—

15,748Purchase oftreasury stock

—

—

—

—

(100)

(100)

—

—

—

—

—

—

(100)

Net changes of
items other thanshareholders’equity

—

—

—

—

—

—

7,804

139

(762)

38

7,219

104

7,324

Balance at
March 31, 2010

403,092,837 ¥27,039¥44,910¥142,426¥(2,307)¥212,068¥10,880¥ 27¥(23,773)¥(124)¥(12,990)¥13,317¥212,396

Disposal oftreasury stock

—

—

0

—

15

15

—

—

—

—

—

—

15

Dividends fromsurplus———(4,798)—(4,798)

—

—

—

—

—

—

(4,798)Net income

—

—

—

12,736—

12,736

—

—

—

—

—

—

12,736

Purchase oftreasury stock

—

—

—

—

(30)

(30)

—

—

—

—

—

—

(30)

Change of scopeof consolidation

—

—

—

54

—

54

—

—

—

—

—

—

54

Increase by merger

—

—

—

21

—

21

—

—

—

—

—

—

21

Net changes of
items other thanshareholders’equity

—

—

—

—

—

—

(4,452)(191)(9,847)(15)(14,506)

1,528(12,978)

403,092,837 ¥27,039¥44,910¥150,439¥(2,321)¥220,068¥ 6,428¥(163) ¥(33,621)¥(140)¥(27,496)¥14,845¥207,416

Minority
interests

Total net
assetsBalance at
March 31, 2011

Thousands of U.S. dollars (Note 4)

Commonstock

Balance at
March 31, 2010

Shareholders’ equity

Accumulated other comprehensive income

Retainedearnings

Valuationdifference
PensionTotal
onDeferredForeignliability
accumulated
available- gains orcurrency
adjustment
otherfor-sale losses on translationof foreign comprehensive
securities hedges adjustments subsidiaries income (loss)

CapitalsurplusTreasury
stock

Total
shareholders’equity$325,183 $540,108 $1,712,880 $(27,745) $2,550,427$130,848 $325 $(285,905)$(1,491)$(156,224) $160,156 $2,554,372

Disposal oftreasury stock—0

Dividends fromsurplus——(57,703)—(57,703)

—

—

—

—

—

—

(57,703)

Net income——

153,169—

153,169

—

—

—

—

—

—

153,169

Purchase oftreasury stock

—

—

—

(361)

(361)

—

—

—

—

—

—

(361)

Change of scopeof consolidation

—

—

649

—

649

—

—

—

—

—

—

649

Increase by merger

—

—

253

—

253

—

—

—

—

—

—

253

Net changes of
items other thanshareholders’equity

—

—

—

—

—

(53,542)(2,297) (118,425)(180)(174,456)

18,376(156,079)$ 77,306 $(1,960) $(404,342)$(1,684)

Balance at
March 31, 2011

—

180

180

$325,183 $540,108 $1,809,248 $(27,913) $2,646,639

See notes to consolidated financial statements.

35

—

—

—

—

—

—

180

$(330,679) $178,533 $2,494,480

Consolidated Statements of Cash Flows
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries
Millions of yen
2011

Years ended March 31
Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of goodwill
Interest and dividends income
Interest expense
Equity in earnings of affiliates
Loss on sales and retirement of noncurrent assets
Gain on sales of investment securities
Gain on extinguishment of tie-in shares
Loss on sales of subsidiaries’ stocks
Loss on disaster
Provision of allowance for government surcharge
Decrease (increase) in accounts receivable–other
Decrease (increase) in notes and accounts receivable–trade
Decrease (increase) in advance payments
Decrease in inventories
Decrease in notes and accounts payable–trade
Increase (decrease) in accrued expenses(Decrease) increase in advances received(Increase) decrease prepaid pension costs
Decrease in provision for retirement benefits
Other, net

Interest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Investing activities(Increase) decrease in short-term investments
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Payments for assets purchase (Note 22)
Purchases of investments in subsidiaries resulting in change in scope of consolidation (Note 22)
Proceeds from sales of investments in subsidiaries resulting in change in scope of
consolidation (Note 22)
Payments of loans receivable
Other, net
Net cash used in investing activities
Financing activities
Net increase (decrease) in short-term loans payable
Net decrease in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of common stock
Repayments of lease obligations
Cash dividends paid
Cash dividends paid to minority shareholders
Purchase of treasury stock
Proceeds from sales of treasury stock
Net cash (used in) provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from change of scope of consolidation
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period (Note 22)
See notes to consolidated financial statements.

36

2010

Thousands of
U.S. dollars(Note 4)2011

¥ 26,751 ¥ 28,191
32,16730,143
94
570
3,635
3,153
(1,080)
(929)
4,873
4,352
(1,541)(1,385)
244
941
(18)
(1,275)
—
(332)
6
18
1,600
—
5,193
—
816
(78)
4,869
(8,517)
1,657
(337)
1,891
11,420(4,006)(14,918)
2,121(1,934)
(159)
664
(196)
1,287
(94)
(170)
3,409
3,873
82,23754,736
1,410
1,353(4,864)(4,315)(12,885)(11,043)
65,89740,730$ 321,720
386,855
1,130
43,716(12,989)
58,605(18,533)
2,934
(216)
—
72
19,24262,4539,814
58,557
19,92822,742(48,178)
25,508(1,912)(2,357)(1,130)40,998989,020
16,957(58,497)(154,961)
792,508(12)
390(29,915)496(474)(1,843)
42—(10,672)

137—(40,830)576(160)(4,685)
1,229(2,137)(56,100)

(144)
4,690
(359,771)
5,965(5,701)(22,165)
505—(128,346)—(2,655)(191)(44,834)

1,547(2,622)(651)(103,697)—(31,930)(2,297)(539,194)¥ 6,561 ¥ (6,516)—(1,000)27,106
81,345(30,157)(10,986)—
15,000—(15,000)
10—(1,678)(1,444)(4,799)(4,800)
(346)
(469)
(41)
(82)
1
2
(3,343)56,048583
1,674
18,302(5,243)23,723
28,776
1,343
108
508
82
¥ 43,877 ¥ 23,723$ 78,906—
325,989(362,682)——
120(20,180)(57,715)(4,161)(493)
12(40,204)
7,011
220,108
285,304
16,152
6,109$ 527,685

Notes to Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statementsof TAIYO NIPPON SANSO CORPORATION (the“Company”) and consolidated subsidiaries are preparedon the basis of accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards,
and are compiled from the consolidated financial
statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan (the“FIEA”).
Under Japanese GAAP, a consolidated statementof comprehensive income is required from the year
ended March 31, 2011 and has been presented herein.

Accordingly, accumulated other comprehensive income
is presented in the consolidated balance sheets andthe consolidated statements of changes in net assets.
Information with respect to other comprehensive income
for the year ended March 31, 2010 is disclosed herein as
required under Japanese GAAP in Note 20.
As permitted by the FIEA, amounts of 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
agree with the sums of the individual amounts.
Certain amounts previously reported have been
reclassified to conform to the current year presentation.

2. Summary of Significant Accounting Policies(a) Consolidation

available-for-sale securities, net of the applicable income
taxes, reported as a separate component of net assets.
Non-marketable securities classified as available-for-salesecurities are carried at cost. Under the Companies Act
of Japan (the “Act”), unrealized gain or loss on availablefor-sale securities, net of the applicable income taxes, is
not available for distribution as dividends.

The accompanying consolidated financial statements
include the accounts of the Company and its 75
significant subsidiaries (70 in 2010). All significant
intercompany accounts and transactions have been
eliminated in consolidation.
In accordance with the regulations for the preparation of consolidated financial statements under the
FIEA, investments in certain unconsolidated subsidiaries
and significant affiliates are accounted for by the equity
method of accounting.
The differences at the dates of acquisition between
the cost and the underlying net equity in investments inconsolidated subsidiaries and the companies accounted
for by the equity method are amortized equally over theyears for which their effect are reasonably estimated.
Investments in unconsolidated subsidiaries andaffiliates other than those which are accounted for by theequity method are principally stated at cost.

(d) Inventories

Inventories of the Company and its consolidated domestic subsidiaries are stated at cost, determined by theaverage method, specific identification method or themoving-average method (lower than book value due todecline in profitability).
As for overseas consolidated subsidiaries, inventories
are stated at the lower of cost or market, cost being
determined by the first-in first-out method.
(e) Property, plant and equipment (except for theleased assets)(b) Cash equivalents

Property, plant and equipment is stated at cost, and for
the Company and its consolidated domestic subsidiaries,
depreciation is computed by the straight-line method
for buildings and leased equipment and by the declining balance method for other equipment based on theestimated useful lives of the respective assets. As forconsolidated overseas subsidiaries, depreciation is principally computed by the straight-line method based on theestimated useful lives of the respective assets.

For purposes of the statements of cash flows, theCompany considers all highly liquid instruments withmaturity of three months or less when purchased to be
cash equivalents.
(c) Investment securities

Investments in securities are classified into three categories: trading securities, held-to-maturity securities andavailable-for-sale securities. The Company and certain
consolidated subsidiaries have marketable securities
classified as available-for-sale securities, which are carriedat fair value with any changes in valuation difference on

The useful lives are as follows:
Buildings
3 to 50 years
Machinery
4 to 15 years

37(f) Intangible assets

Actuarial gains or losses and past service cost arerecognized for each defined benefit plan over a period
not exceeding the expected average remaining service
years of the employees participating in the plan. The
Company and its consolidated domestic subsidiaries recognize actuarial gains or losses evenly over 12 to 16 years
following the respective fiscal years when such gains orlosses are identified. Past service cost is amortized using
the straight-line method over 13 to 16 years.
The Company recognized the amount of unrecognized past service cost due to the revision of theretirement rule at April 1, 2003.
For transition benefit liability, the Company established the pension and severance indemnity trust bycontribution of shares owned by the Company, and theremaining transition benefit liability is being recognizedover a period of 15 years.

Goodwill and other intangible assets are stated at cost. As
for the Company and its consolidated domestic subsidiaries, goodwill and other intangible assets are amortizedby straight-line method based on their estimated usefullife. Consolidated overseas subsidiaries record goodwill
according to Accounting Standards Codification 350,
issued by the Financial Accounting Standards Boardof the USA (“Goodwill and Other Intangible Assets,”
former FASB Statement No. 142).
(g) Leases

Leased assets are initially accounted for at their acquisition costs and depreciated over the leased term by thestraight-line method with no residual value.
Finance leases contracted on or before March
31, 2008 that do not deem to transfer ownership ofthe leased property to the lessee are accounted for as
operating lease transactions.

(j) Allowance for directors’ and corporate auditors’
retirement benefits(h) Translation of foreign currency transactions

The allowance for directors’ and corporate auditors’
retirement benefits of the Company and certain consolidated domestic subsidiaries is provided at the amountwhich would have been required to be paid if all directors and corporate auditors had voluntarily terminatedtheir services as of the balance sheet date. This amount
has been determined in accordance with the internal
rules of the respective companies.
The allowance included ¥439 million ($5,280 thousand) and ¥436 million for corporate officers at March
31, 2011 and 2010, respectively.

All monetary assets and liabilities, regardless of shortterm or long-term, denominated in foreign currencies
other than receivables and payables hedged by qualified
foreign exchange forward contracts, are translated into
yen at the exchange rates prevailing as of the fiscal
year-end, and resulting gains and losses are included inincome.
The accounts of the overseas consolidated subsidiaries are translated into yen at the year-end exchange rates,
except for net assets, which are translated at historicalrates, and income statement items are translated into yen
at average exchange rates during the year. Differences
arising from the translations are stated under “Foreign
currency translation adjustments” and “Minority interests” in the accompanying consolidated balance sheets.

(k) Provision for loss on disaster

The provision for loss on disaster is provided for theestimated amounts for recovery of assets damaged by theGreat East Japan Earthquake.
The amount recorded in loss on disaster in theaccompanying consolidated statements of income corresponds to expenses required for recovery of damaged
assets, such as repair expenses of property, plant andequipment, and loss on disposal of inventories. The
amount includes ¥1,263 million ($15,189 thousand)recorded on the accompanying consolidated balance
sheet for an allowance for loss on disaster as of March
31, 2011.

(i) Pension and severance indemnities

Allowance for employees’ retirement benefits is recognized at the net total of the present value of the defined
benefit obligation at the balance sheet date, plus any
actuarial gains (less any actuarial losses) not yet recognized, minus the fair value of plan assets (if any) at thebalance sheet date out of which the obligations are to besettled directly. If the amount determined above is negative (an asset), such asset should be recorded as prepaid
pension expenses.
Net retirement benefit expense or income is recognized at the net total of current service cost and interest
cost, minus the expected return on any plan assets,
minus any actuarial gains (less any actuarial losses) andpast service cost recognized during the year, plus any
retirement benefits paid at a lump sum.
To determine the present value of a defined benefit
obligation and the related current service cost and, whereapplicable, the past service cost, the project unit credit
method are used.

(l) Provision for government surcharge

The provision for government surcharge is provided forthe estimated amounts based on the preliminary notification for payment related to claims that the Company
was in violation of the “Act on Prohibition of Private
Monopolization and Maintenance of Fair Trade.”(m) Research and development expenses

Research and development expenses are charged tooperations as incurred.

38

(n) Income taxes(q) Valuation allowance for investments

loans payable. Also, currency exchange swap agreements
have been used solely to hedge against risks of fluctuations in foreign exchange of long-term loans payable
denominated in foreign currencies, in compliance with
the internal rules of respective companies.
Under the “Accounting Standard for Financial
Instruments” (Statement No. 10, issued by the
Accounting Standards Board of Japan (ASBJ) on March
10, 2008) derivative transactions are valued at market
prices, except for hedging transactions whose gains orlosses are deferred and recorded in the balance sheet
until the hedged transactions are settled. Moreover, if
interest-rate swaps in Japan are specifically tied to thehedged loan transactions, unrealized gains or losses on
those swaps are not recognized in the consolidated financial statements as such gains or losses are to be offset
with those on the hedged transactions. Deferred hedge
accounting is applied to currency swaps.
Receivables and payables hedged by qualified foreignexchange forward contracts are translated at the corresponding foreign exchange forward contract rates.

To state the investment amount fairly, the allowance isprovided by considering the related parties’ assets andother factors.

(s) Recognition of revenues and costs ofconstruction contracts

Deferred tax assets and liabilities are determined basedon the differences between financial reporting and thetax bases of assets and liabilities and are measured using
the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
(o) Amounts per share

Presentation of diluted net income per share is not applicable as there were no potentially dilutive securities forthe years ended March 31, 2011 and 2010.
(p) Allowance for doubtful accounts

To cover possible losses on collection of receivables, theCompany and its consolidated domestic subsidiaries
provided for an allowance with respect to specific debts
of which recovery is doubtful, based on estimated writeoff amounts, after considering the likelihood of recovery
on an individual basis.

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

(r) Derivative and hedging transactions

The Company and certain consolidated subsidiaries haveused foreign exchange forward contracts solely in orderto hedge against risks of fluctuations in foreign currency
exchange rates relating to its receivables and payables
denominated in foreign currencies, and have used interest-rate swap agreements solely to hedge against risksof fluctuations in interest rates relating to its long-term
3. Changes in Accounting Standards(a) Equity method of accounting for investments

There was no effect as a result of this change on
operating income and income before income taxes andminority interests for the year ended March 31, 2011.

Effective from the beginning of the fiscal year, April 1,
2010, the Company has adopted the “AccountingStandard for Equity Method of Accounting forInvestments” (Statement No. 16, issued by the ASBJ
on March 10, 2008) and the “Practical Solution on
Unification of Accounting Policies Applied to Associates
Accounted for Using the Equity Method” (Practical
Issues Task Force (PITF) No. 24, issued by the ASBJ on
March 10, 2008).
There was no effect as a result of this change on
operating income and income before income taxes andminority interests for the year ended March 31, 2011.

(c) Income before minority interests

Effective from the beginning of the fiscal year,
April 1, 2010, the Company has adopted the “Cabinet
Office Ordinance Partially Revising Regulation for
Terminology, Forms and Preparation of Financial
Statements” (Cabinet Office Ordinance No. 5, issued on
March 24, 2009), based on the “Accounting Standard
for Consolidated Financial Statements” (Statement
No. 22, issued by the ASBJ on December 26, 2008).
Accordingly, “Income before minority interests” is newly
presented in the accompanying consolidated statements
of income.

(b) Asset retirement obligations

Effective from the beginning of the fiscal year, April 1,
2010, the Company has adopted the “AccountingStandard for Asset Retirement Obligations” (Statement
No. 18, issued by the ASBJ on March 31, 2008) and the“Implementation Guidance on Accounting Standard
for Asset Retirement Obligations” (Implementation
Guidance No. 21, issued by the ASBJ on March 31,2008).

(d) Presentation of comprehensive income

Effective from the beginning of the fiscal year, April 1,
2010, the Company has adopted the “AccountingStandard for Presentation of Comprehensive Income”(Statement No. 25, issued by the ASBJ on June 30,2010).

39

(e) Business combinations

December 26, 2008), the “Revised Accounting Standard
for Business Divestitures” (Statement No. 7, issued by
the ASBJ, Revised 2008), the “Accounting Standard
for Equity Method of Accounting for Investments”(Statement No. 16, issued by the ASBJ, Revised 2008),
and the “Revised Guidance on Accounting Standard forBusiness Combinations and Accounting Standard forBusiness Divestitures” (Guidance No. 10, issued by the
ASBJ, Revised 2008).

Effective from the beginning of the fiscal year, April 1,
2010, the Company has adopted the “AccountingStandard for Business Combinations” (Statement
No. 21, issued by the ASBJ on December 26, 2008),
the “Accounting Standard for Consolidated Financial
Statements” (Statement No. 22, issued by the ASBJ
on December 26, 2008), the “Partial Amendments to
Accounting Standard for Research and Development
Costs” (Statement No. 23, issued by the ASBJ on
4. U.S. Dollar Amounts
The translation of Japanese yen amounts into U.S. dollar
amounts is included solely for convenience, as a matterof arithmetical computation only, at the rate of¥83.15=U.S.$1, the approximate rate of exchange at

March 31, 2011. The translation should not be construed as a representation that Japanese yen have been,
could have been, or could in the future be converted into
U.S. dollars at the above or any other rate.

5. Investment Securities
At March 31, 2011 and 2010, information with respect
to available-for-sale securities for which market prices

Carrying
amountwere available was summarized as follows:

Millions of yen
2011
Acquisition
Unrecognized
costgain (loss)

Thousands of U.S. dollars
2011
Carrying
UnrecognizedamountAcquisition cost gain (loss)

Unrecognized gain items: Stock
Unrecognized loss items: Stock¥31,902
2,078¥20,4112,516¥11,490(437)$383,668
24,991$245,472
30,259$138,184(5,256)

Total¥33,981¥22,927¥11,053$408,671$275,731$132,928

Carrying
amountMillions of yen
2010
Acquisition
Unrecognized
costgain (loss)

Unrecognized gain items: Stock
Unrecognized loss items: Stock¥40,253929¥21,447
1,155¥18,806
(226)

Total

¥41,183¥22,603¥18,579

the years ended March 31, 2011 and 2010, respectively,
and an aggregate loss on sales of ¥9 million ($108 thousand) and ¥0 million for the years ended March 31,
2011 and 2010, respectively.

Proceeds from sales of securities classified as available-for-sale securities amounted to ¥59 million ($710
thousand) and ¥54 million with an aggregate gain on
sales of ¥18 million ($216 thousand) and ¥0 million for
6. Notes and Accounts Receivable(a) Notes and accounts receivable liquidated at March 31, 2011 and 2010 were as follows:
Millions of yen
2011
2010

¥4,074
1,399

Accounts receivable transferred by liquidation
Notes receivable transferred by liquidation¥2,8002,327

Thousands of
U.S. dollars
2011$48,996
16,825(b) Notes receivable discounted at March 31, 2011 and 2010 were as follows:
Millions of yen
2011
2010

¥70

Notes receivable discounted

40¥—

Thousands of
U.S. dollars
2011

$842

7. Short-Term Loans Payable, Long-Term Loans Payable and Lease Obligations
At March 31, 2011 and 2010, short-term loans payable
and the current portion of long-term loans payable

consisted of the following:

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011Bank loans
Current portion of long-term loans payable¥23,356
25,645¥17,825
29,604$280,890
308,419

Total¥49,002¥47,429$589,321

The average interest rates applicable to short-termloans payable outstanding at March 31, 2011 and 2010
are 1.26% and 1.51%, respectively.

Long-term loans payable at March 31, 2011 and2010 consisted of the following:
Millions of yen
2011
2010

Loans from banks due through 2018 at average interest rate of
1.89% in 2011 and 1.96% in 2010
1.81% unsecured bonds, payable in yen, due 2011
1.58% unsecured bonds, payable in yen, due 2012
1.13% unsecured bonds, payable in yen, due 2014

Thousands of
U.S. dollars
2011¥157,398—
10,00015,000¥161,197
15,00010,00015,000$1,892,940—
120,265
180,397¥182,398¥201,197$2,193,602

Short-term lease obligations at March 31, 2011 and2010 included in other current liabilities were ¥3,392

million ($40,794 thousand) and ¥1,525 million,
respectively.

The annual maturities of long-term loans payable
subsequent to March 31, 2011 are summarized asfollows:

The annual maturities of lease obligations
subsequent to March 31, 2011 are summarized asfollows:

Years ending March 31

Millions of yen

Thousands of
U.S. dollars

Years ending March 31

Millions of yen

Thousands of
U.S. dollars

2012
2013
2014
2015
2016
2017 and thereafter¥ 25,645
28,33149,17836,852
18,444
24,593$ 308,419
340,722591,437
443,199
221,816
295,767

2012
2013
2014
2015
2016
2017 and thereafter¥3,392
2,059
938
1,238
447
1,879

$ 40,794
24,762
11,281
14,8895,376
22,598¥183,044$2,201,371¥9,956$119,735

8. Pledged Assets
million ($1,371 thousand) and ¥307 million, and otherof ¥85 million ($1,022 thousand) and nil at March 31,
2011 and 2010, respectively, were as follows:

Assets pledged as collateral for short-term loans payableof ¥191 million ($2,297 thousand) and ¥136 million,
long-term loans payable of ¥643 million ($7,733 thousand) and ¥714 million, accounts payable-trade of ¥114

Millions of yen
2011
2010

¥1,156

Property, plant and equipment, at net book value¥2,110Thousands of
U.S. dollars
2011$13,903

9. Assets Replaced by National Subsidy
Assets replaced by national subsidy at March 31, 2011 and 2010 were as follows:
Millions of yen
2011
2010

¥411

Property, plant and equipment

41

¥411

Thousands of
U.S. dollars
2011$4,943

10. Income Taxes
Significant components of the Company’s deferred
tax assets and liabilities at March 31, 2011 and 2010
were as follows:

Income taxes applicable to the Company comprise corporation, enterprise and inhabitants’ taxes, which, in theaggregate, resulted in a statutory tax rate of 40.69% for
the year ended March 31, 2011.

Thousands of
U.S. dollars
2011

Millions of yen
2011
2010

Current deferred tax assets and liabilities
Deferred tax assets:
Accrued bonus
Loss from valuation of inventory
Accrued expenses
Provision for loss on disaster
Other¥2,509
334
1,755
513
1,928

¥2,134
313
2,153
—
1,975

$30,174
4,017
21,106
6,170
23,187

Deferred tax assets—subtotal
Valuation allowance

7,041
(650)

6,577
(171)

84,678(7,817)

Deferred tax assets—net
Deferred tax liabilities

6,391
(1)

6,405
(46)

76,861(12)

Net deferred tax assets¥6,390¥6,359$76,849

Deferred tax liabilities:
Adjustment of allowance for doubtful accounts

¥

(82)

¥ (134)

$

(82)
1

(134)
46

Deferred tax liabilities—subtotal
Offset by deferred tax assets¥

Net deferred tax liabilities
Noncurrent deferred tax assets and liabilities
Deferred tax assets:
Depreciation
Reserve for retirement benefits
Net operating loss carryforward for tax purposes
Other

(81)

¥

(88)

(986)
(986)
12

$

(974)

¥ 1,551
1,305
58
8,617

¥ 1,571
1,335
130
7,946

$ 18,653
15,695
698
103,632

Deferred tax assets—subtotal
Valuation allowance

11,533(5,195)

10,983(4,659)138,701(62,477)

Deferred tax assets—net
Deferred tax liabilities

6,337(4,115)

6,324(4,075)76,212(49,489)

Net deferred tax assets¥ 2,221¥ 2,248$ 26,711

Deferred tax liabilities:
Valuation difference on available-for-sale securities
Reserve for replacement of fixed assets
Reserve for special depreciation
Reserve for replacement of fixed assets—special
Depreciation
Other¥ (4,503)(5,082)(109)(365)(10,363)(11,432)¥ (7,553)(5,846)(145)(270)(10,634)(11,929)$ (54,155)(61,118)(1,311)(4,390)(124,630)(137,486)(31,856)
4,115(36,380)
4,075(383,115)
49,489¥(27,740)¥(32,305)$(333,614)

Deferred tax liabilities—subtotal
Offset by deferred tax assets
Net deferred tax liabilities

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in

the accompanying consolidated statements of income forthe year ended March 31, 2011 was as follows:
2011

Statutory tax rate
Entertainment expenses and others not deductible permanently
Dividends received and others
Valuation allowance for deferred tax assets
Provision of allowance for loss on disaster
Provision of allowance for government surcharge
Other

40.69%
1.15(7.48)
3.08
1.79
7.90
0.70

Effective tax rate

47.82%The reconciliation was omitted for the year ended
March 31, 2010 because the difference was less than 5%of the statutory tax rate.

42

11. Shareholders’ Equity(a) Dividends

and additional paid-in capital equals 25% of the common stock. Under the Act, the total amount of additional paid-in capital and legal reserve may be reversed
without limitation.
The Act also provides that common stock, legal
reserve, additional paid-in capital, other capital surplus
and retained earnings can be transferred among theaccounts under certain conditions upon resolution of theshareholders.

Under the Act, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For
companies that meet certain criteria, such as: (1) having
a Board of Directors, (2) having independent auditors,(3) having a Board of Corporate Auditors, and (4) theterm of service of the directors is prescribed as one year
rather than two years of normal term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends in kind) if the Company hasprescribed so in its articles of incorporation.
The Act permits companies to distribute dividendsin-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid oncea year upon resolution by the Board of Directors if thearticles of incorporation of the Company so stipulate.

(c) Treasury stock and treasury stock acquisitionrightsThe Act also provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders, which is determined by specific formula. Under the Act, stock acquisition rights,
which were previously presented as a liability, are now
presented as a separate component of shareholders’equity.
The Act also provides that companies can purchaseboth treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as aseparate component of shareholders’ equity or deducted
directly from stock acquisition rights.

(b) Increases/decreases and transfer of common
stock, reserve and surplus

The Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital(a component of capital surplus) depending on theequity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve
12. Leases

consolidated balance sheet if finance lease accounting had been applied to the finance lease transactions
currently accounted for as operating leases:(a) The following pro forma amounts represent theacquisition costs, accumulated depreciation and net
book value of leased property at March 31, 2011
and 2010, which would have been reflected in theMillions of yen
2011
2010

Acquisition costs:
Property, plant and equipment
Other assets
Accumulated depreciation:
Property, plant and equipment
Other assets
Net book value:
Property, plant and equipment
Other assets

Thousands of
U.S. dollars
2011¥4,448255¥7,699325$53,494
3,067¥4,704¥8,026$56,572¥3,288202¥5,608
227$39,543
2,429¥3,491¥5,835$41,984¥1,15953¥2,091
98$13,939637¥1,212¥2,190$14,576

computed by the straight-line method over the respective
lease terms for the years ended March 31, 2011 and2010, respectively.

Lease payments relating to finance lease transactions
accounted for as operating leases amounted to ¥718 million ($8,635 thousand) and ¥1,254 million, which wereequal to the depreciation expense of the leased assets

43

Future minimum lease payments (including theinterest portion thereon) subsequent to March 31, 2011

and 2010 for finance lease transactions accounted for as
operating leases are summarized as follows:

Years ending March 31

2011
2012
2013 and thereafter
Total
2010
2011
2012 and thereafter

Millions of yen

Thousands of
U.S. dollars

¥ 582
630

$ 6,999
7,577¥1,212$14,576

¥ 910
1,280

Total

¥2,190(b) Future minimum lease payments subsequent toMarch 31, 2011 and 2010 for non-cancelable

operating leases are summarized as follows:

Years ending March 31

2011
2012
2013 and thereafter
Total
2010
2011
2012 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 1,904
10,896$ 22,898
131,040¥12,801$153,951¥ 2,113
8,532

Total

¥10,646

13. Pension and Severance Indemnities
Certain consolidated overseas subsidiaries have adefined contribution benefit plan.
The funded status and amounts recognized in theaccompanying consolidated balance sheets at March 31,
2011 and 2010 and the components of net retirement
benefit expenses recognized in the accompanying consolidated statements of income for the years ended March
31, 2011 and 2010 are summarized as follows:

The Company has the cash balance plan (market ratelinked pension plan) and the defined contribution
benefit plan.
The Company’s consolidated domestic subsidiaries
have, jointly or severally, defined benefit plans, including
funded non-contributory tax-qualified retirement pension plans and a lump-sum retirement benefits plan,
which together cover substantially all full-time employees
who meet certain eligibility requirements.
(a) Retirement benefit liabilities

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Projected benefit obligation
Plan assets at fair market value¥ 34,610(29,454)¥ 34,450(29,494)$ 416,236(354,227)

Unfunded retirement benefit liabilities
Net unrecognized actuarial losses
Difference at change of accounting standard
Unrecognized prior service cost
Prepaid pension cost
Allowance for employees’ retirement benefits

5,156(12,779)(1,839)1,821
11,427(3,787)

4,956(12,209)(2,312)
2,131
11,230(3,796)62,008(153,686)(22,117)
21,900137,426(45,544)44

(b) Net retirement benefit expenses
Thousands of
U.S. dollars
2011

Millions of yen
2011
2010

Current service cost
Interest cost
Expected return on plan assets
Expense of actuarial loss
Net loss on change in accounting standard for employees’ retirement benefits
Adjustment for prior service cost

¥1,526
594
(693)
1,214
475
(237)

¥1,411
583
(660)
1,271
466
(241)

$18,352
7,144(8,334)
14,6005,713(2,850)Total of retirement benefit expenses¥2,879¥2,831$34,624843

786

10,138¥3,722¥3,617$44,762

Other
Total

(c) The principal assumptions used in determining
retirement benefit obligations and other components

for the Company and certain consolidated domestic
subsidiaries plans are shown below:
2011

2010

Discount rate
Rate of return on assets
Period of recognition of actuarial gains or losses
Period of recognition of transition gains or losses
Period of recognition of prior service costs
Allocation method of estimated retirement benefits

Mainly 2.0 %Mainly 3.0 %Mainly 12 to 16 years
Mainly 15 years
13 to 16 years
Evenly for period

Mainly 2.0 %Mainly 3.0 %Mainly 12 to 16 years
Mainly 15 years
13 to 16 years
Evenly for period

14. Contingent Liabilities
reguarantees by joint investors amounting to ¥458 million ($5,508 thousand) and ¥649 million and commitments to guarantees amounting to ¥279 million ($3,355
thousand) and ¥777 million, respectively.

At March 31, 2011 and 2010, the Company and certain
consolidated subsidiaries had contingent liabilities as
guarantor of indebtedness, amounting to ¥6,686 million($80,409 thousand) and ¥8,442 million, which included
15. Financial Instruments(a) Policy for financial instruments

liquidity risk arising from those payables the Groupmanage the risk by preparing cash management plansmonthly.
Short-term loans payable are raised mainly for shortterm capital and long-term loans are mostly taken out
principally for the purpose of making capital investments
and long-term capital. Some of those loans with variableinterest rates are exposed to interest rate fluctuation risk.
However, to reduce such risk and fix interest expense forthose loans bearing interest at variable rates, the Grouputilizes interest-rate swap transactions for each loan contract to hedge such risks and to fix interest expenses.
Regarding derivatives, the Group enters into forward
foreign exchange contracts to reduce the foreign currency
exchange risk arising from the trade receivables and payables denominated in foreign currencies. The Group also
enters into interest-rate and foreign currency swap transactions to reduce fluctuation risk deriving from interest payable for loans and bonds bearing interest at variable rates.
Information regarding the method of hedge accounting, hedging instruments and hedged items, hedging
policy, and the assessment of the effectiveness of hedging
activities is found in Note 2. (r). Derivative and hedging
transactions.
In conducting derivative transactions, the division in
charge of each derivative transaction follows the internal

In consideration of plans for capital investment, theCompany and consolidated subsidiaries (collectively, the“Group”) raise funds through bank loans or bond issues.
The Group manages temporary cash surpluses throughbank loans. The Group operates funds only throughshort-term deposits. The Group uses derivatives only forthe purpose of reducing risk and does not enter into
derivatives for speculative or trading purposes.
(b) Types of financial instruments and related risk
and risk management

Notes and accounts receivable–trade are exposed tocredit risk in relation to customers. In accordance with
the internal policies of the Group for managing credit
risk arising from receivables, each related division monitors credit worthiness of their main customers periodically, and monitors due dates and outstanding balancesby individual customer.
Investment securities are exposed to market risk.
Those securities are composed of mainly the shares ofcommon stock of other companies with which theGroup has business relationships. The Group also
reviews their fair value quarterly.
Notes and accounts payable–trade have payment due
dates within one year. Although the Group is exposed to45policies and the Group enters into derivative transactions
only with financial institutions which have a soundcredit profile.

market price, if available. When there is no market priceavailable, fair value is reasonably estimated. In addition,
the notional amounts of derivatives in Note 16.
“Derivative and Hedging Activities” are not necessarily
indicative of the actual market risk involved in derivativetransactions.

(c) Fair value of financial instruments

The fair value of financial instruments is based on their(1) Fair value of financial instruments
Carrying amount on the consolidated balance sheet as of March 31, 2011 and estimated fair value and differences offinancial instruments were as follows:

Carrying
amountMillions of yen
2011
Fair
value

Cash and deposits
Notes and accounts receivable–trade
Investment securities:
Available-for-sale securities¥ 44,549
126,207¥ 44,549
126,207

33,981

33,981

Total assets¥204,738

Notes and accounts payable–trade
Short-term loans payable
Long-term loans payable
Total liabilities

Difference

Thousands of U.S. dollars
2011
Carrying
Fair
amountvalue
Difference

¥

—
—
—

408,671408,671¥204,738¥—$2,462,273¥ 66,896
23,356
223,044¥ 66,896
23,356226,030

¥

—
—
2,986

¥313,297¥316,283¥2,986

Carrying
amountMillions of yen
2010
Fair
value

Cash and deposits
Notes and accounts receivable–trade
Investment securities:
Available-for-sale securities¥ 24,029
127,687¥ 24,029
127,687

41,183

41,183

Total assets¥192,899

Notes and accounts payable–trade
Short-term loans payable
Long-term loans payable
Total liabilities$ 535,767
1,517,823$ 535,767
1,517,823$——$2,462,273$—$ 804,522
280,890
2,682,429$ 804,522
280,8902,718,340$$3,767,853$3,803,764$35,911———35,911

Difference¥——¥192,899¥—¥ 67,926
17,825
230,802¥ 67,926
17,825
234,035¥¥316,554¥319,787¥3,233

—
—
—
3,233

payable shown as “Short-term loans payable” in consolidated balance sheets are included in “Long-term loans
payable” in the table above.

The table above does not include financial instruments for which it is extremely difficult to determine thefair value. For information on those items, please refer tonote (2) below. The current portion of long-term loans

Valuation method of fair value of financial instruments and information on investment securities and derivativetransactions were as follows:
Cash and deposits and notes and accounts
receivable–tradeLong-term loans payable

The fair value of bonds is measured at the quoted
market price. The fair value of long-term loans payable other than bonds is based on the present value ofthe total of principal and interest discounted by theinterest rate combined of the risk free rate and credit
spread. Interest-rate swap transactions are utilized formost variable rate loans to fix interest expense. Allinterest-rate swap transactions meet the criteria for the
short-cut method of interest-rate swap transactions
and are integrally processed with those loans. Therefore,
the fair value of those loans is based on the present
value of the total of principal and interest processedwith interest-rate swap discounted by the rate above.

Since these items are settled in a short period of time,
their carrying amount approximates fair value.
Investment securities

The fair value of stocks is based on quoted market pricesof the stock exchange. For information on securities
classified by holding purpose, please refer to Note 5.
“Investment securities.”
Notes and accounts payable–trade and short-termloans payable

Since these items are settled in a short period of time,
their carrying amount approximates fair value.

46

(2) Financial instruments for which it is extremely difficult to determine the fair value
Thousands of
U.S. dollars
2011

Millions of yen
2011
2010

¥19,588—

Unlisted stocks
Preferred stocks$235,574—¥19,995
1,000(3) Redemption schedule for financial assets with maturities subsequent to March 31, 2011 and 2010
Thousands ofMillions of yen
U.S. dollars
2011
2010
2011
Due in one year or less

¥ 44,549
126,207

Cash and deposits
Notes and accounts receivable–trade$ 535,767
1,517,823¥ 24,029
127,687(4) Redemption schedule for long-term loans payable as of March 31, 2011 and 2010
Millions of yen

Thousands of
U.S. dollars

Years ending March 31

2011

2011

Years ending March 31

Millions of yen
2010

2012
2013
2014
2015
2016
2017 and thereafter¥ 40,645
38,33149,17851,852
18,444
24,590$ 488,815
460,986
591,437
623,596
221,816
295,731$2,682,429

2011
2012
2013
2014
2015
2016 and thereafter¥ 29,606
39,611
26,87240,00464,94429,761¥223,044¥230,802(5) Unused overdraft agreement and loan commitmentline were ¥49,556 million ($595,983 thousand) and¥52,555 million as of March 31, 2011 and 2010,
respectively.

16. Derivative and Hedging Activities
Derivative transactions for which hedge accounting is applied for the year ended March 31, 2010 were as follows:(a) Currency-related

Contract
amountHedged item

Deferral hedge accounting
Foreign exchange forward contracts:
Sell:
USD
TWD
MYD
Buy:
USD
EUR
GBP
CHF
TWD
Foreign currency swaps:
Sell:
USD
Buy:
SGD

Accounts receivable–trade

Accounts payable–tradeLong-term loans payable

Total

47

¥ 147
3
1,079

Millions of yen
2011
Due after
one year

Fair
value

¥

*

—
—
—

3,111
157
10
40
703

—
—
—
—
—

975

975

931

931

¥7,161¥1,907

Contract
amountHedged item

Deferral hedge accounting
Foreign exchange forward contracts:
Sell:
USD
TWD
Buy:
USD
EUR
GBP
CHF
SGD
TWD
Foreign currency swaps:
Sell:
USD
Buy:
SGD

Millions of yen
2010
Due after
one year

Fair
value

¥

*

Accounts receivable–trade
¥ 104
6

—
—

Accounts payable–trade
3,769
200
22
655
12
380

—
—
—
—
—
—

350

350

Long-term loans payable

Total

1,888

872

¥7,390¥1,223* The estimated fair value of the foreign exchange forward contracts and foreign currency swaps is included in the fair value of thereceivables/payables as the hedged items.
Thousands of U.S. dollars
2011
Contract
Due after
Fair
amountone yearvalue

Hedged item

Deferral hedge accounting
Foreign exchange forward contracts:
Sell:
USD
TWD
MYD
Buy:
USD
EUR
GBP
CHF
TWD
Foreign currency swaps:
Sell:
USD
Buy:
SGD

Accounts receivable–trade$ 1,768
36
12,977

Accounts payable–tradeLong-term loans payable

Total

$

—
—
—

37,414
1,888
120
481
8,455

—
—
—
—
—

11,726

11,726

11,197

11,197$86,121$22,934** The estimated fair value of the foreign exchange forward contracts and foreign currency swaps is included in the fair value of thereceivables/payables as the hedged items.

(b) Interest-related
Millions of yen

Thousands of U.S. dollars

2011

Short-cut method
Interest-rate swap agreements:
Receive floating/Pay fix

Hedged item

Contract
amountDue after
one yearLong-term loans payable¥66,453 ¥57,521

2011
Fair
value

*

Contract
amountDue after
one year$799,194 $691,774

Fair
value

*

Millions of yen
2010

Short-cut method
Interest-rate swap agreements:
Receive floating/Pay fix

Hedged item

Contract
amountDue after
one yearLong-term loans payable¥61,109 ¥49,520

Fair
value

*

* The estimated fair value of the interest-rate swap agreements is included in the fair value of long-term loans payable as the hedged item.

48

17. Research and Development Costs
million ($47,192 thousand) and ¥4,137 million,
respectively.

Research and development costs included in cost of sales
and selling, general and administrative expenses for theyears ended March 31, 2011 and 2010 totaled ¥3,924

18. Gain and Loss on Sales and Retirement of Noncurrent Assets
Significant components of the gain on sales of noncurrent assets of ¥57 million ($686 thousand) and ¥151
million for the years ended March 31, 2011 and 2010,
respectively, were as follows:
Millions of yen
2011
2010

Land

¥57

¥151

Significant components of the loss on sales andretirement of noncurrent assets of ¥374 million ($4,498
thousand) and ¥1,146 million for the years ended
March 31, 2011 and 2010, respectively, were as follows:

Thousands of
U.S. dollars
2011

Millions of yen
2011
2010

$686

Machinery

¥—

¥631

Thousands of
U.S. dollars
2011

$—

19. Impairment Loss
thousand) and ¥570 million for the years ended March
31, 2011 and 2010, respectively, due to lack of recovery
provability of market value or recovery provability in thenear future. Recoverable amounts for relevant assets are
net selling price (selling price based on contract, valuation by property tax or valuation by inheritance tax).

The Company and its consolidated subsidiaries categorize business assets by business segmentation and idle
assets without a specific future use are categorized separately. For idle assets affected by a decrease in the fairmarket value of land, the book values are written down
to the recoverable amount and such write-downs wererecorded as impairment loss of ¥94 million ($1,130
20. Comprehensive Income

Other comprehensive income for the year ended March 31, 2010 consisted of the following:
Millions of yen
2010

Other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Pension liability adjustment of foreign subsidiaries
Share of other comprehensive income of associates accounted for using the equity method¥7,777
139
(862)
38
117

Total other comprehensive income¥7,210Total comprehensive income for the year ended March 31, 2010 consisted of the following:
Millions of yen
2010

Total comprehensive income attributable to:
Owners of the Company
Minority interests¥22,968
1,133

Total comprehensive income¥24,10149

21. Segment Information
The “Industrial gas” segment produces and sells
gases and related equipment used in the domestic andoverseas steel and chemical industry. The plant engineering business is included in this segment considering thesimilarities of major customers.
The “Electronics” segment produces and sells gases
and related equipment used in the domestic and overseas
electronics industry.
The “Energy” segment sells liquefied petroleum gas
in Japan.
The “Other” segment mainly consists of the medical-related business which sells medial gas, and the thermos business which produces and sells housewares.

Effective from the beginning of the fiscal year, April 1,
2010, the Company has adopted the “AccountingStandard for Disclosures about Segments of anEnterprise and Related Information” (Statement No. 17,
issued by the ASBJ on March 27, 2009) and the“Implementation Guidance on the Accounting Standard
for Disclosures about Segments of an Enterprise andRelated Information” (Implementation Guidance No.
20, issued by the ASBJ on March 21, 2008). The segment information for the year ended March 31, 2010
under this new accounting standard is also disclosed
hereunder as required.
(a) Overview of reportable segments(b) Method of calculating net sales, income (loss),
assets, liabilities and other items by reportablesegment

The reportable segments of the Company are components for which discrete financial information is available
and whose operating results are regularly reviewed by the
Board of Directors to make decisions about resource
allocation and to assess performance.
The Company is made up of segments based on
individual business headquarters classified by products,
services and sales markets. Therefore, the reportable segments of the Company consist of “Industrial gas,”“Electronics,” “Energy” and “Other.”Accounting policies of the reportable segments are
consistent to those described in Note 2. Summary of
Significant Accounting Policies. Segment income isbased on operating income. Intersegment sales ortransfers are based on prevailing market price.

(c) Net sales, income (loss), assets, liabilities and other items by reportable segment

Industrial gas

Net sales:
Sales to third parties
Intersegment sales
or transfers¥288,644

Millions of yen
2011
Reportable segments
Electronics
EnergyOther¥126,495¥37,643¥30,836

Total¥483,620

Adjustments Consolidated¥—¥483,620

1,724

102

1,848

2,768

6,442

(6,442)—

Total
Segment income(operating income)

290,368

126,597

39,49133,604490,062(6,442)

483,620¥ 24,128¥

8,453¥ 1,400¥ 3,041¥ 37,024¥(1,555)¥ 35,468

Other item:
Depreciation expenses¥ 19,594

¥

9,607

¥

¥ 1,628¥ 31,668¥¥ 32,167

Industrial gas

Net sales:
Sales to third parties
Intersegment sales
or transfers¥261,003

837

Millions of yen
2010
Reportable segments
Electronics
EnergyOther¥110,636¥32,344¥29,406

Total¥433,390

499

Adjustments Consolidated¥—¥433,390

1,024

106

1,358

2,670

5,160

(5,160)—

Total
Segment income(operating income)

262,027

110,742

33,70332,077438,551(5,160)433,390¥ 17,981¥

6,583¥ 1,265¥ 3,306¥ 29,136¥(1,580)¥ 27,556

Other item:
Depreciation expenses¥ 18,018

¥

9,466

¥

¥ 1,550¥ 29,584¥¥ 30,143

50

548

559

Industrial gas

Net sales:
Sales to third parties
Intersegment sales
or transfers
Total
Segment income(operating income)
Other item:
Depreciation expenses

Thousands of U.S. dollars
2011
Reportable segments
Electronics
EnergyOther
Total$3,471,365 $1,521,287$452,712

Adjustments Consolidated$370,848 $5,816,236$— $5,816,236

20,734

1,227

22,22533,28977,474

3,492,099

1,522,514

474,937

404,137

5,893,710(77,474) 5,816,236(77,474)—$ 290,174 $ 101,660$ 16,837$ 36,572 $ 445,268$(18,701) $ 426,554$ 235,646 $ 115,538$ 10,066$ 19,579 $ 380,854$ 6,001 $ 386,855

Notes: 1. Adjustments for segment income of ¥(1,555) million ($(18,701) thousand) and ¥(1,580) million as of March 31, 2011 and 2010
include intersegment eliminations of ¥(186) million ($(2,237) thousand) and ¥(196) million, and corporate general administration
expenses which mainly consisted of basic research and development expenses and are not allocable to each reportable segmentof ¥(1,369) million ($(16,464) thousand) and ¥(1,383) million, respectively.
2. The Company does not allocate assets to reportable segments.

(d) Information by geographical area

(1) Net salesJapan¥358,978Japan$4,317,234(2) Property, plant and equipment
Millions of yen
2011
The UnitedStatesOthers¥78,586¥46,054

Thousands of U.S. dollars
2011
The UnitedStatesOthers$945,111$553,867

Millions of yen
2011
The UnitedStatesOthers

Total

Japan

¥483,620¥167,331¥68,627¥20,535

Thousands of U.S. dollars
2011
The UnitedStatesOthers

Total

Japan

$5,816,236$2,012,399$825,340$246,963

Total¥256,494

Total$3,084,714(e) Information about major customers

Information about major customers is not disclosed since there are no outside customers that make up more than 10% of
net sales on the consolidated statements of income.
(f) Information on impairment loss by reportable segments

Impairment loss

Impairment loss

Industrial gas

Electronics

¥—

¥39

Industrial gas

Electronics

$—

$469

Millions of yen
2011
Energy
Other

¥—

¥—

Corporate/Eliminations

Total

¥55

¥94

Thousands of U.S. dollars
2011
EnergyOther
Corporate/Eliminations

$—

$—

$661

Total

$1,130(g) Information on amortization and unamortized balance of goodwill by reportable segments

Amortization
Unamortized balance

Amortization
Unamortized balance

Industrial gas

Electronics¥ 3,996
42,831¥0
6

Industrial gas

Electronics$ 48,058
515,105$ 0
72

Millions of yen
2011
Energy
Other

¥255
505

¥—
—

Corporate/Eliminations

Total

¥—
—

¥ 4,252
43,343Thousands of U.S. dollars
2011
EnergyOther
Corporate/Eliminations$3,067
6,073

51

$—
—

$—
—

Total

$ 51,137
521,263(h) Information on amortization and unamortized balance of negative goodwill which resulted from businesscombinations prior to April 1, 2010 by reportable segments

Industrial gas

Electronics

¥538
570

¥30
65

Amortization
Unamortized balance

Industrial gas

Electronics$6,470
6,855

$361
782

Amortization
Unamortized balance

Millions of yen
2011
Energy
Other

¥25
60

Corporate/Eliminations

Total

¥—
—

¥616
757

¥22
60

Thousands of U.S. dollars
2011
EnergyOther
Corporate/Eliminations

$301
722

$265
722

$—
—

Total

$7,408
9,104

Information about operations in different business segments, geographical segments and overseas sales of the Company
and its consolidated subsidiaries for the year ended March 31, 2010, which is based on the previous standard, is as follows:(a) Business Segments

Year ended or as of March 31, 2010

I. Sales:(1) Sales to third parties(2) Intersegment sales
Total sales
Operating costs and expenses
Operating income
II. Assets, depreciation expenses
and capital expenditure:
AssetsDepreciation expenses
Impairment loss
Capital expenditureGasbusiness

Millions of yen
Plant and gas Housewares
equipment
businessbusinessand others
Total

Eliminations
or corporate

Consolidated¥300,451
5
300,457
278,014¥ 22,443¥113,997
10,012
124,009117,362¥ 6,646¥18,941
34
18,976
15,563¥ 3,412¥433,390
10,052
443,442
410,940¥ 32,502¥—(10,052)(10,052)(5,105)¥ (4,946)¥433,390—
433,390
405,834¥ 27,556¥464,741¥ 28,044¥—¥ 32,425¥ 70,939¥ 1,811¥—¥ 5,875¥21,641¥ 748¥—¥ 1,442¥557,322¥ 30,604¥—¥ 39,743¥ 59,893¥ (461)¥570¥ (1,377)¥617,215¥ 30,143¥570¥ 38,366

Notes: 1. The business segments are classified into “Gas business,” “Plant and gas equipment business” and “Housewares business andothers” on the basis of the kind and character of products and merchandise.
2. The amounts of the operating costs and expenses included in the column “Eliminations or corporate” for the fiscal year ended
March 31, 2010 were ¥3,541 million, which mainly consisted of the expenses in business administration department.
3. The amounts of the corporate assets included in the column “Eliminations or corporate” as of March 31, 2010 were ¥86,215
million, which mainly consisted of surplus working funds, investment securities and the assets in the business administration
department.

52

(b) Geographical Segments

Year ended or as of March 31, 2010

Japan

North
America

Sales:
Sales to third parties
Intersegment sales
Total sales
Operating costs and expenses
Operating income
Assets¥334,444
3,390
337,834
313,802¥ 24,031¥332,399¥ 77,554
5,776
83,331
78,369¥ 4,962¥163,106Millions of yen
Othercountries
Total¥21,391
3,136
24,52822,934¥ 1,594¥35,898

Eliminations
or corporate¥433,390
12,303445,694
415,106¥ 30,587¥531,404¥—(12,303)(12,303)(9,271)¥ (3,031)¥ 85,810

Consolidated¥433,390—
433,390
405,834¥ 27,556¥617,215

Notes: 1. Main countries or areas other than Japan
North America: the United States
Other countries: Singapore, Malaysia, Philippines, China, Taiwan, etc.
2. The amounts of the operating costs and expenses included in the column “Eliminations or corporate” for the fiscal year ending
March 31, 2010 were ¥3,541 million, which mainly consisted of the expenses in business administration department.
3. The amounts of the corporate assets included in the column “Eliminations or corporate” as of March 31, 2010 were ¥86,215
million, which mainly consisted of surplus working funds, investment securities and the assets in the business administration
department.

(c) Overseas Sales

sales (other than exports to Japan) of its overseas consolidated subsidiaries, for the year ended March 31, 2010 issummarized as follows:

Overseas sales, which include export sales of theCompany and its domestic consolidated subsidiaries andYear ended or as of March 31

Overseas sales
Consolidated net sales
Ratio of overseas sales to consolidated net sales

North America

Millions of yen
Other¥67,634¥37,448

15.6%

8.6%

Total

¥105,082
433,390
24.2%

Notes: 1. Main countries or areas
North America: the United States
Other countries: Singapore, Malaysia, Philippines, China, Taiwan, etc.
2. “Overseas sales” are sales outside of Japan by the Company and its consolidated subsidiaries.

22. Supplementary Cash Flow Information
Cash and cash equivalents as of the years ended March
31, 2011 and 2010 were reconciled to the accounts

reported in the consolidated balance sheets as follows:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Cash and deposits
Time deposits with maturities of more than three months¥44,549(672)¥24,029(306)$535,767(8,082)

Cash and cash equivalents¥43,877¥23,723$527,685

The acquisition cost and net payments for assets andliabilities of Matheson K-Air India Pte. Ltd. and WesternInternational Gas & Cylinders Inc. acquired throughstock purchase, for the year ended March 31, 2011 wereas follows:
Millions of yen

Thousands of
U.S. dollars

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities¥ 1,944
6,680
4,451
(602)
(1,618)$ 23,379
80,33753,530(7,240)(19,459)

Acquisition cost of assets
Cash and cash equivalents(10,855)
183(130,547)
2,201

Purchase of investments in subsidiaries resulting in change in scope of consolidation¥(10,672)$(128,346)

53

The acquisition cost and net payments for assets andliabilities of Valley National Gases WV L.L.C. and VNG
Propane L.L.C., acquired through stock purchase by

Matheson Tri-Gas, Inc., a consolidated subsidiary of theCompany, for the year ended March 31, 2010 were as
follows:
Millions of yen

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities¥ 6,526
31,83931,393(2,752)(10,206)

Acquisition cost of assets
Cash and cash equivalents(56,800)
699

Purchase of investments in subsidiaries resulting in change in scope of consolidation¥(56,100)

The acquisition cost and net payments for assets andliabilities of ETOX, Inc., acquired through an asset purchase by Matheson Tri-Gas, Inc., a consolidated

subsidiary of the Company, for the year ended March
31, 2010 were as follows:
Millions of yen

Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities

¥

697
1,634
221
(127)
(41)

Acquisition cost of assets
Cash and cash equivalents(2,384)247

Payments for asset purchase¥(2,137)

Sales amount and proceeds from stock sales, andassets and liabilities of Tri-Gas Technologies which were

excluded from consolidation upon stock sales for theyear ended March 31, 2010 were as follows:
Millions of yen

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Minority interests
Foreign currency translation adjustments
Gain on sales of subsidiaries’ stocks

¥

657
1,071
(313)
(575)
(283)
(55)
1,225

Sales amount of stocks
Cash and cash equivalents

1,725
(177)

Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation¥1,547

23. Subsequent Events
Appropriation of retained earnings

consolidated financial statements for the year ended
March 31, 2011, were approved at the shareholders’meeting held on June 29, 2011.

The following appropriations of retained earnings, whichhave not been reflected in the accompanying

Cash dividends—¥6.00 ($0.072) per share

54

Millions of yen

Thousands of
U.S. dollars¥2,399$28,851

Report of Independent Auditors

55

Investor Information(At March 31, 2011)

Head Office:Toyo Building, 1-3-26, Koyama, Shinagawa-ku, Tokyo 142-8558, Japan
Number of Employees:

10,269Date of Incorporation:

October 1910
Number of Shares:

Authorized—1,600,000,000

Issued—403,092,837

Minimum Trading Unit:

1,000 shares
Number of Stockholders:

24,365
Transfer Agent for Shares:

Mizuho Trust & Banking Co., Ltd.
Major Stockholders:Thousands ofShares Owned

Major Stockholders

Mitsubishi Chemical Corporation
JFE Steel Corporation
Taiyo Nippon Sanso Client Shareholding Society
Meiji Yasuda Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)
Mizuho Corporate Bank, Ltd.
Dai-ichi Mutual Life Insurance Company
The Norinchukin Bank
National Mutual Insurance Federation ofAgricultural Cooperatives
The Master Trust Bank of Japan, Ltd. (Trust Account)

Percentage of
Total

60,94725,254
18,221
16,007
14,875
14,484
10,037
10,00015.12%
6.26
4.52
3.97
3.69
3.59
2.48
2.48

8,431
8,348
186,607

2.09
2.07
46.29%

Common Stock Price Range and Trading Volume:(Yen)(Thousand Shares)

1,250

100,000

1,000

80,000Common Stock Price Range

750

60,000500

40,00020,000250
Trading Volume00
1st Quarter 2nd Quarter 3rd Quarter
Fiscal year 201056

4th Quarter

1st Quarter 2nd Quarter 3rd Quarter
Fiscal year 2011

4th Quarter

Toyo Building, 1-3-26, Koyama,
Shinagawa-ku, Tokyo 142-8558, Japan
Tel: 81-3-5788-8000
www.tn-sanso.co.jp

Printed in Japan