TOYO KANETSU K.K.

Annual Report 2013
For the year ended March 31, 2013

Profile
Toyo Kanetsu K.K. (TKK) was established in 1941. Since that time, TKK has
continued to meet the requirements of the industry through our policy of“Customers First.”
The Plant & Machinery Business was established in 1950 when in-house welding
technology was developed for welded storage tanks. Since then, our expertise has
expanded to provide customers with various kinds of storage tanks consisting of
more than 5,300 units varying from crude oil storage tanks to LNG storage tanks.
In particular, we are proud of our outstanding track record in LNG storage tankconstruction in Japan and at overseas sites in Asia, Africa, the Middle East,
Oceania and the Western Hemisphere. Our technical expertise and our outstanding
record of “safety, quality and delivery” have been recognized and appreciated bymajor clients throughout the world.
The Material Handling Systems Business was begun in 1953 for manufacture
and installation of highly standardized conveyor systems. Since that time, thebusiness has continued to develop the technology to meet the needs of our clients. It
supplied one of the largest airport baggage handling systems in the world in 1998 at
Kuala Lumpur International Airport in Malaysia. Also, as a leading provider
company of logistics solutions in Japan, the business has successfully completed
numerous projects such as distribution center systems, truck terminal systems, food
distribution processing centers and postal sorting systems. The business became asubsidiary company of TKK under the name of Toyo Kanetsu Solutions K.K. in 2002
in order to maximize efficiency and also to vitalize TKK Group companies.
The Building Construction Business was started in 1989 for construction ofapartment houses with the application of modular steel frame structures. The
business has expanded to handling total projects from planning to design andexecution, based on its steel structure buildings, supporting a wide range of
construction, from individual residences to housing complexes, other buildings, andlarge-scale shopping complexes. In recent years, we have also pushed into the
steel

pipe

pilingbusiness,makingnewefforts

towardenvironmentallyfriendly execution.
TKK will continue to provide the advanced technology to answer the needs of ourclients for today and tomorrow.

Contents
Consolidated Financial Highlights ····················································· 2
To Our Shareholders ······································································ 3
Board of Directors, Auditors and Corporate Officers································ 5
Lines of Business ·········································································· 5
TKK Group Companies ·································································· 6
Analysis of Operating Environment and Results ··································· 7
Business Risks ············································································· 8
Financial Section
Consolidated Balance Sheet ························································· 10
Consolidated Statement of Income and Comprehensive Income ·············· 12
Consolidated Statement of Changes in Net Assets ······························· 13
Consolidated Statement of Cash Flows ············································ 16
Notes to the Consolidated Financial Statements ································· 17
Report of Independent Auditors····················································· 38
Corporate Data············································································· 39
Directory···················································································· 39

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31
Thousands of
U.S. dollars

Millions of yen

2013

2012

2011

2010

2009

2013

¥ 45,504
24,027
14,966
1,918
4,593
2,272
1,527
1,971
477

¥ 40,733
23,625
11,624
3,338
2,146
1,474
714
1,083
482

¥ 48,718
26,70917,590
2,180
2,239
2,590
158
(35)
603

¥ 50,446
24,22420,897
2,633
539
2,153
3,863
3,560
504

¥ 47,661
26,392
11,961
5,020
592
3,696
1,867
3,005
533

$484,031
255,573
159,201
20,40348,854
24,165
16,23820,966
5,070

Shareholders’ Equity
Accumulated Other Comprehensive Income
Minority Interests
Total Liabilities and Net Assets¥37,149
13,655
6,810
465
58,07923,1694,048
29,5301,174
158
58,079¥32,750
12,5795,920
244
51,493
18,5933,275
28,724794
107
51,493¥33,792
12,5466,437
281
53,056
19,582
3,735
29,205426
108
53,056¥37,748
12,4907,792
338
58,36820,842
7,250
29,549618
109
58,368¥33,705
13,046
7,920
274
54,94521,555
5,375
27,824102
89
54,945$395,165
145,249
72,4394,942
617,795
246,451
43,056314,119
12,492
1,677
617,795

Order Backlog

46,45950,94050,80757,37966,071

494,193

Per Share:
Net Income
Cash Dividends
Shareholders’ Equity

2013¥12.53
4.00
257.71

2012
¥5.93
4.00
244.77

2011
¥1.31
5.00
246.042010¥28.754.00
250.392009¥ 22.99
4.00
222.092013
13,309787

2012
13,626694

2011
14,109678

2010
14,027631

2009
14,400629

For the Years Ended March 31:
Net Sales
Plant & Machinery Business
Material Handling Systems Business
Building Construction Business
Real Estate Utilizing Business
Other
Operating Income
Net Income
Comprehensive Income
Cash Dividends
At March 31:
Current Assets
Property, Plant and Equipment
Investments and Advances
Intangibles
Total Assets
Current Liabilities
Long-Term Liabilities

Yen

Number of Shareholders
Number of Employees

U.S. dollars

The U.S. dollar amounts in this annual report represent translations of Japanese yen at the rate of \94.01=$1.00, solely for readers’ convenience.

2

Toyo Kanetsu K.K. Annual Report 2013

2013
$0.13
0.04
2.74

To Our Shareholders
I would like to begin this message by expressing my deepest gratitude to all of our shareholders for their support of the Toyo
Kanetsu K.K. (TKK) Group.
I hope you will find this report on our business activities and results for fiscal year 2013 informative and useful.
In fiscal year 2013, the TKK Group achieved growth in both earnings and profits as a solid performance by our Plant &Machinery Business was supplemented by an earnings recovery at the Material Handling Systems Business.
The dividend has been set at ¥4 per share from the perspective of continuous stable distribution. From November 2012 toJanuary 2013, the TKK Group acquired approximately ¥800 million worth of treasury stock as a measure to promoteshareholder return from a long-term perspective.
In consideration of growth in our earnings and changes in business environment, we are now implementing a medium-termbusiness plan for fiscal years 2013–2015 that focuses more than ever before on managing our operations from a longer-term
perspective. Through this plan, we are endeavoring to maximize the TKK Group’s corporate value and meet the expectationsof our shareholders and other stakeholders.
In closing, I would like to thank you in advance for your understanding and continued support of our efforts.
August 2013
Takeshi Mizukami
President and Representative Director

TKK Group’s Medium-Term Business Plan (FY2013-2015)
The Group’s medium-term business plan seeks to realize our management vision of “creating a corporate group with a stableearnings structure” while adhering to the Group’s basic policy of “contributing to society while ensuring customer satisfaction
and winning the trust of our customers by providing the most appropriate products (systems) and services in various industrial
areas.”
Under this policy, we aim to implement management from the standpoint of all stakeholders such as stockholders, customers,
partners, and employees, and to maximize the value of our group enterprises.
Mid- and Long-Term Management Strategy and Issues To Be Addressed
To realize the management vision noted above, we have established a medium-term business plan for fiscal years 2013–2015.
The plan includes three core initiatives designed to fulfill our goal of “securing stable orders, sales and profits by winning thetrust and confidence of our customers.”(1) Strengthen marketing and proposal capabilities for both new construction projects and maintenance services(2) Enhance staff skills and technological capabilities to ensure our ability to continue providing customers with the mosttrustworthy products and services(3) Strengthen capabilities and increase comprehensive strength through collaborative efforts
Toyo Kanetsu K.K. Annual Report 2013

3

The key measures and issues to be addressed in each of our two core business segments are outlined below.
Plant & Machinery Business
The Plant & Machinery Business is undertaking the following five priority measures to appropriately execute orders alreadyreceived and steadily secure new orders, especially for the construction of LNG tank facilities, now in great demand because of
LNG’s position as a clean energy source capable of reducing carbon dioxide emissions.
(1) Strengthen marketing capabilities and optimize orders scheme(2) Further enhance our management of quality, costs, and delivery timing(3)Promote technological development of design, processing, and construction methods that will enhance cost-competitiveness(4) Accelerate the development of professional staff through on-site training and transfer of technologies and skills(5) Supplement and strengthen our sales, technological, production, and construction capabilities through collaborations withGroup firms
Material Handling Systems Business
The Material Handling Systems Business is undertaking the following six priority measures mainly for new construction andand maintenance project in existing markets such as core customers sectors of consumer cooperatives, airports and the
distribution sector (i.e., wholesalers, retailers and mass merchandisers), as well as in growth markets such as online retailers.
Implementing these measures should enhance our ability to provide products and services that meet clients’ most demandingneeds while firmly establishing a business structure capable of generating stable profits.
(1) Demonstrate our comprehensive strength by integrating management with our maintenance subsidiary(2) Develop strategic technologies and introduce products with strong appeal to growth markets(3) Strengthen marketing and proposal capabilities directed at customers in growth markets(4) Strengthen and promote collaborative marketing activities through collaborations with Group firms(5) Reform design, production and procurement functions and improve project response capabilities(6) Raise employee capabilities needed to support growth and improve basic technologies and skills
Quantitative targets under the Group’s medium-term business plan (FY2013–2015) are shown in the table to the bellow. The
figures are targeted annual averages over the plan’s three years.

Consolidated earnings targets

Annual averages for 3 fiscal years from2013 to 2015

Net Sales¥44.0 billion

Operating Income¥2.3 billion

Operating Margin

5.2%

Income before Extraordinary Items¥2.5 billion

Net Income¥1.5 billion

4

Toyo Kanetsu K.K. Annual Report 2013

Board of Directors, Auditors and Corporate Officers
Directors
Directors
President and Representative Director
Managing Director
Director and Senior Corporate Officer
Director
Director and Senior Corporate Officer
Director and Senior Corporate Officer
Director and Senior Corporate Officer
Auditors
AuditorOutside Auditor
Outside Auditor
Outside Auditor

Takeshi Mizukami
Shinji Shimazaki
Sadao Arita
Toru Yanagawa
Shoji Fujiyoshi
Isao Shimomae
Masayuki Takeda

Kazuto Abe
Toshiaki Hiwatari
Tsuneo Nagai
Shigeharu Nakamura

Corporate Officers
Senior Corporate Officer
Senior Corporate Officer
Corporate Officer
Corporate Officer
Corporate Officer

Tetsuya Watanabe
Shiro Ito
Fumitomo Miyashita
Yukio Kurosaka
Yasuhiro YamadaLines of Business
Plant & Machinery BusinessTotal engineering and construction forstorage tanks such as low-temperature tanks,
cryogenic tanks, high-pressure sphericaltanks, floating roof tanks, cone roof tanks
and dome roof tanks, including all related
ancillary works such as civil works, piping
and instrumentation.

Material Handling Systems BusinessEngineering, construction and related civil
and construction work for all systemequipment, system devices and ancillaryequipment related to distribution centersystems, truck terminal systems, production
line systems, airport baggage handlingsystems, postal sorting systems, foodprocessing center systems, food production
factory systems, apparel center systems andother systems.

Building Construction BusinessAll-use, structural planning design and construction of condominiums, apartmentbuildings, offices, stores, medical facilities, residential housing, welfare facilities
and warehouses; steel pipe piling design and execution.

Toyo Kanetsu K.K. Annual Report 2013

5

TKK Group Companies
TOYO KANETSU K.K.

(Plant & Machinery Business)(Building Construction Business)(Other Business)(Material Handling Systems Business)

P.T. Toyo Kanetsu Indonesia

Toyo Kanetsu Solutions K.K.

AL GHALLILAH ENGINEERING& CONSTRUCTION L.L.C.

K-Techno Inc.

TKL Co., Ltd.

Toyo Kanetsu (Malaysia) SDN. BHD.

Toyo Service System K.K.

TOYO KANETSU
SINGAPORE PTE. LTD.

Domestic Subsidiaries

TKK-USA, Inc.

Overseas Subsidiaries

Toyo Koken K.K.

Affiliated Companies

Major Subsidiaries and Affiliated Companies(Domestic)
Toyo Kanetsu Solutions K.K.
Establishment
October 1, 2002
Capital¥400 million
Business
Planning,
design,manufacturing,
construction and sales for material handlingsystems
K-Techno Inc.
Establishment
CapitalBusiness

TKL Co., Ltd.
Establishment
CapitalBusiness

April 17, 1992
¥60 million
Distribution business consulting; servicing,
maintenance and tuning of distribution
equipment; parts sales

P.T. Toyo Kanetsu Indonesia
Establishment
September 9, 1974
CapitalUS$2,000,000
Business
Manufacturing and sales of tanks and steel
framing
Toyo Kanetsu (Malaysia) SDN. BHD.
Establishment
April 13, 1992
CapitalRM2,000,000
Business
Manufacturing and sales of storage tanks;
manufacturing and sales of material handlingsystem equipment and devices
AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C.

September 13, 1985
¥10 million
Leasing operations
equipment operations

andprovisional

Toyo Service System K.K.
Establishment
September 19, 1986
Capital¥60 million
Business
Building management, real estate andOA-related operations
Toyo Koken K.K.
Establishment
February 11, 1957
Capital¥897.49 million
Business
Design, manufacturing and construction of
winches and hoists, lift ladders, conveyors,balancers, industrial robots and othermachinery

6(Overseas)

Toyo Kanetsu K.K. Annual Report 2013

Establishment
CapitalBusiness

May 21, 1997
OMR150,000
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structures

TOYO KANETSU SINGAPORE PTE. LTD.

Establishment
CapitalBusiness

August 8, 2006
S$500,000
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structuresAnalysis of Operating Environment and Results
In the fiscal year ended March 31, 2013 (hereafter, fiscal
year 2013), the Japanese economy continued to show
negative growth in the first half of the year, reflecting
slowdowns in overseas economies and difficult factors. In
the latter half of the year, however, a change in government
prompted a rapid depreciation of the yen and a sharp stock
market rally, which led to a clear improvement in businessand consumer sentiment. However, the global economy
continues to face major uncertainties that continue to make it
difficult for us to make assumptions about our futurebusiness environment.
In the Plant & Machinery Business, the expansion ofenergy demand thanks to the growth of China, India andother emerging countries stimulated numerous plans forelectricity-generating plants, gas supply facilities, oil
refineries and other energy-related projects. In particular, theincreased gas demand which arose from surging crude oil
prices and the use of gas as a way of reducing carbon
dioxide emissions boosted planning activity in the area ofstorage facilities for LNG receipt and distribution. Rising
LNG demand is also stimulating plans for the constructionof new LNG receiving plants in Japan.
The Material Handling Systems Business saw a rebound indemand for its handling systems during fiscal year 2013, as
the mail order and internet shopping markets grew markedly
amid the increasing convenience of the internet and changes
in Japanese lifestyles and demographics, in particular thegraying of society and dwindling birth rate. The businessalso saw improvement in demand from airports, a corecustomer sector, as an increased number of flights and theemergence of low cost carriers (LCCs) led to an increase inprojects for the construction of new terminals as well as
renovated terminals. The increased demand, however, hasbeen accompanied by a more competitive operating
environment, with price competition intensifying.
In this operating environment, a solid overall result fromthe Plant & Machinery Business was supplemented by anearnings rebound at the Material Handling Systems
Business.
As a result, we recorded consolidated net sales of ¥45,504
million (US$484,031 thousand), an increase of 11.7% fromthe previous fiscal year. Operating income and income
before extraordinary items increased by 54.2% to ¥2,272
million (US$24,165 thousand) and 91.6% to ¥2,745 million(US$29,201 thousand), respectively, and net income was¥1,527 million (US$16,238 thousand), an increase of
113.8%. Total orders received decreased by 5.9% to ¥36,429
million (US$387,510 thousand).
Plant & Machinery BusinessWith LNG trade expanding in part because of the fuel’s
efficacy in reducing carbon dioxide emissions, plans toconstruct LNG plants, including storage facilities, areincreasing in both exporter and importer nations. Leveraging
our strong track record and international competitiveness,
we won orders for LNG and other types of tanks from
customers in Southeast Asia. In the domestic maintenancemarket, we secured a steady supply of contracts, among

them orders for modification works to floating-roof tanks
following a partial revision to the Fire Service Act.
Overall, the Plant & Machinery Business posted net salesof ¥24,027 million (US$255,573 thousand), an increase of
1.7% from the previous fiscal year. Operating income andOrders received decreased by 9.5% to ¥1,771 million(US$18,835 thousand) and 26.6% to ¥17,786 million(US$189,194 thousand), respectively.
Material Handling Systems Business
The distribution sector remains a severely competitivemarket, but our Material Handling Systems Business was
successful in winning orders for its Multishuttle automatedcase storage system from internet sales companies andlogistics companies. The contribution to sales from theseorders combined with our efforts to reduce costs and boost
operating efficiency brought the segment back to the blackin fiscal year 2013, after posting a loss in the previous fiscal
year. The business saw a big rebound in orders from acouple of core customer sectors, receiving a large order foran airport baggage handling system and orders fromconsumer cooperatives for new construction andreplacement projects. The maintenance division’s efforts to
expand its business led to steady increases in sales andprofits.
As a result, the Material Handling Systems Businessrecorded net sales of ¥14,966 million (US$159,201
thousand), an increase of 28.8% from the previous fiscal
year, and returned to the black at the operating income levelwith a profit of ¥232 million (US$2,466 thousand) from an
operating loss of ¥728 million posted in the previous fiscal
year. Orders received totaled ¥16,823 million (US$178,951
thousand), an increase of 37.9%.
Building Construction BusinessWe steadily shifted from the leased apartment sector which
was our main client to general construction sector such as
welfare facilities. However, their profitability remained
challenging because construction cost rose due to theshortage of materials and manpower after Great East Japan
Earthquake.
As a result, the Building Construction Business posted net
sales of ¥1,918 million (US$20,403 thousand), a decrease of
42.5% from the previous fiscal year and an operating loss of¥24 million (US$257 thousand) contrasting with operating
income of ¥14 million in the previous fiscal year. Orders
received decreased by 20.9% to ¥1,820 million (US$19,365
thousand).
Other Businesses
Net sales in businesses other than those above totaled ¥4,593
million (US$48,854 thousand), an increase of 114.0% fromthe previous fiscal year, and operating income increased by
17.1% to ¥575 million (US$6,120 thousand). The
consolidation of Toyo Koken K.K. in the first quarter of the
fiscal year contributed to the strong results in this segment.

Toyo Kanetsu K.K. Annual Report 20137

Business Risks
The following risks may affect the business results, stock
price and financial position of the TKK Group.
Potential risks associated with international activities
and overseas advance
The TKK Group conducts some operations in overseas
markets, primarily those of the Plant & Machinery Business.
Further, its subsidiary manufactures tank materials inIndonesia. These overseas operations carry inherent risks as
stated below, and the TKK Group’s business results andfinancial position may be adversely affected by such risks.
1) Unexpected changes in laws and regulations
2) Political and economic instability
3) Difficulties in securing human resources
4) Tax system revisions that could be unfavorable to the
TKK Group5) Social confusion arising from acts of terror, war or any
other factors
Exchange rate fluctuations
The TKK Group’s business activities include manufacturing
products, selling materials and implementing construction
operations
overseas.
Foreign-currency-denominatedaccounting items such as sales, expenses and assets aretranslated into Japanese yen for the purpose of preparing
consolidated financial statements. The exchange rates usedin currency conversion may affect the yen-denominatedvalue. As most of our payments and receipts aredenominated in U.S. dollars or Euros, a stronger yen will
adversely affect the TKK Group’s business, while a weaker
yen will favorably affect the TKK Group’s business.
The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly
entering into forward exchange contracts or option contracts,
and by implementing structural solutions such as using
overseas manufacturing bases and internationally procuring
raw materials. However, an unexpected change in exchange
rates may adversely affect the TKK Group’s business results
and financial position.
Project execution
The business results of the TKK Group may be affected bysituations where, for customer reasons, projects are
suspended or postponed or the project content is otherwise
altered.
Further, as our projects take the form of inclusive contracts,
deterioration in project profitability may impact on businessresults in the event of a sudden change in the economic
situation leading to unforeseen rises in equipment andmaterial prices, transportation costs, construction costs orother expenses, or in the event of natural disaster, outbreakof disease, serious accident or other eventualities.
Intense competition for winning orders
All of the major businesses of the TKK Group are being
operated under the make-to-order type system and the TKKGroup is facing severe competition to win orders.
Depending on the circumstances, we recognize thepossibility that a competitor may disregard profitability and8 Toyo Kanetsu K.K. Annual Report 2013

enter into price competition with the TKK Group. Although
the TKK Group strives to reduce all kinds of costs andreinforce its price competitiveness, such unreasonable
downward pressure on the TKK Group’s earnings may
adversely affect the TKK Group’s business results andfinancial position.
Disasters
The TKK Group takes necessary measures such as daily
check, drill and establishment of contact system to continue
our business activities preparing for fire, earthquakes orother large-scale natural disasters.
However, in cases where such disasters cause serious
physical/human damage and large amount of restoration cost,
TKK Group’s business results and financial position may be
adversely affected.

Financial Section
For the years ended March 31, 2013 and 2012

Toyo Kanetsu K.K. Annual Report 20139

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance SheetAt March 31, 2013 and 2012

2013

2012

Thousands of
U.S. dollars(Note 1)2013

Current Assets:
Cash on hand and in banks
Trade notes and accounts receivable
Investments in leases
Marketable securities
Inventories (Note 3)
Deferred tax assets (Note 8)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥10,673
10,241
882
4,500
9,721
626
561
(55)
37,149¥9,985
8,627
1,671
3,999
7,425
453
738
(148)
32,750$113,533
108,9379,379
47,865
103,400
6,659
5,981
(589)
395,165

Property, Plant and Equipment:
Buildings and structures (Note 5)
Machinery and equipment (Note 5)
Land (Note 5 and 6)
Lease assets
Construction in progress
Less: Accumulated depreciation

10,946
6,530
9,879
3
223
(13,926)

10,074
5,558
9,140
63
(12,256)

116,432
69,466
105,085
31
2,371(148,136)

13,655

12,579145,249

465
465

244
244

4,942
4,942

6,096
56
74
922
(338)
6,810

4,960
106
258
853
(257)
5,920

64,849
597
784
9,805
(3,596)72,439¥58,079¥51,493$617,795

ASSETS
Millions of yen

Total property, plant and equipment
Intangibles:
Intangible fixed assets
Total intangibles
Investments and Advances:
Investments in securities (Notes 4)Long-term loans receivable
Deferred tax assets (Note 8)
Other investments
Less: Allowance for doubtful accounts
Total investments and advances
Total assets
The accompanying notes are an integral part of the consolidated financial statements.

10

Toyo Kanetsu K.K. Annual Report 2013

LIABILITIES and NET ASSETS
Millions of yen

Thousands of
U.S. dollars(Note 1)
2013

2013

2012

Current Liabilities:
Short-term debt and current portion of long-term debt (Note 5)
Trade notes and accounts payable
Lease obligations (Note 5)
Accrued liabilities
Accrued income taxes
Deferred tax liabilities (Note 8)
Advances from customers
Accrued bonuses
Reserve for losses on work in progress
Reserve for warranty costs for completed works
Other current liabilities
Total current liabilities¥2,745
2,438
77
5,209
850
3
10,805
250
398
152
242
23,169¥2,983
1,959
74
3,900
765
2
8,031
194
137
250
298
18,593$29,201
25,929814
55,4079,039
36
114,939
2,663
4,233
1,618
2,572
246,451

Long-Term Liabilities:
Long-term debt (Note 5)
Lease obligations (Note 5)
Deferred tax liabilities (Notes 8)
Deferred tax liabilities on revaluation of land (Notes 6 and 8)
Accrued retirement benefits for employees (Note 7)
Asset retirement obligations (Note19)
Other long-term liabilities
Total long-term liabilities

1,150
53
37
1,896
531
300
81
4,048

500
131
38
1,904
314
298
90
3,275

12,230568
395
20,172
5,652
3,195
844
43,056

18,5801,104
13,753(3,907)29,53018,5801,104
12,768(3,728)28,724

197,639
11,744
146,295(41,559)
314,119

775
2
1,048
(651)
1,174
158
30,862¥58,079

317
3
1,062
(588)
794
107
29,625¥51,4938,245
18
11,148(6,919)12,492
1,677
328,288$617,795

Net Assets
Shareholders’ Equity:
Common stock:
Authorized: 297,000,000 shares
Issued: 138,730,741 shares
Additional paid-in capital
Accumulated earnings
Less: Treasury stock, at cost
Total shareholders’ equity
Accumulated Other Comprehensive Income:Net unrealized holding gains on investments in securities
Deferred gains or losses on hedges
Unrealized gains on revaluation of land (Note 6)
Foreign currency translation adjustments
Total accumulated other comprehensive income
Minority Interests
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 201311

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Income and Comprehensive Income
For the years ended March 31, 2013 and 2012

2013

2012

Thousands of
U.S. dollars(Note 1)
2013

¥45,504
39,290
6,214
3,942
2,272

¥40,733
35,745
4,988
3,514
1,474

$484,031
417,929
66,102
41,937
24,165

190
(32)
379
(167)
30
73
473
2,745

194
(9)
(56)
(289)
81
37
(42)
1,432

2,020
(345)
4,029
(1,779)
327
784
5,036
29,201

98
0
(83)
(33)
0
(18)
2,727

3
(6)
(3)
1,429

1,039
3
(880)
(351)
1
(188)
29,013

1,416
(250)
1,166
1,561

1,072
(366)
706
723

15,067(2,659)12,40816,605

Minority interests in net income of consolidated subsidiaries
Net Income

34¥1,5279¥714

367$16,238

Minority interests in net income of consolidated subsidiaries
Income before minority interests

34
1,561

9
723

367
16,605

460
(1)
(47)
(2)

198
3
270
(119)
8

4,895
(14)
(504)
(16)

Total Comprehensive Income

410
1,971

360
1,083

4,361
20,966

Total comprehensive income attributable to:owners of the parent
minority interests

1,921
50

1,084
(0)

20,432
534

Millions of yen

Net Sales
Cost of Sales (Note 11)
Gross profit
Selling, General and Administrative Expenses (Notes 10 and 11)
Operating income
Other Income (Expenses):
Interest and dividend income
Interest expense
Foreign currency exchange gain (loss)
Equity in income (loss) of affiliates
Gain on sales of scraps
Other, net
Income before extraordinary items
Extraordinary Profit (Loss):
Gain on step acquisitions
Gain on sale of investments in securities, net
Loss on write-down of investments in securities, net
Impairment loss
Other, net
Income before income taxes and minority interests
Income Taxes (Note 8):
Current
DeferredIncome before minority interests

Other Comprehensive Income
Net unrealized holding gains or losses on investment securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using
equity method

2013

2012

U.S. dollars(Note 1)
2013

¥12.53

¥5.93

$0.13

Yen

Per Share (Note 22)
Net income
The accompanying notes are an integral part of the consolidated financial statements.

12

Toyo Kanetsu K.K. Annual Report 2013

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Changes in Net Assets
For the years ended March 31, 2011, 2012 and 2013

Millions of yen

Balance at April 1, 2011
Cash dividends paid
Net income for the year
Purchases of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Treasury
stock

Total
shareholders’equity¥13,271
(603)
714
-

¥(3,750)(1)¥29,205
(603)
714
(1)

-

(614)

23

(591)

-

-

-

-

-

¥18,580¥1,104¥12,768¥(3,728)¥28,724

Number of shares ofcommon stock

Additional
Accumulated
paid-in capital earnings (deficit)

Common stock

138,730,741-¥18,580-¥1,104---

138,730,741

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Balance at April 1, 2011
Cash dividends paid
Net income for the year
Purchases of treasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2012

Deferred
gains orlosses onhedges

Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
incomeMinority
interests

Total net assets

¥118
-

¥(6)
-

¥792
-

¥(478)
-

¥426
-

¥108
-

¥29,739
(603)
714
(1)

-

-

-

-

-

-

(591)

199

-

-

-

199

-

199

¥317

9
¥3

270
¥1,062(110)¥(588)

9
270
(110)
¥794

(1)
¥107

9
270
(110)
(1)
¥29,625

Toyo Kanetsu K.K. Annual Report 201313

Millions of yen

Balance at April 1, 2012
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for land

Purchases of treasury stock
Decrease in treasury stock by shareexchanges
Transfer of losses on disposal oftreasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2013

Treasury
stock

Total
shareholders’equity¥12,768
(482)
1,527
13
-

¥(3,728)(805)¥28,724
(482)
1,527
13
(805)

(73)

-

626

553

-

73

(73)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

138,730,741¥18,580¥1,104¥13,753¥(3,907)¥29,530

Number of shares ofcommon stock

Common stock

138,730,741-¥18,580----

Additional
Accumulated
paid-in capital earnings (deficit)¥1,104-

Millions of yen
Net unrealized
holding (gains)losses on
investment
securities

Balance at April 1, 2012
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for land

Purchases of treasury stock
Decrease in treasury stock by shareexchanges
Transfer of losses on disposal oftreasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 201314

Toyo Kanetsu K.K. Annual Report 2013

Deferred
gains orlosses onhedges

Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
incomeMinority
interests

Total net assets

¥317
-

¥3
-

¥1,062-¥(588)
-

¥794
-

¥107
-

¥29,625
(482)
1,527
13
(805)

-

-

-

-

-

-

553

-

-

-

-

-

-

-

-

-

-

-

-

-

-

458

-

-

-

458

-

458

¥775

(1)
¥2

(14)
¥1,048(63)¥(651)

(1)
(14)
(63)
¥1,174

51
¥158

(1)
(14)
(63)
51
¥30,862

Thousands of U.S. dollars (Note 1)

Balance at April 1, 2012
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for land

Purchases of treasury stock
Decrease in treasury stock by shareexchanges
Transfer of losses on disposal oftreasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2013

Treasury
stock

Total
shareholders’equity$135,813(5,131)
16,238150-$(39,666)(8,553)$305,530(5,131)
16,238150(8,553)

(775)

-

6,660

5,885

-

775

(775)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

138,730,741$197,639$11,744$146,295$(41,559)$314,119

Minority
interests

Total net assets

Number of shares ofcommon stock

Common stock

138,730,741-$197,639
-

-

-

-

Net unrealized
holding (gains)losses on
investment
securities

Balance at April 1, 2012
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for land

Purchases of treasury stock
Decrease in treasury stock by shareexchanges
Transfer of losses on disposal oftreasury stock
Change in equity in affiliates
accounted for by equity method
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation of land
Foreign currency translation adjustments

Minority interests
Balance at March 31, 2013

Deferred
gains orlosses onhedgesAdditional
Accumulated
paid-in capital earnings (deficit)$11,744-

Thousands of U.S. dollars (Note 1)
Total
Unrealized
Foreignaccumulated
gains oncurrency
otherrevaluation of translation comprehensive
land
adjustments
income$3,367-$32-$11,298-$(6,248)-$8,449-$1,143-$315,122(5,131)
16,238150(8,553)

-

-

-

-

-

-

5,885

-

-

-

-

-

-

-

-

-

-

-

-

-

-

4,878

-

-

-

4,878

-

4,878

$8,245

(14)
$18

(150)
$11,148(671)$(6,919)

(14)
(150)
(671)
$12,492534$1,677

(14)
(150)
(671)
534
$328,288

The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 201315

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the years ended March 31, 2013 and 2012

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of long-term prepaid expenses
Impairment loss
Amortization of goodwill
Increase (decrease) in provision for allowance for doubtful accounts
Increase (decrease) in provision for employees’ retirement benefits
Increase (decrease) in provision for losses on work in progress
Increase (decrease) in provision for warranty costs for completed works
Interest and dividend income
Interest expense
Exchange loss (gain)
Equity in loss (income) of affiliates
Loss (gain) on step acquisitions
Loss (gain) on sales of investment securities
Loss (gain) on write-down of investments in securities
Loss (gain) on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Decrease (increase) in notes and accounts receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments
Decrease (increase) in accrued income
Increase (decrease) in notes and accounts payable
Increase (decrease) in advances from customers
Other
Sub totalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Payments into time deposits (over 3-month term)
Proceeds from withdrawal of time deposits
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of investments in securities
Proceeds from sales of investments in securities
Proceeds from liquidation of a affiliate
Proceeds from purchase of investments in a subsidiary resulting in change inscope of consolidation
Payments of loans receivableCollection of loans receivable
Other
Net cash used in investing activities
Cash Flows from Financing Activities:
Increase (decrease) in short-term debt, net
Proceeds from long-term debt
Repayment of long-term debt
Purchases of treasury stock
Capital dividend paid
Net cash provided by (used in) financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year (Note 15)
The accompanying notes are an integral part of the consolidated financial statements.

16

Toyo Kanetsu K.K. Annual Report 2013

Thousands of
U.S. dollars(Note 1)
2013

2013

2012

¥2,727
642
3
33
62
(39)
8
261
(98)
(190)
32
(373)
167
(98)
(0)
83
(1)
2
(529)
690
(1,696)
(91)
(23)
964
2,729
82
5,347
190
(32)
(1,350)4,155¥1,429
643
16
(85)
13
(168)
22
(194)
9
(15)
289
(3)
(0)
5
2,988
630
(46)
(83)
(51)
(512)
1,249
(193)
5,943
198
(9)
(896)
5,236

$29,013
6,824
28
351
663
(410)
80
2,778
(1,046)(2,020)345(3,970)1,779(1,039)
(3)
880
(9)
17
(5,629)7,337(18,039)
(971)
(249)
10,25929,026886
56,881
2,014(339)(14,360)
44,196

(95)
36
(642)
5
(1,412)
353
155
439

(436)
596
(683)
125
(353)
8
-

(1,010)383(6,831)50(15,020)
3,760
1,649
4,674

1
(38)
(1,198)

(5)
122
72
(554)

14
(416)
(12,747)

(900)
500
(591)
(804)
(479)
(2,274)447
1,130
13,953¥15,083

1,095
400(3,221)(2)(600)(2,328)19
2,373
11,580¥13,953(9,572)
5,319(6,287)(8,553)(5,100)(24,193)
4,758
12,014148,423$160,437

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2013 and 2012

1. Basis of Presenting the Consolidated Financial Statements(1) Basis of Presenting the Consolidated Financial Statements
The accompanying consolidated financial statements of Toyo Kanetsu Kabushiki Kaisha (hereinafter the “Company”) and its
domestic consolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, andare compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Law of Japan. The accounts of overseas-consolidated subsidiaries are based on their financial statements prepared inconformity with generally accepted accounting principles and practices prevailing in the respective countries in which thesubsidiaries are incorporated.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan
have been reclassified in these accounts for the convenience of readers outside Japan.
(2) United States Dollar Amounts
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥94.01=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2013, has been used in translation. The approximate rate of exchange
prevailing at May 31, 2013 was ¥101.12=U.S. $1.00. The inclusion of such amounts are not intended to imply that theJapanese yen has been or could be readily converted, realized or settled in U.S. dollars at this rate or any other rates.
2. Summary of Significant Accounting Policies(1) Principles of Consolidation and Investments in Affiliated Companies
The consolidated financial statements include the accounts of the Company and those of its subsidiaries in which it has control.
The consolidated financial statements include the accounts of its ten subsidiaries. All significant inter-company transactions
and accounts and unrealized inter-company profits are eliminated on consolidation.
The consolidated company, AL GHALLILAH ENGINEERING & CONSTRUCTION L.L.C is in the course of liquidation.
Toyo Koken K.K.and Toyo Miyama Co., Ltd. have been excluded from the scope of equity method for the year ended March
31, 2013 because Toyo Koken K.K. has become the consolidated company and Toyo Miyama Co., Ltd. has liquidated.
The excess of the cost over the underlying net equity of investments in consolidated subsidiaries as well as companies
accounted for on an equity basis, is deferred and amortized on a straight-line basis over a period of five years from the date ofacquisition.
Five overseas subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2012 for the current year
consolidation and at December 31, 2011 for the previous year consolidation, respectively. Material differences ininter-company transactions and accounts arising from the use of the different fiscal year ends are appropriately adjusted for on
consolidation.
(2) Revaluation of Assets and Liabilities of the Subsidiaries
All assets and liabilities of the subsidiaries are fair valued as of the date of acquisition of control.
(3) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to bewithdrawn on demand and highly liquid short-term investments with an original maturity of three months or less which carry
only a minor risk of fluctuation in value.
(4) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at an amount for losses which are expected to occur but cannot be determinedon an item-by-item or group basis. This general allowance is calculated using historical write-off experience from prior periods.
In addition, an amount for expected losses on individual uncollectible receivables is calculated based on management’s
estimate.

Toyo Kanetsu K.K. Annual Report 201317

(5) Inventories
Inventories are valued at cost as determined by the following methods:
Finished goods………………………Mainly First-in first-out method (a carrying amounts on the balance sheet iswritten down if the profitability decreases)
Work in process and supplies ………Mainly Specific identification method (a carrying amounts on the balance sheet iswritten down if the profitability decreases)
Raw materials……………………….Mainly Gross-average method (a carrying amounts on the balance sheet is written
down if the profitability decreases)(6) Financial Instruments(a) Derivatives
All derivatives are stated at fair value except for certain derivatives that are designated as “hedging instruments” (see Note 18.
Derivative and Hedging Activities below).
(b) Securities to be Held to Maturity
These are accounted for using the amortized cost method (straight-line method).
(c) Investments in Securities
Securities held by the Company and its subsidiaries are classified into two categories:“Investments of the Company in equity securities issued by the affiliated companies” are accounted for by the equity method.
Other investments in debt and equity securities are classified as “Other securities.” “Other securities” with market quotations
are stated at fair value with any unrealized holding gains and losses, net of tax, being reported in separate component of net
assets. The cost of sold is determined by the moving-average method.
“Other securities” without market quotations are stated at cost determined by the moving-average method.
(7) Hedge Accounting
Gains or losses arising from changes in the fair value of the derivatives designated as “hedging instruments” are deferred as an
asset or liability and included in net assets in the same period during which the gains and losses on the hedged items ortransactions are recognized. However, in cases where forward exchange contracts used as hedges meet certain hedging criteria,
the existing foreign currency receivables or payables are translated at their contract rates. In addition, if interest rate swaps
contracts meet certain exceptional criteria, the net amount to be paid or received under these swap contracts is added to or
deducted from the interest on the related hedged liabilities.
Derivatives designated as hedging instruments by the Company and its consolidated subsidiaries are principally forward
exchange contracts and interest swaps. The related hedged items are expected account receivables or payables in foreign
currency, and long-term bank loans.
In accordance with the Company’s regulations on the handling of derivative transactions, the Company and its consolidated
subsidiaries do not make active use of individual transactions for speculative purposes but uses them exclusively to reduce
exposure to risk from foreign exchange and interest rate fluctuations.
The Company and its consolidated subsidiaries evaluate the effectiveness of its hedging activities by reference to theaccumulated gains or losses on the hedging instruments and the related hedged items beginning from the commencement of thehedges. The Company, however, does not evaluate the effectiveness of interest swaps because of exceptional accounting
treatment.
(8) Property, Plant and Equipment
Property, plant and equipment are stated at cost. The cost of maintenance, repairs and minor renewals is charged to current
operations; major renewals and enhancements are capitalized. Depreciation is mainly computed using the declining-balancemethod, except for buildings acquired after April 1, 1998, to which the straight-line method is applied for the Company and its
domestic subsidiaries. The principal estimated the range of useful lives from 3 to 57 years for buildings and from 3 to 17 years
for machinery and equipment. Depreciation of overseas subsidiaries is computed using the straight-line method.
(Changes in depreciation method)
Effective from the year ended March 31, 2013, the company and its domestic consolidated subsidiaries changed thedepreciation method for property, plant and equipment acquired on or after April 1, 2012 in accordance with the revised
Corporate Tax Law.
Due to the change, compared with the conventional method, depreciation cost for the year ended March 31, 2013 decreased¥11 million ($118 thousand) and operating income, income before extraordinary items and income before income taxes andminority interests increased ¥11 million ($118 thousand), respectively.

18 Toyo Kanetsu K.K. Annual Report 2013

(9) Intangible Assets
Amortization of intangible assets is computed using the straight-line method. Software for internal use is amortized over its
expected useful life (5 years), on a straight-line basis.

(10) Reserve for Losses on Work in Progress
A reserve for losses on work in progress is provided based on an estimate of the total losses which can be anticipated for the
next fiscal year and beyond in respect of construction projects on which eventual losses are deemed inevitable and amounts
thereof can reasonably be estimated.
Work in progress on construction contracts in which losses are envisaged and the reserve for losses on work in progress are notmutually offset but are both presented.
Of the total amount of work in progress on construction contracts in which losses are envisaged, the amount corresponding to
the reserve for losses on work in progress is ¥56 million ($592 thousand) and ¥20 million for the years ended March 31, 2013
and 2012, respectively.
(11) Reserve for Warranty Costs for Completed Works
A reserve for warranty costs for completed works is provided based on the past experience rates for warranty costs andafter-sales service costs for completed works on an item-by-item or group basis.
(12) Income Taxes
The income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local inhabitants’ taxes andenterprise taxes.
Income taxes are determined using the asset and liability approach, whereby deferred tax assets and liabilities are recognized in
respect of temporary differences between the tax base of assets and liabilities and those as reported in the consolidated
financial statements.
(13) Accrued Bonuses
Accrued bonuses to employees are provided for at the estimated amounts which the Company and its consolidated subsidiaries
are obligated to pay to employees after the fiscal year-end, based on services provided during the current period.
(14) Accrued Retirement Benefits for Employees
Accrued retirement benefits for employees of the Company and its major consolidated subsidiaries are provided based on theestimated present value of projected benefit obligations and fair value of funded plan assets. For other insignificant
consolidated subsidiaries, accrued retirement benefits for employees are calculated using the simplified method. The amount of
actuarial gains (losses) is amortized on a straight-line basis over five years and recognized as deductions from expenses or
included in expenses, respectively, in the next fiscal year. Prior service cost is recognized as deductions from expenses or
included in expenses, respectively, in the year of occurrence.
(15) Significant Accounting Policies for Earnings and Expenses(a) Regarding the accounting policy for the net sales of completed construction contracts and the cost of sales of completed
construction contracts, for work in progress in the years ended March 31, 2013 and 2012, the Company and its consolidated
subsidiaries accounted for projects with an outcome deemed certain on the percentage-of-completion basis (with the estimatedstage of completion calculated on the cost-to-cost basis) and other projects on the completed-contract basis.
(b) Regarding finance lease transactions, sales and cost of sales were recorded when lease receivables from customers are paid.
(16) Accounting for Consumption Tax
The Company and its domestic consolidated subsidiaries account for consumption tax by the tax-exclusion method.
(17) Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” (Statement No.26 issued by the ASBJ on May 17, 2012) and “Guidance on
Accounting Standard for Retirement Benefits” (Guidance No.25 issued by the ASBJ on May 17, 2012)(a) Overview
Actuarial gains and losses and prior services costs are required to be recognized in net assets at net of tax effects. Funded status
is fully recognized as a liability or asset on the balance sheet. With respect to the amortization method of expected benefit, thebenefit formula basis is newly allowed as an option in addition to the straight-line basis. In addition, the method for
determining the discount rate is amended.

Toyo Kanetsu K.K. Annual Report 201319

(b) Date of adoption
The Company and its domestic consolidated subsidiaries will adopt the accounting standards to the consolidated financial
statements for the year ended March 31, 2014. However, the revision of the amortization method of expected benefit will be
adopted from the beginning of the year ended March 31, 2015. The Company does not apply the standards to the past financial
statements retroactively since transitional treatments are prescribed in the accounting standards.
(c ) Impact of the adoption of the accounting standards
The adoption of these standards is expected to have a significant impact on the consolidated financial statements of the Group.
In the consolidated balance sheet, the net assets are expected to fluctuate due mainly to the immediate recognition of theactuarial gains and losses. Amount of the impact is currently being evaluated.
(18) Changes in Presentation
In the consolidated statement of income and comprehensive income, “Gain on sale or disposal of property, plant andequipment, net” (¥0 million) which was separately disclosed as item within extraordinary profit(loss) in the year ended March
31, 2012 is included in “Other, net” in the year ended March 31, 2013 due to the decrease in materiality.
Consequently, “Gain on sale or disposal of property, plant and equipment, net” of ¥6 million in the previous fiscal year isreclassified to “Other, net” in the current fiscal year.
3. Inventories
Inventories as at March 31, 2013 and 2012consisted as follows:
Thousands of
U.S. dollars
2013$1,051
13,54588,804$103,400

Millions of yen
2012
2013
¥2
¥99
572
1,273
6,851
8,349
¥7,425¥9,721March 31
Merchandise and finished goods
Raw materials and supplies
Work in progress
Total

4. Investments in Securities
The aggregate fair value and carrying amounts of securities to be held to maturity with market quotations at March 31, 2013
and 2012 were as follows:
Millions of yen
Thousands of U.S. dollars
2012
2013
2013
March 31
Government
bonds and local
government
bonds
Bonds
Other
Total

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

¥100

¥ 100

¥0

¥ 96

¥ 100

¥ (4)

$ 1,066$1,064$2

1,074¥1,174

1,100¥1,200

(26)
¥(26)

578
¥674

600
¥700

(22)
¥(26)

11,419$12,485

11,701$12,765(282)$(280)

The aggregate acquisition cost and carrying amounts of other securities with market quotations at March 31, 2013 and 2012were as follows:
Millions of yen
Thousands of U.S. dollars
2012
2013
2013
March 31
Equity securities
Bonds
Other
Total

Acquisition

Carrying

Cost

Amount¥2,169500¥2,669¥3,379501¥3,880Difference¥1,2101¥1,211

Acquisition

Carrying

Cost

Amount¥2,05950¥2,109¥2,55049¥2,599Difference

¥491
(1)
¥490

Acquisition

Carrying

Cost

Amount$23,073
5,318$28,391

Difference$35,950 $12,877
5,326
8$41,276 $12,885

Proceeds from sale of other securities were ¥3 million ($37 thousand) and ¥8 million for the years ended March 31, 2013 and2012, respectively. On those sales, gross realized gains were ¥0 million ($3 thousand) and ¥3 million for the years ended
March 31, 2013 and 2012, respectively. Gross realized losses were nothing for the years ended March 31, 2013 and 2012.
Non-listed stocks whose fair value was not determinable were not included in the above table. For the years ended March 31,
2013 and 2012, the carrying amounts of them in the consolidated balance sheet were respectively ¥1,016 million ($10,809
thousand) and ¥1,660 million.
Commercial paper, etc. were not included in the above table as the period to maturity of it was short and the fair value wasclose to the book value. For the years ended March 31, 2013 and 2012, the carrying amounts of them on the balance sheet were
¥4,500 million ($47,865 thousand) and ¥3,999 million, respectively.

20 Toyo Kanetsu K.K. Annual Report 2013For the year ended March 31, 2013, the Company and its consolidated subsidiaries recognized ¥83 million ($880 thousand) ofa write-down of non-listed stocks in other securities.
Investments in affiliates included in investments in securities were ¥574 million for the years ended March 31, 2012.
5. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars
2013

Millions of yen
2012

2013
Weighted

Weighted

averageaverageinterest

March 31interest rate

rate

Short-term debt
Current portion of long-term debt
Lease obligations (current liabilities)
Long-term debt
Lease obligations (long-term liabilities)
Total¥2,654
91
77
1,150
53
¥4,025

0.98%
2.47
1.19
-

¥2,483
500
74
500
131
¥3,688

0.89%
1.30
1.21
-

$28,233
968
814
12,230568$42,813

Note 1: The above interest rates were calculated by weighted average method based on the balance of debt at the end of the fiscal
year.
Note 2: Interest rates of lease obligations are not presented since lease obligations on the consolidated balance sheet are before
deduction of interests included in total lease charge.

Secured debt as at March 31, 2013 and 2012 was as follows:

March 31
Short-term debt secured by buildings, machinery and landLong-term debt secured by buildings, machinery and land
Total

Millions of yen
2012
2013
¥1,127¥437
300
895¥1,427¥1,332Thousands of
U.S. dollars
2013$4,651
9,516$14,167

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2013 and 2012 were as follows:

March 31
Buildings and structures (at net book value)
Machinery, equipment and vehicles (at net book value)
Tools, furniture and fixtures (at net book value)
Land
Investment in securities
Total

Millions of yen
2012
2013
¥462
¥588
0
0
0
5,459
5,565
5
¥5,921¥6,158

Thousands of
U.S. dollars
2013$6,2580
159,19051$65,500

Annual maturities of long-term debt and lease obligations as at March 31, 2013 and 2012 were as follows:
Long-term debt

March 31
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years

Millions of yen
2012
2013
¥¥481
400
669
100
-

Thousands of
U.S. dollars
2013$5,116
7,114-

Lease obligations
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
¥78
¥53
$568
53
-

Toyo Kanetsu K.K. Annual Report 2013

21

6. Revaluation of Land
In accordance with the “Law on Land Revaluation” issued on March 31, 1998, the Company revalued its business-purpose
land. Of the revaluation difference, the amount related to tax is recognized as a deferred tax liability and the revaluationdifference, net of tax, is recognized as a component of net assets.
The revaluation was performed on March 31, 2002 based on the fixed asset tax revaluation amount set in the “Law on Land
Revaluation” Article. 2, Item 3, and is calculated based on land prices set in the “Law on Land Revaluation” Article.2, Item 4
with certain reasonable adjustments.
The excess of the book value over the current market value of such revalued land held at March 31, 2013 and 2012 amounted
to ¥3,511 million ($37,351 thousand) and ¥3,401 million, respectively.
7. Retirement Benefits Plan
The Company and some consolidated subsidiaries have defined benefits pension plans and employee’s pension funds bymulti-employer plan as the system of defined benefits. The other consolidated subsidiaries have the smaller enterpriseretirement allowance mutual aid and termination allowance plan. The Company and certain consolidated subsidiaries also havethe defined contribution pension plans.
The accrued retirement benefits as of March 31, 2013 and 2012 were as follows:

March 31
Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial differences
Net retirement benefit obligations
Less: Pension costs paid in advanceAccrued retirement benefits for employees

Millions of yen
2012
2013
¥(2,853)¥(3,206)
2,642
2,984
(211)
(222)
(32)
(238)
(243)
(460)
71
71
(314)
(531)

Thousands of
U.S. dollars
2013$(34,105)
31,746(2,359)(2,535)(4,894)758(5,652)

Net pension and severance costs related to the retirement benefit plans for the years ended March 31, 2013 and 2012 were as
follows:
Thousands ofMillions of yen
U.S. dollars
March 31
2012
2013
2013
Net pension and severance costs
¥184
¥226
$2,406
Service costs
141
163
1,737
Interest cost
43
49
528
Expected return on plan assets
(26)
(27)
(290)
Net amortization
(16)
(1)
(13)
Transfer to defined contribution pension plans
42
42
444

Assumptions used in calculation of the above information were as follows:
March 31
2013
Discount rate
1.5%
Expected rate of return on plan assets
1.0%
Method of attributing the projected benefit obligations toStraight-line basis
periods of service
Expensed in the year of
Amortization of prior service costs
occurrence
Amortization of unrecognized actuarial differences
5 years

2012
1.5%
1.0%
Straight-line basis
Expensed in the year ofoccurrence
5 years

8. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in thestatutory income tax rate of approximately 38.0% for the years ended March 31, 2013 and 40.7% for the year ended March 31,
2012. Foreign subsidiaries are subject to income taxes of the countries in which they operate.

22 Toyo Kanetsu K.K. Annual Report 2013

At March 31, 2013 and 2012, significant components of deferred tax assets and liabilities were as follows:

March 31
Deferred tax assets
Tax losses carried forward
Accrued enterprise tax
Accrued retirement benefits for employees
Accrued bonuses
Allowance for doubtful accounts
Reserve for losses on work in progress
Loss on write-down of investments in securities
Loss on write-down of investments
Impairment losses on fixed assets
Depreciation and amortization

Millions of yen
2012
2013

Thousands of
U.S. dollars
2013

Less: valuation allowance
Gross deferred tax assets¥1,235
75
188
93
140
151
329
46
413
80
107
318
531
3,706
(2,516)¥1,190¥1,276
58
111
72
111
51
295
57
368
65
106
278
485
3,333
(2,372)¥961$13,140
801
2,004
991
1,483
1,599
3,493
494
4,393
849
1,139
3,382
5,650
39,418(26,762)$12,656

Deferred tax liabilities
Deferred tax liabilities on revaluation of land
Net unrealized holding gains on investments in securities
Special item for lease
Foreign currency translation adjustment
Other
Gross deferred tax liabilities¥1,896432
1239
48¥2,427¥1,904175
38
75
2¥2,194$20,172
4,589
130
415
510
$25,816

Asset retirement obligations
Tax effect of investments, etc., in subsidiary due for liquidation
Other

Deferred tax assets and liabilities as at March 31, 2013 and 2012 were recorded in the consolidated balance sheet as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2013
2013
Deferred tax assets (current assets)
Deferred tax assets (investments and advances)
Deferred tax liabilities (current liabilities)
Deferred tax liabilities (long-term liabilities)
Deferred tax liabilities on revaluation of land (long-term liabilities)

¥626
74
3
37
1,896

¥453
258
2
38
1,904

$6,659784
36
395
20,172

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2013 and2012 were as follows:
2012
2013
Statutory income tax rate
40.7%
38.0%
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance(10.5)
6.2
Permanently non-deductible expenses
3.4
1.3
Permanently non-taxable dividends received
(0.8)
(1.9)
Local inhabitant’s tax
2.0
1.1
Difference in tax rates for foreign subsidiaries
(0.7)
(0.3)
Equity in loss of affiliates
9.6
Adjustment for unrealized gains and losses
0.6
0.1
Decrease of deferred tax assets by tax rate change
4.9
Tax effect of investments, etc., in subsidiary due for liquidation(1.5)
Gain on step acquisitions(1.4)
Amortization of goodwill
0.9
Other
0.2
0.3
Effective income tax rate
49.4%
42.8%

Toyo Kanetsu K.K. Annual Report 201323

9. Commitments and Contingent Liabilities
As at March 31, 2013and 2012, the Company was contingently liable for the affiliated company as follows:
Thousands of
U.S. dollars
2013$-

Millions of yen
2012
2013
¥213
¥-

March 31
Trade liabilities

10. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2013 and 2012 were as
follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2012
2013
2013
Salaries and benefits¥1,362¥1,457$15,495
Bonuses
274
246
2,617
Accrued bonuses
71
114
1,214
Pension and severance costs
134
146
1,558
Allowance for doubtful accounts
(23)
(7)
(69)
11. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2013 and 2012 were ¥144 million ($1,533 thousand) and ¥244 million, respectively.
12. Impairment Loss on Fixed Assets
The Company and its consolidated subsidiaries have recognized impairment loss on the following group of assets for the year
ended March 31, 2013.
Location
Kisarazu City,
Chiba Prefecture

Use

Category

Idle assets

Land

The Company, as a general rule, groups its operating assets by business unit and groups its idle assets individually. For the year
ended March 31, 2013, the Company reduced the book value of the asset group whose fair value has significantly decreased to
the recoverable amount and recorded as impairment loss of ¥33 million ($351 thousand) in extraordinary loss.
The recoverable amount of the above asset group is measured by net realizable value.
13. Tax effects and Reclassification Pertaining to Other Comprehensive Income
Components of other comprehensive income for the year ended on March 31, 2013 and 2012 were as follows.

Year ended on March 31
Net unrealized holding gains on investments:
Unrealized gains (losses) arising during the year
Reclassification to profit or loss for the year
Before tax effects adjustments
Tax effectNet unrealized holding gains on investments
Deferred gains or losses on hedges:
Unrealized gains (losses) arising during the year
Before tax effects adjustments
Tax effect
Deferred gains or losses on hedges
Unrealized gains on revaluation of land:Tax effects
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the year
Before tax effects adjustments
Tax effects
Foreign currency translation adjustments

24 Toyo Kanetsu K.K. Annual Report 2013

Millions of yen
2013

2012

Thousands of
U.S. dollars
2013

¥721
(7)
714
(254)
460

¥293
(0)
293
(95)
198

$7,669(69)
7,600(2,705)
4,895

(2)
(2)
1
(1)

5
(2)
3

(23)
(23)
9
(14)

-

270

-

(83)
(83)
36
(47)

(44)
(75)
(119)

(886)
(886)
382
(504)

Share of other comprehensive income of associates accounted forusing equity method:
Unrealized gains (losses) arising during the year
Reclassification to profit or loss for the year
Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income

(2)
(2)

2
6
8

(16)
(16)

¥410

¥360

$4,361

14. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2013 and 2012 were as follows:
Thousands of sharesYear ended on March 31
Issued stock
Common stock
Number of issued stock at the beginning of the fiscal year
Increase in number of stock
Decrease in number of stock
Number of issued stock at the end of the fiscal year

2013

2012

138,731
138,731

138,731
138,731

Treasury stock
Common stock
Number of treasury stock at the beginning of the fiscal year
Increase in number of stock
Decrease in number of stock
Number of treasury stock at the end of the fiscal year

18,137
4,492
3,045
19,584

18,29610
169
18,137For the year ended March 31, 2013, treasury stock increased by 4,492 thousand shares resulting from purchasing treasury stock
4,474 thousand shares based on decision in the board of directors meeting and purchasing 18 thousand shares less than one unit,
decreased by 3,045 thousand shares resulting from the share exchanges with Toyo Koken K.K.
For the year ended March 31, 2012, treasury stock increased by 10 thousand shares resulting from purchasing shares less than
one unit, decrease by 169 thousand shares resulting from the change in equity in affiliates accounted for by equity method.
Cash dividends paid to shareholders from the beginning of the effective date were as follows:
2013
Approved by annual general shareholders’ meeting
Date of approval
June 28, 2012
Type of shares
Common stock
Date of record
March 31, 2012
Effective dateJune 29, 2012
Dividends per share¥4.00 ($0.04)¥482 million
Amount of cash dividends($5,131 thousand)2012
June 29, 2011
Common stock
March 31, 2011
June 29, 2011
¥5.00
¥603 million

The dividend per share of 2012 includes a commemorative dividend of ¥1.00 per share to mark the 70th anniversary of theCompany’s establishment.
Cash dividends for the year ended March 31, 2013 as a date of record but an effective date subsequent to the current fiscal year
were as follows:
Amount of cash dividends
Resolution
Type ofDate ofEffective
Per share
Millions ofThousands ofapproved bysharesrecorddate
Paid from(Yen)
yen
U.S. dollars
Annual generalshareholders’March 31,
June 28, Accumulated
Common stock
¥4.00
¥477
$5,070meeting held on
2013
2013
earnings
June 27, 2013

Toyo Kanetsu K.K. Annual Report 201325

15. Supplements for Consolidated Statements of Cash Flow
(1) Cash and cash equivalents
Cash and cash equivalents as at March 31, 2013 and 2012 for the purpose of statement of cash flows consisted of:March 31
Cash on hand and at bankLess: Time deposits, over 3-month term
Less: Other
Commercial paper (Marketable securities)
Money held in trust (Marketable securities）
Cash and cash equivalents

Millions of yen
2012
2013
¥9,985¥10,673
(30)
(70)
(1)
(20)
1,999
1,000
2,000
3,500
¥13,953¥15,083

Thousands of
U.S. dollars
2013$113,533
(745)
(216)
10,63537,230$160,437(2) The breakdown of assets and liabilities of new consolidated subsidiary by share acquisition
The breakdown of assets and liabilities at the beginning of consolidation resulting and relation of the acquisition cost of sharesand net proceeds from acquisition were as follows:Year ended on March 31
Current assets
Noncurrent assets
Goodwill
Current liabilities
Noncurrent liabilities
Gain on step acquisition
Investment value by equity method until the acquisition
Acquisition cost of Toyo Koken K.K. shares
Additional acquisition cost of Toyo Koken K.K. shares in shareexchanges
Purchase cost for the year ended March 31, 2012
Purchase cost for the year ended March 31, 2013
Cash and cash equivalents of Toyo Koken K.K.
Balance: Proceeds from purchase of investments in a subsidiary
resulting in change in scope of consolidation

Millions of yen
2013¥2,123948
311(1,908)
(540)
(97)
(251)
586

Thousands of
U.S. dollars
2013$22,582
10,076
3,313(20,291)(5,743)(1,039)(2,666)
6,232

(553)

(5,884)

(30)
3
442

(319)
29
4,703

¥439

$4,674(3) Significant non-cash transactions
Transaction resulting from acquiring 100% ownership of Toyo Koken K.K. by share exchanges were as follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2013
2013
Decrease in treasury stock resulting from additional acquisition of¥626$6,659Toyo Koken K.K. shares
Loss on disposal of treasury stock
(73)
(775)
Additional cost of Toyo Koken K.K. shares for share exchanges¥553$5,884

16. Leases
Lessee
The future payments due under non-cancellable operating lease transactions were as follows:

March 31
Within one year
Over one year

26 Toyo Kanetsu K.K. Annual Report 2013

Millions of yen
2012
2013
¥15
¥12
28
16
¥43
¥28

Thousands of
U.S. dollars
2013
$129
168
$297

LessorThe breakdown of investments in leases on the consolidated balance sheet was as follows:

March 31
Current assets
Receivables from lease rental revenue
Estimated salvage value
Interest income
Investments in leases

Millions of yen
2012
2013
¥856
101
(75)
¥882

¥1,716126(171)¥1,671Thousands of
U.S. dollars
2013$9,105
1,078(804)$9,379

Expected amount of collection from receivables of lease rental revenue in each annual period are as follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2012
2013
2013
Within one year
¥855
¥434
$4,614
1 to 2 years
437
265
2,821
2 to 3 years
267
120
1,273
3 to 4 years
120
26
275
4 to 5 years
26
11
122
Over 5 years
11
17. Financial Instruments(1) Overview(A) Policy for financial instruments
The Company and its consolidated subsidiaries raise funds required for its operations through borrowings from banks. In theevent temporary surplus of funds arise, the Company and its consolidated subsidiaries invest them in financial instruments,
which are highly secured.
In accordance with the Company’s policy for derivative transactions, such transactions are used to reduce exposure to the risks
specified in (B) and derivative transaction is not used for speculation purpose.
(B) Description of financial instruments and related risk and risk management systems
Notes and accounts receivable are exposed to customer credit risk, while certain receivables denominated in foreign currency
are exposed to the risk of foreign currency exchange rate fluctuation. In the case of customer credit risk, the Company and its
consolidated subsidiaries seek to minimize risk by regularly monitoring the status of receivables using management charts andother methods; in the case of risk from foreign currency exchange rate fluctuation, measures to minimize risk include making
borrowings denominated in foreign currency as necessary.
Marketable securities are exposed to credit risk of invested entity. To mitigate such risk, the Company and its consolidated
subsidiaries invest in short-term commercial papers of high credit rating and high security and in money trusts under theprescribed internal procedures.
Investments in securities are exposed to credit risk of invested entity and to the risk of fluctuations in market price. These
consist primarily of shares in listed companies with which the Company and its consolidated subsidiaries have business
relationship. The investments are held in the form of other marketable securities and are subject to regular checks of fair value.
Certain securities include compound financial instruments which were treated together with embedded derivative.
Notes and accounts payable and accrued liabilities are exposed to liquidity risk, while certain liabilities denominated in foreign
currency are exposed to risk of foreign currency exchange rate fluctuation. In the case of liquidity risk, the Company and its
consolidated subsidiaries seek to minimize risk by regularly preparing cash flow worksheets and using other methods; in thecase of risk of foreign currency exchange rate fluctuation, measures to minimize risk include entering into forward exchange
contracts as necessary.
Within Company borrowings, short-term debt consists primarily of finance relating to routine business transactions, while
long-term debt consists primarily of temporary advances for major projects. Borrowings at variable interest rates are exposed
to risk of interest rate fluctuation. In order to avoid this risk by fixing interest rates for major long-term debt, interest rate
swaps are used as a hedging instrument for individual contracts. Interest rate swaps are limited to the debt where theapplication of exceptional treatment is allowed under accounting principles generally adopted in Japan. Evaluation of theeffectiveness of the hedge is omitted here. For the liquidity risk, efforts to minimize risk are made by regularly preparing
financing charts and similar methods.

Toyo Kanetsu K.K. Annual Report 2013

27

The execution and management of derivative transactions is carried out in accordance with the Company’s policies forderivative transactions. When using derivatives, in order to minimize credit risk, the Company and its consolidated subsidiaries
enter into transactions exclusively with financial institutions with high credit rating. For information on hedge accounting,including hedging instruments, hedging policy, and the method of evaluating hedge effectiveness, refer to Note 2. Summary of
Significant Accounting Policies (7) Hedge Accounting.
(C) Supplementary notes on fair value of financial instruments, etc.
In addition to fair value based on market price, the fair value of financial instruments may include prices calculated on areasonable basis where a market price is not available. The calculation of the price is based on variable factors and the price istherefore subject to fluctuation depending on the different assumptions made and other factors. It should further be noted that
contract value of derivative transactions referred to in Note 18. Derivative and Hedging Activities does not represent themarket risk involved in the derivative transactions.
(2) Fair value of financial instruments, etc.
The carrying amounts in the consolidated balance sheet and fair values and the corresponding differences at March 31, 2013
and 2012 (the consolidated accounting date) are as set out below. In the case of items where estimation of the fair value isrecognized to be very difficult, the relevant item is not included in the table below (see note *4 below).

Year ended March 31, 2013
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in securities
Total assets

Carrying amountMillions of yen
Fair value

Differences¥10,673
10,241(48)
10,193¥10,673¥-

10,193

-

4,500
5,081
¥30,447

4,500
5,054
¥30,420

(27)
¥(27)

¥2,4382,654
4,954¥2,438
2,654
4,954

¥-

Liabilities(e) Notes and accounts payable(f) Short-term debt(g) Accrued liabilities(h) Long-term debt (including amount due within
one year)
Total liabilities

1,240

1,253

13

¥11,286¥11,299¥13

Derivative transactions (*2)(i) Transactions not covered by hedge accounting(j) Transactions covered by hedge accounting
Total derivative transactions

¥3
¥3

¥3
¥3

¥¥-

Year ended March 31, 2012
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in leases(e) Investments in securities(f) Short-term loans receivable(g) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets

28 Toyo Kanetsu K.K. Annual Report 2013

Carrying amountMillions of yen
Fair value

Differences¥9,985
8,627
(136)
8,491

¥9,985

¥-

8,491

-

3,999
1,545

3,999
1,584

39

3,299
120
106
(11)
95
¥27,534

3,272
121

(27)
1

94
¥27,546(1)¥12

Liabilities(h) Notes and accounts payable(i) Short-term debt(j) Accrued liabilities(k) Long-term debt (including amount due within
one year)(l) Lease obligations (including amount due within
one year)
Total liabilities
Derivative transactions (*2)(m) Transactions not covered by hedge accounting(n) Transactions covered by hedge accounting
Total derivative transactions

Year ended March 31, 2013
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable
Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in securities
Total assets¥1,9592,483
3,737¥1,959
2,483
3,737

¥-

1,000

1,002

2

205

218

13

¥9,384¥9,399

¥15

¥5
¥5

¥5
¥5

¥¥-

Carrying amountThousands of U.S. dollars
Fair value

Differences$113,533
108,937(510)
108,427$113,533$-

108,427-

47,86554,041$323,866

47,86553,762$323,587(279)$(279)$25,929
28,233
52,694$25,929
28,233
52,694$-

Liabilities(e) Notes and accounts payable(f) Short-term debt(g) Accrued liabilities(h) Long-term debt (including amount due within
one year)
Total liabilities

13,19813,331

133$120,054$120,187$133

Derivative transactions (*2)(i) Transactions not covered by hedge accounting(j) Transactions covered by hedge accounting
Total derivative transactions

$29
$29

$29
$29

$$-

*1. The allowances for doubtful accounts included in notes and accounts receivable, investments in leases, and long-term loans
receivable have been deducted.
*2. Net credits and liabilities arising from derivative transactions are presented on a net basis; in the case of an overall net
liability, the amount is presented in parentheses.
*3. Fair value calculation method for financial instruments and notes on marketable securities and derivative transactions.
[Assets](a) Cash on hand and at bank and (b) Notes and accounts receivable
As these are mainly settled over short periods and the fair value is close to the book value, these are stated at the relevantbook value.
(c) Marketable securities
As the period to maturity is short and the fair value is close to the book value, these are stated at the relevant book value.
(d) Investments in securities
Fair value reflects stock exchange price or the price quoted by the financial institution dealing with the Company and its
consolidated subsidiaries. For related notes, see Note 4. Investments in Securities.
[Liabilities](e) Notes and accounts payable (f) Short-term debt and (g) Accrued liabilities
As these are settled over short periods and the fair value is close to the book value, these are stated at the relevant bookvalue.
(h) Long-term debt (including amount due within one year)
Fair value of long-term debt with variable interest rate is estimated based on cash flow of repayments of principal andinterest determined together with the applicable interest rate swap, which is accounted for under exceptional method. The
cash flow is discounted at a reasonable estimate of the interest rate that would apply if a new borrowing of the sameamount for the same term were to be made.
Toyo Kanetsu K.K. Annual Report 201329

[Derivative transactions]
For related notes, see Note 18. Derivative and Hedging Activities.
*4. As there is no market price for non-listed stocks (carrying amount in consolidated balance sheet ¥1,016 million ($10,809
thousand) and $1,660 million for the years ended March 31, 2013 and 2012, respectively) and it is also not practicable to
make estimates of future cash flow, etc., and fair value. These stocks are therefore not included in the item (e) Investments
in securities in the Assets section above.
*5. Repayment schedule subsequent to the end of the fiscal year of monetary debt and marketable securities with maturity
dates are as follows:
Millions of yen
As at March 31, 2013
Time deposit
Notes and accounts receivable
Marketable securities
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Total

Within one year

1 to 5 years

5 to 10 years

Over 10 years¥10,648
10,180
4,500

¥13
-

¥-

¥-

-

1,200
500

-

-

¥25,328¥1,713¥-¥-

1 to 5 years

5 to 10 years

Over 10 years¥9,958
8,491
4,000
760

¥774

¥11

¥-

-

700
50

-

-

120
¥23,32952¥1,576

¥11

42
¥42

1 to 5 years

5 to 10 years

Over 10 years$113,262
108,293
47,865

$135
-

$-

$-

-

12,7655,326--$269,420$18,226-$-

Millions of yen
As at March 31, 2012
Time deposit
Notes and accounts receivable
Marketable securities
Investments in leases
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Short-term loans receivable
Long-term loans receivable
Total

Within one year

Thousands of U.S. dollars
As at March 31, 2013
Time deposit
Notes and accounts receivable
Marketable securities
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Total

Within one year

*6. Repayment schedule of long-term debt and other interest-bearing debt is mentioned in Note 5. Short-Term Debt,
Long-Term Debt, and Lease Obligations.
18. Derivative and Hedging Activities
There were no relevant transactions as of March 31, 2013 and as of March 31, 2012, derivative transactions for which hedged
accounting have not been applied.
In the year ended March 31, 2013 and 2012, derivative transactions, for which hedged accounting have been applied, are as
follows:

30 Toyo Kanetsu K.K. Annual Report 2013

(1) Currency-related

As at March 31, 2013
Forward exchange contract
Buy Euro

As at March 31, 2012
Forward exchange contract
Buy Euro

As at March 31, 2013
Forward exchange contract
Buy Euro

Due within one
year

Millions of yen
Contract value
Due after one
Total
year

Fair value

¥53

¥-

¥53

¥56

¥53

¥-

¥53

¥56

Due within one
year

Millions of yen
Contract value
Due after one
Total
year

Fair value

¥88

¥-

¥88

¥93

¥88

¥-

¥88

¥93

Due within one
year

Thousands of U.S. dollars
Contract value
Due after one
Total
year

Fair value

$562

$-

$562

$591

$562

$-

$562

$591

*1. The principal object of the hedge is accounts payable in the balance sheet.
*2. Payables hedged by the above contracts, which met certain hedging criteria for deferral hedge accounting, were translated
at the relevant contract rates.
*3. The fair value of the above was based on the price quoted by the financial institution dealing with the Company.
(2) Interest-related

As at March 31, 2013
Interest rate swaps(receivable rate variable/payable rate fixed)

As at March 31, 2012
Interest rate swaps(receivable rate variable/payable rate fixed)

As at March 31, 2013
Interest rate swaps(receivable rate variable/payable rate fixed)

Due within one
year¥-

Due within one
year
¥500

Due within one
year$-

Millions of yen
Contract value
Due after one
Total
year
¥800

¥800

Millions of yen
Contract value
Due after one
Total
year
¥300

¥800

Thousands of U.S. dollars
Contract value
Due after one
Total
year
$8,510$8,510Fair value(*4)

Fair value(*4)

Fair value(*4)*4. As items to which exceptional treatment of interest rate swaps is applicable are treated as a single unit with the long-term
debt covered by the hedge, the fair value is included in the fair value indicated for the relevant long-term debt.

Toyo Kanetsu K.K. Annual Report 201331

19. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheet as of March 31, 2013 and 2012.
a. Outline of relevant asset retirement obligations
These are obligations under the Ordinance on Prevention of Asbestos Hazards relating to certain facilities for lease.
b. Method of calculation of amount of relevant asset retirement obligations
For the facilities in a. above, calculations are based on estimated period of use 31 years and discount rate 2.2%.
c. Increase/decrease in total amount of relevant asset retirement obligations for the year ended March 31, 2013 and 2012 are as
follows.
Thousands ofMillions of yen
U.S. dollars
March 31
2012
2013
2013
Balance at the beginning of the fiscal year
¥298
¥298
$3,170
Increase/decrease during year225
Balance at the end of the fiscal year
¥298
¥300
$3,195
20. Real Estate for Leasing
In the Tokyo area and other districts, the Company and certain of its subsidiaries undertake leasing of part of their businesspremises or of land and buildings used for residential leasing. In the year ended March 2013 and 2012, the net rent income on
the relevant real estate for leasing was ¥286 million ($3,044 thousand) and ¥321 million with rent income recorded under net
sales and rent expenses under cost of sales.
The carrying amounts in the consolidated balance sheet of the relevant real estate for leasing, the change during the period, andthe fair value are as set out below.
Thousands ofMillions of yen
U.S. dollars
March 31
2012
2013
2013
The carrying amounts in the consolidated balance sheet
Balance at the beginning of the fiscal year
¥5,470¥5,415$57,601
Change during the fiscal year
(55)
57
604
Balance at the end of the fiscal year
5,415
5,472
58,205
Fair value at the end of fiscal year

¥3,839¥3,790$40,835*1. The carrying amounts in the consolidated balance sheet are the acquisition cost, net of accumulated depreciation andaccumulated impairment loss.
*2. The change during the year ended March 31, 2013 was mainly due to an increase in leased area accounting for ¥138
million ($1,467 thousand), an increase in leased assets because of consolidated subsidization of Toyo Koken K.K.
accounting for ¥46 million ($493 thousand) and a decrease by depreciation accounting for ¥128 million ($1,357 thousand).
The change during the year ended March 31, 2012 was mainly due to a decrease by depreciation accounting for ¥41
million.
*3. Fair value of significant properties at March 31, 2013 and 2012 represents a price based on appraised value determined by
an external real estate appraiser. Fair value of insignificant properties is based on index considered to appropriately reflectmarket price.
21. Segment Information(1) Outline of Reporting Segments
The Company’s reporting segments consist of components of its business for which separate financial information is available
and which are evaluated regularly by the Company’s board of directors in deciding the allocation of operational resources andin assessing business performance.
The TKK Group conducts its operations on the basis of a comprehensive business strategy formulated to cover the products
and services of its different business segments and of the Company’s subsidiary Toyo Kanetsu Solutions K.K.
Accordingly, the Company recognizes the following reporting segments, which consist of segments handling different products
and services: Plant & Machinery Business; Material Handling Systems Business; and Building Construction Business.

32 Toyo Kanetsu K.K. Annual Report 2013

The operations of the Plant & Machinery Business consist chiefly of the design, manufacture, and installation of storage tanks
for LNG, LPG, crude oil, and other gases and liquids and maintenance operations for these various types of tank. The Material
Handling Systems Business engages chiefly in the development, design, and installation of material distribution systems
consisting mainly of sorting, picking, and conveying systems, and the maintenance of these various systems. The Building
Construction Business engages chiefly in the design, construction, and management of buildings of various types including
apartment buildings, office buildings, welfare facilities, and warehouses.
(2) Method of Calculation of Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
The accounting methods applied to the reporting segments are the same as those specified above in Note 2. Summary of
Significant Accounting Policies. The income of the reporting segments is based on operating income. Intersegmental
transactions are entered at the actual amount.
(3) Information on Amounts for Net Sales, Income or Loss, Assets, and Other Items for Reporting Segments
Millions of yen
Reporting segment
Plant &
Machinery

Year ended March 31, 2013
Sales
Sales to external customers
Inter-segment sales

Business

Material
Handling
Systems
Business

Building
Construction

Other

Subtotal

Adjustments

Total

Business¥24,027¥14,966¥1,918¥40,911¥4,593

¥-

-

-

-

-

646

(646)

-

Total

24,027

14,966

1,918

40,911

5,239

(646)

45,504

Operating income

1,771

232

(24)

1,979

575

(282)

2,272

Assets17,018

11,295

1,710

30,023

9,899

18,15758,079

266

199

7

472

158

12

642

497

79

3

579

218

(1)

796

Other items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets¥ 45,504

Note: Other includes manufacturing and sales of industrial facilities/instruments, real-estate rental and leasing business.

Millions of yen
Reporting segment
Plant &
Machinery

Year ended March 31, 2012
Sales
Sales to external customers
Inter-segment sales

Business

Material
Handling
Systems
Business

Building
Construction

Other

Subtotal

Adjustments

Total

Business¥23,625¥11,624¥3,338¥38,587¥2,146¥-¥ 40,733

-

-

-

-

682

(682)

-

Total

23,625

11,624

3,338

38,587

2,828

(682)

40,733Operating income

1,956

(729)

14

1,241

491

(258)

1,474

Assets15,425

9,611

1,859

26,8958,228

16,37051,493

274

200

10

484

145

14

643

551

83

0

634

40

5

679

Other items
Depreciation
Increase in tangible fixed assets andintangible fixed assets

Note: Other includes real-estate rental and leasing business.

Toyo Kanetsu K.K. Annual Report 201333

Thousands of U.S. dollars
Reporting segment
Material

Plant &
Machinery

Year ended March 31, 2013
Sales
Sales to external customers
Inter-segment sales

Handling

Business

Systems
Business

Building
Construction

Other

Subtotal

Adjustments

Total

Business$255,573$159,201$20,403$435,177$48,854

$-

-

-

-

-

6,870

(6,870)-

Total

255,573

159,201

20,403435,177

55,724(6,870)484,031

Operating income

18,835

2,466

(257)

21,0446,120(2,999)24,165

Assets181,024

120,148

18,189319,361

105,302

193,132

617,795

2,827

2,114

79

5,020

1,675

129

6,824

5,291

843

30

6,164

2,315

(14)

8,465

Other items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets$484,031(4) Differences between Segmental Totals and Consolidated Financial Statement Totals and Main Factors in Difference(a) Operating income
Thousands ofMillions of yen
U.S. dollars
March 31
2012
2013
2013
Sum total of reporting segments operating income¥1,242¥1,979$21,043
Income in Other category
491
575
6,121
Corporate expenses (*)
(268)
(288)
(3,066)
Other adjustments
9
6
67
Operating income in consolidated financial statements¥1,474¥2,272$24,165* Corporate expenses are chiefly expenses for administrative and other managerial divisions that do not belong to a reporting
segment.

(b) Assets

March 31
Sum total of reporting segments assets
Assets in Other category
Corporate assets (*)
Other adjustments
Total assets of consolidated financial statements

Millions of yen
2012
2013
¥26,895¥30,023
8,228
9,899
16,39618,180(26)(23)¥51,493¥58,079

Thousands of
U.S. dollars
2013$319,361
105,302
193,383(251)$617,795* Corporate assets are chiefly Company cash and deposits and assets relating to the administration department for investments insecurities etc., which do not belong to a reporting segment.

(5) Information by Individual Product or Service

March 31
Sales to external customers
Storage tanks, etc.
Storage tank maintenance operations
Material handling systems and machinery, etc.
Apartment and office buildings, etc.
Other
Total

34 Toyo Kanetsu K.K. Annual Report 2013

Millions of yen
2012
2013
¥17,7286,299
14,966
1,918
4,593¥45,504¥15,888
7,737
11,624
3,338
2,146¥40,733

Thousands of
U.S. dollars
2013$188,577
66,996
159,201
20,40348,854$484,031

(6) Geographical Information(a) Sales
Thousands of
U.S. dollars
2013

Millions of yen
2012
2013

March 31
Sales to external customers
Japan¥30,047¥33,884
South-east Asia
2,116
3,945
Middle East
2,272
312
Oceania
5,960
6,863
Africa
282
453
Other
56
47
Total
¥40,733¥45,504
Note: Net sales figures are categorized by country or region based on the location of the contract.

$360,432
41,9603,314
73,0004,824
501$484,031(b) Tangible fixed assets
Thousands of
U.S. dollars
2013$130,055
15,1904$145,249

Millions of yen
2012
2013
¥11,268¥12,227
1,311
1,428
0
¥12,579¥13,655

March 31
Japan
South-east Asia
Oceania
Total(7) Information on Main Customers
Main Customer for the year ended March 31, 2013 and the year ended March 31, 2012 was Bechtel(Customer of Plant &Machinery Business) and sales to Bechtel was ¥6,888 million ($73,268 thousand) and ¥6,225 million, respectively.
(8) Information on Amortization of Goodwill and Unamortized Balance for Reporting Segments
There is no relevant information for the year ended March 31, 2012.
Millions of yen
Plant &
Machinery

Year ended March 31, 2013
Amortization of goodwill
Unamortized balance

Business

Material
Handling
Systems
Business

Building
Construction

Other

Adjustment

Total

Business¥¥¥¥62249
Note: Amounts of Other is related to manufacturing and sales of industrial facilities/instruments.

¥-

¥ 62
249

Thousands of U.S. dollars
Plant &
Machinery

Year ended March 31, 2013
Amortization of goodwill
Unamortized balance

Business$-

Material
Handling
Systems
Business$-

Building
Construction

Other

Adjustment

Total

Business

$-

$663
2,651

$-

$663
2,651

22. Amount Per Share
Amounts per share at March 31, 2013 and 2012 and for the years then ended were as follows:
Yen
2012
2013
Net assets¥244.77¥257.71
Net income
5.93
12.53

U.S. dollars
2013
$2.74
0.13

Diluted net income per share for the years ended March 31, 2013 and 2012 has not been presented because no potentiallydilutive shares of common stock were outstanding.

Toyo Kanetsu K.K. Annual Report 201335

Net income per share was calculated on the following basis:

Net income
Net income not available to shareholders of common stock
Net income available to shareholders of common stock

Millions of yen
2012
2013
¥714
¥1,527¥714¥1,527Weighted-average number of outstanding shares of common stockThousands of shares
2012
2013
120,441
121,868

Thousands of
U.S. dollars
2013$16,238$16,238

23. Business Combination(1) Outline of business combination(a) Acquired company: Toyo Koken K.K.
Business lines: Manufacture and sales of winch, balancer, conveyor and industrial robot(b) Main reason of business combination
This acquisition was designed to advancement of corporate value and enhancement of the comprehensive strength byunifying/streamlining the development/production/sales structure, and integrating their technology resources.
(c) Acquisition date: April 1, 2012(d) Form of acquisition: Share exchange(e) Company name after this combination
There is no change.
(f) Supplement for the outline
The Company (hereinafter "TKK") and Toyo Koken K.K. (hereinafter “KOK”) resolved at their respective board of
directors meetings held on December 20, 2011 and concluded an agreement on the same day, to implement a shareexchange (the "Share Exchange") pursuant to a share exchange agreement entered into by TKK and KOK (the "Share
Exchange Agreement"), under which TKK will become the wholly owning parent of KOK and KOK became a wholly
owned subsidiary of TKK.
Pursuant to the provision of Paragraph 3 of Article 796 of Japanese Corporate Law, the Share Exchange was implemented
as a short-form share exchange for which the approval at a general meeting of TKK shareholders was not required. The
Share Exchange subject to the approval of the Share Exchange Agreement by a resolution at the extraordinary general
meeting of KOK shareholders was held on February 28, 2012.
Based on the Share Exchange Agreement, the Share Exchange became effective as of April 1, 2012 and KOK became asubsidiary of TKK.
(g) Ratio of voting rights
Ratio before the business combination
Ratio additionally acquired on the business combination date
Ratio after the acquisition

39.4%
60.6%
100.0%(h) Main reason of deciding the acquiring company
The Company acquired the 100% voting rights shares of KOK by Share Exchange.
(2) Business period of acquired company included in the consolidated financial statements
From April 1, 2012 to March 31, 2013
(3) Acquisition cost and breakdown

Acquisition price

Cost incurred directly
Acquisition cost

36 Toyo Kanetsu K.K. Annual Report 2013

Fair value of KOK shares owned by
TKK just before the businesscombination
Fair value of TKK treasury stock
allocated on the acquisition date
Advisory fee etc.

Millions of yen

Thousands of
U. S. dollars¥350 million$3,722553 million

5,884

33 million¥936 million

348$9,954

(4) Difference between the acquisition cost and total amount of each transaction cost for the acquisition
Gain on step acquisition ¥98 million ($1,039 thousand)(5) Share exchange rate, calculation basis and number of allocated shares(a) Share exchange rate
Company Name
TKK(Parent Company)
1
Share Exchange Rate

KOK
0.6

(b) Calculation Basis
In order to ensure fairness and reasonableness of the share exchange ratio for the Share Exchange, each of the parties decided
to request a separate independent third party valuation institution to calculate a share exchange rate. For this purpose, TKK
appointed Daiwa Securities Capital Markets Co., Ltd. (Current Daiwa Securities Co., Ltd. hereinafter "Daiwa Securities CM ")and KOK appointed A.G.S. Consulting Co., Ltd. (hereinafter “AGS”).
Daiwa Securities CM and AGS determined that the value of TKK and KOK Shares should be analyzed using the market pricemethod based on the fact that both of their market prices are available and the discount cash flow method in order to reflect thestatus of future activities.
TKK and KOK engaged in repeated negotiations and discussions based on the analysis provided by the above third party
valuation institutions, and bearing in mind their respective financial conditions, performance trends and stock price movements,
etc. As a result, TKK and KOK determined that the share exchange rate set forth above and resolved the share exchange rate
for the Share Exchange upon approval obtained at meetings of their respective boards of directors.
(c) Number of allocated shares
Common Stock 3,045,000 shares (Common stock held in treasury 3,045,000 shares)(d) Amount of goodwill, reason for its recognition, amortization method and period
i. Amount of goodwill¥311 million ($3,313 thousand)ii. Reason for its recognition
Goodwill is recognized in the total amount of difference between the amount of subsidiary stock which was additionallyacquired and market value of net assets on the date of the acquisition, and difference between the acquisition cost ofpreviously owned shares and the carrying amount under equity method.
iii. Amortization method and period
5 years with straight-line method(e) Assets acquired and liabilities assumed on the acquisition dateThousands ofMillions of yen
U. S. dollars
Current assets¥2,123$22,582
Fixed assets
936
9,960
Total assets
3,059
32,542Current liabilities
1,907
20,292
Fixed liabilities
513
5,453
Total liabilities¥2,420$25,745

Toyo Kanetsu K.K. Annual Report 201337

38 Toyo Kanetsu K.K. Annual Report 2013

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

138,730,741

Number of Shareholders

14,109Security Traded

Tokyo Stock Exchange Market, First Section

Transfer Agent and Registrar The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan
Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head OfficeOsaka Sales Office

19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp/
Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173
Material Handling Systems Business(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
Building Construction Business
Tel: +81-3-5857-3160 Fax: +81-3-5857-3186

1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Plant & Machinery Business
Tel: +81-72-645-2520 Fax: +81-72-645-2532
Material Handling Systems Business(Toyo Kanetsu Solutions K.K. West Japan Sales Office)Tel: +81-72-645-2530 Fax: +81-72-645-2532

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3180
URL: http://www.tksl.co.jp/

P.T. Toyo Kanetsu Indonesia(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62 (21) 570-7805 / 7739 Fax: +62 (21) 570-3950

K-Techno Inc.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3155 Fax: +81-3-5857-7248
URL: http://k-techno.co.jp
TKL Co., Ltd.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-5606-6377
URL: http://www.web-tkl.co.jp

Chiba Plant
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

TOYO KANETSU SINGAPORE PTE. LTD.
38, Robinson Road, #17-00, The Corporate Office,Singapore 068906
Tel: +62 6228 0561 Fax: +62 6223 1735
Toyo Kanetsu (Malaysia) SDN. BHD.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60 (86) 338122 Fax: +60 (86) 338123

Toyo Service System K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3201
URL: http://www.toyoservice.co.jp
Toyo Koken K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: http://www.toyokoken.co.jp

Toyo Kanetsu K.K. Annual Report 201339

19-20, Higashisuna 8-chome, Koto-ku,
Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-3170
URL: http://www.toyokanetsu.co.jp/