TOYO KANETSU K.K.

Annual Report 2014
For the year ended March 31, 2014

Contents
Consolidated Financial Highlights ·················································· 2
To Our Shareholders ··································································· 3
Board of Directors, Auditors and Corporate Officers ·························· 6Lines of Business ········································································ 6
TKK Group Companies ······························································· 7
Analysis of Operating Environment and Results ······························· 8Business Risks ··········································································· 9
Financial Section
Consolidated Balance Sheet ······················································ 11
Consolidated Statement of Income and Comprehensive Income ········· 13
Consolidated Statement of Changes in Net Assets ··························· 14
Consolidated Statement of Cash Flows ········································· 17
Notes to the Consolidated Financial Statements······························ 19
Report of Independent Auditors ················································· 40
Corporate Data ·········································································· 41
Directory ·················································································· 41

Toyo Kanetsu K.K. and Consolidated Subsidiaries

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

Millions of yen

2014

2013

2012

2011

2010

2014

¥ 48,395
26,90415,158
6,333
4,341
2,880
3,224
595

¥ 45,504
24,027
14,966
6,511
2,272
1,527
1,971
477

¥ 40,733
23,625
11,624
5,484
1,474
714
1,083
482

¥ 48,718
26,70917,590
4,419
2,590
158
(35)
603

¥ 50,446
24,22420,897
5,325
3,863
3,560
504

$470,405
261,508
147,338
61,55942,19827,992
31,335
5,783

Shareholders’ Equity
Accumulated Other Comprehensive Income
Minority Interests
Total Liabilities and Net Assets¥33,841
12,912
7,369
393
54,515
16,7254,000
32,1061,471
213
54,515¥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$328,939
125,50971,622
3,821
529,891
162,567
38,883312,071
14,302
2,068
529,891

Order Backlog

49,06546,45950,94050,80757,379476,919

Per Share:
Net Income
Cash Dividends
Shareholders’ Equity

2014¥24.185.00
282.182013¥12.53
4.00
257.71

2012
¥5.93
4.00
244.77

2011
¥1.31
5.00
246.042010¥28.754.00
250.392014
13,517742

2013
13,309787

2012
13,626694

2011
14,109678

2010
14,027631

For the Years Ended March 31:
Net Sales
Plant & Machinery Business
Material Handling Systems 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 \102.88=$1.00, solely for readers’ convenience.

2

Toyo Kanetsu K.K. Annual Report 2014

2014
$0.24
0.05
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 2014 informative useful.
In fiscal year 2014, the TKK Group achieved growth in both earnings and profits as a solid performance by our
Plant & Machinery Business was supplemented by an earnings improvement at the Material Handling Systems Business.
As a result, we achieved at record high operating earnings & current earnings.

In consideration of growth in our earnings and financial condition, the dividend has been set at ¥5 per share by making¥1 per share additions from the common value at ¥4 per share.

We upgraded the assessment figure of annual average operating earnings, based on medium – term business plan for fiscal
year 2013-2015, from ¥2.3 billion to ¥3.1 billion.
Through the plan above, we are endeavoring to maximize the TKK Group’s corporate value and meet the expectations of
our shareholders and other stakeholders.

In closing, I would like to thank you in advance for your understanding and continue support of our efforts.

August 2014
Toru Yanagawa
President and Representative Director

Toyo Kanetsu K.K. Annual Report 2014

3

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
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

4

Toyo Kanetsu K.K. Annual Report 2014

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¥47.0 billion

Operating Income¥3.1 billion

Operating Margin

6.6%

Income before Extraordinary Items¥3.4 billion

Net Income¥2.2 billion

5

Toyo Kanetsu K.K. Annual Report 2014

Board of Directors, Auditors and Corporate Officers
Directors
Directors
Chairman and Representative Director
President and Representative Director
Executive Vice President
Director and Division Manager
Director and Division Manager
Director and Deputy Division Manager
Director and Senior Execuive Officer

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

Auditors
AuditorOutside Auditor
Outside Auditor
Outside Auditor

Kazuto Abe
Toshiaki Hiwatari
Tsuneo Nagai
Shigeharu Nakamura

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

Tetsuya Watanabe
Shiro Ito
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.

Toyo Kanetsu K.K. Annual Report 2014

6

TKK Group Companies
TOYO KANETSU K.K.
(Material Handling Systems Business)(Other Business)(Plant & Machinery Business)

Toyo Kanetsu Builtec K.K.

P.T. Toyo Kanetsu Indonesia

Toyo Kanetsu Solutions K.K.

Toyo Service System K.K.

TOYO KANETSU
SINGAPORE PTE. LTD.

K-Techno Inc.

Toyo Koken K.K.

Toyo Kanetsu (Malaysia) SDN. BHD.

TKK-USA, Inc.

Domestic Subsidiaries

Overseas Subsidiaries

Major Subsidiaries and Affiliated Companies(Overseas)(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

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
TOYO KANETSU SINGAPORE PTE. LTD.

Toyo Kanetsu Builtec K.K.
Establishment
April 1, 2014
Capital¥50 million
Business
Building construction businessprovisional equipment operations

Establishment
CapitalBusinessandToyo Service System K.K.
Establishment
September 19, 1986
Capital¥60 million
Business
Building management, real estate, leasing
operations and OA-related operations

August 8, 2006
S$500,000
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structures

TKK-USA Inc.

Establishment
CapitalBusiness

Jun 7, 2003
US$10,000
Manufacturing and sales of storage tanks,pressure vessels, and onshore and offshore
steel structures

Toyo Koken K.K.
Establishment
February 11, 1957
Capital¥90 million
Business
Design, manufacturing and construction of
winches and hoists, lift ladders, conveyors,balancers, industrial robots and othermachinery

7

Toyo Kanetsu K.K. Annual Report 2014

Analysis of Operating Environment and Results
In the fiscal year ended March 31, 2014 (hereafter, fiscal year2014), the Japanese economy followed a path of moderate recovery.
This reflected an improvement in the employment situation and an
upturn in capital investment resulting from a correction in thestrong yen and a stock market rally on the back of the government’s
economic policies. Even so, a sense of uncertainty about the futureof the economy still remains, characterized by rising raw material
prices and downswing concerns due to the April 2014 Japanese
consumption tax hike.
In the Plant & Machinery Business, energy-related projects arebeing planned in various regions around the world reflecting
expansion in energy demand on the back of economic growth inemerging countries and global population growth, while on theother hand there are cautious attitudes toward the prospects forsuch planned projects, reflecting such uncertain factors as weakereconomic growth in emerging countries and an easing of energy
supply and demand balance caused by the shale gas revolution. It istherefore difficult to predict the future direction of this sector
despite an overall tone of increasing LNG demand.
The Material Handling Systems Business saw a rebound indemand for its handling systems, in part as a result of expectationsof growth in the internet sales market amid the increasing
convenience of the internet and changes in Japanese lifestyles anddemographics, in particular the graying of society and dwindlingbirth rate. Other factors in this rebound include an increase inrenewal and replacement projects to increase capacity at existing
distribution centers, airport facilities and others, and forlabor-saving purposes.
In this operating environment, record highs were posted for eachof net sales, operating income and income before extraordinary
items in fiscal year 2014. Specifically, owing to a solid result fromthe Plant & Machinery Business, net sales were ¥48,395 million, an
increase of 6.4% from the previous fiscal year. Operating income
was ¥4,341 million, an increase of 91.1%, reflecting not only theeffects of increased revenue in the Plant & Machinery Business but
also improved profitability in the Material Handling Systems
Business. Furthermore, despite a decrease in foreign currency
exchange gain, income before extraordinary items was ¥4,776
million, an increase of 74.0%, reflecting the absence of equity inloss of affiliates. Net income was ¥2,879 million, an increase of
88.6%, despite the recording of impairment loss on real estate
owned. In addition, total orders received were ¥46,547 million, an
increase of 27.8%.
Effective from fiscal year 2014, the reportable segments havebeen changed from the previous three classifications of “Plant &Machinery Business,” “Material Handling Systems Business” and“Building Construction Business” to two classifications of “Plant &Machinery Business” and “Material Handling Systems Business.”
In the following comparisons with the previous fiscal year, thefigures for the previous fiscal year have been restated in accordancewith the segment classification after the change.

Plant & Machinery BusinessWith LNG demand expanding in part because of the fuel’s
efficacy in reducing carbon dioxide emissions, plans to construct
LNG plants, including storage facilities, are preceding in both
exporter and importer nations. On the other hand, competition for
Toyo Kanetsu K.K. Annual Report 20148orders is becoming even more severe, partly due to a move torestrain the investment amount by those making orders. In response,
we leveraged our strong track record and international
competitiveness and concentrated on sales activities, and as a result
we won orders for LNG and other types of tanks from customers inSoutheast Asia. In the domestic maintenance market, we secured asteady supply of contracts, among them orders for modification
works to floating-roof tanks following a partial revision to the Fire
Service Act.

As a result, the Plant & Machinery Business posted net
sales of ¥26,903 million, an increase of 12.0% from theprevious fiscal year. Operating income and orders received
increased by 50.8% to ¥2,670 million and 61.3% to ¥28,693
million, respectively.
Material Handling Systems Business
The distribution sector remains a severely competitivemarket, but the sales of our Material Handling Systems
Business benefitted from large orders for its Multishuttle
automated case storage system from internet sales
companies and logistics companies, and for airport baggage
handling systems. There was also a substantial improvementin the profit margins in this business. In addition, themaintenance division’s efforts to expand its business led tosteady increases in both net sales and profits.
As a result, the Material Handling Systems Businessrecorded net sales of ¥15,158 million, an increase of 1.3%
from the previous fiscal year, and operating income of¥1,150 million, an increase of 396.5%. Orders received were
¥14,318 million, a decrease of 14.9%.
Other Businesses
In businesses other than those above, we concentrated on
improving results in a way that fits the characteristics ofeach business. As a result, net sales totaled ¥6,333 million, adecline of 2.7% from the previous fiscal year, while
operating income and orders received increased by 39.5% to¥768 million and 94.2% to ¥3,535 million, respectively.

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

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.

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 and9 Toyo Kanetsu K.K. Annual Report 2014

Financial Section
For the years ended March 31, 2014 and 2013

Toyo Kanetsu K.K. Annual Report 201410

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Balance SheetAt March 31, 2014 and 2013

2014

2013

Thousands of
U.S. dollars(Note 1)
2014

Current Assets:
Cash on hand and in banks
Trade notes and accounts receivable
Investments in leases (Note 15)
Marketable securities
Inventories (Note 3)
Deferred tax assets (Note 8)
Other current assets
Less: Allowance for doubtful accounts
Total current assets¥13,000
8,151
1,339
4,000
6,630
279
499
(57)
33,841¥10,673
10,241
882
4,500
9,721
626
561
(55)
37,149$126,362
79,23213,011
38,87964,448
2,707
4,854
(554)
328,939

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
Total property, plant and equipment

10,115
6,691
9,441
2
110
(13,447)
12,912

10,946
6,530
9,879
3
223
(13,926)
13,65598,31565,03591,76919
1,068(130,697)
125,509

393
393

465
465

3,821
3,821

6,472
43
26
331
811
(314)
7,369

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

62,908
416
254
3,215
7,884
(3,055)71,622¥54,515¥58,079$529,891

ASSETS
Millions of yen

Intangibles:
Intangible fixed assets
Total intangibles
Investments and Advances:
Investments in securities (Notes 4)Long-term loans receivable
Deferred tax assets (Note 8)
Net defined benefit asset (Note 7)
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.

Toyo Kanetsu K.K. Annual Report 201411

LIABILITIES and NET ASSETS
Millions of yen

Thousands of
U.S. dollars(Note 1)
2014

2014

2013

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¥2,882
2,212
52
3,628
635
5,821
296
406
320
473
16,725¥2,745
2,438
77
5,209
850
3
10,805
250
398
152
242
23,169$28,01321,501
508
35,2696,174
56,582
2,873
3,945
3,113
4,589
162,567

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)
Net defined benefit liability (Note 7)
Asset retirement obligations (Note18)
Other long-term liabilities
Total long-term liabilities

864
1
569
1,776
392
300
98
4,000

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

8,396
11
5,528
17,264
3,814
2,920
950
38,883

18,5801,104
16,374(3,952)
32,106

18,5801,104
13,753(3,907)29,530180,600
10,731
159,153(38,413)
312,071

1,033
831
(618)
225
1,471
213
33,790¥54,515

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

10,046
8,075(6,011)
2,192
14,302
2,068
328,441$529,891

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
Remeasurements of defined benefit plans
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 201412

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Income and Comprehensive Income
For the years ended March 31, 2014 and 2013

2014

2013

Thousands of
U.S. dollars(Note 1)
2014

¥48,395
40,044
8,351
4,010
4,341

¥45,504
39,290
6,214
3,942
2,272

$470,405
389,236
81,16938,971
42,198

233
(20)
106
56
61
436
4,777

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

2,270
(199)
1,030
540
590
4,231
46,429

9
(1)
110
(410)
6
(286)
4,491

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

89
(9)
1,071
(3,984)59(2,774)43,655

1,012
573
1,585
2,906

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

9,842
5,567
15,40928,246

Minority interests in net income of consolidated subsidiaries
Net Income

26¥2,88034¥1,527

254$27,992

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

26
2,906

34
1,561

254
28,246

259
(2)
61
-

460
(1)
(47)
(2)

2,511
(17)
595
-

Total Comprehensive Income

318¥3,224410¥1,971

3,089$31,335

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

3,169
55

1,921
50

30,798537

Millions of yen

Net Sales
Cost of Sales (Note 10)
Gross profit
Selling, General and Administrative Expenses (Notes 9 and 10)
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
Gain on liquidation of subsidiaries and associates
Impairment loss (Note 11)
Other, net
Income before income taxes and minority interests
Income Taxes (Note 8):
Current
DeferredIncome before minority interests

Other Comprehensive Income (Note 12)
Net unrealized holding gains or losses on investment securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using
equity method

Yen

Per Share (Note 21)
Net income

2014

2013

¥24.18¥12.53

U.S. dollars(Note 1)
2014

$0.24

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

Toyo Kanetsu K.K. Annual Report 201413

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Changes in Net Assets
For the years ended March 31,2013 and 2014

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
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
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

Toyo Kanetsu K.K. Annual Report 201414

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Millions of yen
Number of sharesof common stock

Commonstock

Additional
paid-in capital

Accumulated
earnings (deficit)

Total
shareholders’equityTreasurystock

138,730,741-¥18,580-¥1,104-¥13,753
(476)
2,880

¥(3,907)-¥29,530
(476)
2,880

-

-

-

217

-

217

Purchases of treasury stock
Net unrealized holding gains on
investments

-

-

-

-

(45)

(45)

-

-

-

-

-

-

Deferred gains or losses on hedges
Unrealized gains on revaluation ofland
Foreign currency translation
adjustments
Remeasurements of defined benefits
plans

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

138,730,741¥18,580¥1,104¥16,374¥(3,952)¥32,106

Balance at April 1, 2013
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for
land

Minority interests
Balance at March 31, 2014

Millions of yen

Balance at April 1, 2013
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for
land

Purchases of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation ofland
Foreign currency translation
adjustments
Remeasurements of defined benefits
plans

Minority interests
Balance at March 31, 2014

Net
unrealized
holding(gains) lossesoninvestment
securities

Deferred
gains orlosses onhedges

Unrealized
gains onrevaluationof land

¥775
-

¥2
-

¥1,048-¥(651)--¥1,174-¥158-¥30,862
(476)
2,880

-

-

-

-

-

-

-

217

-

-

-

-

-

-

-

(45)

258

-

-

-

-

258

-

258

-

(2)

-

-

-

(2)

-

(2)

-

-

(217)

-

-

(217)

-

(217)

-

-

-

33

-

33

-

33

-

-

-

-

225

225

-

225

¥1,033-¥831¥(618)¥225¥1,471

55¥213

55¥33,790

Total
Foreign
Remeasure- accumulated
currency
ments ofothertranslation
definedcomprehenadjustments benefits plans sive income

Minority
interests

Total net
assetsToyo Kanetsu K.K. Annual Report 201415

Thousands of U.S. dollars (Note 1)

Common stock

Additional
paid-in capital

Accumulated
earnings (deficit)

Treasury stock

Total
shareholders’equity$180,600$10,731$133,682$(37,976)$287,037---(4,632)
27,992-(4,632)
27,992

-

-

-

2,111

-

2,111

Purchases of treasury stock
Net unrealized holding gains on
investments

-

-

-

-

(437)

(437)

-

-

-

-

-

-

Deferred gains or losses on hedges
Unrealized gains on revaluation ofland
Foreign currency translation
adjustments
Remeasurements of defined benefits
plans

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

138,730,741$180,600$10,731$159,153$(38,413)$312,071

Number of sharesof common stock

138,730,741

Cash dividends paid
Net income for the year
Reversal of revaluation reserve forland

Balance at April 1, 2013

Minority interests
Balance at March 31, 2014

Thousands of U.S. dollars

Balance at March 31, 2013
Cash dividends paid
Net income for the year
Reversal of revaluation reserve for
land

Purchases of treasury stock
Net unrealized holding gains on
investments
Deferred gains or losses on hedges
Unrealized gains on revaluation ofland
Foreign currency translation
adjustments
Remeasurements of defined benefits
plans

Minority interests
Balance at March 31, 2014

Net
unrealized
holding(gains)losses on
investment
securities

Deferred
gains orlosses onhedges$7,535-

Total
Unrealized
Foreign
Remeasure- accumulated
gains oncurrency
ments ofotherrevaluation translation
definedcomprehenof land
adjustments benefits plans sive income

Minority
interests$17-$10,187-$(6,323)--$11,416-$1,532 $299,985(4,632)
27,992

-

-

-

-

-

-

-

2,111

-

-

-

-

-

-

-

(437)

2,511

-

-

-

-

2,511

-

2,511

-

(17)

-

-

-

(17)

-

(17)

-

-

(2,112)--(2,112)-(2,112)

-

-

-

312

312

-

312

2,192

2,192

-

2,192

$2,192$14,302$10,046-$8,075The accompanying notes are an integral part of the consolidated financial statements.

Toyo Kanetsu K.K. Annual Report 201416($6,011)-

Total net
assets536
536$2,068 $328,441

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
For the years ended March 31, 2014 and 2013

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 net defined benefit liability
Increase (decrease) in net defined benefit asset
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 liquidation of subsidiaries and associations
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 Marketable securities
Proceeds from Sales of Marketable securities
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
Collection 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 14)

Thousands of
U.S. dollars(Note 1)
2014

2014

2013

¥4,491
752
2
410
62
(22)
6
(42)
(70)
168
(233)
20
(165)
(110)
(9)
1
(9)
7
2,107
(593)
3,090
67
36
(1,675)(4,977)
289
3,603
228
(17)
(1,207)2,607¥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$43,655
7,312
17
3,984
606
(216)
56
(410)
(681)
1,635
(2,270)199(1,601)(1071)
(89)
9
(91)
68
20,484(5,764)30,035648
347(16,277)(48,374)
2,809
35,0202,215(168)(11,729)
25,338

(130)
116
(100)
100
(724)
259
(604)
639
-

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

(1,262)
1,128
(969)
969
(7,037)2,520(5,870)
6,209
-

41
(403)

1
(38)
(1,198)402(3,910)

(440)
300
(142)
(11)
(474)
(767)
374
1,811
15,083¥16,894

(900)
500
(591)
(804)
(479)
(2,274)447
1,130
13,953¥15,083(4,278)2,916(1,380)(104)(4,612)(7,458)3,636
17,606146,604$164,210

Toyo Kanetsu K.K. Annual Report 2014

17

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

Toyo Kanetsu K.K. Annual Report 201418

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Notes to the Consolidated Financial Statements
For the years ended March 31, 2014 and 2013

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 ¥102.88=U.S. $1.00, theapproximate rate of exchange prevailing at March 31, 2014, has been used in translation. The approximate rate of exchange
prevailing at May 31, 2014 was ¥101.64=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 nine 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 excluded from consolidated
companies along with the liquidation.
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.
Four overseas subsidiaries were consolidated on the basis of their fiscal years ended at December 31, 2013 for the current year
consolidation and at December 31, 2012 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 201419

(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.
(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.

20 Toyo Kanetsu K.K. Annual Report 2014

(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 nothing and ¥56 million for the years ended March 31, 2014 and 2013,
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.
(Change in accounting principles)
The Company adopted “Accounting Standard for Retirement Benefits” (ASBJ Statement No.26 of May 17, 2012) and“Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No.25 of May 17, 2012) (except for certain
provisions described in the main clause of Section 35 of the standard and in the main clause of Section 67 of the guidance) asof the end of the fiscal year ended March 31, 2014. These accounting standards require entities to apply a revised method forrecording the retirement benefit obligation, after deducting pension plan assets, as a liability for retirement benefits. In addition,
unrecognized actuarial differences and unrecognized prior service costs are recorded as a liability for retirement benefits. If
pension assets exceed retirement benefit obligations, the Company recognizes the difference as assets associated withretirement benefits.
Concerning the application of the Accounting Standard for Retirement Benefits, based on the provisional treatment set out inClause 37 of the standard, the effects of such changes in the current fiscal year have been recorded in retirement benefits
liability adjustments through accumulated other comprehensive income.
Due to the change, investments and advances increased by ¥217 million ($2,112 thousand), accumulated other comprehensive
income increased by ¥225 million ($2,191thousand) and long-term liabilities decreased by ¥8 million ($79 thousand) at thecurrent fiscal year end.
In addition, net assets per share increased by ¥1.89 ($0.02).
(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, 2014 and 2013, 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.

Toyo Kanetsu K.K. Annual Report 201421

(17) Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” the main clause of Article 35 (Statement No.26 issued by the ASBJ on May 17,2012) and “Guidance on Accounting Standard for Retirement Benefits” the main clause of Article 67 (Guidance No.25 issued
by the ASBJ on May 17, 2012)(a) Overview
Under the revised accounting standard, with respect to the amortization method of the expected benefit, the benefit formulabasis is newly allowed as an option, in addition to the straight-line basis. The method for determining the discount rate is also
amended.
(b) Scheduled 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, 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 Company currently considers the effects of applying the revised accounting standard to be immaterial.
3. Inventories
Inventories as at March 31, 2014 and 2013consisted as follows:
Thousands of
U.S. dollars
2014
$602
11,932
51,914$64,448

Millions of yen
2013
2014
¥99
¥62
1,273
1,227
8,349
5,341
¥9,721¥6,630March 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, 2014
and 2013 were as follows:
Millions of yen
Thousands of U.S. dollars
2013
2014
2014
March 31
Government
bonds and local
government
bonds
Bonds
Other
Total

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

Fair Value

Carrying
AmountDifference

¥101

¥ 100

¥1

¥ 100

¥ 100

¥0

$ 983

$972

$11

1,594
¥1,6951,600¥1,700

(6)
¥(5)

1,074
¥1,174

1,100¥1,200(26)¥(26)

15,488$16,471

15,552$16,524

(64)
$(53)

The aggregate acquisition cost and carrying amounts of other securities with market quotations at March 31, 2014 and 2013
were as follows:
Millions of yen
Thousands of U.S. dollars
2013
2014
2014
March 31
Equity securities
Bonds
Other
Total

Acquisition

Carrying

Cost

Amount¥2,160¥2,160¥3,772¥3,772Difference¥1,612¥1,612Acquisition

Carrying

Cost

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

Acquisition

Carrying

Cost

Amount$20,992$20,992

Difference$36,660 $15,668$36,660 $15,668

Proceeds from sale of other securities were ¥139 million ($1,349 thousand) and ¥3 million for the years ended March 31, 2014
and 2013, respectively. On those sales, gross realized gains were ¥22 million ($211 thousand) and ¥0 million for the years
ended March 31, 2014 and 2013, respectively. Gross realized losses were ¥13 million ($122 thousand) and nothing for theyears ended March 31, 2014 and 2013, respectively.
Non-listed stocks whose fair value was not determinable were not included in the above table. For the years ended March 31,
2014 and 2013, the carrying amounts of them in the consolidated balance sheet were respectively ¥1,000 million ($9,723
thousand) and ¥1,016 million.

22 Toyo Kanetsu K.K. Annual Report 2014

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, 2014 and 2013, the carrying amounts of them on the balance sheet were
¥4,000 million ($38,879 thousand) and ¥4,500 million, respectively.
For the year ended March 31, 2014 and 2013, a write-down of non-listed stocks in other securities were ¥1 million ($9thousand) and ¥82 million, respectively.
5. Short-Term Debt, Long-Term Debt, and Lease Obligations
Short-term debt, long-term debt and lease obligations as at March 31, 2014 and 2013 were as follows:
Thousands of
U.S. dollars
2014

Millions of yen
2013

2014
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¥2,347535
52864
1¥3,799

0.68%
1.21
1.20
-

¥2,654
91
77
1,150
53
¥4,025

0.98%
2.47
1.19
-

$22,813
5,200
508
8,396
11
$36,928

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, 2014 and 2013 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
2013
2014
¥437
¥811
895
587
¥1,332¥1,398

Thousands of
U.S. dollars
2014$7,881
5,709$13,590

Assets pledged as collateral for the short-term debt and the long-term debt as at March 31, 2014 and 2013 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
2013
2014
¥588
¥548
0
0
0
0
5,565
5,524
5
¥6,158¥6,072Thousands of
U.S. dollars
2014$5,3240053,694$59,018

Annual maturities of long-term debt and lease obligations as at March 31, 2014 and 2013 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
2013
2014
¥481
¥729
669
60
60
15

Thousands of
U.S. dollars
2014$7,083583
583
147

Lease obligations
Thousands ofMillions of yen
U.S. dollars
2013
2014
2014
¥53
¥1
$11
-

Toyo Kanetsu K.K. Annual Report 201423

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, 2014 and 2013 amounted
to ¥3,299 million ($32,068 thousand) and ¥3,511 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 rate of ¥94.01=U.S. $1.00, the approximate rate of exchange prevailing at March 31, 2013, has been used in translation.
The accurued retirement benefits as of March 31, 2013 were as follows:
March 31, 2013
Projected benefit obligations
Plan assets
Net unreserved projected benefit obligations
Unrecognized actuarial gains and losses
Net retirement benefit obligations
Less: Pension costs paid in advanceAccrued retirement benefits for employees

Millions of yen¥(3,206)
2,984
(222)
(238)
(460)
71
(531)

Thousands of
U.S. dollars$(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 were as follows:
Thousands ofMarch 31, 2013
Millions of yen
U.S. dollars
Net pension and severance costs¥226$2,406
Service cost
163
1,737
Interest cost49
528
Expected return on plan assets
(27)
(290)
Recognition of actuarial gains and losses(1)(13)
Transfer to defined contribution pension plans
42444

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
Amortization of prior service costsof occurrence
Amortization of unrecognized actuarial gains and losses
5 years
Changes in defined benefit obligations

As of April 1, 2013
Service cost
Interest cost
Acturial gains and losses
Benefits paid
Other
As of March 31, 201424 Toyo Kanetsu K.K. Annual Report 2014

Millions of yen¥3,206
174
49
6
(331)
(3)
¥3,101Thousands of
U.S. dollars$31,165
1,690
476
55
(3,213)(25)$ 30,148

Changes in plan assets

As of April 1, 2013
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefits paid
As of March 31, 2014

Millions of yen¥2,984
29
185
170
(328)
¥3,040Thousands of
U.S. dollars$29,009
277
1,800
1,652
(3,189)$ 29,549

Reconciliation of defined benefit obligations and plan assets
The reconciliation of the defined benefit obligations and plan assets to the liabilities and assets on retirement benefits
recognized in the consolidated balance sheet as of March 31, 2014 is as follows:
Thousands ofMarch 31, 2014
Millions of yen
U.S. dollars
Funded defined benefit obligations$29,619¥3,047
Plan assets(29,549)(3,040)Subtotal
70
7
Unfunded defined benefit obligations
529
55
Net amount of liabilities and assets recognized in$599¥62
consolidated balance sheet
Liabilities (net defined benefit liability)
3,814
393
Assets (net defined benefit asset)
3,215
331
Net amount of liabilities and assets recognized in$599¥62
consolidated balance sheet
Retirement benefit expenses
The retirement benefit expenses for the fiscal year ended March 31, 2014 is as follows:
Thousands ofMarch 31, 2014
Millions of yen
U.S. dollars
Service cost
$1,690¥174
Interest cost476
49
Expected return on plan assets
(277)
(28)
Recognition of actuarial gains and losses
(646)
(66)
Total
$ 1,243¥129
Unrecognized prior service cost and unrecognized actuarial gains and losses recognized in accumulated other comprehensive
income
The unrecognized prior service cost and unrecognized actuarial gains and losses recognized in accumulated othercomprehensive income (amount before income tax effect) for the fiscal year ended March 31, 2014 are as follows:
Thousands ofMarch 31, 2014
Millions of yen
U.S. dollars
Unrecognized prior service cost$¥Unrecognized actuarial gains and losses(3,419)(352)
Total$(3,419)¥(352)
Major breakdown of plan assets
March 31, 2014
Debt securities
Equity securities
General account
Other
Total

31
31
34
4
100%

Actuarial assumptions
March 31, 2014
Discount rate
Expected return rate on plan assets

1.5%
1.0

Note: Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of plan assets
and anticipated future long-term performance of individual asset classes that comprise the funds’ asset mix.

Defined contribution pension plan
Contribution to the defined contribution plans were ¥38 million ($374 thousand) for the fiscal years ended March 31, 2014.
Toyo Kanetsu K.K. Annual Report 201425

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, 2014 and 2013. Foreign subsidiaries are
subject to income taxes of the countries in which they operate.
At March 31, 2014 and 2013, 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 net defined benefit liability
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
2013
2014

Thousands of
U.S. dollars
2014

Less: valuation allowance
Gross deferred tax assets¥1,022
54
135
105
123
133
331
46
205
72
107
201
2,534
(2,111)¥423¥1,235
75
188
93
140
151
329
46
413
80
107
318
531
3,706
(2,516)¥1,190$9,939
521
1,313
1,024
1,191
1,293
3,216
451
1,992
700
1,041
1,951
24,632(20,522)$4,110

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¥1,776574
0
113¥2,463¥1,896432
1239
48¥2,427$17,264
5,584
4
1,088
$23,940

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

Deferred tax assets and liabilities as at March 31, 2014 and 2013 were recorded in the consolidated balance sheet as follows:
Thousands ofMillions of yen
U.S. dollars
2013
2014
2014
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)

26 Toyo Kanetsu K.K. Annual Report 2014

¥279
26
569
1,776

¥626
74
3
37
1,896

$2,707
254
5,528
17,264

The reconciliation of the statutory income tax rate to the effective income tax rate for the years ended March 31, 2014 and2013 were as follows:
2013
2014
Statutory income tax rate
38.0%
38.0%
Increase (decrease) in tax rate due to;Increase and decrease of valuation allowance
6.2
(5.5)
Permanently non-deductible expenses
1.3
1.1
Permanently non-taxable dividends received
(1.9)
(0.3)
Local inhabitant’s tax
1.1
0.7
Difference in tax rates for foreign subsidiaries
(0.3)
0.4
Adjustment for unrealized gains and losses
0.1
Decrease of deferred tax assets by tax rate change
0.4
Tax effect of investments, etc., in subsidiary due for liquidation(1.5)
Gain on step acquisitions(1.4)
Amortization of goodwill
0.9
0.5
Other
0.3
(0.0)
Effective income tax rate
42.8%
35.3%
(Effects of Corporate Tax Rate Change, etc)
The “Act on Partial Revision, etc. of the Income Tax Act, etc.” is promulgated on March 31, 2014 and “The Restoration
Corporation Surtax” will not be imposed in the consolidated fiscal year beginning on or after April 1, 2014.
Due to this change in tax laws, temporary differences that are expected to reverse in the consolidated fiscal year beginning on
or after April 1, 2014, the statutory tax rates for measuring deferred tax assets and liabilities will be changed from 38.01% to35.64%.
Following this change, deferred tax assets decreased by ¥17 million ($172 thousand) and deferred income taxes increased by
the same amount.
9. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2014 and 2013 were as
follows:
Thousands ofMillions of yen
U.S. dollars
Year ended on March 31
2013
2014
2014
Salaries and benefits¥1,457¥1,437$13,974
Bonuses
246
341
3,321
Accrued bonuses
114
105
1,025
Pension and severance costs
146
116
1,136
Allowance for doubtful accounts
(7)
(5)
(50)
10. Research and Development Costs
Research and development costs charged to manufacturing costs and selling, general and administrative expenses for the years
ended March 31, 2014 and 2013 were ¥200 million ($1,943 thousand) and ¥144 million, respectively.
11. Impairment Loss on Fixed Assets
The Company and its consolidated subsidiaries accounted for impairment losses for the year ended March 31, 2013, as follows.
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 in extraordinary loss.
The recoverable amount of the above asset group is measured by net realizable value.
The Company and its consolidated subsidiaries accounted for impairment losses for the year ended March 31, 2014, as follows.
Location
Kamagaya City,
Chiba Prefecture

Use

Category

Idle assets

Land, building and others

Toyo Kanetsu K.K. Annual Report 2014

27

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, 2014, 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 ¥410 million ($3,984 thousand) in extraordinary loss. The
impairment loss consisted of buildings and structures (¥234 million ($2,271 thousand) ) ,machinery and equipment (¥0 million($1 thousand) ) and land (¥176 million ($1,712 thousand) ).
The recoverable amount of the above asset group is measured by net realizable value.
12. Tax effects and Reclassification Pertaining to Other Comprehensive Income
Components of other comprehensive income for the year ended on March 31, 2014 and 2013 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
Foreign currency translation adjustments:
Unrealized gains (losses) arising during the year
Reclassification to profit or loss for the year
Before tax effects adjustments
Tax effects
Foreign currency translation adjustments
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

Millions of yen
2014

2013

Thousands of
U.S. dollars
2014

¥423
(22)
401
(142)
259

¥721
(7)
714
(254)
460

$4,112(211)
3,901(1,390)
2,511

(3)
(3)
1
(2)

(2)
(2)
1
(1)

(27)
(27)
10
(17)

108
(86)
22
39
61

(83)
(83)
36
(47)

1,052
(837)
215
379
594

-

(2)

-

-

(2)

-

¥318

¥410

$3,089

13. Supplements for Consolidated Statements of Changes in Net Assets
Type and number of shares as at March 31, 2014 and 2013 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

2014

2013

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

19,584
153
19,737

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

For the year ended March 31, 2014, treasury stock increased by 153 thousand shares resulting from purchasing 36 thousand
shares less than one unit and purchasing of 117 thousand shares of shareholders whose whereabouts are unknown.
For 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.

28 Toyo Kanetsu K.K. Annual Report 2014

Cash dividends paid to shareholders from the beginning of the effective date were as follows:
2014
Approved by annual general shareholders’ meeting
Date of approval
June 27, 2013
Type of shares
Common stock
Date of record
March 31, 2013
Effective dateJune 28, 2013
Dividends per share¥4.00 ($0.04)¥477 million
Amount of cash dividends($4,632 thousand)2013
June 28, 2012
Common stock
March 31, 2012
June 29, 2012
¥4.00
¥482 million

Cash dividends for the year ended March 31, 2014 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 30, Accumulated
Common stock
¥5.00
¥595
$5,783
meeting held on
2014
2014
earnings
June 27, 2014
The dividend per share includes a special dividend of ¥1.00 per share.
14. Supplements for Consolidated Statements of Cash Flow
Cash and cash equivalents as at March 31, 2014 and 2013 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
2013
2014
¥10,673¥13,000
(70)
(80)
(20)
(26)
1,000
500
3,500
3,500
¥15,083¥16,894

Thousands of
U.S. dollars
2014$126,362
(778)
(253)
4,860
34,019$164,210

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

March 31
Within one year
Over one year

Millions of yen
2013
2014
¥12
¥13
16
10
¥28
¥23

Thousands of
U.S. dollars
2014
$132
95
$227

Lessor
The 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
2013
2014
¥1,47070(201)¥1,339

¥856
101
(75)
¥882

Thousands of
U.S. dollars
2014$14,287677(1,953)$13,011

Toyo Kanetsu K.K. Annual Report 201429

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
2013
2014
2014
Within one year
¥434
¥501
$4,874
1 to 2 years
265
356
3,460
2 to 3 years
120
262
2,548
3 to 4 years
26
248
2,408
4 to 5 years
11
103
997
Over 5 years
16. 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.
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.
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.

30 Toyo Kanetsu K.K. Annual Report 2014

(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, 2014
and 2013 (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, 2014
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
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
Derivative transactions (*2)(i) Transactions not covered by hedge accounting(j) 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

Carrying amountMillions of yen
Fair value

Differences¥13,000
8,151
(47)
8,104

¥13,000

¥-

8,104

-

4,000
5,471
¥30,575

4,000
5,466
¥30,570(5)¥(5)¥2,212
2,347
3,482¥2,212
2,347
3,482

¥-

1,399

1,406

7

¥9,440¥9,447

¥7

¥¥-

¥¥-

¥¥-

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, 2014
Assets(a) Cash on hand and at bank(b) Notes and accounts receivable

Carrying amount$126,362
79,232Thousands of U.S. dollars
Fair value$126,362

Differences$-

Toyo Kanetsu K.K. Annual Report 201431

Allowance for doubtful accounts (*1)(c) Marketable securities(d) Investments in securities
Total assets
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
Derivative transactions (*2)(i) Transactions not covered by hedge accounting(j) Transactions covered by hedge accounting
Total derivative transactions(464)
78,76878,768-38,87953,184$297,193

38,87953,132$297,141

(52)
$(52)

$21,501
22,81333,849$21,501
22,81333,849$-13,596

13,665

69$91,759$91,828

$69

$$-

$$-

$$-

*1. The allowances for doubtful accounts included in notes and accounts 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.
[Derivative transactions]
For related notes, see Note 17. Derivative and Hedging Activities.
*4. As there is no market price for non-listed stocks (carrying amount in consolidated balance sheet ¥1,000 million ($9,723
thousand) and $1,016 million for the years ended March 31, 2014 and 2013, 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, 2014
Time deposit
Notes and accounts receivable
Marketable securities
Investment in securities
Securities to be held to maturity
Other securities with market
quotations
Total

32 Toyo Kanetsu K.K. Annual Report 2014

Within one year

1 to 5 years

5 to 10 years

Over 10 years¥12,975
8,104
4,000

¥-

¥-

¥-

-

1,700
-

-

-

¥25,079¥1,700¥-¥-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$126,124
78,76838,879

$-

$-

$-

4,860
-

11,664---$248,631$11,664-$-

Thousands of U.S. dollars
As at March 31, 2014
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.
17. Derivative and Hedging Activities
There were no relevant transactions as of March 31, 2014 and as of March 31, 2013, derivative transactions for which hedged
accounting have not been applied.
In the year ended March 31, 2013, derivative transactions, for which hedged accounting have been applied, are as follows:(1) Currency-related

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

*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.
*4. In the year ended March 31, 2014, currency-related derivative transactions, for which hedged accounting have been applied,
is nothing.
(2) Interest-related

As at March 31, 2014
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
¥360

Due within one
year¥-

Millions of yen
Contract value
Due after one
Total
year
¥695

¥1,055

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

¥800

Fair value(*5)

Fair value(*5)

Toyo Kanetsu K.K. Annual Report 201433

As at March 31, 2014
Interest rate swaps(receivable rate variable/payable rate fixed)

Due within one
year$3,499Thousands of U.S. dollars
Contract value
Due after one
Total
year
$6,756

Fair value$10,255(*5)*5. 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.
18. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheet as of March 31, 2014 and 2013.
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, 2014 and 2013 are as
follows.
Thousands ofMillions of yen
U.S. dollars
March 31
2013
2014
2014
Balance at the beginning of the fiscal year
¥298
¥300
$2,920
Increase/decrease during year
2
Balance at the end of the fiscal year
¥300
¥300
$2,92019. 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 2014 and 2013, the net rent income on
the relevant real estate for leasing was ¥305 million ($2,968 thousand) and ¥286 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
2013
2014
2014
The carrying amounts in the consolidated balance sheet
Balance at the beginning of the fiscal year
¥5,415¥5,472$53,186
Change during the fiscal year57
(175)
(1,703)
Balance at the end of the fiscal year
5,472
5,297
51,483
Fair value at the end of fiscal year

¥3,685¥3,839$35,819*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, 2014 was mainly due to a decrease by leased area accounting for ¥145 million($1,407 thousand) and a decrease by depreciation accounting for ¥30 million ($296 thousand).
The change during the year ended March 31, 2013 was mainly due to an increase in leased area accounting for ¥138
million, an increase in leased assets because of consolidated subsidization of Toyo Koken K.K. accounting for ¥46 million
and a decrease by depreciation accounting for ¥128 million.
*3. Fair value of significant properties at March 31, 2014 and 2013 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.
20. 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.

34 Toyo Kanetsu K.K. Annual Report 2014

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; and Material Handling Systems Business.
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.
(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)Change in Segment Classification
On or after April 1, 2013, the Company has changed its segment “Building Construction Business” to “Other”
The segment information of the Building Construction Business is included in the “Other” item since this segment hascontinuously been below quantitative threshold for certain period due to declining volume of orders received.
The segment information of the last fiscal year is retrospectively revised to conform to the revised segment classification.
(4) 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, 2014
Sales
Sales to external customers
Inter-segment sales

Business

Material
Handling
Systems

Other

Subtotal

Adjustment

Total

Business¥26,904¥15,158¥42,062¥6,333

¥-

-

-

-

513

(513)

-

Total

26,90415,15842,062

6,846

(513)

48,395

Operating income

2,670

1,150

3,820

769

(248)

4,341

Assets12,0399,842

21,881

11,663

20,97154,515

334

183

517

226

9

752

317

245

562

122

9

693

Other items
Depreciation
Increase in tangible fixed assets andintangible fixed assets¥ 48,395

Note: Other includes building construction business, manufacturing and sales of industrial facilities/instruments, real-estate rental and leasing
business.
Millions of yen
Reporting segment
Plant &
Machinery

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

Business

Material
Handling
Systems

Other

Subtotal

Adjustment

Total

Business¥24,027¥14,966¥38,993¥6,511¥-¥ 45,504

-

-

-

646

(646)

-

Total

24,027

14,96638,993

7,157

(646)

45,504

Operating income

1,771

232

2,003

551

(282)

2,272

Assets17,018

11,29528,313

11,60918,15758,079

266

199

465

165

12

642

497

79

576

221

(1)

796

Other items
Depreciation
Increase in tangible fixed assets andintangible fixed assets

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

Toyo Kanetsu K.K. Annual Report 201435

Thousands of U.S. dollars
Reporting segment
Material

Plant &
Machinery

Year ended March 31, 2014
Sales
Sales to external customers
Inter-segment sales

Business

Handling

Other

Subtotal

Systems

Adjustment

Total

Business$261,508$147,338$408,846$61,559

$-

-

-

-

4,988

(4,988)-

Total

261,508

147,338

408,846

66,547(4,988)

470,405

Operating income

25,953

11,18337,136

7,474(2,412)

42,198Assets117,020

95,663

212,683

113,366

203,842

529,891

3,250

1,776

5,026

2,196

90

7,312

3,080

2,386

5,466

1,183

89

6,738

Other items
Depreciation
Increase in tangible fixed assets
and intangible fixed assets$470,405(5) 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
2013
2014
2014
Sum total of reporting segments operating income¥2,003¥3,820$37,136
Income in Other category
551
769
7,474
Corporate expenses (*)
(288)
(264)
(2,570)
Other adjustments
6
16
158
Operating income in consolidated financial statements¥2,272¥4,341$42,198* 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
2013
2014
¥28,313¥21,881
11,60911,66318,18020,996(23)(25)¥58,079¥54,515

Thousands of
U.S. dollars
2014$212,683
113,366
204,086(244)$529,891* 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.

(6) 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

36 Toyo Kanetsu K.K. Annual Report 2014

Millions of yen
2013
2014
¥18,832
8,072
15,1581,879
4,454¥48,395¥17,7286,299
14,966
1,918
4,593¥45,504

Thousands of
U.S. dollars
2014$183,046
78,463
147,338
18,26343,295$470,405

(7) Geographical Information(a) Sales
Thousands of
U.S. dollars
2014

Millions of yen
2013
2014

March 31
Sales to external customers
Japan
South-east Asia
Middle East
Oceania
AfricaOther
Total¥37,143
7,079
153
3,724
242
54
¥48,395¥33,884
3,945
312
6,863
453
47
¥45,504$361,028
68,807
1,487
36,1982,361
524$470,405

Note: Net sales figures are categorized by country or region based on the location of the contract.

(b) Tangible fixed assets
Thousands of
U.S. dollars
2014$111,691
13,8162$125,509

Millions of yen
2013
2014
¥12,227¥11,491
1,428
1,421
0
0
¥13,655¥12,912

March 31
Japan
South-east Asia
Oceania
Total(8) Information on Main Customers
Main Customer for the year ended March 31, 2014 has not been presented because there has been no specific customer towhom the Company sells more than 10% of total ordinary income in the consolidated statements of income.
Main Customer for the year ended March 31, 2013 was Bechtel(Customer of Plant & Machinery Business) and sales to
Bechtel was ¥6,888 million.
(9) Information on Impairment Loss on Fixed Assets
Millions of yen

Year ended March 31, 2014
Loss on Impairment

Plant &
MachineryBusiness¥-

Material
Handling
Systems
Business¥-

Other

Adjustment

¥-

¥410

Total
¥410

Note: Amounts of Adjustment is related to corporate assets.
Millions of yen

Year ended March 31, 2013
Loss on Impairment

Plant &
MachineryBusiness¥-

Material
Handling
Systems
Business¥-

Other

Adjustment

¥33

¥-

Total
¥33

Note: Amounts of Other is related to real-estate rental business.

Year ended March 31, 2014
Loss on Impairment

Plant &
MachineryBusiness$-

Thousands of U.S. dollars
Material
Handling
Other
Adjustment
Systems
Business$$$3,984

Total$3,984

Toyo Kanetsu K.K. Annual Report 201437

(10) Information on Amortization of Goodwill and Unamortized Balance for Reporting Segments
Millions of yen
Material
Plant &
Handling
Machinery
Other
Adjustment
Total
Systems
BusinessYear ended March 31, 2014
Business
Amortization of goodwill
¥¥¥62
¥¥62
Unamortized Balance
187
187
Note: Amounts of Other is related to manufacturing and sales of industrial facilities/instruments.
Millions of yen

Year ended March 31, 2013
Amortization of goodwill
Unamortized BalanceYear ended March 31, 2014
Amortization of goodwill
Unamortized Balance

Plant &
MachineryBusiness¥-

Plant &
MachineryBusiness$-

Material
Handling
Systems
Business¥-

Other

Adjustment

¥62
249

¥-

Thousands of U.S. dollars
Material
Handling
Other
Adjustment
Systems
Business$$606$1,817
-

Total
¥62
249

Total
$606
1,817

21. Amount Per Share
Amounts per share at March 31, 2014 and 2013 and for the years then ended were as follows:
Yen
2013
2014
Net assets¥257.71¥282.18
Net income
12.53
24.18

U.S. dollars
2014
$2.74
0.24

Diluted net income per share for the years ended March 31, 2014 and 2013 has not been presented because no potentiallydilutive shares of common stock were outstanding.
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
2013
2014
¥1,527¥2,880¥1,527¥2,880Weighted-average number of outstanding shares of common stockThousands of shares
2013
2014
121,868
119,11138 Toyo Kanetsu K.K. Annual Report 2014

Thousands of
U.S. dollars
2014$27,992$27,99222. Purchase of Treasury StockAt the meeting of the Board of Directors held on May 13th 2014, the Company resolved to purchase its treasury stocks
according to 156 of the Companies Act, as applied by a reading of the terms under Article 165, Paragraph 3 of the same act.
(1) Reason for stock buybacks
The Company has decided to purchase its treasury stock to enhance the capital efficiency in order to respond to the changing in
the business environment.
(2) Detail of purchase of treasury stock(a) Type of stock to be purchased
Common stock of the Company(b) Number of shares to be purchased
4,000,000 shares (Maximum)(c) Total purchasing cost
¥1 billion (Maximum)(d) Period of purchase
May 14 ,2014 to September 22,2014(e) Method of purchaseMarket transaction on the trust and investments
The purchasing of treasury stock above ended on June 20, 2014.
(a) Type of stock to be purchased
Common stock of the Company(b) Number of shares to be purchased
3,940,000 shares(c) Total purchasing cost
¥0.999 billion

Toyo Kanetsu K.K. Annual Report 201439

40 Toyo Kanetsu K.K. Annual Report 2014

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

16,738

Security 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

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

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

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
Toyo Kanetsu Builtec K.K.
19-20, Higashisuna 8-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com

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 201441

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/