TABLE OF CONTENTS
Page No.
1
2
3
5
7
Contents
Profile
Financial Highlights
To Our Shareholders and Investors
Medium-term Management Plan
Management’s Discussion and Analysis of Financial Condition and Results of
10
11
13
15
16
18
20
22
24
44
46
47
48
Operations
Principal Shareholders
Board of Directors, Corporate Auditors and Executive Officers
Organization Chart
Independent Auditors’ Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Global Network
Corporate History
Investor Information
Stock Information
Forward-Looking Statements:
This annual report contains forward-looking statements about Chiyoda Corporation’s outlooks, plans, forecasts, results and other items that may take
place in the future. Such statements are based on data available as of June 24, 2008. Unknown risks and other uncertainties that happen in the future
may cause our actual results to be different from the forward-looking statements contained in this report. The risks and uncertainties include business
and economic conditions, competitive pressure, changes in laws and regulations, addition or elimination of products, and exchange rate fluctuation,
among others.
PROFILE
Since its establishment in 1948, Chiyoda Corporation has engaged in engineering and construction work and
services at numerous industrial plants both in Japan and overseas in the fields of oil, natural gas and other energy
sources; petrochemicals and chemicals; pharmaceuticals; and general industrial machinery.
Thirty-six years ago in 1972, Chiyoda’s founder was already emphasizing that sustainable social development
should progress by harmonizing nature and industrial development in a booklet entitled “Legacy for the Twenty-first
Century.” We are one of the first companies to state our intention to contribute to sustainable social development
through our engineering and technology by providing appropriate solutions to the various energy and environmental
issues we currently face, and have been putting those words into action ever since. This booklet is available on our
website.
With 60 years of technological experience, Chiyoda is working to build on its position as the “Reliability No. 1”
project company with a high level of customer and investor trust, not only in terms of technology but also in terms of
our people and management. At the same time, we will continue to improve our financial strength and raise our
corporate value.
Corporate Philosophy
Enhance our business and contribute to the development of a sustainable society as an integrated engineering
company through the use of our collective wisdom and painstakingly developed technology.
The Chiyoda Group’s Strengths
Superior technologies, including project execution capabilities, and the people that support them
1. Technological Superiority
Chiyoda’s core elemental technologies encompass environmentally responsible technologies, catalysts and
energy-saving technologies, while execution technologies focus on managing the costs and schedules of projects in
progress and ensuring reliable quality. Our execution technologies are supported by the most advanced information
technology, which currently applies to our project execution at every stage from design and procurement to
construction of ultra-large-scale liquefied natural gas (LNG)* plants and other facilities. This technology is
embodied in our integrated project engineering software, “i-Plant 21,” which Chiyoda developed and continues to
enhance.
* LNG is manufactured by liquefying natural gas. Demand for this clean energy is increasing.
2. Chiyoda Group
Human Resources
Chiyoda is working to create an environment in which our people can make their dreams a reality through our
engineering. We cultivate professionals through on-the-job training and career development programs according to
individual competencies. This supports our ability to successfully execute projects.
- 1 -
FINANCIAL HIGHLIGHTS
(As of and for the years ended March 31, 2007 and 2008)
1. Consolidated Performance
(1) Consolidated financial results:
Revenue
Gross profit
Operating income
Income before income taxes and minority
interests
Net income
Net income, basic per share (yen, U.S. dollars)
Net income, diluted per share (yen, U.S. dollars)
Return on equity (ROE)
Return on assets (ROA)
Operating income to revenues
(2) Consolidated financial position:
Total assets
Total equity
Shareholders' equity ratio
Net assets per share (yen, U.S. dollars)
(3) Consolidated cash flows:
Operating activities
Investing activities
Financing activities
Cash and cash equivalents, end of year
2. Dividends
2008
2007
(millions of yen)
2008 / 2007
(percentage
change)
2008
(thousands of
U.S. dollars)
¥603,560
20,525
8,840
18,992
9,641
¥50.15
50.12
12.2%
4.7%
1.5%
¥378,820
81,638
21.4%
¥422.44
¥14,274
(3,917)
(17,220)
70,089
¥484,895
39,736
28,700
37,935
23,532
¥122.41
122.28
35.5%
10.2%
5.9%
¥442,953
77,415
17.4%
¥400.56
¥35,532
(3,458)
(2,191)
77,052
24.5%
-48.3%
-69.2%
-49.9%
-59.0%
-59.0%
-59.0%
$6,035,600
205,250
88,400
189,920
96,410
$0.50
0.50
-14.5%
5.5%
$3,788,200
816,380
5.5%
$4.22
$142,740
(39,170)
(172,200)
700,890
Dividends per Share
Year-end
Annual
(yen)
¥15.00
10.00
11.00
¥15.00
10.00
11.00
Payment of
Cash
Dividends
(Annual)
(millions of yen)
¥2,884
1,923
-
Payout
Ratio
(Consolidated)
(%)
Dividend on
Equity Ratio
(Consolidated)
(%)
12.3%
19.9%
30.0%
4.4%
2.4%
-
2007
2008
2009 (Forecast)
3. Consolidated Results Forecast for Year Ending March 31, 2009
Revenue
Operating income
Net income
Net income, basic per share (yen)
2009
Interim
Full Year
(millions of yen)
¥230,000
5,000
4,000
¥16.08
¥460,000
12,500
9,500
¥37.40
Notes:
1. U.S. dollar amounts are converted, for convenience only, at the rate of ¥100 = U.S.$1, the approximate exchange rate
in March 31, 2008.
2. Yen amounts are rounded to the nearest million. U.S. dollar amounts and percentages are rounded to the nearest unit.
3. Return on equity (ROE) = Net income / Average shareholders' equity
4. Return on assets (ROA) = Ordinary income / Average total assets
5. Forecasts stated above disclosed on May 14, 2008 in the Consolidated Financial Results.
- 2 -
TO OUR SHAREHOLDERS AND INVESTORS
Joined Chiyoda Corporation
Project General Manager, Second Overseas Project Division
Career Summary
1969:
1995:
1998: Director, General Manager, Asia & Australia Project Division
2001: Managing Director, International Project Operation
2004: Director, Deputy General Manager, Domestic Project Operation
2005: Managing Director, Technology & Engineering
2007:
President & CEO
Takashi Kubota
President & CEO
Reliability No. 1: Your Partner for Success
Aiming for Growth in Corporate Earnings
May this announcement find all of our shareholders in good health and prosperity.
I would like to express my sincere gratitude for your exceptional support.
Chiyoda Corporation celebrated the 60th anniversary since its establishment as a corporation on January 17, 2008.
Looking back over our history since being founded, I truly feel that we have carried the torch of the ideals of “Human
Resources,” “Technology and Reliability,” and “Contributing to International Society” that were adopted at the time
of our inception.
I would now like to report on our corporate status for fiscal year 2007 (ended March 31, 2008) and our management
policy for fiscal year 2008 (ending March 31, 2009).
- Fiscal Year 2007 Performance: Increased Revenue and Decreased Earnings
Demand for capital investments both domestic and overseas is as active as ever due to the increase in demand for
energy at a global level. Although we have carried out thorough risk management and put all our energy into
conclusively following through with existing orders, construction costs have increased due to special circumstances,
including a shortage of skilled construction workers caused by an unparalleled construction boom in Qatar.
Regretfully, as a result, earnings have declined due to an unavoidable decrease in operating income. Train 4 of the
Qatargas liquefied natural gas (LNG) plant, which is claimed to be one of the biggest LNG trains in the world, will
soon be completed as the first among the 6 trains under construction.
- Our Slogan for Fiscal Year 2008: “New Horizons, Infinite Experience”
―Inheriting the Accomplishments of Our Forefathers Clears Our Path to the Future―
In fiscal year 2008, we will adopt even more comprehensive measures in consideration of cost management and
safety, while continuing to work hard at restoring earnings by effectively following through with existing orders both
domestic and overseas. As we plan on passing our legacy on to the next generation by strengthening the foundation
of our engineering business, we will continue with three important goals implemented as of fiscal year 2007: 1)
Proof of Reliability No.1 through effective follow through, 2) Establishment of safety oriented operation as a part of
corporate culture, and 3) Execution of business strategies for the next term.
- 3 -
- Capital/Business Alliance with Mitsubishi Corporation
On March 31, 2008, we concluded capital contribution and business alliance agreements with Mitsubishi
Corporation. Through these agreements, we plan to achieve synergy with Mitsubishi Corporation, which shares our
direction in terms of expansion of business in the field of plant engineering. Furthermore, in order to finance our goal
of an increased business scale along with the increase in our business region, and to strengthen our relationship with
Mitsubishi Corporation, we have issued stock through third-party allocation, with a payment of approximately ¥60.8
billion already completed.
- New Medium-Term Management Vision
With the recent conclusion of our capital/business alliance with Mitsubishi Corporation, we expect to secure new
earnings streams within five years in addition to LNG and gas processing plants, which represent our main earnings
streams at present. Aiming at becoming a comprehensive engineering firm with diverse business content in various
regions and business fields, we will draw up a new medium-term management plan to be implemented from fiscal
year 2009 (ending March 31, 2010) after the current medium-term management plan, Double Step-Up Plan 2008
(DSP 2008), comes to an end on March 31, 2009.
- Strengthening Integrated Group Operations
All employees in our group engage in business activities based on the Corporate Philosophy i.e. “Enhance our
business and contribute to the development of a sustainable society as an integrated engineering company through
the use of our collective wisdom and painstakingly developed technology.” We have come up with a Chiyoda Group
logo to celebrate our 60th anniversary, endeavoring to unite all group companies being trusted by all stakeholders,
including shareholders, customers, business partners, employees, and regional companies. Having reconfirmed the
corporate management principle as a group, we continue to promote integrated group operations.
- To Our Shareholders
Although we have worked hard to strengthen our financial position by promoting the medium-term management
plan, DSP 2008, settlements have fallen far below our plans at the start of fiscal year 2007, resulting in a distribution
for this period of ¥10 per share. Aiming at a dividend payout of 30%, plans call for a distribution of ¥11 per share for
fiscal year 2008. Since we are dedicated to working harder than ever to increase corporate value, I would humbly ask
our shareholders for their continued cooperation and support.
July 2008
Takashi Kubota
President & CEO
- 4 -
MEDIUM-TERM MANAGEMENT PLAN
Medium-Term Management Plan, Double Step-Up Plan 2008 (DSP 2008)
Current Status and New Medium-Term Management Vision
- Aiming to be the “Reliability No. 1” Project Company
and a Company par excellence Able to Sustain Earnings Growth -
Aiming for the double step-up of “Reliability No. 1 Project Company” and “a Company par excellence Able to
Sustain Earnings Growth,” the Chiyoda Group implemented the medium-term management plan “Double Step-Up
Plan 2008 (DSP 2008)” with initiatives commencing in fiscal year 2005 which are to be completed at the end of fiscal
year 2008.
In fiscal year 2007, the third year of the DSP, the aim was for early achievement of various measures which resulted
generally in accelerated progress of the medium-term plan.
In fiscal year 2008, the final year of the DSP, the aim is to continue the reliable execution of ongoing projects and,
in addition, advancing business plans by means of a further upgrade of the Reliability Program and a further upgrade
of risk management skills.
1. Current Status of Management Objectives (Financial Objectives):
Increased Shareholders’ Equity and Equity Ratio
Shareholders’ equity has steadily increased over the last several years and at the end of March 2008 had grown to
¥81.2 billion, a ¥4.2 billion increase compared to the previous year. Further, the equity ratio had grown to 21.4%, a
4% increase compared to the previous year.
It is forecast that both shareholders’ equity and the equity ratio will have increased come the end of March 2009
as a result of progress on ongoing projects.
2. Current Status of Management Plan:
Decreased Profit on Increased Revenue
In consideration of the large backlog of ongoing projects, discrimination was exercised and new contracts were
controlled to the amount of ¥258.7 billion to give a total value of backlog of contracts of ¥670.0 billion at the end
of March 2008.
With the steady progress of overseas and domestic projects, optimization of indirect costs and execution of DSP
2008 measures, the revenue exceeded the DSP 2008 planned figure to reach ¥603.5 billion, a ¥118.6 billion
increase compared to the previous year. However, construction costs have increased due to unique circumstances
caused by a rising demand for skilled construction workers as a result of the construction rush in Qatar. While this
is extremely regrettable, operating income was ¥8.8 billion, a reduction of ¥19.8 billion compared to the previous
year and net income was also down by ¥13.8 billion for the period to reach ¥9.6 billion.
3. Financial Outlook for Fiscal Year 2008
In a firming market environment accompanying medium to long term growth in energy demand, new contracts in
fiscal year 2008 is forecasted to reach ¥450.0 billion, an increase of 74% compared to the previous year.
Operating income reached ¥12.5 billion, an increase of 41% compared to the previous year, due to more
thorough cost management. Further, net income for this period is forecast to reach ¥9.5 billion, a decrease of 1%
compared to the previous year. This is a result of reduced interest income which is due to a decline in the jointly
controlled asset of joint venture in parallel of progress on overseas projects.
- 5 -
4. New Medium-Term Management Vision
Since fiscal year 2005, the aim has been growth by means of the DSP 2008, but in order to achieve continuous
growth into the future, a stronger financial structure and stable management base have become essential.
Accordingly, along with conclusion of our capital/business alliance with Mitsubishi Corporation, a growth strategy
will be implemented with the new medium-term management vision:
1) Become a world-class comprehensive engineering company providing an end-to-end range of upstream and
downstream facilities in the fields of energy, resources and the environment.
2) Strengthen the Chiyoda Group’s brand image as the “Reliability No. 1” Comprehensive Engineering Company
that delivers outstanding technical capability with an established safety oriented operation.
The objective is to accomplish business in a diversity of regions and industries, aiming for target figures in the
scope of ¥700-¥800 billion for consolidated annual revenue after 5 years and an ordinary income ratio of 7%.
5. Distribution of Profits
While planning to enrich capital stock by preparing to create business for the next generation by way of
technology investment and the development of our business foundation, a management target has been hoisted to
distribute profits amongst all shareholders, with the aim of payout ratio of 30%.
- 6 -
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. Operations Outlook
Looking at the market environment surrounding the Chiyoda Group in the current consolidated fiscal year, the
overseas plant market saw planning for plant construction in response to global level growth in energy demand and
in Japan there was also vigorous capital investment by oil and petrochemical companies. However, the environment
for executing construction work in Qatar is still difficult due the shortage of skilled construction workers caused by
the continuing plant construction rush.
Under this kind of environment, the Chiyoda Group has strived with all its energy to continue more thorough risk
management, starting with countermeasures for increasing costs, to ensure reliable execution of work for ongoing
projects with an emphasis on ultra-large-scale LNG plant projects in Qatar. However, with the projects in Qatar, it
was not possible to avoid a deterioration of earnings. This situation was caused by increased construction costs that
accompanied the rise in labor costs and falling productivity due to a shortage of skilled construction workers, the
scale of which exceeded initial forecasts.
The cause of the decline in earnings is a phenomenon unique to Qatar, where the scope for limiting the contractor
risk management has been far and away eclipsed by the shortage of skilled workers and the steep price rise in raw
materials. Other construction work overseas and in Japan, including the performance of group companies, is
proceeding according to plan. Overseas, progress is generally favorable at Russia’s first LNG plant Sakhalin II
LNG Project, including completion of Train 1. Further, domestically as well, the Chiyoda Group secured many
orders, mainly in the oil and energy sectors, and managed to accumulate a high level of revenues with the steady
execution of contracted projects.
The result of orders for RFCC (residue fluid catalytic cracking) unit for Taiyo Oil Co., Ltd. and expansion of a
thermal cracking unit for Fuji Oil Co., Ltd. saw new contracts in the current consolidated fiscal year reach ¥258,755
million (a 53.6% decrease compared to the previous consolidated fiscal year).
Consolidated revenues reached ¥603,560 million (a 24.5% increase on the previous year) due to the progress of
major construction work on hand, which exceeded the forecast.
On the profit aspect, despite the increased revenues, the gross margin declined due to increased construction
costs on Qatari projects. Income before income taxes and minority interests was ¥18,992 million (a 49.9% decrease
on the previous year) and net income for the current period reached ¥9,641 million (a 59.0% decrease on the
previous year).
Major Completed Construction (*) Completed portion
- Aromatics complex for Kashima Aromatics Co., Ltd
- Hikone Plant, No. 4 unit for Maruho Co., Ltd. (Chiyoda TechnoAce Co., Ltd.)
- MXDA facility for Mitsubishi Gas Chemical Company, Inc.
- CCR unit for Seibu Oil Co., Ltd. (*)
- Utsunomiya No. 2 Plant for Hisamitsu Pharmaceutical Co., Inc.
- 2007 shut-down maintenance (SDM) of Hokkaido refinery for Idemitsu Kosan Co., Ltd.
(Chiyoda Kosho Co., Ltd.)
- Expansion of No. 7 naphtha hydrosulfurization plant for Fuji Oil Co., Ltd.
- LNG plant Trains 6 & 7 for Ras Laffan Liquefied Natural Gas Co., Ltd. (3) in Qatar (*)
- LNG plant Trains 6 & 7 for Qatar Liquefied Gas Company Limited (3) & (4) in Qatar (*)
- LNG plant Trains 4 & 5 for Qatar Liquefied Gas Company Limited (2) in Qatar (*)
- LNG plant Trains 1 & 2 for Sakhalin Energy Investment Co., Ltd. in Russia (*)
Domestic
Overseas
- 7 -
2. Status of Orders Received and Completion
(1) Field of Natural Gas and Electric Power
Internationally, with the growth in global demand for natural gas, investment planning is being carried out in
various locations for investment in the gas value chain. Gas producing nations and all major energy companies
are developing gas fields, constructing LNG plants, arranging LNG carriers and constructing LNG receiving
terminals. In such a situation, in order to acquire large scale contracts the Chiyoda Group continues to devote its
energy in focusing on receiving orders for technical studies and basic design, along with reliably executing
ongoing projects with an emphasis on Qatar.
In the domestic electric power and gas industry, there have been ambitious attempts to invest in new projects
in order to cope with the shift in primary fuel to LNG and the trend to diversify outside the core business within
the energy industry, such as the gas marketing business of oil and electric power companies, which
accompanied the sudden jump in crude oil prices. Firm orders have been achieved including new and/or
expansion planning for large-scale LNG-receiving terminals.
(2) Field of Petroleum, Petrochemicals and Gas Chemicals
In the field of petroleum and petrochemicals, starting with the completion of aromatic manufacturing
facilities for Kashima Aromatics Co., Ltd, execution of construction work on hand is progressing smoothly. On
the orders received front, there is also a firm trend with an emphasis on facilities for heavy oil upgrading.
Further, a satisfactory acceptance of orders has been achieved, including group companies, due to continued
high level initiatives including investment to support production facilities conforming to structural changes in
the demand for petroleum products, environmental support and facility surveys and the optimization of
maintenance.
(3) Field of General Chemicals and Industrial Machinery
In the field of general chemicals and industrial machinery, Chiyoda received an order for an acrylic sheet
plant for Thai MMA Co., Ltd. This is the result of focusing on domestic and Asian expansion and is based on
the continuing customer trend for intensive investment in strategic product fields such as high value added
functional chemicals and electronic materials. Further, in the pharmaceuticals field, there is a heightened desire
for capital investment, starting with new and/or expansion of plants and laboratories, in order to cope with
changes in the industrial environment in recent years.
(4) Environment and Other Fields
In the environmental field, accompanying the trend of strengthening environmental regulations, it has been
possible to acquire new contracts by continuing domestic and overseas business activities for the in-house
developed Chiyoda Thoroughbred-121 (CT-121) flue gas desulfurization technology, as well as expanding
business activities in other fields.
3. Business Risks and Other Risks
Primary issues that could affect investor decisions regarding investment risk, such as material issues related to
the Chiyoda Group’s financial position, performance and cash flow and the Chiyoda Group’s response to such
issues, include but are not limited to the issues outlined below. The Chiyoda Group recognizes the potential
occurrence of these risks and works to avoid them to the maximum extent possible. The Chiyoda Group also moves
to respond as quickly as possible to minimize the impact of issues that present risks when they occur.
As of June 24, 2008, Chiyoda Group management acknowledges the issues that may present risks in the future
outlined below and has made them the focus of risk management.
- 8 -
(1) Changes in Exchange Rates
In overseas construction projects, construction payments are often in different currencies than payments for
vendors and/or subcontractors. Foreign currency exchange rates may therefore affect the financial results of the
projects. The Chiyoda Group works to avoid and minimize such foreign currency fluctuation risks by using
forward foreign exchange contracts and matching planned outlays in multiple currencies with construction
payments and receivables.
(2) Rising Equipment and Resource Prices and Material Shortages
Plant construction entails a time lag between estimates and bids and orders for equipment, resources,
materials and subcontracted construction. Consequently, actual prices for equipment and materials may exceed
those projected in estimates and bids. Moreover, restricted supplies of metals such as copper, nickel, aluminum
and zinc may cause problems including delays in the delivery and mobilization of equipment and materials.
Resulting delays in the progress of construction projects could affect the Chiyoda Group’s results.
The Chiyoda Group works to avoid and minimize these risks to the best of its ability by diversifying
procurement in ways such as using multiple suppliers in various regions worldwide, considering bundled
purchases, ordering equipment and materials at an early stage, and structuring cooperative relationships with
suppliers.
(3) Shortages of Construction Workers and Increased Subcontractor Expenses
Plant construction entails a time lag between estimates and bids and orders for subcontracting. Large-scale
construction projects can magnify the impact of such time lag, which may result in labor costs that exceed those
projected in estimates and bids. In particular, lack of qualified, skilled workers may require countermeasures
that increase costs.
The Chiyoda Group works to minimize the impact of these issues by structuring cooperative relationships
with qualified construction companies, deploying personnel skilled in various professions from various regions
around the world, and improving the skills of construction workers at each job site.
(4) Terrorism, Conflicts in Neighboring Countries, Strikes, Anarchy and Natural Disasters
Terrorism or conflicts anywhere in the world may cause direct losses, delays in procuring or delivering
materials and equipment, threats to the safety of workers on site, cessation of construction work, and other
problems at construction sites in Japan and overseas. Such incidents could result in losses and expenses that the
Chiyoda Group could not pass on to clients, which could affect the Chiyoda Group’s performance.
The Chiyoda Group has structured a threat management system that includes cooperation with clients and
other related parties to support rapid initial response should such issues occur.
(5) Plant Accidents
Serious accidents including explosions or fire may occur due to various causes at plants that the Chiyoda
Group is constructing or has completed. The Chiyoda Group could be judged responsible for such accidents,
which could impact the Chiyoda Group’s performance.
The Chiyoda Group works to avoid or minimize this risk in ways such as taking all possible measures to
preclude the occurrence of accidents, including quality control and safety management. Other countermeasures
include maintaining appropriate insurance coverage and negotiating contracts that rationally allocate client
responsibility for damages.
- 9 -
PRINCIPAL SHAREHOLDERS
(As of March 31, 2008)
Full Name or Title
Number of Shares
Owned
(thousands of shares)
Mitsubishi Corporation
State Street Bank and Trust Company
(Standing Proxy: Mizuho Corporate Bank, Ltd.)
JP Morgan Chase Bank 380055
(Standing Proxy: Mizuho Corporate Bank, Ltd.)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
(Standing Proxy: The Master Trust Bank of Japan, Ltd.)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank of New York, Treaty JASDEC Account
(Standing Proxy: The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
Deutsche Securities Inc.
BNP PARIBAS Securities (Japan) Limited.
Total
* Increased to 86,931 thousand (33.4%) on April 30, 2008.
19,851*
12,107
10,408
9,033
8,034
7,415
6,368
5,386
4,393
3,902
86,899
Ratio of Number of
Shares Owned to
Aggregate Number
of Shares Issued (%)
10.27*
6.26
5.38
4.67
4.15
3.83
3.29
2.78
2.27
2.01
44.98
- 10 -
BOARD OF DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICIERS
(As of July 1, 2008)
Board of Directors
Chairman of the Board
Nobuo Seki
President & CEO
Takashi Kubota*
Executive Vice President
Corporate Strategy & Planning
Yoichi Kanno*
Executive Vice President
Corporate Management & Finance and CFO
Hiroshi Shibata*
Corporate Auditors
Hiroshi Ida**
Wataru Shimono
Masanori Ito**
Yukihiro Imadegawa**
** Outside Corporate Auditor
Executive Vice President
CSR, Operational Auditing Office
Nobuyasu Kamei
Senior Managing Director
International Project Operation
Madoka Koda*
Managing Director
Projects Logistics
Atsuo Minamoto
Managing Director
Technology & Engineering
Sumio Nakashima
Managing Director
Domestic Project Operation
Satoru Yokoi
Managing Director
International Project Operation
Hiroshi Ogawa
Director
Seiji Shiraki
Note: All members of the Board of Directors serve concurrently as Executive Officers
* Representative Directors/Members of Executive Committee
- 11 -
Executive Officers
Senior Executive Officer
Corporate Strategy & Planning
Takaharu Saegusa
Senior Executive Officer
General Manager,
Russia Project Division,
Project Director
Hideo Kobayashi
Executive Officer
Executive Assistant to President
Fumio Nagata
Executive Officer
Executive Assistant to International Business
Development Operation
Hidehiro Shinohara
Executive Officer
Technology & Engineering
Takeo Kawase
Executive Officer
General Manager,
Petroleum & Chemical Project Division
Tsuyoshi Kakizaki
Executive Officer
General Manager,
Qatar Project Division 2,
International Project Operation
Osamu Imahara
Executive Officer
General Manager,
Gas Value Chain Project Division,
International Project Operation
Hiroshi Shimada
Executive Officer
General Manager,
Domestic Business Development Operation,
Domestic Project Operation
Eisaku Yamashita
Executive Officer
General Manager,
Administration & Personnel Division,
Corporate Management & Finance
Toshiyuki Ohnuma
Executive Officer
Deputy General Manager,
Russia Project Division,
Deputy Project Director
Koichi Shirakawa
Executive Officer
International Business Development Operation
Takao Kamiji
Executive Officer
General Manager,
Finance Division
Katsutoshi Kimura
Executive Officer
Projects Logistics
Manabu Mitani
- 12 -
ORGANIZATION CHART
(As of July 1, 2008)
Shareholders Meeting
Corporate Auditors Committee
Board of Directors
Executive Committee
SQE Division
CSR Division
Operational Auditing Office
Corporate Strategy & Planning
Corporate Management & Finance
Technology & Engineering
Projects Logistics
Corporate Planning Division
Administration & Personnel
Division
Finance Division
Research Institute of
Technology
Innovation & Strategy
Management of Technology
Division
Procurement Division
Project Management
Administration Division
Technology Development
Division
Process Technology Division
Engineering Division
International Business
Development Operation
International Business
Development Division 1
International Business
Development Division 2
International Project Operation
Domestic Project Operation
Gas Value Chain Project Division
Project Service Division
Domestic Business Development
Operation
Petroleum & Chemical Project
Division
Construction Division
Domestic Projects
- Oil & Petrochemical
Qatar Project Division 1
Qatar Project Division 2
Russia Project Division
Domestic Projects
- Pharmaceutical/Fine/Energy Industries
Domestic Projects
- Liquefied Gas Terminal
- 13 -
Chiyoda Corporation and
Consolidated Subsidiaries
Consolidated Financial Statements for the
Years Ended March 31, 2008 and 2007,
and Independent Auditors' Report
- 14 -
- 15 -
Chiyoda Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2008 and 2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade (Note 4)
Allowance for doubtful accounts
Costs and estimated earnings on long-term construction
contracts (Note 5)
Costs of construction contracts in process
Accounts receivable—other (Note 4)
Jointly controlled assets of joint venture
Deferred tax assets (Note 13)
Prepaid expenses and other
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
(Note 1)
2008
¥
¥
70,089
895
27,230
(5)
$
77,052
125
23,816
(41)
700,890
8,950
272,300
(50)
9,139
16,802
10,441
192,684
5,337
5,596
14,843
27,656
9,199
256,061
5,884
3,442
91,390
168,020
104,410
1,926,840
53,370
55,960
Total current assets
338,208
418,037
3,382,080
PROPERTY, PLANT AND EQUIPMENT (Note 9):
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Total
Accumulated depreciation
11,936
14,894
1,261
5,467
33,558
(10,485)
1,835
6,616
1,163
5,544
15,158
(7,693)
119,360
148,940
12,610
54,670
335,580
(104,850)
Net property, plant and equipment
23,073
7,465
230,730
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 6)
Investments in and advances to unconsolidated
subsidiaries and associated companies (Note 8)
Software
Deferred tax assets (Note 13)
Other assets (Note 10)
Allowance for doubtful accounts
5,583
3,734
3,566
1,650
3,496
(490)
5,345
3,411
3,286
2,057
3,892
(540)
55,830
37,340
35,660
16,500
34,960
(4,900)
Total investments and other assets
17,539
17,451
175,390
TOTAL
¥
378,820
¥
442,953
$
3,788,200
See notes to consolidated financial statements.
- 16 -
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 9)
Notes and accounts payable—trade (Note 4)
Advance receipts on construction contracts
Income taxes payable
Deposits received
Allowance for warranty costs for completed works
Allowance for losses on construction contracts
Accrued expenses and other (Note 4)
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
(Note 1)
2008
¥
¥
10,039
74,038
185,023
1,408
4,970
2,099
4,045
12,364
$
97
86,813
231,818
13,071
4,783
1,582
10
13,271
100,390
740,380
1,850,230
14,080
49,700
20,990
40,450
123,640
Total current liabilities
293,986
351,445
2,939,860
NON-CURRENT LIABILITIES:
Long-term debt (Note 9)
Liability for retirement benefits (Note 10)
Other liabilities (Note 13)
Total non-current liabilities
COMMITMENTS AND CONTINGENT LIABILITIES
(Notes 4, 15, 16 and 17)
EQUITY (Notes 11, 16 and 19):
Common stock—authorized, 570,000 thousand shares;
issued, 193,183 thousand shares in 2008 and
193,126 thousand shares in 2007
Preferred stock—authorized, 80,000 thousand shares
Capital surplus
Retained earnings
Unrealized (loss) gain on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Foreign currency translation adjustments
Treasury stock—at cost, 904 thousand shares in 2008
and 837 thousand shares in 2007
Total
Minority interests
22
2,226
948
3,196
10,067
2,277
1,749
14,093
220
22,260
9,480
31,960
12,935
6,718
65,155
(847)
(1,668)
(6)
(1,059)
81,228
410
12,928
129,350
6,712
58,398
248
(408)
50
(905)
77,023
392
67,180
651,550
(8,470)
(16,680)
(60)
(10,590)
812,280
4,100
Total equity
81,638
77,415
816,380
TOTAL
¥
378,820
¥
442,953
$
3,788,200
- 17 -
Chiyoda Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Years Ended March 31, 2008 and 2007
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
(Note 1)
2008
REVENUE (Notes 4 and 5)
¥
603,560
¥
484,895
$
6,035,600
COST OF REVENUE (Notes 4 and 5)
583,035
445,159
5,830,350
Gross profit
20,525
39,736
205,250
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(Notes 4 and 14)
Operating income
OTHER INCOME (EXPENSES):
Interest and dividend income
Interest expense
Equity in earnings of associated companies
Foreign exchange loss
Loss on a partial termination of a defined benefit
pension plan (Note 10)
Reversal of allowance for doubtful accounts
Reversal of allowance for investment loss
Gain on sales of investment securities
Reversal of impairment loss (Note 7)
Loss on valuation of investment securities
Other—net
Other income—net
11,685
8,840
10,901
(405)
435
(979)
(485)
72
644
268
(617)
318
10,152
11,036
28,700
8,511
(310)
375
(629)
742
263
17
266
9,235
116,850
88,400
109,010
(4,050)
4,350
(9,790)
(4,850)
720
6,440
2,680
(6,170)
3,180
101,520
INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTS
18,992
37,935
189,920
INCOME TAXES (Note 13):
Current
Deferred
Total income taxes
MINORITY INTERESTS IN NET INCOME
7,355
1,968
9,323
28
16,209
(1,866)
14,343
60
73,550
19,680
93,230
280
NET INCOME
¥
9,641
¥
23,532
$
96,410
See notes to consolidated financial statements.
- 18 -
PER SHARE OF COMMON STOCK (Notes 2.t and 18):
Basic net income
Diluted net income
Cash dividends applicable to the year
¥ 50.15
50.12
10.00
¥ 122.41
122.28
15.00
$ 0.50
0.50
0.10
Yen
2008
2007
U.S. Dollars
2008
- 19 -
Chiyoda Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended March 31, 2008 and 2007
Thousands
Outstanding
Number of
Shares of
Common
Stock
Millions of Yen
Common
Stock
Capital
Surplus
Retained
Earnings
Unrealized
(Loss) Gain on
Available-for-
sale
Securities
Deferred
Loss on
Derivatives
under Hedge
Accounting
BALANCE, APRIL 1, 2006
192,152 ¥
12,901 ¥
6,685 ¥
36,877 ¥
45
Reclassified balance as of
March 31, 2006 (Note 2.m)
Net income
Issuance of common stock by stock
option plan (Notes 11 and 12)
Cash dividends, ¥10.00 per share
Repurchase of treasury stock
Decrease in retained earnings due
to exclusion from consolidation
of consolidated subsidiaries
Net change in the year
27
27
232
(95)
23,532
(1,922)
(89)
203 ¥
BALANCE, MARCH 31, 2007
192,289
12,928
6,712
58,398
248
(408)
(408)
Net income
Issuance of common stock by stock
option plan (Notes 11 and 12)
Cash dividends, ¥15.00 per share
Repurchase of treasury stock
Net change in the year
57
(67)
7
6
9,641
(2,884)
(1,095)
(1,260)
BALANCE, MARCH 31, 2008
192,279 ¥
12,935 ¥
6,718 ¥
65,155 ¥
(847) ¥
(1,668)
Thousands of U.S. Dollars (Note 1)
Common
Stock
Capital
Surplus
Retained
Earnings
Unrealized
(Loss) Gain on
Available-for-
sale
Securities
Deferred
Loss on
Derivatives
under Hedge
Accounting
BALANCE, MARCH 31, 2007
$
129,280 $
67,120 $
583,980 $
2,480 $
(4,080)
Net income
Issuance of common stock by stock
option plan (Notes 11 and 12)
Cash dividends, $0.15 per share
Repurchase of treasury stock
Net change in the year
70
60
96,410
(28,840)
(10,950)
(12,600)
BALANCE, MARCH 31, 2008
$
129,350 $
67,180 $
651,550 $
(8,470) $
(16,680)
See notes to consolidated financial statements.
- 20 -
Millions of Yen
Foreign
Currency
Translation
Adjustments
Treasury
Stock
Total
Minority
Interests
Total
Equity
¥
(323) ¥
(676) ¥
55,509
¥
55,509
(229)
¥
23,532
54
(1,922)
(229)
(89)
168
(905)
77,023
373
50
9,641
13
(2,884)
(154)
(2,411)
(154)
(56)
322
70
392
18
322
23,532
54
(1,922)
(229)
(89)
238
77,415
9,641
13
(2,884)
(154)
(2,393)
¥
(6) ¥
(1,059) ¥
81,228 ¥
410 ¥
81,638
Thousands of U.S. Dollars (Note 1)
Foreign
Currency
Translation
Adjustments
Treasury
Stock
Total
Minority
Interests
Total
Equity
$
500 $
(9,050) $
770,230 $
3,920 $
774,150
96,410
130
(28,840)
(1,540)
(24,110)
96,410
130
(28,840)
(1,540)
(23,930)
180
(1,540)
(560)
$
(60) $
(10,590) $
812,280 $
4,100 $
816,380
- 21 -
Chiyoda Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, 2008 and 2007
OPERATING ACTIVITIES:
Income before income taxes and minority interests
¥
18,992
¥
37,935
$
189,920
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
(Note 1)
2008
Adjustments for:
Income taxes paid
Payments of project settlement money
Depreciation and amortization
Reversal of allowance for doubtful accounts—net
Provision for (reversal of) warranty costs for completed
works
Provision for (reversal of) loss on construction contracts
Reversal of retirement benefits—net
Reversal of impairment loss
Gain on sales of investment securities—net
Loss on valuation of investment securities
Foreign exchange loss (gain)—net
Equity in earnings of associated companies
Loss on a partial termination of a defined benefit
pension plan
Changes in operating assets and liabilities:
Decrease in trade notes and accounts receivable,
and costs and estimated earnings on
long-term construction contracts
Decrease (increase) in costs of construction contracts
in process
Decrease (increase) in jointly controlled asset of joint
venture
Increase in interest and dividend receivable
(Decrease) increase in trade notes and accounts payable
(Decrease) increase in advance receipts on construction
contracts
Increase in deposits received
(Decrease) increase in accrued liability of a defined
contribution pension plan
Other—net
Total adjustments
(20,913)
1,594
(77)
522
4,035
(473)
(268)
(644)
617
81
(435)
485
2,216
10,855
63,377
(9,874)
(12,740)
(46,788)
183
(833)
4,362
(4,718)
(6,492)
(469)
1,507
(1,057)
(305)
(136)
(6,116)
(17)
(74)
(375)
(209,130)
15,940
(770)
5,220
40,350
(4,730)
(2,680)
(6,440)
6,170
810
(4,350)
4,850
8,485
22,160
(9,729)
108,550
(124,724)
(8,175)
947
129,742
3,919
2,445
8,221
(2,403)
633,770
(98,740)
(127,400)
(467,880)
1,830
(8,330)
43,620
(47,180)
Net cash provided by operating activities—
(Forward)
¥
14,274
¥
35,532
$
142,740
See notes to consolidated financial statements.
- 22 -
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
(Note 1)
2008
Net cash provided by operating activities—(Forward)
¥
14,274
¥
35,532
$
142,740
INVESTING ACTIVITIES:
Payments for time deposits
Proceeds from refunds of time deposits
Payments for purchases of investment securities
Proceeds from sales of investment securities
Purchases of property, plant and equipment
Purchases of intangible assets
Disbursements for originating long-term loans
Proceeds from collections of long-term loans
Payments for acquisition of shares in subsidiary affecting
scope of consolidation, net of cash acquired (Note 3)
Other—net
(827)
68
(2,306)
839
(360)
(1,257)
35
(116)
7
31
(2,419)
32
(460)
(1,320)
(15)
610
83
(8,270)
680
(23,060)
8,390
(3,600)
(12,570)
350
(1,160)
70
Net cash used in investing activities
(3,917)
(3,458)
(39,170)
FINANCING ACTIVITIES:
Repayments of long-term debt
Proceeds from issuance of common stock
Payments of cash dividends
Payments of cash dividends to minority shareholders
Other—net
(14,186)
13
(2,880)
(12)
(155)
(47)
54
(1,915)
(54)
(229)
(141,860)
130
(28,800)
(120)
(1,550)
Net cash used in financing activities
(17,220)
(2,191)
(172,200)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS
(100)
357
(1,000)
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
(6,963)
30,240
(69,630)
CASH AND CASH EQUIVALENTS OF EXCLUSION OF
CONSOLIDATED SUBSIDIARIES, BEGINNING OF YEAR
(67)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
77,052
46,879
770,520
CASH AND CASH EQUIVALENTS, END OF YEAR
¥
70,089
¥
77,052
$
700,890
- 23 -
Chiyoda Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Years Ended March 31, 2008 and 2007
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth
in the Japanese Financial Instruments and Exchange Law (formerly, the Japanese Securities and Exchange Law) and
its related accounting regulations and in conformity with accounting principles generally accepted in Japan ("Japanese
GAAP"), which are different in certain respects as to application and disclosure requirements of International
Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the consolidated financial statements issued domestically in order to present them in a form which is more familiar to
readers outside Japan. In addition, certain reclassifications and rearrangements have been made in the 2007 financial
statements in order for them to conform to classifications and presentations used in 2008.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Chiyoda
Corporation (the "Company") is incorporated and principally operates. The translations of Japanese yen amounts into
U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate
of ¥100 to $1, the approximate rate of exchange at March 31, 2008. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Consolidation—The consolidated financial statements for the year ended March 31, 2008 include the accounts
of the Company and its 16 significant (17 in 2007) subsidiaries (together, the "Group").
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to
exercise control over operations are fully consolidated and those companies over which the Group has a
significant influence are accounted for by the equity method.
Investments in 5 associated companies are accounted for by the equity method. Investments in the remaining
unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting had
been applied to the investments in these companies, the effect on the accompanying consolidated financial
statements would not be material.
The excess of the cost of the Company's investments in consolidated subsidiaries and associated companies
accounted for by the equity method over its equity in the fair value of the net assets at the respective dates of
acquisition, was charged to income at the time of acquisition as the amount involved was not material.
- 24 -
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.
b. Business Combination—In October 2003, the Business Accounting Council issued a Statement of Opinion,
"Accounting for Business Combinations," and on December 27, 2005, the Accounting Standards Board of Japan
(the "ASBJ") issued ASBJ Statement No. 7, "Accounting Standard for Business Divestitures" and ASBJ
Guidance No. 10, "Guidance for Accounting Standard for Business Combinations and Business Divestitures."
These new accounting pronouncements were effective for fiscal years beginning on or after April 1, 2006.
The accounting standard for business combinations allows companies to apply the pooling of interests method of
accounting only when certain specific criteria are met such that the business combination is essentially regarded
as a uniting-of-interests. For business combinations that do not meet the uniting-of-interests criteria, the
business combination is considered to be an acquisition and the purchase method of accounting is required. This
standard also prescribes the accounting for combinations of entities under common control and for joint
ventures.
On November 28, 2007, the Company acquired 85.1% of the shares of Sunrise Real Estate Co., Ltd. ("Sunrise"),
which trades and leases land and buildings, and merged with Sunrise on January 1, 2008. The Company
accounted for the acquisition by the purchase method of accounting. The negative goodwill arising in the
transaction was charged to income.
c. Revenue—Revenues on construction contracts greater than ¥100 million and having a construction duration of
exceeding one year are recognized on the percentage-of-completion method based on the ratio of costs incurred
to total estimated costs. Under this method, related costs and estimated earnings in excess of progress billings
are presented as a current asset.
Unbilled costs on the other contracts, which are accounted for by the completed-contract method, are stated as
cost of construction contracts in process.
Payments received in excess of costs and estimated earnings on the contracts, which are accounted for by the
percentage-of-completion method, and payments received on the other contracts are presented as current
liabilities.
Costs of preparation work for unsuccessful proposals and other projects which are not realized are charged to
income and are included in costs of revenue.
d. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that
are exposed to insignificant risk of changes in value. Cash equivalents include time deposits and certificates of
deposit both of which mature or become due within three months of the date of acquisition.
e.
Investment Securities—All marketable securities are classified as available-for-sale securities and are reported
at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of
equity. The cost of securities sold is determined based on the moving-average method.
- 25 -
Non-marketable securities are stated at cost determined by the moving-average method. For other than
temporary declines in fair value, non-marketable securities are reduced to net realizable value by a charge to
income.
f. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be
appropriate based on the Group's past credit loss experience and an evaluation of estimated losses on the
receivables outstanding.
g. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation is computed by
the declining-balance method, except for buildings owned by the Company which are depreciated using the
straight-line method, at rates based on the estimated useful lives of the assets. The range of useful lives is from
11 to 57 years for buildings and structures, from 4 to 13 years for machinery and equipment, and from 2 to
15 years for tools, furniture and fixtures.
h. Long-lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted
future cash flows expected to result from the continued use and eventual disposition of the asset or asset group.
The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
i. Other Assets—Intangible assets are carried at cost less accumulated amortization, which is calculated by the
straight-line method over their estimated useful lives. Software for internal use is amortized on a straight-line
basis over its estimated useful life (5 years at the maximum).
j. Allowance for Warranty Costs for Completed Work—The allowance for warranty costs for completed work is
provided based on past rate experience.
k. Allowance for Losses on Construction Contracts—The allowance for losses on construction contracts is
provided for an estimated amount of probable losses to be incurred in future years in respect of construction
projects in progress.
l. Retirement Benefits—Employees of the Company are, under most circumstances, entitled to payments from the
defined contribution pension plan and the qualified defined benefit pension plan. Employees of certain of the
Company's consolidated subsidiaries are, under most circumstances, entitled to certain lump-sum severance
payments and pension payments.
Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted a new accounting
standard for employees' retirement benefits and accounted for the liability for retirement benefits based on the
projected benefit obligations and plan assets at the balance sheet date.
The transitional obligation of ¥5,696 million ($56,960 thousand) is being amortized and charged to income over
15 years using the straight-line amortization method and presented as an operating expense in the consolidated
statements of income for the years ended March 31, 2008 and 2007.
- 26 -
Retirement benefits to directors, officers and corporate auditors are provided at the amount which would be
required if all directors, officers and corporate auditors terminated at the end of each period.
m. Presentation of Equity—On December 9, 2005, the ASBJ published a new accounting standard for the
presentation of equity. Under this accounting standard, certain items which were previously presented as
liabilities are now presented as components of equity. Such items include stock acquisition rights, minority
interests, and any deferred gain or loss on derivatives accounted for under hedge accounting. This standard is
effective for fiscal years ending on or after May 1, 2006. The balances of such items as of March 31, 2006 were
reclassified as separate components of equity as of April 1, 2006 in the consolidated statement of changes in
equity.
n. Research and Development Costs—Research and development costs are charged to income when incurred.
o. Leases—All leases are accounted for as operating leases. Under Japanese accounting standards for leases,
finance leases that are deemed to transfer ownership of the leased property to the lessee are to be capitalized,
while other finance leases are permitted to be accounted for as operating lease transactions if certain "as if
capitalized" information is disclosed in the notes to the lessee's consolidated financial statements.
p.
Income Taxes—The provision for income taxes is computed based on the pretax income included in the
consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and
liabilities for the expected future tax consequences of temporary differences between the carrying amounts and
the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the
temporary differences.
The Group has filed a tax return under the consolidated corporate-tax system from the fiscal year ended March
31, 2003, which allows companies to base tax payments on the combined profits or losses of the parent company
and its wholly owned domestic subsidiaries.
q. Foreign Currency Transactions—Both short-term and long-term receivables and payables denominated in
foreign currencies are translated into Japanese yen at exchange rates in effect at the balance sheet date.
Any differences between the foreign exchange contract rates and historical rates resulting from the translation of
receivables and payables are recognized as income or expense over the lives of the related contracts.
r. Foreign Currency Financial Statements—The balance sheet accounts of the consolidated foreign subsidiaries
are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which
is translated at the historical rate. Differences arising from such translation were shown as "Foreign currency
translation adjustments" in a separate component of equity.
- 27 -
Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current
exchange rate as of balance sheet date.
s. Derivative Financial Instruments—The Company uses a variety of derivative financial instruments, including
foreign currency forward exchange contracts as a means of hedging exposure to foreign currency risks. The
Company does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows:
(a) all derivatives are recognized as either assets or liabilities and measured at fair value, with gains or losses
recognized in the income statement and (b) for derivatives used for hedging purposes, if derivatives qualify for
hedge accounting, because of high correlation and effectiveness between the hedging instruments and the hedged
items, gains or losses on derivatives are deferred until maturity of the hedged transactions.
The foreign currency forward exchange contracts are utilized to hedge foreign exchange risks. Certain assets
and liabilities on construction contracts denominated in foreign currencies are translated at the contracted rates if
the forward contracts qualify for hedge accounting.
t. Per Share Information—Basic net income per share is computed by dividing net income available to common
shareholders by the weighted-average number of common shares outstanding for the period, retroactively
adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or
converted into common stock. Diluted net income per share of common stock assumes full conversion of the
outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an
applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.
u. New Accounting Pronouncements
Lease Accounting—On March 30, 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for
Lease Transactions," which revised the existing accounting standard for lease transactions issued on June 17,
1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after
April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
Under the existing accounting standard, finance leases that deem to transfer ownership of the leased property to
the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as operating lease
transactions if certain "as if capitalized" information is disclosed in the note to the lessee's financial statements.
The revised accounting standard requires that all finance lease transactions shall be capitalized recognizing lease
assets and lease obligations in the balance sheet.
- 28 -
Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements—Under Japanese GAAP, a company currently can use the financial statements of foreign
subsidiaries which are prepared in accordance with generally accepted accounting principles in their respective
jurisdictions for its consolidation process unless they are clearly unreasonable. On May 17, 2006, the ASBJ
issued ASBJ Practical Issues Task Force (PITF) No. 18, "Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements." The new task force
prescribes: (1) the accounting policies and procedures applied to a parent company and its subsidiaries for
similar transactions and events under similar circumstances should in principle be unified for the preparation of
the consolidated financial statements, (2) financial statements prepared by foreign subsidiaries in accordance
with either International Financial Reporting Standards or the generally accepted accounting principles in the
United States tentatively may be used for the consolidation process, (3) however, the following items should be
adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP
unless they are not material;
(1) Amortization of goodwill
(2) Actuarial gains and losses of defined benefit plans recognized outside profit or loss
(3) Capitalization of intangible assets arising from development phases
(4) Fair value measurement of investment properties, and the revaluation model for property, plant and
equipment, and intangible assets
(5) Retrospective application when accounting policies are changed
(6) Accounting for net income attributable to a minority interest
The new task force is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted.
Construction Contracts—Under current Japanese GAAP, either the completed-contract method or the
percentage-of-completion method is permitted to account for construction contracts. On December 27, 2007, the
ASBJ published a new accounting standard for construction contracts. Under this accounting standard, the
construction revenue and construction costs should be recognized by the percentage-of-completion method, if
the outcome of a construction contract can be estimated reliably. When total construction revenue, total
construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured,
the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract
cannot be reliably estimated, the completed-contract method shall be applied. When it is probable that total
construction costs will exceed total construction revenue, an estimated loss on the contract should be
immediately recognized by providing for loss on construction contracts. This standard is applicable to
construction contracts and software development contracts and effective for fiscal years beginning on or after
April 1, 2009 with early adoption permitted for fiscal years beginning on or before March 31, 2009 but after
December 27, 2007.
3. BUSINESS COMBINATION
On November 28, 2007, the Company acquired 85.1% of the shares of Sunrise. As a result, Sunrise became a wholly
owned subsidiary of the Company and the Company merged with Sunrise on January 1, 2008. The business of
Sunrise was to trade and lease real estate and the Company was leasing real estate from Sunrise. This acquisition was
made to own and manage the real estate which the Company was previously leasing from Sunrise. The results of
operations of Sunrise are included in the Company's consolidated statements of income from November 28, 2007.
- 29 -
The Company accounted for this business combination by the purchase method of accounting. The acquisition cost,
¥284 million ($2,840 thousand), was determined based on the net assets of Sunrise.
The total cost of acquisition has been allocated to the assets acquired and the liabilities assumed based on their
respective fair values. Negative goodwill recorded in connection with the acquisition totaled ¥297 million
($2,970 thousand). The negative goodwill was charged to income due to immateriality.
The estimated fair values of the assets acquired and the liabilities assumed at the acquisition date are as follows:
Current assets
Investments and other assets
Total assets acquired
Current liabilities
Long-term liabilities
Total liabilities assumed
Net assets acquired
Negative goodwill
Pre-acquisition carrying amount of investment in Sunrise
Cash acquired
Millions of Yen
Thousands of
U.S. Dollars
¥
287
16,518
16,805
(902 )
(15,306 )
(16,208 )
597
(297 )
(15 )
(169 )
$
2,870
165,180
168,050
(9,020)
(153,060)
(162,080)
5,970
(2,970)
(150)
(1,690)
Net of cash acquired
¥
116
$
1,160
Pro forma results of operations for the above business combination have not been presented because the effects were
not material to the consolidated financial statements.
4. TRANSACTIONS WITH UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES
Significant transactions with and balances due from/(to) unconsolidated subsidiaries and associated companies are
summarized as follows:
Transactions for the Year Ended March 31
Revenue
Cost of revenue
Selling, general and administrative expenses
Balances at March 31
Notes and accounts receivable—trade
Accounts receivable—other
Notes and accounts payable—trade
Accrued expenses and other
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
31
¥
(7,158)
(1,652)
8
¥
(4,919 )
(1,690 )
310
$
(71,580)
(16,520)
31
59
(472)
(318)
2
(470 )
310
590
(4,720)
(3,180)
The Company guaranteed the indebtedness of certain unconsolidated subsidiaries and associated companies in the
amount of ¥370 million at March 31, 2007.
- 30 -
5. REVENUE
Costs and estimated earnings recognized with respect to revenue which is accounted for by the
percentage-of-completion method at March 31, 2008 and 2007, were as follows:
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
Costs and estimated earnings
Amounts billed
¥ 1,115,404
(1,106,265)
¥ 727,700
(712,857 )
$ 11,154,040
(11,062,650)
Net
¥
9,139
¥ 14,843
$
91,390
6.
INVESTMENT SECURITIES
Investment securities at March 31, 2008 and 2007, consisted of the following:
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
Equity securities
¥ 5,583
¥ 5,345
$ 55,830
The carrying amounts and aggregate fair values of investment securities with readily determinable fair values at
March 31, 2008 and 2007, were as follows:
March 31, 2008
Millions of Yen
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
Available-for-sale—Equity securities
¥ 5,259
¥ 170
¥ 982
¥4,447
March 31, 2007
Available-for-sale—Equity securities
3,557
778
361
3,974
March 31, 2008
Thousands of U.S. Dollars
Unrealized
Unrealized
Losses
Gains
Fair
Value
Cost
Available-for-sale—Equity securities
$ 52,590
$ 1,700
$ 9,820
$ 44,470
Available-for-sale securities whose fair value was not readily determinable at March 31, 2008 and 2007, were as
follows:
Equity securities
¥ 1,136
¥ 1,371
$ 11,360
Carrying Amount
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
- 31 -
Proceeds from sales of available-for-sale securities for the year ended March 31, 2008, were ¥839 million
($8,390 thousand). Gross realized gains on these sales, computed on the moving average cost basis, were
¥644 million ($6,440 thousand) for the year ended March 31, 2008.
Proceeds from sales of available-for-sale securities for the year ended March 31, 2007, were ¥32 million and gross
realized gains on these sales, computed on the moving average cost basis, were ¥17 million for the year ended March
31, 2007.
7. REVERSAL OF IMPAIRMENT LOSS
Reversal of impairment loss of ¥268 million ($2,680 thousand) represents that impairment loss recognized in prior
periods for buildings and structures of a foreign subsidiary which was reversed under the generally accepted
accounting principles applied to the foreign subsidiary.
8.
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED
COMPANIES
Investments in and advances to unconsolidated subsidiaries and associated companies at March 31, 2008 and 2007,
were as follows:
Investments
Long-term receivables
Total
9. LONG-TERM DEBT
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
¥ 3,720
14
¥ 3,395
16
$ 37,200
140
¥ 3,734
¥ 3,411
$ 37,340
Long-term debt at March 31, 2008 and 2007, consisted of the following:
Long-term loans from banks, maturing serially
through 2011, with interest rates ranging
from 3.4% to 5.8% at 2008 and 2007:
Collateralized
Uncollateralized
Total
Less current portion
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
¥
61
10,000
10,061
(10,039)
¥
164
10,000
10,164
(97 )
$
610
100,000
100,610
(100,390)
Long-term debt, less current portion
¥
22
¥ 10,067
$
220
- 32 -
Subordinated loans in the amount of ¥10,000 million ($100,000 thousand) from The Bank of Tokyo-Mitsubishi UFJ,
Ltd. were included in 'Uncollateralized' at March 31, 2008 and 2007.
Annual maturities of long-term debt at March 31, 2008, were as follows:
Year Ending
March 31
2009
2010
2011
Total
Commitment-line contracts at March 31, 2008, were as follows:
Commitment-line contracts
Unused commitments
Millions of Yen
¥ 10,039
18
4
¥ 10,061
Thousands of
U.S. Dollars
$ 100,390
180
40
$ 100,610
Millions of Yen
Thousands of
U.S. Dollars
¥ 15,000
$ 150,000
¥ 15,000
$ 150,000
The following assets were pledged as collateral for long-term debt at March 31, 2008:
Land
Buildings and structures—net of accumulated
depreciation
Total
10. RETIREMENT BENEFITS
Millions of Yen
Thousands of
U.S. Dollars
¥ 381
496
¥ 877
$ 3,810
4,960
$ 8,770
Employees of the Company are, under most circumstances, entitled to payments from the defined contribution
pension plan and the qualified defined benefit pension plan upon retirement or termination.
Employees of certain of the Company's domestic consolidated subsidiaries are, under most circumstances, entitled to
certain lump-sum severance payments and pension payments upon retirement or termination.
Two of the Company's domestic consolidated subsidiaries, Chiyoda Keiso and Chiyoda Kosho, transferred their
retirement benefit plan to a defined contribution pension plan and the reformed qualified defined pension plan as of
April 1, 2008. As a result of this transfer, "loss on a partial termination of a defined benefit pension plan" of
¥485 million ($4,850 thousand) was recorded in other expenses for the year ended March 31, 2008.
- 33 -
Liability for retirement benefits includes retirement benefits to directors, officers and corporate auditors in the amount
of ¥536 million ($5,360 thousand) and ¥487 million for the years ended March 31, 2008 and 2007, respectively. The
retirement benefits to directors and corporate auditors are paid subject to the approval of the shareholders.
The liability for employees' retirement benefits at March 31, 2008 and 2007, consisted of the following:
Projected benefit obligation
Fair value of plan assets
Unrecognized transitional obligation
Unrecognized actuarial loss
Unrecognized prior service cost
Net accrued pension liabilities
Prepaid pension cost
Loss on a partial termination of defined
benefit pension plan
Millions of Yen
2008
2007
¥ 27,812
(21,454 )
(4,922 )
(1,299 )
1,557
1,694
96
¥ 27,455
(20,338)
(4,307)
(3,634)
1,381
557
648
485
Thousands of
U.S. Dollars
2008
$ 274,550
(203,380)
(43,070)
(36,340)
13,810
5,570
6,480
4,850
Liability for employees' retirement benefits
¥ 1,690
¥ 1,790
$ 16,900
The components of net periodic benefit costs for the years ended March 31, 2008 and 2007, were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of transitional obligation
Recognized actuarial loss
Amortization of prior service cost
Subtotal
Loss on a partial termination of defined
benefit pension plan
Payment to defined contribution pension trust
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
¥ 903
371
(532)
615
335
(176)
1,516
485
176
¥ 702
375
(356 )
615
342
(176 )
1,502
168
$ 9,030
3,710
(5,320)
6,150
3,350
(1,760)
15,160
4,850
1,760
Net periodic benefit costs
¥ 2,177
¥ 1,670
$ 21,770
- 34 -
Assumptions used for the years ended March 31, 2008 and 2007, are set forth as follows:
Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss
Amortization period of transitional obligation
Amortization period of prior service cost
11. EQUITY
2008
1.5%
2.7%
10 years
15 years
10 years
2007
1.5%
2.2%
10 years
15 years
10 years
Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the "Corporate Law"),
which reformed and replaced the Commercial Code of Japan. The significant provisions in the Corporate Law that
affect financial and accounting matters are summarized below:
a. Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the
year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as;
(1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors,
and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company
cannot do so because it does not meet all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the
articles of incorporation of the company so stipulate. The Corporate Law provides certain limitations on the
amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount
available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
b.
Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a
component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
- 35 -
c. Treasury Stock and Treasury Stock Acquisition Rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stock by
resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount
available for distribution to the shareholders which is determined by specific formula. Under the Corporate Law,
stock acquisition rights, which were previously presented as a liability, are now presented as a separate
component of equity. The Corporate Law also provides that companies can purchase both treasury stock
acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.
12. STOCK OPTION
The stock option outstanding as of March 31, 2008 was as follows:
Stock Option
2002 Stock
Option
Persons
Granted
Number of
Options Granted
Date of
Grant
Exercise
Price
Exercise Period
8 directors
8 officers
623 employees
7,896,000 shares
June 27,
2002
¥ 233
($ 2.33
)
From July 1, 2004
to June 30, 2009
The stock option activity was as follows:
For the Year Ended March 31, 2007
Vested:
March 31, 2006—outstanding
Exercised
March 31, 2007—outstanding
For the Year Ended March 31, 2008
Vested:
March 31, 2007—outstanding
Exercised
March 31, 2008—outstanding
13.
INCOME TAXES
2002 Stock Option
(Shares)
355,000
(232,000 )
123,000
123,000
(57,000 )
66,000
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the
aggregate, resulted in a normal effective statutory tax rate of approximately 41% for the years ended March 31, 2008
and 2007.
- 36 -
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets
and liabilities at March 31, 2008 and 2007, are as follows:
Deferred tax assets:
Cost of revenue
Retirement benefits
Allowance for employees' bonus
Allowance for warranty costs for completed works
Allowance for losses on construction contracts
Allowance for doubtful accounts
Loss on write-down of property, plant and equipment
Deferred loss on derivatives under hedge accounting
Other
Less valuation allowance
Total
Deferred tax liabilities
Net deferred tax assets
Millions of Yen
2008
2007
¥ 4,182
1,610
731
1,644
1,368
4,046
(766)
¥ 4,261
718
1,995
192
578
3,658
(439 )
Thousands of
U.S. Dollars
2008
$ 41,820
16,100
7,310
16,440
13,680
40,460
(7,660)
12,815
10,963
128,150
5,828
3,035
58,280
¥ 6,987
¥ 7,928
$ 69,870
Net deferred tax assets as of March 31, 2008 and 2007 were recorded in the accompanying consolidated balance
sheets as follows:
Deferred tax assets—current assets
Deferred tax assets—investments and other assets
Other liabilities (deferred tax liabilities—
non-current liabilities)
Millions of Yen
2008
2007
Thousands of
U.S. Dollars
2008
¥ 5,337
1,650
¥ 5,884
2,057
$ 53,370
16,500
(13 )
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the
accompanying consolidated statements of income for the years ended March 31, 2008 and 2007, is as follows:
Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Non-taxable dividend income
Tax credit
Decrease in valuation allowance for deferred tax assets
Lower income tax rates applicable to subsidiaries
Lower tax basis of enterprise tax
Corporate income tax for previous years
Earnings retained by tax haven company
Other—net
Actual effective tax rate
- 37 -
2008
41 %
1
(1)
(2)
(3)
1
1
10
1
49 %
2007
41 %
1
(1)
(2)
(1)
38 %
14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,659 million ($16,590 thousand) and ¥1,204 million for
the years ended March 31, 2008 and 2007, respectively.
15. LEASES
The Company and a subsidiary lease certain machinery, computer equipment, office space and other assets. Total
lease payments under finance leases were ¥128 million ($1,280 thousand) and ¥182 million for the years ended
March 31, 2008 and 2007, respectively.
Pro forma information for leased property under finance leases that do not transfer ownership of the leased property
to the lessee on an "as if capitalized" basis for the years ended March 31, 2008 and 2007, was as follows:
Year Ended March 31, 2008
Acquisition cost
Accumulated depreciation
Net leased property
Acquisition cost
Accumulated depreciation
Net leased property
Millions of Yen
Buildings
and
Structures
Tools,
Furniture
and Fixtures
Other
Total
¥
¥
$
$
68 ¥
6
62 ¥
450 ¥
219
231 ¥
76 ¥
34
42 ¥
594
259
335
Thousands of U.S. Dollars
Buildings
and
Structures
Tools,
Furniture
and Fixtures
Other
Total
680 $
60
4,500 $
2,190
760 $
340
5,940
2,590
620 $
2,310 $
420 $
3,350
Year Ended March 31, 2007
Millions of Yen
Obligations under
Finance Lease
Thousands of U.S.
Dollars
Obligations under
Finance Lease
Due within one year
Due after one year
Total
¥
¥
$
109
226
335
$
1,090
2,260
3,350
Millions of Yen
Tools, Furniture
and Fixtures
Other
Total
Acquisition cost
Accumulated depreciation
Net leased property
¥
¥
¥
638
317
161 ¥
84
799
401
321
¥
77 ¥
398
- 38 -
Due within one year
Due after one year
Total
Millions of Yen
Obligations under
Finance Lease
¥
¥
157
241
398
Depreciation expense as lessee, which is not reflected in the accompanying consolidated statements of income,
computed by the straight-line method was ¥128 million ($1,280 thousand) and ¥182 million for the years ended
March 31, 2008 and 2007, respectively.
The amounts of obligations, acquisition cost and depreciation under finance leases include the imputed interest
income portion and interest expense portion, respectively.
16. DERIVATIVES
The Company enters into foreign currency forward exchange contracts to hedge foreign exchange risk associated with
certain assets and liabilities on construction contracts denominated in foreign currencies. It is the Company's policy
to use derivatives only for the purpose of reducing foreign exchange risks associated with such assets or liabilities.
The Company does not hold or issue derivatives for trading purposes.
Because the counterparties to these derivatives are limited to major international financial institutions, the Company
does not anticipate any losses arising from credit risk.
The basic policies for the use of derivatives are approved by the executive committee and the execution and control of
derivatives are controlled by the financing department. The hedging effectiveness in reducing foreign exchange risks
is periodically assessed and reported to the accounting department and executive officers.
The Company had the following foreign currency forward exchange contracts outstanding at March 31, 2008 and
2007.
Contract
Amount
¥
9
14
20,621
2
Buying:
U.S.$
Euro
Selling:
U.S.$
Euro
Millions of Yen
2008
Fair
Value
Unrealized
Gain
Thousands of U.S. Dollars
2008
Fair
Value
Unrealized
Gain
Contract
Amount
¥
9
15
20,522
2
¥ 1
99
$
90
140
$
90
150
206,210
20
205,220
20
$ 10
990
- 39 -
Buying:
U.S.$
Euro
Selling U.S.$
Millions of Yen
2007
Fair
Value
Unrealized
Gain
Contract
Amount
¥
213
13
12,315
¥
221
14
12,313
¥ 8
1
2
Foreign currency forward exchange contracts which qualify for hedge accounting for the years ended March 31, 2008
and 2007, are excluded from the disclosure of market value information.
The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts
exchanged by the parties and do not measure the Company's exposure to credit or market risk.
17. CONTINGENT LIABILITIES
At March 31, 2008, the Group had the following contingent liabilities:
Millions of Yen
Thousands of
U.S. Dollars
Employees (housing loan)
¥ 567
$ 5,670
18. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March
31, 2008 and 2007 is as follows:
Year Ended March 31, 2008
Basic EPS—Net income available
to common shareholders
Effect of dilutive securities—
Stock option
Diluted EPS—Net income
for computation
Year Ended March 31, 2007
Basic EPS—Net income available
to common shareholders
Effect of dilutive securities—
Stock option
Diluted EPS—Net income
for computation
Millions
of Yen
Net
Income
Thousands
of Shares
Weighted-average
Shares
Yen
U.S. Dollars
EPS
¥ 9,641
192,256
¥ 50.15
$ 0.50
95
¥ 9,641
192,351
¥ 50.12
$ 0.50
¥ 23,532
192,234
¥ 122.41
202
¥ 23,532
192,436
¥ 122.28
- 40 -
19. SUBSEQUENT EVENTS
a. Appropriation of Retained Earnings
The following appropriation of retained earnings at March 31, 2008, was approved at the Company's
shareholders meeting held on June 24, 2008:
Millions of
Yen
Thousands of
U.S. Dollars
Year-end cash dividends, ¥10.00 ($0.10) per share
¥
1,923 $
19,230
b.
Issuance of New Ordinary Shares to a Third Party
At the Company's Board of Directors meeting held on March 31, 2008, the Company resolved the issuance of
new ordinary shares to an allocated third party and has accepted as a result of allocating new ordinary shares to
Mitsubishi Corporation on April 30, 2008. Details are as follows:
(1) Number of shares issued:
(2) Issue price:
(3) Aggregate issue amount:
(4) Allocated third party:
Ordinary shares, 67,080 thousand shares
¥907 per share
¥60,841 million ($608,410 thousand)
Mitsubishi Corporation
20. SEGMENT INFORMATION
Information about geographical segments and sales to foreign customers of the Company and consolidated
subsidiaries for the years ended March 31, 2008 and 2007, was as follows:
(1) Geographical Segments
Year Ended March 31, 2008
Japan
Asia
Millions of Yen
North
America
Other
Subtotal
Eliminations
(Corporate)
Consolidated
Revenue:
Outside customers
Intersegment
¥ 588,606 ¥ 14,954
¥ 603,560
1,638 ¥
37 ¥
26
1,701 ¥
¥
(1,701)
603,560
Total
588,606 16,592
37
26 605,261
(1,701)
603,560
Operating expenses
581,030 15,323
34
43 596,430
(1,710)
594,720
Operating income (loss)
¥ 7,576 ¥ 1,269 ¥
3 ¥
(17) ¥ 8,831 ¥
9 ¥
8,840
Assets
¥ 369,452 ¥ 9,620 ¥
693 ¥ 122 ¥ 379,887 ¥
(1,067) ¥
378,820
- 41 -
Year Ended March 31, 2008
Japan
Asia
Thousands of U.S. Dollars
North
America
Other
Subtotal
Eliminations
(Corporate) Consolidated
Revenue:
Outside customers
Intersegment
$ 5,886,060 $ 149,540
$ 6,035,600
$ 6,035,600
16,380 $
370 $
260
17,010 $
(17,010 )
Total
5,886,060
165,920
370
260 6,052,610
(17,010 )
6,035,600
Operating expenses
5,810,300
153,230
340
430 5,964,300
(17,100 )
5,947,200
Operating income (loss)
$
75,760 $
12,690 $
30 $
(170) $
88,310 $
90 $
88,400
Assets
$ 3,694,520 $
96,200 $ 6,930 $ 1,220 $ 3,798,870 $
(10,670 ) $ 3,788,200
Year Ended March 31, 2007
Japan
Asia
Millions of Yen
North
America
Other
Subtotal
Eliminations
(Corporate) Consolidated
Revenue:
Outside customers
Intersegment
¥ 476,813 ¥
8,082
1,708 ¥
¥ 484,895
38 ¥
27
1,773 ¥
¥
(1,773 )
484,895
Total
476,813
9,790
Operating expenses
448,622
9,283
38
36
27
486,668
(1,773 )
484,895
27
457,968
(1,773 )
456,195
Operating income
¥
28,191 ¥
507 ¥
2
¥
28,700
¥
28,700
Assets
¥ 436,171 ¥
7,095 ¥
689 ¥
148 ¥ 444,103 ¥
(1,150 ) ¥
442,953
Notes: 1. The Company and consolidated subsidiaries operate within four geographic segments based on the
countries where the companies are located.
The segments consisted of the following countries in 2008 and 2007:
Asia:
North America: United States of America
Nigeria
Other:
Indonesia, Singapore, Philippines, Myanmar, Malaysia and Thailand
2. Corporate assets mainly consist of long-term loans and investment securities of the Company.
Corporate assets as of March 31, 2008 and 2007 were ¥2,153 million ($21,530 thousand) and
¥2,130 million, respectively.
- 42 -
(2) Sales to Foreign Customers
Year Ended March 31, 2008
Asia
Millions of Yen
The Middle
and
Near East
Russia and
Central Asia
Other
Total
Overseas sales (A)
Consolidated sales (B)
(A)/(B)
¥ 17,093
¥ 425,970
¥ 49,408
¥ 1,015
2.83%
70.58%
8.19%
0.16%
¥ 493,486
603,560
81.76%
Year Ended March 31, 2008
Asia
Thousands of U.S. Dollars
The Middle
and
Near East
Russia and
Central Asia
Other
Total
Overseas sales (A)
Consolidated sales (B)
(A)/(B)
$ 170,930
$ 4,259,700
$ 494,080
$ 10,150
2.83%
70.58%
8.19%
0.16%
$ 4,934,860
6,035,600
81.76%
Year Ended March 31, 2007
Asia
Millions of Yen
The Middle
and
Near East
Russia and
Central Asia
Other
Total
Overseas sales (A)
Consolidated sales (B)
(A)/(B)
¥ 11,187
¥ 316,649
¥ 49,275
¥ 1,234
2.31%
65.30%
10.16%
0.26%
¥ 378,345
484,895
78.03%
Note: The Company and consolidated subsidiaries are summarized into four segments by geographic area based
on the countries where the companies are located.
The segments consisted of the following countries in 2008 and 2007:
Asia:
The Middle and Near East:
Russia and Central Asia:
Other:
Singapore, Malaysia, Indonesia and others
Qatar, Iran and others
Russia
Nigeria and others
The Company and its consolidated subsidiaries operate predominantly in the engineering business, while certain
subsidiaries operate in leasing and software producing businesses which are minor in relation to the total business.
Accordingly, the presentation of industry segment information is not required under Japanese accounting standards.
* * * * * *
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Global Network
(As of July 1, 2008)
Head Office
Yokohama Head Office
The Hague Representative Office
Parkstraat 83, 2514 JG
12-1, Tsurumichuo 2-chome, Tsurumi-ku
The Hague, The Netherlands
Yokohama 230-8601, Japan
Tel: (81) 45-521-1231
Fax: (81) 45-503-0200
Koyasu Office & Research Park
13, Moriya-cho 3-chome, Kanagawa-ku
Yokohama 221-0022, Japan
Tel: (81) 45-441-1268
Fax: (81) 45-441-1297
Tel: (31) 70-385-9453
Fax: (31) 70-346-3779
Major Subsidiaries & Affiliated Companies
Overseas
Engineering Business
Chiyoda Almana Engineering LLC
Services: Design and construction of
Jeddah Head Office
P.O. Box 6188, Jeddah 21442
The Kingdom of Saudi Arabia
Tel: (966) 2-647-0558
Fax: (966) 2-647-1908
Chiyoda Philippines Corporation
Services: Design
Chiyoda Bldg. Meralco Avenue Corner,
General Araneta Street, San Antonio,
Pasig City, Metro Manila, Philippines
Tel: (63) 2-636-1001～1008
Research & Development Center
industrial facilities
Fax: (63) 2-636-1013/1023
Tel: (81) 45-441-9132
Fax: (81) 45-441-9728
Osaka Office
14-10, Nishinakajima 5-chome,
Almana Tower, 5th floor, Airport RD,
P.O. Box 22961, Doha, Qatar
Tel: (974) 462-2926
Fax: (974) 462-6404
Yodogawa-ku Osaka 532-001, Japan
Chiyoda Corporation (Shanghai)
Tel: (81) 6-6390-3411
Fax: (81) 6-6889-5101
Overseas Offices
Abu Dhabi Office
Clock Tower Bldg. Al Najda Street,
P.O. Box 43928, Abu Dhabi, U.A.E.
Tel: (971) 2-671-7161
Fax: (971) 2-671-7162
Beijing Office
Services: Project consulting
29F-Room E, Pufa Tower, No. 588,
Pudong Rd. (S), Pudong New Area,
Shanghai 200120, China
Tel: (86) 21-5877-6266
Fax: (86) 21-5877-6366
1177 West Loop South, Suite 680
Houston, TX 77027, U.S.A.
URL: http://www.chiyodaphil.com.ph
Chiyoda & Public Works Co., Ltd.
Services: Design and construction of
industrial facilities
SEDONA HOTEL Room 307 ~ 309 No. 1,
Kaba Aye Pagoda Road, Yankin Township,
Yangon, Myanmar
Tel: (95) 1-545605
Fax: (95) 1-545227
Chiyoda Singapore (Pte) Limited
Services: Design and construction of
East, Singapore 609922
Tel: (65) 6563-3488
Fax: (65) 6567-5231
URL: http://www.chiyoda.com.sg/
Chiyoda International Corporation
industrial facilities
Services: Business activities in the U.S.A.
14 International Business Park Jurong
Room No. 1028, China World Tower 1,
Jianguomenwai Street, Chaoyang District,
Tel: (1) 713-965-9005
Fax: (1) 713-965-0075
Beijing, 100004, China
Tel: (86) 10-6505-2678
Fax: (86) 10-6505-1118
Jakarta Office
Chiyoda Malaysia Sdn. Bhd.
Chiyoda (Thailand) Limited
Services: Design and construction of
Services: Design and construction of
industrial facilities
industrial facilities
15th Floor, Menara Maxisegar Jalan Pandan
140/42 ITF Tower II, Suite H 20th Floor,
9th Floor, Mid-Plaza Bldg. Jalan Jenderal
Indah, 4/2 Pandan Indah, 55100
Silom Road, Kwaeng Suriyawong,
Sudirman Kav. 10-11 Jakarta, 10220, Indonesia
Kuala Lumpur, Malaysia
Khet Bangrak, Bangkok 10500, Thailand
Tel: (62) 21-570-7579
Fax: (62) 21-570-6276
Korea Representative Office
Tel: (60) 3-4297-0988
Fax: (60) 3-4297-0800
URL: http://www.chiyoda.com.my/
1358-8, Tal-dong Nam-ku, Ulsan, Korea
Chiyoda Oceania Pty Limited
Tel: (66) 2-231-6441/6442
Fax: (66) 2-231-6443
L&T-Chiyoda Limited
Services: Design
Tel: (82) 52-256-5721/5722
Fax: (82) 52-256-5723
Services: Design and construction of
B.P. Estate, National Highway No. 8,
industrial facilities
Chhani Baroda-391740, Gujarat State, India
Middle East Headquarters Doha Office
Level 28, AMP Tower 140 St Georges Terrace,
Tel: (91) 265-2771003/2772855
Al Mana Tower Airport Road,
P.O. Box 20243, Doha Qatar
Tel: (974) 4622-875/876
Fax: (974) 4622-716
Perth WA 6000, Australia
Tel: (61) 8-9278-2599
Fax: (61) 8-9278-2727
Chiyoda Petrostar Ltd.
Fax: (91) 265-2774985
URL: http://www.lntchiyoda.com/
PT. Chiyoda International Indonesia
Services: Design and construction of
Milan Representative Office
Services: Design and construction of
industrial facilities
Viale Della Liberazione 18, 20124 Milan, Italy
industrial facilities
MENARA HIJAU, 10th Floor Suite 1001 J1. Mt.
Tel: (39) 02-303517-111
Fax: (39) 02-303517-35
Singapore Human Resources Office
10 Anson Road, #03-02, International Plaza,
Singapore 079903
Tel: (65) 6324-0080
Fax: (65) 6324-0090
Al-Khobar Office
P.O. Box 31707, Al-Khobar 31952
The Kingdom of Saudi Arabia
Tel: (966) 3-864-0839
Fax: (966) 3-864-0986
Haryono Kav. 33 Jakarta Selatan 12770, Indonesia
Tel: (62) 21-798-4680
Fax: (62) 21-798-6174
Project Companies
Oman, Qatar, Russia
- 44 -
Domestic
Major Subsidiaries & Affiliated Companies
Chiyoda TechnoAce Co., Ltd.
Arrowhead International Corporation
Domestic
Engineering Business
Chiyoda Advanced Solutions Corporation
Services: Advanced engineering consulting
1-25, Shinurashima-cho 1-chome
Services: Design and construction for
Services: Travel services and supply of spare parts
pharmaceutical facilities
7-8, Shibakoen 1-chome, Minato-ku
13, Moriya-cho 3-chome, Kanagawa-ku
Yokohama 221-0022, Japan
Tel: (81) 45-441-9600
Fax: (81) 45-450-5236
Tokyo 105-0011, Japan
Tel: (81) 3-5470-0880
Fax: (81) 3-5470-0890
URL: http://www.arrowhead.co.jp/
Kanagawa-ku, Yokohama 221-0031, Japan
URL: http://www.cta.chiyoda.co.jp/
Arrow Mates Co., Ltd.
Tel: (81) 45-441-1260
Fax: (81) 45-441-1264
Chiyoda U-Tech Co., Ltd.
Services: Placement of technicians and
Services: Consulting and human resources
office staff and reemployment support
URL: http://www.chiyoda-as.co.jp/
placement
43, Hon-cho 4-chome, Naka-ku
Chiyoda Keiso Co., Ltd.
15-19, Tsurumichuo 2-chome, Tsurumi-ku
Yokohama 231-0005, Japan
Services: Design, procurement and construction
Yokohama 230-0051, Japan
for electrical and instrumentation
facilities
Tel: (81) 45-502-7618
Fax: (81) 45-503-5399
Tel: (81) 45-662-1126
Fax: (81) 45-662-1173
URL: http://www.arrowmates.co.jp/
13, Moriya-cho 3-chome, Kanagawa-ku
URL: http://www.utc-yokohama.com/
IT Engineering Limited
Yokohama 221-0022, Japan
Tel: (81) 45-441-1433
Fax: (81) 45-441-1434
Other Businesses
Arrow Business Consulting Corporation
Services: IT consulting and solution provider
1-25, Shinurashima-cho 1-chome,
Services: Consulting for finance and accounting
Kanagawa-ku, Yokohama 221-0031, Japan
URL: http://www.ckc.chiyoda.co.jp/
32-1, Tsurumichuo 4-chome, Tsurumi-ku
Chiyoda Kosho Co., Ltd.
Yokohama 230-0051, Japan
Services: Design, construction and maintenance
Tel: (81) 45-502-5774
for domestic projects
Fax: (81) 45-502-5753
Tel: (81) 45-441-9123
Fax: (81) 45-441-1466
URL: http://www.ite.co.jp/
34-26, Tsurumichuo 4-chome, Tsurumi-ku
Yokohama 230-0051, Japan
Tel: (81) 45-506-7662
Fax: (81) 45-506-7667
URL: http://www.cks-ykh.co.jp/
- 45 -
CORPORATE HISTORY
(From January 1948 to April 2008)
Chiyoda Corporation was established on January 20, 1948 with one million yen of capital stock when the
construction division of Mitsubishi Oil Co., Ltd. became independent and set up its head office in Minato-ku, Tokyo.
The subsequent changes in the Chiyoda Corporate Group are shown below.
Month/Year
January 1950
August 1954
Major Events
Registration as a Civil Engineering and Construction Contractor, Ministry of Construction
Registration Number (i)1431
Purchase of Tsurumi Plant in Tsurumi-ku, Yokohama and Commencement of Manufacturing
Chemical Machinery
Establishment of Chiyoda Keiso Co., Ltd.
Listed on the First Section of the Tokyo, Osaka and Nagoya Stock Exchanges
October 1956
October 1961
September 1968 Head Office Address Transferred to Tsurumi-ku, Yokohama
February 1971
August 1973
December 1973
Establishment of Chiyoda Singapore (Pte) Limited
Establishment of Chiyoda International Corporation
Acquisition of Authorization for a Specialized Construction Business License, Ministry of
Construction Authorization Number (Special-48) 2371.
Establishment of Chiyoda Kosho Co., Ltd.
Establishment of Chiyoda Malaysia Sdn. Bhd.
Establishment of Chiyoda Petrostar Ltd. (Saudi Arabia)
Establishment of Arrowhead International Corporation
Establishment of Chiyoda Nigeria Limited
Establishment of Arrow Human Resources Inc. (currently Arrow Mates Co., Ltd.)
Establishment of Chiyoda TechnoAce Co., Ltd., U-Tech Consulting Company Limited
(currently Chiyoda U-Tech Co., Ltd.), Chiyoda Information Service Company Limited
(currently IT Engineering Limited.)
Establishment of Arrow Business Consulting Limited.
Establishment of Chiyoda (Thailand) Limited
Establishment of PT Chiyoda International Indonesia
Establishment of L&T Chiyoda Limited
Establishment of C&E Corporation (currently Chiyoda Philippines Corporation)
Establishment of Chiyoda & Public Works Co., Ltd. (Myanmar)
Third-Party Allocation of Shares
Formulation of New Restructuring Plan
Reduction of Capital Without Compensation
Third-Party Allocation of Shares
Establishment of Chiyoda Advanced Solutions Corporation
Abolition of Listing on the Osaka Securities Exchange
Formulation of Medium-Term Management Plan
Merger Acquisition of Sun Rise Real Estate Company Limited
Contract Concluded with Mitsubishi Corporation in Relation to a Capital/Business Alliance
Third-Party Allocation of Shares to Mitsubishi Corporation
April 1974
June 1974
June 1975
January 1981
June 1983
February 1986
October 1986
April 1989
March 1990
May 1990
November 1994
February 1995
September 1997
March 1999
November 2000
February 2001
March 2001
April 2002
March 2003
February 2005
January 2008
March 2008
April 2008
- 46 -
INVESTOR INFORMATION
(As of March 31, 2008)
Item
Trade Name:
Head Office Address:
Date of Incorporation:
Paid-in Capital:
Fiscal Year:
Number of Employees:
Number of Consolidated Subsidiaries:
Number of Affiliated Companies
Accounted for Using the Equity Method:
Accounting Auditor:
Listed Stock Exchange:
Stock Code:
Total Number of Authorized Shares:
Aggregate Number of Shares Issued:
Number of Shares Per Unit:
Number of Shareholders:
Transfer Agent of Common Stock:
Enquiries in Relation to IR:
Details
Chiyoda Corporation
12-1, Tsurumi-Chuo 2-chome, Tsurumi-ku, 230-8601 Yokohama, Japan
January 20, 1948
12,935 million yen (43,389 million yen as of April 30, 2008)
Ends March 31
3,067 people
16 companies
5 companies
Deloitte Touche Tohmatsu
First Section of the Tokyo Stock Exchange
6366
650,000,000 shares
193,182,529 shares (260,262,529 shares as of April 30, 2008)
1,000 shares
9,250 people
Mitsubishi UFJ Trust and Banking Corporation
- Telephone:
- Fax:
- E-mail
- URL：
045-506-7538
045-506-7085
CHYOD@ykh.chiyoda.co.jp
http://www.chiyoda-corp.com/en/
Recognized by SRI (Socially Responsible Investment) Evaluation Bodies
- FTSE4Good Index Series
In March 2005, Chiyoda was first certified to
be a member of the “FTSE4Good” Index Series
of FTSE Group, UK.
This means that Chiyoda is acknowledged as
a Japanese corporation fulfilling a series of
internationally recognized CSR standards.
- Morningstar Socially Responsible Investment Index
In September 2007, Morningstar Japan K.K. selected Chiyoda for inclusion in
the SRI Index that they compile and monitor. This was a first for a Japanese
engineering company.
- 47 -
STOCK INFORMATION
(From April 1, 2003 to March 31, 2008)
Stock Price Index Compared with Main Indices
800
700
600
500
400
300
200
100
0
Chiyoda
TOPIX
Nikkei 225
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- 49 -