Minato Mirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Tel: (81)45-225-7777 (voice guidance) http://www.chiyoda-corp.com/en/ CORPORATE PHILOSOPHY Enhance our business in aiming for harmony between energy and the environment, and contribute to the sustainable development of a society as an integrated engineering company through the use of our collective wisdom and painstakingly developed technology. (As of August 2013) Selected in FTSE Group’s responsible investment index ANNUAL REPORT FY2012 For the year ended March 31, 2013 Profile Since its establishment in 1948, Chiyoda Corporation has engaged in engineering and construction work and services at innumerable 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. Financial Highlights Years Ended March 31, 2013, 2012, 2011, 2010 and 2009 For the Year (Millions of Yen) Revenues Cost of revenue Operating income Income before income taxes and minority interests Net income 2013 2012 2011 2010 2009 ¥398,918 ¥254,675 ¥247,082 ¥312,985 ¥446,438 356,402 25,113 26,747 16,077 215,783 24,197 23,543 14,364 215,563 17,544 11,476 7,979 298,766 427,461 1,702 4,714 2,953 7,227 9,651 6,498 More than forty years ago in 1972, Chiyoda’s founder was already At Year-End (Millions of Yen) emphasizing in a booklet entitled Legacy for the Twenty-first Century that sustainable social development should progress by harmonizing nature and industrial development. We were 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 over 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 to raise our corporate value. Total assets Total equity Current ratio (%) Per Common Share (Yen ) Earnings per share (EPS) Book value per share (BPS) Dividend per share Ratios (%) Return on assets (ROA) Return on equity (ROE) ¥435,379 ¥365,795 ¥353,392 ¥328,174 ¥357,816 189,356 166.3 168,737 165.5 155,758 173.8 ¥62.06 727.24 19.0 6.4 9.0 ¥55.44 648.95 17.0 6.6 8.9 ¥30.79 599.15 11.0 4.6 5.3 149,253 175.2 ¥11.39 573.61 3.5 1.4 2.0 145,917 161.1 ¥25.58 561.12 7.5 3.1 5.7 Note: Yen amounts are rounded down to the nearest million. U.S. dollar amounts and percentages are rounded to the nearest unit. Contents 01 Financial Highlights 02 At a Glance 03 To Our Shareholders 04 Management’s Discussion and Analysis 06 The Medium-Term Management Plan 08 Topics 12 Corporate Governance 14 Corporate Information 16 Directors and Officers 17 Stock Information Revenues Billions of yen Billions of yen Billions of yen 800 800 800 700 700 700 600 600 600 500 500 500 446.4 446.4 446.4 400 400 400 300 300 300 200 200 200 100 100 100 0 0 0 398.9 398.9 398.9 313.0 313.0 313.0 247.1 247.1 247.1 254.7 254.7 254.7 2009 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013 Operating Income Net Income Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen 30 30 30 25 25 25 20 20 20 15 15 15 10 10 10 5 5 5 0 0 0 25.1 25.1 25.1 24.2 24.2 24.2 17.5 17.5 17.5 30 30 30 20 20 20 16.1 16.1 16.1 14.4 14.4 14.4 7.2 7.2 7.2 1.7 1.7 1.7 10 10 10 6.5 6.5 6.5 8.0 8.0 8.0 3.0 3.0 3.0 2009 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013 0 0 0 2009 2009 2009 2010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013 Courtesy of Mizushima LNG Co., Ltd. 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 July 1, 2013. 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. CHIYODA CORPORATION ANNUAL REPORT FY2012 1 At a Glance To Our Shareholders Revenues New Orders Backlog of Contracts (Billions of yen) 6 11 33 32 18 398.9 Billion yen LNG 12 6 29 50 402.9 Billion yen 23 11 8 58 900.6 Billion yen 128.4 (32%) 47.2 (12%) 521.2 (58%) Gas Processing*1 73.0 (18%) 24.9 (6%) 69.9 (8%) Fine Industries*2 130.4 (33%) 115.9 (29%) 94.7 (11%) Petroleum and Petrochemicals 42.7 (11%) 200.6 (50%) 203.9 (23%) Others 24.5 (6%) 14.2 (3%) 10.9 (0%) *3 *4 *5 *6 *7 EPC* / EPCm** / EPsCm*** Execution FEED**** / Feasibility Study Overseas Projects under Execution (As of June 30, 2013) New Ulaanbaatar International Airport Mongolia / Infrastructure Al Jubail Export Refinery Saudi Arabia / Oil Refinery Industrial Wastewater Treatment Saudi Arabia / Water Recycling Arzew Algeria / LNG Plateau Maintenance Project Qatar / LNG Long Term Service Agreement (RasGas / Qatargas / Shell) Qatar / LNG, GTL Laffan Refinery Phase 2 Project Qatar / Condensate Refinery Mozambique LNG Area 1&4 Mozambique / LNG Stolthaven Singapore / Tank terminal Shell Bukom Singapore / Refinery Infenium Singapore / Chemical Map Ta Phut Industrial Complex Thailand / Energy Saving Nghi Son Refinery Vietnam / Refinery & Petrochemical Nickel Refining Plant Philippines / Material Tokuyama Phase-2 Malaysia / Renewable Energy Material PNG LNG Papua New Guinea / LNG Arrow LNG Australia / LNG Ichthys LNG Australia / LNG Abadi LNG Indonesia / FLNG Puerto La Cruz Venezuela / Oil Refinery : Engineering, Procurement and Construction *EPC **EPCm : Engineering, Procurement and Construction management ***EPsCm : Engineering, Procurement support and Construction management ****FEED : Front-end Engineering and Design *1: Classified as “Gas and power utilities” in “Consolidated Financial Results” *2: Classified as “Industrial machinery” and “General chemicals” in “Consolidated Financial Results” *3: Courtesy of Qatargas Operating Company Limited *4: Courtesy of Shell *5: Courtesy of Solar Frontier K.K. *6: Courtesy of Kashima Aromatics Co., Ltd. *7: Water Treatment Plant Takashi Kubota (Left) Executive Chairman Chiyoda Corporation Shogo Shibuya (Right) President & CEO Chiyoda Corporation Thank you for your continued support over the growing trend of renewable energies, this past 12 months. as well as rapid urbanization. Under the We would like to present the Chiyoda new Medium-Term Management Plan titled Group’s annual report for the fiscal year ended “Seize the moment, Open up new frontiers” March 31, 2013. launched by the new management team in Revenues and earnings rose year-on-year fiscal 2013, we will further implement key on the back of new contracts for refineries in strategies of the previous plan. By executing Southeast Asia and the Middle East, as well as Engineering, Procurement, and Construction steady progress made in executing backlog (EPC) projects as usual, expanding our projects such as LNG plants in Papua New business through accelerated investment Guinea and Australia. In the 12 months before in fields related to our core business, and the year under review, the final year of our strengthening health, safety and environment Medium-Term Management Plan entitled (HSE) and risk management policies, the “Engineering Excellence, Value Creation 2012”, entire Chiyoda Group management team and we implemented key strategies aimed at staff will work eagerly to create new value creating a firm basis for future growth. and raise corporate value. This is a time of major change both in We paid a dividend of ¥19 per share, in Japan and overseas, with increased demand line with our earnings for fiscal 2012. We ask for energy due to economic growth in all of our shareholders for their continued emerging countries, the momentum of support in our ongoing efforts. development from the shale revolution, the continuing global shift from oil to gas, 2 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 3 Management’s Discussion and Analysis Results of Operations Analysis of Results During the fiscal year under review, we saw a continuing sense of uncertainty in the world economy caused by problems such as prolonged European debt crisis and the slowdown in the economy of emerging countries such as China. Preparations for investment in numerous gas related facilities were now being encouraged by the enduring increase in demand for energy, the shale revolution and the tide of the shift to gas. Many in Japan expect the new Japanese government, in the second half of the fiscal year, to bailout deflation, to correct the yen’s appreciation by following flexible and dynamic monetary policies for economic recovery, and to invest in renewable energy projects, in which investment has increased rapidly under the Feed-in Tariff scheme. Faced with these conditions, while the Chiyoda Group continued to expand its global operation and enhance its operation in the hydrocarbon field, mainly in LNG (Liquefied Natural Gas), the Group also made inroads into new business fields such as infrastructure and renewable energy. We placed particular focus on bidding activities, making the most of our technological superiority in the market. We concluded contracts for EPC (Engineering, Procurement, and Construction) works for oil refineries in Vietnam and the Middle East. We won orders in Japan for the EPC of petroleum and petrochemical plants and large-scale photovoltaic power generation systems. Additionally, we were awarded FEED (Front End Engineering and Design) works for an LNG plant in Mozambique and a FLNG (Floating Liquefied Natural Gas) plant in Indonesia. The projects under execution are progressing as planned, including the LNG plants in Papua New Guinea and Australia, some overseas projects for Japanese clients and LNG receiving terminals in Japan. We are still seeking an improvement in profitability by steadily executing backlog projects while reviewing the cost for completed works during the warranty period. The Group relocated the head office and integrated the company’s function to improve work efficiency. As part of the integration process, we sold the land where the previous headquarters was located. Consolidated new orders for the fiscal year amounted to 402,919 million yen (34.2% decrease year on year). The backlog and revenues were 900,618 million yen (7.1% increase) and 398,918 million yen (56.6% increase) respectively. The operating income amounted to 25,113 million yen (3.8% increase year on year), ordinary income to 25,518 million yen (7.2% increase), and net income resulted in 16,077 million yen (11.9% increase). Results by Business Segment LNG Plants/Gas and Power Utilities The Group was awarded FEED contracts for an onshore natural gas liquefaction facility in Mozambique and an FLNG facility in Indonesia. We are also focusing on study works for other FLNG projects. The EPC execution of an LNG plant in Papua New Guinea and another LNG project in Australia is progressing as planned. Our Qatari subsidiary is working on the maintenance and modification works for the existing LNG and gas processing plants mainly built by the Group. In Japan, several EPC works on LNG receiving terminals, the expansion/ modification works of existing plants and various FEED works are ongoing in parallel. LNG is our priority business field and we are focusing on related works for other LNG projects, which are onshore / offshore and also overseas / domestic. Petroleum, Petrochemicals and Gas Chemicals In addition to the EPC contract for a refinery and petrochemical complex in Vietnam, the Group won an order for the EPC for refinery project in the Middle East. Our subsidiary in Singapore signed an Enterprise Framework Agreement for downstream projects within Asia and started the related study works. EPC works are progressing favorably, including a heavy oil cracking unit in Saudi Arabia and petrochemical plant in Singapore, and EPsCm (Engineering, Procurement support and Construction management) services for heavy crude oil upgrading facilities in Venezuela and for a petroleum refinery in Singapore are progressing as well. In Japan, we continued to perform the EPC work for a TransAlkylation Unit, the diagnosis of existing facilities, maintenance and upgrading works, studies and construction works aimed at improving the competitiveness of and energy saving in the facilities. Industrial Machinery/Environment/ Chemicals and Other Fields As part of the Mid-Term Business Plan to expand our business fields, we are developing our business activities to include receiving orders and executing works for overseas and domestic non-hydrocarbon projects. EPC works for polycrystalline silicon plants in Malaysia, the product used for photovoltaic cells, and EPC work for a nickel refinery in the Philippines were executed smoothly. We have been reinforcing our efforts and developing our sales activities to meet the needs of Japanese companies expanding their operations into Southeast Asia. We have invested in an Italian company that is the only manufacturer of the solar collector tubes used in the Molten Salt Parabolic Trough-Concentrating Solar Power (MSPT-CSP) system, and are accelerating our efforts in demonstrating the technology and developing the business by building a demonstration plant in Italy. Additionally, we are expecting several EPC contracts in the CSP system. In an effort to expand our recycled water-related business into the Middle East, related works for a demonstration project on an energy-saving water recycling system in Saudi Arabia were entrusted to a member of our group. In addition, we are strengthening our position in the social infrastructure field and, in collaboration with a capital alliance partner, aim to introduce airport and railway projects into our portfolio. In Japan, we won a number of EPC works for large-scale photovoltaic power generation systems and are executing and expanding our sales activities by enhancing our group operation in this field. We are also active in the pharmaceutical field, having completed the construction of pharmaceutical bio-formulation plant, and have executed EPC works for several facilities such as anti-cancer drugs, bulk vaccine and newly awarded In Vitro Diagnostics. We are developing hydrogen-related technology and demonstrating the effectiveness of our own catalyst at our demonstration plant. Once proven, the transportation and storage of large volumes of hydrogen can be achieved safely and economically, which will pioneer the way to achieve a hydrogen-based society. Outlook for the Next Fiscal Year Chiyoda will continue to accelerate its sales activities in order to win contracts in areas where Chiyoda can best leverage its technological advantages. We will also continue to work diligently on the execution of existing overseas and domestic projects including the large projects in Papua New Guinea and Australia. In consideration of these circumstances, and assuming an exchange rate of ¥90/US$, our forecasts for the fiscal year ending March 31, 2014 include 600.0 billion yen in consolidated new orders and 470.0 billion yen in revenues. Our forecast for the consolidated operating income is 24.0 billion yen, consolidated ordinary income is 26.0 billion yen, and the consolidated net income is 16.0 billion yen. 4 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 5 The Medium-Term Management Plan “Seize the moment, Open up new frontiers” The results of the previous Medium-Term Management Plan “Engineering Excellence, Value Creation 2012” were comprehensively reviewed and, in consideration of such, The Medium-Term Management Plan (The MT-Plan) was established with the slogan “Seize the moment, Open up new frontiers” with the objective of pursuing further growth of the Chiyoda Group for the period covering Fiscal Years 2013 – 2016. In order to establish The MT-Plan, the trend of influences and changes occurring in the external environment were first analyzed. We then set the direction in which we would like to see the Group develop. (1) Changes and trends of the external environment The analysis of the changes occurring and trend of influences in the external environment showed that: World energy demand is projected to further increase and changes are occurring in the structure of energy demand (shift to gas and renewable energy). The developments in shale oil exploration have brought about a revitalization of the US market. Competition between contractors is escalating, including those from Europe, the US and, particularly, Korea. Chiyoda Group envisages that the number of projects being developed in harsh areas of the world, such as in severely cold climates and in deep seas will increase. Chiyoda has also observed that developing countries are emerging, national oil companies (NOC) are growing presence, and Japanese companies are accelerating expansion of overseas business. (2) Chiyoda Group 10 years on The MT-Plan has been developed by 1) establishing a vision of how we want the Chiyoda Group to be “10 years on”, and 2) establishing what Chiyoda needs to do in the first 4 years for that vision to become a reality. This led us to consider the future direction we need to take in order to expand our business based on three axes, 1) Operation, 2) Business Model and 3) Business Field/Area. Direction of evolution ・Operation by Japanese nationals in Japan Operation Operation local consumption ・Operation to execute medium and small size project on the basis of local production for ・Division of work on a worldwide basis by strategic regional operation centers Current Business Domain Growth of business through 3 axes of operation, business and business field / area Further evolution aimed at Chiyoda Group 10 years on Business Business Model Model Business Business Field / Area Field / Area ・Pillar of existing business: Gas value chain projects (from LNG to receiving terminals), hydrocarbon downstream and non-hydrocarbon projects ・EPC (LSTK ＋ CR) ・Promotion of monetization of technology & ・Offshore ・upstream & ・Energy infrastructure, social infrastructure & ・Expansion of business area (Australia, North America, East Africa) ・Investment based on Project Management know-how and technology 1) Axis: Operation Chiyoda will pursue a “group style” operation for execution of regional medium / small size projects. We will establish several offices as Chiyoda Regional Headquarters (CRH), the main overseas bases of operation, as well as setting up subsidiary offices operating under CRH, to encourage sharing the work among Chiyoda Group companies on a worldwide basis. 2) Axis: Business Model This axis designates the style of business that the Chiyoda Group should pursue. It is important that we secure a new sources of revenue from providing professional services on a reimbursable basis, developing and licensing our advanced technology, etc, as well as continuing with our core business of undertaking lump sum turnkey / engineering, procurement and construction (LSTK/EPC) contracts. We will, in addition, look to invest in the fields related to Chiyoda’s core business and strongholds. 3) Axis: Business Field/Area Chiyoda Group has long specialized in EPC contracts for onshore hydrocarbon projects. We will seek to expand our business under this axis into offshore and upstream projects (related to exploration and treatment of oil and gas fields). Chiyoda Group perceives that energy / social infrastructure will provide new sources of profit and will also allow us to further explore business opportunities in our existing main market of Asia / the Middle East / Oceania as well as in Continental North America and Africa. (3) Key Strategies under The MT-Plan Chiyoda has established 5 key growth strategies and 5 key operating foundation strategies as the key strategies under The MT-Plan for Fiscal Years 2013 – 2016. Growth Strategies The growth strategies aim to improve the base level of profit by expanding the business to take account of any prevailing external environmental trends (a shift to gas and a following wind of increasing demand for LNG) considered to be favorable for Chiyoda business based on: • expansion of Chiyoda group core business in the fields of gas and LNG projects, • expansion of business into offshore and upstream projects, • increase in the number of domestic and overseas small/medium size projects to be undertaken, • energy/social infrastructure The main points of growth strategies are: 1 Strengthening of core business • Pursuit of LNG project business opportunities to the maximum extent possible • Challenges for unconventional projects (FLNG, projects in cold / deep sea area & under harsh environment) 2 3 4 Expansion into new business fields, establishing new business models and new sources of revenue • Expansion of business field to offshore / upstream • Expansion of business fields to new energy and renewable energies Upgrading of services to address clients’ need for commercialization • Assistance to Japanese companies in their overseas expansion of business • Acceleration in establishing professional service business and provision of front-end services to international oil companies (IOC) at overseas bases adjacent IOC offices Use of the economic vigor of emerging countries for the growth of the Chiyoda Group • Execution of medium and small size local projects • Shift to EPC project execution based on consolidated global operation 5 Acceleration of investment • Acceleration of investment in the fields related to Chiyoda's core business and strongholds Operating Foundation Strategy Consolidation of Chiyoda’s “base” (global infrastructure) and ”resources” (secure, develop and reinforce the pool of human resources) will be continued as the operating foundation for growth strategy. The main points the of operation foundation strategy are: 6 7 8 9 Strengthening of competitiveness and execution capability • Improve competitiveness against competitors and continue to improve execution capability Establishment and operation of data management infrastructure • Enhance utilization of data management (ERP) for efficient management and control of operation / Establish global platform for operation Promotion of consolidated operation base and global operation • Establish framework of global human resource management for utilization of global resource Securing / development of human resources, optimization of allocation, and creation of a lively and energetic working environment • Establish framework for human resource development / increase and exchange of project key personnel within the group companies • Evolve into a company with a lively and energetic working environment regardless of nationality, sex, age and so on 10 Strengthening of safety and risk management / establishment of culture prioritizing the health of employees • Proactively strengthen the risk management framework to respond to changes in the external environment and the times • Promote culture prioritizing the safety and health of employees (4) Quantitative Target (Profit Plan) With the key measures in place, based on the key strategies, Chiyoda will be able to pursue diversification of its source of profit for stable growth. The target management index is set at a consolidated net income of J. Yen 30 billion. (5) Capital Plan / Investment Strategy Chiyoda will provide a stable capital plan based on business performance. A high return of equity (ROE) of over 12% will be sought and a dividend ratio of over 30% will be set. In order to sustain further growth of the Chiyoda Group, the company will invest in areas that will contribute to Chiyoda’s growth, areas to consolidate the operating foundation and areas to expand and stabilize profit. In order to continue Chiyoda’s sustainable development, we plan to budget J. Yen 80 billion for our investment strategy. Such capital will be distributed and invested prudently, flexibly and efficiently in accordance with the actual progress of The MT-Plan and changes in the business environment. (6) Personnel Plan The MT-Plan envisages that the Chiyoda group will have approximately 10,000 personnel in the expanded domestic and overseas operation base as of Fiscal Year 2016. With the centre of gravity of part of the work shifting from CGH to the group companies, and with the progress of sharing the work among group companies in Japan and abroad, enhancement of the capability of the personnel at CGH will also be required. 6 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 7 Topics Group Companies Awarded Long Term Contracts SPERA* Hydrogen EFA with Shell (Chiyoda Singapore) SPERA Hydrogen is easy to use * SPERA derives from the Latin for “hope”. Chiyoda Singapore (Pte) Limited* signed an Enterprise Framework Agreement (EFA) with Shell for Onshore Engineering and Project Management Services-Downstream covering downstream projects within Asia. Under this EFA, Chiyoda Singapore will provide a full range of services for Front End Engineering Design (FEED) and Engineering, Procurement, and Construction Management (EPCm) by utilizing Chiyoda Group’s regional capacity located in each country. Chiyoda Group places great importance on the continuation of its valuable relationship with Shell. * Chiyoda Singapore (Pte) Limited was established in 1971 and is a 100% subsidiary company of Chiyoda Corporation Dr. Geok Yong, Vice President of Shell Project & Technology with CSL’s President Morita at the signing ceremony Long Term Engineering Services Contracts in Qatar (Chiyoda Almana) Chiyoda Almana Engineering LLC (“Chiyoda Almana”)*1 was awarded long term engineering services contracts by the three companies; Qatar Chemical Company Limited (“Q-Chem”), Qatar Chemical Company II Limited (“Q-Chem II”) and Ras Laffan Olefins Company Limited (“RLOC“). Chiyoda and Chiyoda Almana are aiming to contribute further to Qatari sustainable development through the engineering services of these contracts and through those contracts awarded previously. Chiyoda group intends to expand its “Project Life Cycle Engineering”*2 services to other countries in the Middle East, and elsewhere, while strengthening its regional business development through its global operation network. *1: Chiyoda Almana was established by Chiyoda in March, 2008, in collaboration with a local company (Al-Mana Group), as a local company providing full engineering services in Qatar. *2: A business model, involving both Chiyoda and the client, to provide feasibility studies, front-end engineering design (FEED), detailed engineering, procurement and construction (EPC), operation, maintenance, expansion, modification, upgrading and revamping throughout the lifecycle of a project. Signing Ceremony for Refinery and Petrochemical Complex in Vietnam On 27 January 2013, the signing ceremony for the Nghi Son Refinery and Petrochemical Complex took place in the Thanh Hoa Province in Vietnam. Almost 800 people attended the magnificent ceremony including Vietnamese Prime Minister Nguyen Tan Dung, the Japanese Ambassador to Vietnam, Yasuaki Tanizaki, and representatives of Nghi Son Refinery and Petrochemical LLC and investors from Idemitsu Kosan Co., Ltd., Kuwait Petroleum International, Vietnam Oil and Gas Corporation and Mitsui Chemicas,Inc. A number of senior managements of the contractors forming a joint venture also joined the ceremony including our then President Takashi Kubota as well as local entities concerned. This project is a grassroots oil refinery and petrochemical complex, which will be the second refinery in Vietnam and will have a daily processing capacity of 200,000 barrels of crude oil (atmospheric distillation basis). The completion is scheduled for the second half of 2016. Once considered a distant dream, hydrogen, as a source of conventional energy, has become a reality, and Chiyoda Corporation has made it remarkably easy to use. Our innovative technologies enable hydrogen, the lightest of gases and difficult to store or transport under normal conditions, to be liquefied and consequently transported at ambient temperature and pressure. We named this liquid “SPERA Hydrogen.” Almost unthinkable before, this “hydrogen of hope” is highly safe and stable, is able to survive transportation over long distances and can be stored over long periods of time. It will overturn the conventional wisdom regarding hydrogen. Two technologies have made SPERA Hydrogen possible 1. Hydrogenation By applying Organic Chemical Hydride (OCH) Technology, the hydrogen is fixed to toluene, a major component of gasoline, and produces a liquid called methylcyclohexane (MCH), which is easy to handle at ambient temperature and pressure. This is SPERA Hydrogen. Our technology facilitates storage of hydrogen in large quantities and transportation over long distances in a safe and stable manner, and at a low cost, because it eliminates the need for hydrogen to be liquefied at cryogenic temperatures or pressurized in cylinders. 2. Dehydrogenation The extraction of hydrogen from methylcyclohexane (MCH) had, for some time, been considered impossible. However, in 2004 Chiyoda Corporation succeeded in developing the world’s first dehydrogenation catalyst through the use of platinum nanoparticles. We named this catalyst “SPERA Catalyst”. SPERA Catalyst not only makes it possible to easily extract hydrogen from SPERA Hydrogen (MCH), but it has a long lifespan and can be mass produced. Demonstration plant verifies “Large-Scale Hydrogen Storage and Transportation System” In March 2013, Chiyoda completed a demonstration plant at its Koyasu Office and Research Park to verify its “Large-Scale Hydrogen Storage and Transportation System” and, thereafter, successfully achieved its expected performance including 1) hydrogenation to fix hydrogen to toluene producing SPERA Hydrogen, 2) storage and transportation of SPERA Hydrogen, and 3) dehydrogenation to extract hydrogen from SPERA Hydrogen by using SPERA Catalyst. This system can utilize existing infrastructures, including Demonstration plant oil tanks and tankers for storage and transportation, and proves that it is possible to supply and deliver hydrogen on a commercial basis. 8 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 9 Topics Challenge to Continue in Our LNG Business Chiyoda and CCC Establish Joint Venture Company In December 2012, CC JV, a joint venture comprising of Chiyoda and CB&I, was awarded a contract by Anadarko In March 2013 Chiyoda Corporation and Consolidated Contractors Moçambique Area 1, Limitada, for the Front End Engineering and Design (FEED) for an onshore natural gas liquefaction Company (CCC, Head Office: Athens, Greece) established a joint facility project in the Republic of Mozambique. Additionally, PT Chiyoda International Indonesia was awarded a FEED venture company in Singapore, “Chiyoda-CCC Engineering (PTE.) contract in January 2013 for Abadi Floating LNG (FLNG) Project in collaboration with PT Saipem Indonesia (Leader), PT Limited (CCEL), having its regional headquarters in Abu Dhabi, United Tripatra Engineers & Constructors , PT Tripatra Engineering and PT Rekayasa Industri. The Clients are INPEX Masela, Ltd. Arab Emirates. (Operator: 60%),Shell Upstream Overseas Services (I) Limited (30%) and PT EMP Energi Indonesia (10%). The inauguration ceremony was held with about 200 people in Such achievements reflect the high regard in which we are held based on our peerless technological capabilities attendance, including our then President Kubota and representatives accumulated through successful completion of large-scale LNG plants, which has enabled problem-free operation in of CCC. Qatar in the Middle East, and our first tier project management capabilities now being showcased at LNG plants under The purpose of this establishment is to operate an engineering construction in Papua New Guinea and Australia. We will continue to seek new frontiers, address the challenges of company targeting certain hydrocarbon processing industries within satisfying customers and meeting the needs of the times, regardless of location or technology. the Middle East. Taking advantage of regional presence and resources, CCEL will provide total project lifecycle services in energy, oil, gas, Mr. Madoka Koda, President of CCEL at the inauguration ceremony petrochemicals and utilities sectors. “JAPAN-GTL Process” won the Japan Institute of Energy Award 2012 Chiyoda Licenses its Own Process Technology on Acetic Acid Seven companies won the Japan Institute of Energy Award 2012 in Technical Division for the establishment of a JAPAN-GTL (Gas to Liquids) Process. The seven companies include Japan Oil, Gas and Metals National Corporation (JOGMEC), INPEX CORPORATION, COSMO OIL CO., LTD, Japan Petroleum Exploration Co., Ltd, JX Nippon Oil & Energy Corporation, NIPPON STEEL & SUMIKIN ENGINEERING CO., LTD and Chiyoda Corporation. Gas-To-Liquids (GTL) is a technology that uses natural gas as the raw material and produces petroleum products such as naphtha, diesel oil and kerosene through chemical reactions. JAPAN-GTL features the utilization of carbon dioxide as raw material, which is a groundbreaking technology that would for the first time ever allow for natural gas containing carbon dioxide to be used directly for conversion. JAPAN-GTL Process The winning companies of JAPAN-GTL joint research receive their award Natural Gas CH4-CO2 + Steam Syngas Production Syngas H2 CO Main process facilities: FT Synthesis* FT Products Upgrading (Hydrotreating) Petroleum Products Naphtha Kerosens Gas Oil Chiyoda Corporation was awarded a Licensing and Engineering contract for the use of its technology, the Acetica® process, to produce acetic acid. This technology was sub-licensed for a gas-to-chemicals complex in Linhares, Espirito Santo State, southeast Brazil, called Complexo Gás-Químico UFN-IV*. Chiyoda developed the Acetica® process, a methanol-carbonylation process that use methanol and carbon monoxide as feedstock, which employs a heterogeneous catalyst for the efficient production of acetic acid. The process has tangible advantages including 1) an easy-to-handle catalyst 2) limited loss of precious rhodium 3) efficient reactor 4) low content of by-products 5) relatively low corrosiveness and less utility consumption effected by the use of a loop-typed bubbling reactor system. Chiyoda aims to license its own technology and provide associated engineering services which will contribute to the growing needs for Linhares, Estado do Espírito Santo Syngas Producing Section FT (Fischer-Tropsch) Synthesis Section Upgrading (hydrotreating) Section * This complex is planned to produce ammonia and urea fertilizers, methanol, acetic acid, formic acid and melamine. Through series of demonstration tests, the seven companies established the Japan-GTL Process as a technology applicable to commercial plants. The seven companies will further continue studies of the Japan-GTL process for future commercialization. 10 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 11 *FT Synthesis : Fischer- Tropsch Synthesis materialization or expansion to produce acetic acid. Corporate Governance The Chiyoda Group recognizes that its management needs to focus on corporate social responsibility that inspires the support and trust of shareholders, customers, employees, and other stakeholders. We believe that this is a foundation of our corporate activities. As such, we continue working toward sustainable long-term qualitative growth, improving our management basics, and ensuring management soundness and transparency. We have identified improved corporate governance and a stronger internal controls structure as important issues for our company and we strive to further enhance these areas. Corporate Governance System Overview and Rationale for Adoption of Corporate Governance System The Chiyoda Group operates under an executive officer system and its efficiency in executing its business is based on the establishment of a corporate auditor system. The Board of Directors has adopted this system of performing management supervisory functions with the participation of one external director and three outside audit & supervisory board members, which ensures that there is oversight from an objective and neutral standpoint. The Board of Directors The Board of Directors meets once a month. The Board is made up of nine directors, one of whom is an external director, and three audit & supervisory board members, all of whom are outside audit & supervisory board members. The Board of Directors decides on important business matters and oversees the execution of business operations. Appropriate decisions are made and management oversight is conducted under the objective views of the external director and outside audit & supervisory board members. In addition, an Executive Officer Meeting is held once a month, with Board members present, and its business reports are presented at the monthly Board Meeting, thereby fulfilling its reporting function. The Company efficiently executes business operations under an executive officer system. The Executive Committee The Company has established an Executive Committee as a decision-making body on matters concerning the execution of business operations. The Executive Committee, composed of representative directors excluding the Chairman, makes prompt decisions concerning the execution of business operations as stipulated by the Board of Directors’ resolutions. It also conducts preliminary deliberations regarding matters to be brought before the Board of Directors for resolution. Auditing by Audit & Supervisory Board Members The Company has three audit & supervisory board members, all of whom are outside audit & supervisory board members; two of the audit & supervisory members serve on a full-time basis. They are responsible for auditing the state of execution of director duties. Two of the outside audit & supervisory board members are independent auditors and the other is exceptionally well-versed in finance and accounting. Status of Internal Controls System The Company has structured and is operating a system of internal controls, in line with the unique nature and characteristics of our business, which optimizes operational effectiveness and efficiency, financial reporting reliability, legal compliance, and asset preservation. The Company has established an Internal Controls Management Committee (ICMC) to improve our systems of internal controls. The Director of the Risk Management & CSR Division chairs the committee and the heads of departments related to internal controls serve as committee members. The ICMC receives referrals from the Executive Committee to exchange information and coordinate with each department to determine whether operations are being appropriately and efficiently carried out under an adequate system of internal controls. At the end of the fiscal period, or as and when deemed necessary, the ICMC will offer advice to the Executive Committee on improvements in internal controls . The Executive Committee takes the advice received from the ICMC under consideration and submits proposed internal controls improvements, if any, to the Board of Directors for decision. Corporate Governance and Internal Controls Election Submit/Report Report Election Report Election General Shareholders’ Meeting Directors Board of Directors Election Supervision Election Submit/Report Executive Officers Executive Officer Meeting 4 Representative Directors Executive Committee Scheduled Reports (deliverables, etc.) Organization Staffing Submit/Report Audit Audit Referral (advice) Report Survey, Report Request Internal Controls Management Committee(ICMC) Risk Management & CSR Division Operational Auditing Unit Department Internal Controls Corporate Auditors Audit & Supervisory Board Report Accounting Auditor Group Companies Business Execution Departments (Risk Manager) Self-Assessment Global Operation Unit Corporate Planning Unit Corporate Services Unit, HRM* Unit Finance & Project Audit Unit *HRM: Human Resource Management SQE Unit CSR Unit Crisis Management Unit c o n t r o l f u n c t i o n s ) ( d e p a r t m e n t s w i t h i n t e r n a l Financial Audit External Directors and Outside Corporate Auditors External Directors and Outside Audit & Supervisory Board Members The Company employs one external director and three outside audit & supervisory board members. The names of external director and outside audit & supervisory board members, and the Company’s rationale for selecting them (including the rationale for designation as independent directors of Hiroshi Ida and Yukihiro Imadegawa, both of whom are on file with the Tokyo Stock Exchange as independent directors) are as follows. Name Masaji Santo Hiroshi Ida Munehiko Nakano Yukihiro Imadegawa Rationale for Election as External Director and Outside Audit & Supervisory Board Member The individual is able to suitably perform his duties as an external director by putting to use his experience as the former President of Mitsubishi Chile Ltda. and as a Senior Vice President of Mitsubishi Corporation. The individual is able to contribute to the sound management of the Company through neutral and objective audits based on his experience as a former executive officer with Mitsubishi UFJ Trust and Banking Corporation.The individual is not involved in any matters that conflict with the interests of general Company shareholders, and is recognized as an outside audit & supervisory board member having no conflict of interest with general Company shareholders. The individual is able to contribute to the sound management of the Company through neutral and objective audits based on his experience as a former corporate auditor with Lawson, Inc. and a finance and accounting executive with Mitsubishi Corporation The individual is able to contribute to the sound management of the Company through neutral and objective audits based on his expertise in corporate law as an attorney. The individual is not involved in any matters that conflict with the interests of general Company shareholders, and is recognized as an outside audit & supervisory board member having no conflict of interest with general Company shareholder. There are no particular relationships of interest between Company and the external director and outside audit & supervisory board members. Rationale for Adoption of Current System Based on its establishment of a corporate auditor system, the Chiyoda Group efficiently executes business operations under an executive officer system. The Board of Directors has adopted an existing system of corporate governance that is capable of sufficiently performing management supervisory functions from an objective and neutral standpoint with the participation of one external director and three outside audit & supervisory board members. Director Compensation, Etc Total Compensation for Each Director Category; Total Compensation by Director Type, and Number of Directors in Question Number Base Compensation Incentive Compensation Stock-Based Compensation Directors Audit & Supervisory Board Members 10 5 ¥192million ¥79million ¥52million ¥ 61million - - Notes: 1. Total director compensation is ¥325 million. Total audit & supervisory board member compensation is ¥61 million. Total outside audit & supervisory board member (four individuals) compensation is ¥55 million. 2. The number of directors above discloses the number of directors and audit & supervisory board members receiving compensation during the fiscal period, including two directors and two audit & supervisory board members who retired as of the General Shareholders’ Meeting held on June 26, 2012. 12 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 13 Corporate Information (As of March 31, 2013) Corporate Data Chiyoda Global Headquarters Minatomirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Tel: (81)45-225-7777 (voice guidance) Established January 20, 1948 Paid-in Capital ¥ 43,396 million Organization Chart (As of July 1, 2013) Number of Employees 1,519 (Non-Consolidated) 4,915 (Consolidated) Annual Fiscal Close March 31 Shareholders’ Meeting June Board of Directors Audit & Supervisory Board Executive Committee President Executive Office Unit Corporate-service Review Team Risk Management & CSR Division Global Project Management Division Offshore & Upstream Project Operations SQE Unit CSR Unit Operational Auditing Unit Crisis Management Unit Project Administration Unit Project Management Unit IT Management Unit Global Operation Unit Global Human Resource Planning Unit BPM* Team Work Process Innovation Task Team Global Operation Platform Task Team Chiyoda Globalization Task Force Team change the Mindset Business Planning Unit Business Operation Unit Gas & LNG Project Operations International Gas & LNG Project Unit Strategic Project Development Unit Project Team Corporate Planning management & Finance Division Technology & Engineering Division Downstream & Non Hydrocarbon Project Operations Corporate Planning Unit IR & Public Relations Sec. Corporate Services Unit HRM* Unit Finance & Project Audit Unit Legal Sec. Investment Promotion Team Engineering Operation Unit Gas & LNG Process Engineering Unit Refinery, Petrochemical & New Energy Process Engineering Unit Integrity Management Unit Mechanical Engineering Unit Control System Engineering Unit Electrical System & Smart Grid Engineering Unit Piping Engineering Unit Civil Engineering Unit Oil & Petrochemical Project Unit Gas & Storage Project Unit International Downstream & Non-hydrocarbon Project Unit Project Team Infrastructure Project Operations IP* Planning & Administration Unit Strategic Business & Investment Management Unit Green Infrastructure Project Unit Green Materials Project Unit Pharmaceutical & Environmental Project Unit Technology Development Unit Research & Development Center Global Network Chiyoda’s global network enables Project Lifecycle Engineering to be offered all over the world. Chiyoda has expanded its network in order to provide prompt support for customers’ business activities on a global scale. Our services cover the entire life cycles of projects – from planning, engineering, procurement and construction through to operation and maintenance. With a view to meeting the ever-changing needs of our customers, we offer services by utilizing local offices and group companies with thorough knowledge of the latest local and global circumstances in countries around the world. Chiyoda's Global Network Sales Base Engineering Center Procurement Center Project Execution Base Milan Representative Office Chiyoda Corporation Netherlands B.V. Chiyoda & Public Works Co., Ltd. Beijing Office Chiyoda International Corporation Chiyoda Corporation (Shanghai) Korea Representative Office The Netherlands Italy Saudi Arabia Qatar UAE India China Myanmar Thailand Malaysia Korea Japan USA Philippines Chiyoda Philippines Corporation Singapore Indonesia Australia Chiyoda Oceania Pty Limited Brazil Jakarta Office PT. Chiyoda International Indonesia Singapore Human Resources Office Chiyoda Singapore (Pte) Limited Chiyoda Malaysia Sdn. Bhd. Chiyoda Sarawak Sdn. Bhd. Chiyoda (Thailand) Limited Chiyoda do Brasil Representações Ltda. Business Development Division Project Logistics & Construction Division ChAS Project Operations Strategic Business Planning & Administration Unit Corporate Relations Sec. Business Development Unit 1 Business Development Unit 2 Business Development Unit 3 PLC* Planning & Administration Unit Procurement & Logistics Management Unit Construction Unit Commissioning Unit Engineering Solution Unit Project Lifecycle Engineering Unit Program Management Consulting Unit Space Solution Unit ChAS Business Strategy Unit HRM: Human Resource Management BPM: Business Process Management PLC: Project Logistics & Construction IP: Infrastructure Project L&T-Chiyoda Limited Bangalore Office Abu Dhabi Office Chiyoda-CCC Engineering (Pte) Limited Middle East Headquarters Doha Office Chiyoda Almana Engineering LLC Chiyoda Petrostar Ltd. 14 CHIYODA CORPORATION ANNUAL REPORT FY2012 CHIYODA CORPORATION ANNUAL REPORT FY2012 15 Directors and Officers (As of July 1, 2013) Board of Directors Representative Directors Directors Executive Chairman Takashi Kubota*1 Executive Vice President Katsuo Nagasaka*1 President & CEO Shogo Shibuya*1 Senior Vice President Ryosuke Shimizu Senior Executive Vice President Senior Executive Vice President Executive Vice President & CFO Keiichi Nakagaki*1 Senior Vice President Masahiko Kojima*1 Hiroshi Ogawa*1 Director Masaji Santo*1/*2 Masahito Kawashima Audit & Supervisory Board Members Hiroshi Ida*3 Munehiko Nakano*3 Yukihiro Imadegawa*3 Executive Officers Executive Vice President Satoru Yokoi Vice President Eisuke Oki*1 Senior Vice President Tadashi Izawa*1 Vice President Masao Ishikawa*1 Senior Vice President Katsutoshi Kimura Vice President Toshiyuki Kariya*1 Senior Vice President Kenjiro Miura Vice President Yasumitsu Abe*1 Senior Vice President Mamoru Nakano*1 Vice President Nobuyuki Uchida Senior Vice President Takao Kamiji Vice President Yasuo Hosono*1 Senior Vice President Hiromi Koshizuka Vice President Mitsuya Ogawa Senior Vice President Sumio Nakashima Vice President Seiichiro Ikeda Senior Vice President Koichi Shirakawa Vice President Akira Fujisawa*1 Vice President Noriyuki Kasuya *1 : New Assignments *2 : External *3 : Outside Corporate Auditor 16 CHIYODA CORPORATION ANNUAL REPORT FY2012 Stock Information Authorized Shares 570,000,000 Number of Shareholders 14,503 Capital Stock Issued 260,324,529 Number of Share per Unit 1,000 Stock Code ISIN: SEDOL1: 6191704 JP TSE: 6366 JP3528600004 Transfer Agent of Common Stock Mitsubishi UFJ Trust and Banking Corporation 1-4-5 Marunouchi, Chiyoda-ku, Tokyo Major Shareholders (as of March 31,2013) Number of Shares Owned (Thousands of Shares) Mitsubishi Corporation The Master Trust Bank of Japan, Ltd. (Trust Account) Japan Trustee Services Bank, Ltd. (Trust Account) The Bank of Tokyo-Mitsubishi UFJ, Ltd. The Mitsubishi UFJ Trust and Banking Corporation Bank of New York GCM Client Account JPRD ISG (FE-AC) State Street Bank and Trust Company State Street Bank and Trust Company 505225 Tokio Marine & Nichido Fire Insurance Co., Ltd. Mellon Bank N.A. as Agent for its Client Mellon Omnibus US Pension Breakdown by shareholder 86,931 11,777 9,250 9,033 7,496 3,153 2,883 2,806 2,759 2,319 Ratio Shares Owned (%) 33.39 4.52 3.55 3.47 2.87 1.21 1.10 1.07 1.06 0.89 Total Number of Shares Issued: 260,325 thousand 11.63 22.63 23.58 4.06 38.10 Financial Institutions Securities Companies Other Corporations Foreign Investors and Others Individuals and Others Monthly Stock Price Range on the Tokyo Stock Exchange (Yen) 2,400 1,600 800 0 Share Price (left) Volume (right) Nikkei Stock Average (right) (Yen) 45,000 30,000 15,000 (Thousands of shares) 160,000 80,000 4 5 6 7 8 9 101112 2008 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 2009 2010 2011 2012 0 1 2 3 2013 CHIYODA CORPORATION ANNUAL REPORT FY2012 17 Minato Mirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Tel: (81)45-225-7777 (voice guidance) http://www.chiyoda-corp.com/en/ CORPORATE PHILOSOPHY Enhance our business in aiming for harmony between energy and the environment, and contribute to the sustainable development of a society as an integrated engineering company through the use of our collective wisdom and painstakingly developed technology. (As of August 2013) Selected in FTSE Group’s responsible investment index ANNUAL REPORT FY2012 For the year ended March 31, 2013 Minato Mirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Tel: (81)45-225-7777 (voice guidance) http://www.chiyoda-corp.com/en/ CORPORATE PHILOSOPHY Enhance our business in aiming for harmony between energy and the environment, and contribute to the sustainable development of a society as an integrated engineering company through the use of our collective wisdom and painstakingly developed technology. (As of August 2013) Selected in FTSE Group’s responsible investment index Consolidated Financial Statements For the Year Ended March 31, 2013, and Independent Auditor's Report Chiyoda Corporation and Consolidated Subsidiaries Chiyoda Corporation and Consolidated Subsidiaries Consolidated Balance Sheet Consolidated Balance Sheet March 31, 2013 Consolidated Balance Sheet March 31, 2013 Millions of Yen ASSETS ASSETS 2013 CURRENT ASSETS: CURRENT ASSETS: Cash and cash equivalents (Note 13) Cash and cash equivalents (Note 13) Held-to-maturity securities—current (Notes 5 and 13) Held-to-maturity securities—current (Notes 5 and 13) Short-term investments (Note 13) Short-term investments (Note 13) Notes and accounts receivable—trade (Note 13) Notes and accounts receivable—trade (Note 13) Allowance for doubtful accounts Allowance for doubtful accounts Costs and estimated earnings on long-term construction Costs and estimated earnings on long-term construction ¥ 180,229 2,400 226 37,917 (3 ) contracts (Notes 4 and 13) contracts (Notes 4 and 13) Costs of construction contracts in process Accounts receivable—other Costs of construction contracts in process Accounts receivable—other Jointly controlled assets of joint venture (Note 13) Jointly controlled assets of joint venture (Note 13) Deferred tax assets (Note 10) Prepaid expenses and other Deferred tax assets (Note 10) Prepaid expenses and other Total current assets Total current assets PROPERTY, PLANT, AND EQUIPMENT: Land Buildings and structures Machinery and equipment Tools, furniture, and fixtures Construction in progress PROPERTY, PLANT, AND EQUIPMENT: Land Buildings and structures Machinery and equipment Tools, furniture, and fixtures Construction in progress Total Total Accumulated depreciation Accumulated depreciation Thousands of U.S. Dollars Millions of Yen (Note 1) 2013 2012 Thousands of U.S. Dollars (Note 1) 2013 LIABILITIES AND EQUITY LIABILITIES AND EQUITY Millions of Yen 2013 2012 2013 Thousands of U.S. Dollars (Note 1) Millions of Yen 2013 2012 2012 2013 ¥ 173,769 ¥ 180,229 2,400 307 226 30,051 37,917 (6) (3 ) $1,917,333 ¥ 173,769 25,531 2,407 307 403,376 30,051 (36) (6) 13,788 27,477 13,419 15,295 7,282 8,476 65,794 94,696 12,987 13,162 3,083 3,329 292,309 13,788 162,713 13,419 90,174 7,282 1,007,408 65,794 140,029 12,987 35,421 3,083 320,478 383,206 4,076,670 320,478 $1,917,333 25,531 2,407 403,376 (36) 292,309 162,713 90,174 1,007,408 140,029 35,421 4,076,670 27,477 15,295 8,476 94,696 13,162 3,329 383,206 5,375 11,711 1,124 5,450 494 24,156 (9,609 ) 12,736 5,375 16,072 11,711 1,220 1,124 5,201 5,450 109 494 35,340 24,156 (16,339) (9,609 ) 57,191 12,736 124,594 16,072 11,960 1,220 57,983 5,201 5,258 109 256,987 35,340 (102,226) (16,339) 57,191 124,594 11,960 57,983 5,258 256,987 (102,226) CURRENT LIABILITIES: CURRENT LIABILITIES: Current portion of long-term debt (Notes 7, 12 and 13) ¥ Current portion of long-term debt (Notes 7, 12 and 13) Notes and accounts payable—trade (Note 13) Notes and accounts payable—trade (Note 13) Advance receipts on construction contracts Advance receipts on construction contracts Income taxes payable (Note 13) Income taxes payable (Note 13) Deposits received Deposits received Allowance for warranty costs for completed works Allowance for warranty costs for completed works Allowance for losses on construction contracts Allowance for losses on construction contracts Asset retirement obligations Asset retirement obligations Accrued expenses and other Accrued expenses and other 91 117,769 79,210 8,500 6,822 480 1,291 5 16,259 ¥ ¥ 10,006 86,211 76,533 1,162 6,179 289 568 165 12,572 91 $ 117,769 79,210 8,500 6,822 480 1,291 5 16,259 ¥ 10,006 977 86,211 1,252,863 76,533 842,660 1,162 90,429 6,179 72,583 289 5,113 568 13,739 54 165 12,572 172,976 Total current liabilities Total current liabilities 230,431 193,687 230,431 2,451,398 193,687 NONCURRENT LIABILITIES: NONCURRENT LIABILITIES: Long-term debt (Notes 7, 12 and 13) Liability for retirement benefits (Note 8) Provision for treatment of PCB waste Asset retirement obligations Other liabilities (Note 10) Long-term debt (Notes 7, 12 and 13) Liability for retirement benefits (Note 8) Provision for treatment of PCB waste Asset retirement obligations Other liabilities (Note 10) 10,135 2,310 364 957 1,822 204 2,486 123 59 496 10,135 2,310 364 957 1,822 107,819 24,584 3,882 10,190 19,392 204 2,486 123 59 496 107,819 24,584 3,882 10,190 19,392 Total noncurrent liabilities Total noncurrent liabilities 15,591 3,369 15,591 165,869 3,369 165,869 (March 31, 2013) Thousands of U.S. Dollars (Note 1) 2013 $ 977 1,252,863 842,660 90,429 72,583 5,113 13,739 54 172,976 2,451,398 Net property, plant, and equipment Net property, plant, and equipment 14,547 19,001 14,547 154,761 19,001 INVESTMENTS AND OTHER ASSETS: INVESTMENTS AND OTHER ASSETS: Investment securities (Notes 5 and 13) Investments in and advances to unconsolidated subsidiaries and associated companies (Note 6) Investment securities (Notes 5 and 13) Investments in and advances to unconsolidated subsidiaries and associated companies (Note 6) Goodwill Software Other assets (Note 10) Allowance for doubtful accounts Goodwill Software Other assets (Note 10) Allowance for doubtful accounts 23,740 15,527 23,740 252,558 15,527 5,164 675 5,987 2,138 (80 ) 2,668 716 3,215 4,277 (88) 5,164 675 5,987 2,138 (80 ) 54,936 7,182 63,700 22,745 (859) 2,668 716 3,215 4,277 (88) Total investments and other assets Total investments and other assets 37,624 26,316 37,624 400,263 26,316 TOTAL TOTAL ¥ 435,379 See notes to consolidated financial statements. See notes to consolidated financial statements. ¥ 365,795 ¥ 435,379 $4,631,695 ¥ 365,795 COMMITMENTS AND CONTINGENT LIABILITIES COMMITMENTS AND CONTINGENT LIABILITIES (Notes 7, 12, 14 and 15) (Notes 7, 12, 14 and 15) 154,761 EQUITY (Notes 9 and 18): EQUITY (Notes 9 and 18): Common stock—authorized, 570,000 thousand shares; issued, 260,324 thousand shares in 2013 and 2012 Common stock—authorized, 570,000 thousand shares; issued, 260,324 thousand shares in 2013 and 2012 Preferred stock—authorized, 80,000 thousand shares in 2013 and 2012 Preferred stock—authorized, 80,000 thousand shares in 2013 and 2012 Capital surplus Capital surplus Retained earnings Retained earnings Treasury stock—at cost, 1,279 thousand shares in 2013 and Treasury stock—at cost, 1,279 thousand shares in 2013 and 1,260 thousand shares in 2012 1,260 thousand shares in 2012 Accumulated other comprehensive income (loss): Accumulated other comprehensive income (loss): Unrealized gain on available-for-sale securities Unrealized gain on available-for-sale securities Deferred gain on derivatives under hedge accounting Deferred gain on derivatives under hedge accounting Foreign currency translation adjustments Foreign currency translation adjustments 37,112 100,988 43,396 (1,349) 252,558 54,936 7,182 63,700 22,745 (859) 400,263 Total Total Minority interests Minority interests Total equity Total equity $4,631,695 TOTAL TOTAL - 2 - - 2 - 43,396 43,396 461,663 43,396 37,112 89,346 37,112 100,988 394,815 1,074,343 37,112 89,346 461,663 394,815 1,074,343 (1,328) (1,349) (14,358) (1,328) (14,358) 6,584 2,890 (1,235) 188,386 969 6,584 1,509 2,890 442 (1,235) (2,358) 188,386 168,120 969 617 70,044 30,746 (13,140) 2,004,116 10,310 1,509 442 (2,358) 168,120 617 189,356 ¥435,379 168,737 189,356 2,014,427 168,737 ¥365,795 ¥435,379 $4,631,695 ¥365,795 70,044 30,746 (13,140) 2,004,116 10,310 2,014,427 $4,631,695 1 Consolidated Financial Statements Consolidated Financial Statements 2 Consolidated Statement of Income Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Comprehensive Income Chiyoda Corporation and Consolidated Subsidiaries (Year Ended March 31, 2013) Millions of Yen 2013 2012 Thousands of U.S. Dollars (Note 1) 2013 Consolidated Statement of Comprehensive Income Year Ended March 31, 2013 (Year Ended March 31, 2013) Millions of Yen 2013 2012 Thousands of U.S. Dollars (Note 1) 2013 ¥398,918 ¥ 254,675 $4,243,814 NET INCOME BEFORE MINORITY INTERESTS ¥16,391 ¥ 14,515 $174,380 Consolidated Statement of Income Year Ended March 31, 2013 REVENUE COST OF REVENUE Gross profit 42,515 38,891 452,293 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (Note 11) 17,402 14,693 185,133 356,402 215,783 3,791,520 OTHER COMPREHENSIVE INCOME (LOSS) (Note 16): Unrealized gain on available-for-sale securities Deferred gain on derivatives under hedge accounting Foreign currency translation adjustments Share of other comprehensive income (loss) of associates accounted for using the equity method 5,075 2,448 1,081 1,738 97 (361 ) 53,991 26,042 11,508 85 (105 ) 913 Operating income 25,113 24,197 267,160 Total other comprehensive income 8,690 1,368 92,456 COMPREHENSIVE INCOME ¥25,082 ¥ 15,884 $266,836 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Minority interests ¥24,723 358 ¥ 15,761 123 $263,020 3,815 See notes to consolidated financial statements. OTHER INCOME (EXPENSES): Interest and dividend income Interest expense Equity in earnings of associated companies Foreign exchange loss Gain on sales of fixed assets Loss on disposal of fixed assets Loss on valuation of investment securities Other—net 2,321 (206) 145 (1,681) 1,704 (244) (230) (173) 1,230 (207 ) 72 (1,243 ) (250 ) (255 ) 24,694 (2,193) 1,545 (17,886) 18,131 (2,599) (2,454) (1,846) Other income (expenses)—net 1,634 (654 ) 17,390 INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 26,747 23,543 284,551 INCOME TAXES (Note 10): Current Deferred 11,669 (1,313) 2,310 6,717 124,140 (13,969) Total income taxes 10,356 9,027 110,170 NET INCOME BEFORE MINORITY INTERESTS 16,391 14,515 174,380 MINORITY INTERESTS IN NET INCOME 314 151 3,345 NET INCOME Chiyoda Corporation and Consolidated Subsidiaries ¥ 16,077 ¥ 14,364 $ 171,035 Consolidated Statement of Income Year Ended March 31, 2013 Yen 2013 2012 U.S. Dollars 2013 PER SHARE OF COMMON STOCK (Notes 2.w and 17): - 3 - Basic net income Cash dividends applicable to the year ¥62.06 19.00 ¥ 55.44 17.00 (Continued) $0.66 0.20 - 5 - See notes to consolidated financial statements. 3 Consolidated Financial Statements Consolidated Financial Statements 4 - 4 - (Concluded) Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Changes in Equity Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Changes in Equity Year Ended March 31, 2013 Consolidated Statement of Changes in Equity Year Ended March 31, 2013 Thousands Thousands Millions of Yen Millions of Yen Outstanding Number of Shares of Common Stock Outstanding Number of Shares of Common Stock Capital Surplus Common Stock Common Stock Retained Earnings Capital Surplus Treasury Stock Accumulated Other Comprehensive Income (Loss) Deferred Gain on Derivatives Treasury under Hedge Stock Accounting Unrealized (Loss) Gain Foreign on Available- Currency for-Sale Translation Securities Adjustments Accumulated Other Comprehensive Income (Loss) Deferred Gain on Derivatives under Hedge Accounting Total Unrealized (Loss) Gain on Available- for-Sale Securities Retained Earnings Foreign Currency Translation Adjustments Minority Interests (Year Ended March 31, 2013) Total Equity Total Minority Interests Total Equity BALANCE, APRIL 1, 2011 BALANCE, APRIL 1, 2011 259,102 ¥ 43,396 259,102 ¥ 37,112 ¥ 43,396 ¥ 77,832 ¥ 37,112 ¥(1,295) ¥ 77,832 ¥ (229) ¥(1,295) ¥ 345 ¥ (229) ¥ (1,919 ) ¥ 345 ¥ 155,242 ¥ (1,919 ) ¥516 ¥ 155,242 ¥155,758 ¥516 ¥155,758 Net income Cash dividends, ¥11.00 per share Purchase of treasury stock Net change in the year Net income Cash dividends, ¥11.00 per share Purchase of treasury stock Net change in the year (37 ) 14,364 (2,850) (37 ) (32) 14,364 (2,850) 1,738 (32) 97 1,738 (438 ) 14,364 (2,850) (32) 1,396 97 (438 ) 100 14,364 14,364 (2,850) (2,850) (32) (32) 1,396 1,497 BALANCE, MARCH 31, 2012 BALANCE, MARCH 31, 2012 259,065 43,396 259,065 37,112 43,396 89,346 37,112 (1,328) 89,346 1,509 (1,328) 442 1,509 (2,358 ) 442 168,120 (2,358 ) 617 168,120 168,737 Net income Cash dividends, ¥17.00 per share Change of scope of consolidation Purchase of treasury stock Net change in the year Net income Cash dividends, ¥17.00 per share Change of scope of consolidation Purchase of treasury stock Net change in the year (19 ) 16,077 (4,404) (31) (19 ) (21) 16,077 (4,404) (31) 5,075 (21) 2,448 5,075 1,123 16,077 (4,404) (31) (21) 8,646 2,448 1,123 351 16,077 16,077 (4,404) (4,404) (31) (31) (21) (21) 8,646 8,998 14,364 (2,850) (32) 1,497 168,737 16,077 (4,404) (31) (21) 8,998 100 617 351 BALANCE, MARCH 31, 2013 BALANCE, MARCH 31, 2013 259,045 ¥ 43,396 259,045 ¥ 37,112 ¥ 43,396 ¥100,988 ¥ 37,112 ¥(1,349) ¥100,988 ¥6,584 ¥(1,349) ¥2,890 ¥6,584 ¥ (1,235 ) ¥2,890 ¥ 188,386 ¥ (1,235 ) ¥969 ¥ 188,386 ¥189,356 ¥969 ¥189,356 Thousands of U.S. Dollars (Note 1) Thousands of U.S. Dollars (Note 1) Common Stock Capital Surplus Common Stock Retained Earnings Capital Surplus Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Deferred Gain on Derivatives Treasury under Hedge Stock Accounting Accumulated Other Comprehensive Income (Loss) Deferred Gain on Derivatives under Hedge Accounting Total Unrealized Gain on Foreign Available- Currency for-Sale Translation Securities Adjustments Unrealized Gain on Available- for-Sale Securities Foreign Currency Translation Adjustments Minority Interests Total Equity Total Minority Interests Total Equity BALANCE, MARCH 31, 2012 BALANCE, MARCH 31, 2012 $ 461,663 $ 394,815 $ 461,663 $ 950,499 $ 394,815 $(14,131) $ 950,499 $16,053 $(14,131) $ 4,703 $16,053 $ (25,091 ) $ 4,703 $1,788,513 $ (25,091 ) $ 6,569 $1,788,513 $1,795,083 $ 6,569 $1,795,083 Net income Cash dividends, $0.18 per share Change of scope of consolidation Purchase of treasury stock Net change in the year Net income Cash dividends, $0.18 per share Change of scope of consolidation Purchase of treasury stock Net change in the year 171,035 (46,852) (338) 171,035 (46,852) (338) 53,991 (227) (227) 26,042 53,991 11,951 171,035 (46,852) (338) (227) 91,985 26,042 11,951 3,741 171,035 (46,852) (338) (227) 91,985 171,035 (46,852) (338) (227) 95,726 3,741 171,035 (46,852) (338) (227) 95,726 BALANCE, MARCH 31, 2013 BALANCE, MARCH 31, 2013 $ 461,663 $ 394,815 $ 461,663 $1,074,343 $ 394,815 $(14,358) $1,074,343 $70,044 $(14,358) $30,746 $70,044 $ (13,140 ) $30,746 $2,004,116 $ (13,140 ) $10,310 $2,004,116 $2,014,427 $10,310 $2,014,427 See notes to consolidated financial statements. See notes to consolidated financial statements. - 6 - - 6 - 5 Consolidated Financial Statements Consolidated Financial Statements 6 Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows Year Ended March 31, 2013 Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Cash Flows Year Ended March 31, 2013 Millions of Yen 2012 2013 Thousands of U.S. Dollars (Note 1) 2013 OPERATING ACTIVITIES: Income before income taxes and minority interests ¥26,747 ¥ 23,543 $284,551 Adjustments for: Income taxes paid Depreciation and amortization (Reversal of) allowance for doubtful accounts—net Allowance for (reversal of) warranty costs for completed works Allowance for (reversal of) loss on construction contracts Liability for retirement benefits—net Gain on sales and disposals of fixed assets Foreign exchange (gain) loss—net Equity in earnings of associated companies Changes in operating assets and liabilities: (Increase) decrease in trade notes and accounts receivable, and costs and estimated earnings on long-term construction contracts Increase in costs of construction contracts in process Increase (decrease) in trade notes and accounts payable Increase in advance receipts on construction contracts (Increase) decrease in accounts receivable—other (Increase) decrease in jointly controlled assets of joint venture Increase in deposits received Increase in interest and dividend receivable Other—net Total adjustments (130 ) 2,580 (11 ) 187 723 (185 ) (1,460 ) (125 ) (145 ) (10,820 ) 2,637 4 (894 ) (489 ) (320 ) 22 (72 ) (1,389) 27,450 (118) 1,998 7,695 (1,968) (15,532) (1,334) (1,545) (20,453 ) (1,714 ) 30,130 992 (3,170 ) 11,946 (796 ) (11,102 ) 14,236 3,678 (217,595) (18,243) 320,537 10,561 (33,730) (28,603 ) 619 (674 ) 8,840 (12,599 ) 22,776 1,640 (544 ) 169 32,071 (304,290) 6,589 (7,177) 94,051 (134,042) Net cash provided by operating activities— (Forward) ¥ 14,147 ¥ 55,615 $ 150,509 (Year Ended March 31, 2013) Millions of Yen 2013 2012 Thousands of U.S. Dollars (Note 1) 2013 Net cash provided by operating activities—(Forward) ¥ 14,147 ¥ 55,615 $ 150,509 INVESTING ACTIVITIES: Net decrease (increase) in time deposits Purchases of marketable securities Purchases of property, plant, and equipment Proceeds from sales of property, plant, and equipment Purchases of intangible assets Payments for asset retirement obligations Payments for purchases of investment securities Purchases of investments in subsidiaries Payments of short-term loans receivable Proceeds from collections of short-term loans receivable Payments of long-term loans receivable Proceeds from collections of long-term loans Other—net 127 (2,400) (3,620) 7,020 (3,502) (66) (2,450) 81 (514) 35 32 (234 ) (1,618 ) 1,725 (1,380 ) (7,561 ) (57 ) (85 ) 71 1,354 (25,531) (38,518) 74,682 (37,260) (705) (26,070) 871 (5,473) 374 350 Net cash used in investing activities (5,257) (9,140 ) (55,926) FINANCING ACTIVITIES: Proceeds from long-term debt Repayments of long-term debt Payments of cash dividends Payments of cash dividends to minority shareholders Other—net 10,000 (10,000) (4,397) (7) (27) 106,382 (106,382) (46,784) (74) (293) (2,844 ) (7 ) (47 ) Net cash used in financing activities (4,432) (2,899 ) (47,152) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 2,024 (424 ) 21,532 NET INCREASE IN CASH AND CASH EQUIVALENTS 6,482 43,151 68,962 DECREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM EXCLUSION OF SUBSIDIARIES FROM CONSOLIDATION (22) (237) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 173,769 130,618 1,848,609 CASH AND CASH EQUIVALENTS, END OF YEAR ¥180,229 ¥ 173,769 $1,917,333 See notes to consolidated financial statements. - 7 - (Continued) - 8 - (Concluded) 7 Consolidated Financial Statements Consolidated Financial Statements 8 Chiyoda Corporation and Consolidated Subsidiaries Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements Year Ended March 31, 2013 1. BASIS OF PRESENTATION OF 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 Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to the 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 2012 consolidated financial statements to conform to the classifications used in 2013. 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 ¥94 to $1, the approximate rate of exchange at March 31, 2013. 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. Japanese yen figures less than a million yen are rounded down to the nearest million yen, except for per-share data. U.S. dollar figures less than a thousand U.S. dollars are rounded down to the nearest thousand U.S. dollars, except for per-share data. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation—The consolidated financial statements as of March 31, 2013, include the accounts of the Company and its 18 significant (21 in 2012) 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 the ability to exercise significant influence are accounted for by the equity method. Investments in two associated companies are accounted for by the equity method in 2013 and 2012. 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 acquisition over the fair value of the net assets of an acquired subsidiary at the date of acquisition is being amortized over a period of 20 years. - 9 - (Year Ended March 31, 2013) 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. Construction Contracts—In December 2007, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Statement No. 15, "Accounting Standard for Construction Contracts" and ASBJ Guidance No. 18, "Guidance on Accounting Standard for Construction Contracts." Under this accounting standard, 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 is deemed to be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. Concerning the construction contracts, the Group applies the accounting methods below: Unbilled costs on contracts, which are accounted for by the completed-contract method, are stated as costs of construction contracts in process. Payments received in excess of costs and estimated earnings on 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 that are not realized are charged to income, as incurred, and are included in costs of revenue. c. 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, certificate of deposits, and commercial paper, all of which mature or become due within three months of the date of acquisition. d. Held-to-Maturity Securities and Investment Securities—Held-to-maturity securities and investment securities are classified and accounted for, depending on management's intent, as follows: (1) held-to-maturity debt securities, for which there is the positive intent and ability to hold to maturity are reported at cost; and (2) available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. e. Short-Term Investments—Short-term investments are time deposits, which will mature three months after the date of acquisition. Short-term investments are exposed to insignificant risk of changes in value. f. Jointly Controlled Assets of Joint Venture—Jointly controlled assets of a joint venture are the equity amount equivalent of the Company and consolidated subsidiaries related to the cash deposits of the joint venture. 9 Consolidated Financial Statements - 10 - Consolidated Financial Statements 10 Notes to Consolidated Financial Statements g. 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 potential losses in the receivables outstanding. h. 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 that 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 8 to 57 years for buildings and structures, from 4 to 17 years for machinery and equipment, and from 4 to 15 years for tools, furniture, and fixtures. Equipment held for leases is depreciated by the straight-line method over the respective lease periods. i. 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 is 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. j. Software—Software for internal use is amortized on a straight-line basis over its estimated useful life (five years at the maximum). k. Other Assets—Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line method over their estimated useful lives. l. Allowance for Warranty Costs for Completed Work—The allowance for warranty costs for completed work is provided based on past rate experience. m. 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. When there are losses on completed-contract method applied contracts, the allowance for losses on construction contracts is offset against the costs of construction contracts in process on the balance sheet. n. Provision for Treatment of PCB Waste—A provision for treatment of PCB (Poly Chlorinated Biphenyl) waste is provided based on estimated costs of the treatment for PCB products and equipment as well as their collection and transportation fees. o. Retirement and Pension Plans—Employees of the Company are, under most circumstances, entitled to payments from the defined contribution pension plan and the defined benefit corporate 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 ($60,599 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, 2013 and 2012. Certain of the Company's consolidated subsidiaries terminated their unfunded retirement benefit allowance for all directors and officers under the resolution of the shareholders' meeting and the board meeting during the year ended March 31, 2012. The outstanding balance was reclassified to noncurrent liabilities—other liabilities in the years ended March 31, 2013 and 2012. p. Asset Retirement Obligations—In March 2008, the ASBJ published ASBJ Statement No. 18, "Accounting Standard for Asset Retirement Obligations" and ASBJ Guidance No. 21, "Guidance on Accounting Standard for Asset Retirement Obligations." Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development, and normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost. q. Research and Development Costs—Research and development costs are charged to income as incurred. r. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for Lease Transactions," which revised the previous accounting standard for lease transactions. Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain "as if capitalized" information was disclosed in the note to the lessee's financial statements. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet. The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company continues to account for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions. All other leases are accounted for as operating leases. 11 Consolidated Financial Statements Consolidated Financial Statements 12 - 11 - - 12 - Notes to Consolidated Financial Statements s. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statement 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 Company files a tax return under the consolidated corporate-tax system, which allows companies to base tax payments on the combined profits or losses of the parent company and its wholly-owned domestic subsidiaries. t. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. Foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by foreign currency forward contracts. w. 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 statement of income are dividends applicable to the respective years including dividends to be paid after the end of the year. Diluted net income per share is not disclosed because there is no potential stock, which has a dilutive effect for the fiscal years ended March 31, 2013 and 2012. u. Foreign Currency Financial Statements—Balance sheet accounts of consolidated foreign x. Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement 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 are shown as "Foreign currency translation adjustments" under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date. v. Derivatives and Hedging Activities—The Company uses derivative financial instruments, including foreign currency forward contracts and interest swap contracts, as a means of hedging exposure to foreign currency risks and interest rate risks. The Company does not enter into derivatives for trading or speculative purposes. Derivative financial instruments are classified and accounted for as follows: No. 24, "Accounting Standard for Accounting Changes and Error Corrections" and ASBJ Guidance No. 24, "Guidance on Accounting Standard for Accounting Changes and Error Corrections." Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies—When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting standard includes specific transitional provisions in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation—When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates—A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is discovered, those statements are restated. (1) All derivatives are recognized as either assets or liabilities and measured at fair value, with y. New Accounting Pronouncements gains or losses recognized in the consolidated statement of income. (2) For derivatives used for hedging purposes, if such 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. Foreign currency forward 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. Foreign currency deposits are held to hedge foreign exchange risks derived from forecasted purchases of fixed assets denominated in foreign currency. Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included in interest expense. Accounting Standard for Retirement Benefits—On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits" and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced the Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and followed by partial amendments from time to time through 2009. Major changes are as follows: (a) Treatment in the balance sheet Under the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, "deficit or surplus"), adjusted by such unrecognized amounts, is recognized as a liability or asset. 13 Consolidated Financial Statements Consolidated Financial Statements 14 - 13 - - 14 - Notes to Consolidated Financial Statements Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss shall be recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). (b) Treatment in the statement of income and the statement of comprehensive income The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain period no longer than the expected average remaining working lives of the employees. However, actuarial gains and losses and past service costs that arose in the current period and have not yet been recognized in profit or loss shall be included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments. This accounting standard and the guidance are effective for the end of annual periods beginning on or after April 1, 2013, with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required. The Company expects to apply the revised accounting standard from the end of the annual period beginning on April 1, 2013, and is in the process of measuring the effects of applying the revised accounting standard for the year ending March 31, 2014. 3. ACCOUNTING CHANGES Changes in Accounting Policies That Are Difficult to Distinguish from Changes in Accounting Estimates—In conjunction with the revision of the Corporation Tax Act, the Company and its domestic consolidated subsidiaries have changed the depreciation method for property, plant, and equipment acquired on or after April 1, 2012, to the depreciation method based on the revised Corporation Tax Act. The impact of this change on income (loss) is minimal. 4. CONSTRUCTION CONTRACTS Costs and estimated earnings recognized with respect to construction contracts which are accounted for by the percentage-of-completion method at March 31, 2013 and 2012, were as follows: 5. HELD-TO-MATURITY SECURITIES AND INVESTMENT SECURITIES Held-to-maturity securities and investment securities at March 31, 2013 and 2012, consisted of the following: Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Current—Held-to-maturity securities Noncurrent—Equity securities ¥ 2,400 23,740 ¥15,527 $ 25,531 252,558 The costs and aggregate fair values of marketable and investment securities at March 31, 2013 and 2012, were as follows: March 31, 2013 Millions of Yen Cost Unrealized Gains Unrealized Losses Fair Value Securities classified as: Available-for-sale—equity securities Held-to-maturity ¥11,455 2,400 ¥9,991 ¥ 112 ¥21,334 2,400 March 31, 2012 Securities classified as— Available-for-sale—equity securities March 31, 2013 Millions of Yen Cost Unrealized Gains Unrealized Losses Fair Value ¥ 11,682 ¥2,570 ¥ 367 ¥ 13,885 Thousands of U.S. Dollars Unrealized Losses Unrealized Gains Fair Value $106,290 $1,196 $226,960 25,531 Cost $121,866 25,531 Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Securities classified as: Available-for-sale—equity securities Held-to-maturity Costs and estimated earnings Amounts billed ¥329,290 (301,813) ¥282,492 (268,703 ) $3,503,090 (3,210,781) Net ¥ 27,477 ¥ 13,788 $ 292,309 Available-for-sale securities whose fair value was not readily determinable at March 31, 2012, were as follows. Similar information for 2013 is disclosed in Note 13. March 31, 2012 Available-for-sale—Equity securities Carrying Amount Millions of Yen ¥1,642 15 Consolidated Financial Statements Consolidated Financial Statements 16 - 15 - - 16 - Notes to Consolidated Financial Statements 6. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED 8. RETIREMENT AND PENSION PLANS COMPANIES Investments in and advances to unconsolidated subsidiaries and associated companies at March 31, 2013 and 2012, were as follows: Investments Long-term receivables Total 7. LONG-TERM DEBT Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 ¥4,686 477 ¥2,662 5 $49,858 5,078 ¥5,164 ¥2,668 $54,936 Long-term debt at March 31, 2013 and 2012, consisted of the following: Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Long-term loans principally from banks, due serially through 2018, with interest rates ranging from 1.9% to 2.0% at 2013 and 2012—Unsecured Obligations under finance lease Total Less current portion ¥ 10,221 5 10,226 (91) ¥ 10,198 12 10,210 (10,006 ) $ 108,736 61 108,797 (977) Long-term debt, less current portion ¥10,135 ¥ 204 $107,819 Annual maturities of long-term debt, excluding finance leases (see Note 12), at March 31, 2013, were as follows: Year Ending March 31 2014 2015 2018 Total Millions of Yen Thousands of U.S. Dollars ¥ 88 132 10,000 $ 941 1,411 106,382 ¥10,221 $108,736 Commitment-line contracts at March 31, 2013, were as follows: Commitment-line contracts ¥15,000 $159,574 Unused commitments ¥15,000 $159,574 Millions of Yen Thousands of U.S. Dollars Employees of the Company are, under most circumstances, entitled to payments from the defined contribution pension plan and the defined benefit corporate pension plan upon retirement or termination. Employees of certain of the Company's consolidated subsidiaries are, under most circumstances, entitled to certain lump-sum severance payments and pension payments upon retirement or termination. The liability for employees' retirement benefits at March 31, 2013 and 2012, consisted of the following: Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Projected benefit obligation Fair value of plan assets Unrecognized transitional obligation Unrecognized actuarial loss Unrecognized prior service cost Net amount booked in the consolidated balance sheet Prepaid pension expenses ¥23,727 (19,858) (1,217) (839) 499 2,310 ¥ 24,492 (18,429 ) (1,826 ) (2,432 ) 675 2,479 (6 ) $252,418 (211,259) (12,954) (8,933) 5,312 24,584 Net liability for employees' retirement benefits ¥ 2,310 ¥ 2,486 $ 24,584 The components of net periodic benefit costs for the years ended March 31, 2013 and 2012, 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 Payment to defined contribution pension trust Millions of Yen 2012 2013 Thousands of U.S. Dollars 2013 ¥ 721 326 (275) 608 591 (176) 1,796 372 ¥ 829 341 (264 ) 608 748 (176 ) 2,086 294 $ 7,672 3,476 (2,930) 6,477 6,287 (1,875) 19,108 3,958 Net periodic benefit costs ¥2,168 ¥2,381 $23,066 Assumptions used for the years ended March 31, 2013 and 2012, 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 2013 2012 1.5% 1.6% 10 years 15 years 10 years 1.5% 1.6% 10 years 15 years 10 years 17 Consolidated Financial Statements Consolidated Financial Statements 18 - 17 - - 18 - Notes to Consolidated Financial Statements 9. EQUITY 10. INCOME TAXES Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in normal effective statutory tax rates of approximately 38% for the year ended March 31, 2013, and 41% for the year ended March 31, 2012. a. Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. For companies that meet certain criteria, 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. The Company is organized as a company with board committees. The Companies Act permits companies to distribute dividends in kind (noncash assets) to shareholders subject to a certain limitation and additional requirements. 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 Companies Act 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 Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act 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. c. Treasury Stock and Treasury Stock Acquisition Rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders, which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act 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. The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2013 and 2012, were as follows: Deferred tax assets: Cost of revenue Allowance for employees' bonus Retirement benefits Future deductible depreciation Enterprise tax Loss on valuation of investment securities Other Less valuation allowance Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 ¥11,438 1,641 792 636 511 424 3,955 (1,082) ¥ 10,712 1,475 859 1,876 160 342 2,695 (594 ) $121,690 17,460 8,428 6,766 5,436 4,520 42,075 (11,513) Total 18,317 17,527 194,866 Deferred tax liabilities: Unrealized gain on available-for-sale securities Deferred gain on derivatives under hedge accounting Profit/loss in joint venture Other 3,414 1,852 402 380 695 304 797 562 36,329 19,703 4,282 4,045 Total 6,050 2,359 64,365 Net deferred tax assets ¥12,267 ¥ 15,168 $130,500 Prior to April 1, 2012, "Deferred gain on derivatives under hedge accounting" was included in "Other" among the deferred tax liabilities section. Since this fiscal year ended March 31, 2013, the amount is disclosed separately due to the increase in materiality. Net deferred tax assets as of March 31, 2013 and 2012, were recorded in the accompanying consolidated balance sheet as follows: Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Current assets—Deferred tax assets Investments and other assets—Other assets Noncurrent liabilities—Other liabilities ¥13,162 570 (1,465) ¥ 12,987 2,204 (23 ) $140,029 6,065 (15,594) 19 Consolidated Financial Statements Consolidated Financial Statements 20 - 19 - - 20 - Notes to Consolidated Financial Statements A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2012, is as follows: Normal effective statutory tax rate Expenses not deductible for income tax purposes Nontaxable dividend income Profit/loss in joint venture Tax credit Lower income tax rates applicable to subsidiaries Tax rate changes due to tax reform Actual effective tax rate 2012 41% 1 (1) (6) (1) (2) 5 38% For the year ended March 31, 2013, a reconciliation is not disclosed because the difference is less than 5% of the normal effective statutory tax rate. On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate from approximately 41% to 38% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and to 36% thereafter. 11. RESEARCH AND DEVELOPMENT COSTS Research and development costs charged to income were ¥2,323 million ($23,007 thousand) and ¥1,848 million for the years ended March 31, 2013 and 2012, respectively. 12. LEASES The Group leases certain machinery, computer equipment, and other assets. Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows: Year Ended March 31, 2013 Millions of Yen Thousands of U.S. Dollars Finance Leases Off On Balance Balance Operating Leases Finance Leases Off On Balance Balance Operating Leases Due within one year Due after one year Total ¥3 2 ¥5 ¥ 9 13 ¥23 ¥188 494 ¥682 $36 24 $61 $ 99 147 $2,001 5,256 $ 246 $7,257 Pro forma Information of Leased Property Whose Lease Inception Was before March 31, 2008 ASBJ Statement No. 13, "Accounting Standard for Lease Transactions" requires that all finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance sheet. However, ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee and whose lease inception was before March 31, 2008, to continue to be accounted for as operating lease transactions if certain "as if capitalized" information is disclosed in the note to the financial statements. The Company applied ASBJ Statement No. 13 effective April 1, 2008, and accounted for such leases as operating lease transactions. Pro forma information of leased property whose lease inception was before March 31, 2008, on an "as if capitalized" basis was as follows: Year Ended March 31, 2013 Acquisition cost Accumulated depreciation Net leased property Year Ended March 31, 2012 Acquisition cost Accumulated depreciation Net leased property Year Ended March 31, 2013 Acquisition cost Accumulated depreciation Net leased property Millions of Yen Buildings and Structures Tools, Furniture, and Fixtures Other Total ¥16 9 ¥ 6 ¥51 42 ¥ 8 ¥ 26 18 ¥ 8 Millions of Yen Buildings and Structures Tools, Furniture, and Fixtures Other ¥67 32 ¥34 ¥79 61 ¥17 ¥ 26 15 ¥ 10 Thousands of U.S. Dollars Buildings and Structures Tools, Furniture, and Fixtures $172 100 $ 71 $543 454 $ 89 Other $ 276 191 $ 85 ¥93 70 ¥23 Total ¥173 109 ¥ 63 Total $992 746 $246 21 Consolidated Financial Statements Consolidated Financial Statements 22 - 21 - - 22 - Notes to Consolidated Financial Statements Obligations under finance leases for the years ended March 31, 2013 and 2012, were as follows: Due within one year Due after one year Total Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 ¥ 9 13 ¥23 ¥ 47 16 ¥ 63 $ 99 147 $246 Depreciation expense as lessee, which is not reflected in the accompanying consolidated statement of income, computed by the straight-line method was ¥13 million ($142 thousand) and ¥53 million for the years ended March 31, 2013 and 2012, respectively. Lease payments were approximately equal to the depreciation expense. The amounts of obligations, acquisition cost, and depreciation under finance leases include the imputed interest income portion and interest expense portion. 13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES (1) Group Policy for Financial Instruments The Group uses financial instruments for cash surpluses, if any, invested in low-risk financial assets, such as certificates of deposit and deposits at call. For operating capital, the Group uses bank loans. Derivatives are used, not for speculative purposes, but to manage exposure to the market risk of fluctuation in foreign currency exchange rates and interest rates. (2) Nature and Extent of Risks Arising from Financial Instruments Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Although receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign currencies, is hedged by using foreign currency forward contracts. Cash equivalents include certificates of deposit, which mature shortly and are used for cash surpluses. Short-term investments include deposits at call, which will mature three months after the date of acquisition. Both certificates of deposit and deposits at call are exposed to default risk of the issuing financial institution. Investment securities are equity securities related to the business, which the Group operates. Marketable securities are exposed to the risk of fluctuations in stock prices. Payment terms of payables, such as trade notes and trade accounts, are generally less than one year. Although payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, those risks are netted against the balance of receivables denominated in the same foreign currency as noted above. Bank loans are used for operating capital. Although they are exposed to the market risks from changes in interest rates, the risk is hedged by using interest rate swap contracts. Derivatives are foreign currency forward contracts and interest rate swap contracts, which are used to manage exposure to market risks from changes in foreign currency exchange rates of receivables and payables, and from changes in interest rates, respectively. Please see Notes 2.v and 14 for more detail about derivatives. (3) Risk Management for Financial Instruments Credit risk management Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt according to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment terms and balances of major customers to identify the default risk of customers at an early stage. Certificates of deposit and deposits at call are exposed to insignificant default risk because transactions are limited to major financial institutions. With respect to foreign currency forward contracts, the Group limits the counterparty to those derivatives to major financial institutions that can bear losses arising from credit risk. Market risk management (risk of foreign exchange and interest rates) Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principally with foreign currency forward contracts. Interest expense associated with long-term debts is exposed to market risk resulting from changes in interest rates. Such risk is hedged by interest rate swap contracts. Foreign currency forward contracts are controlled under internal guidelines. The position related to particular construction contracts is identified and is reviewed monthly. Reconciliation of the transaction and balances with customers' confirmation replies is made, and the transactions related to foreign currency forward contracts are executed and accounted for under internal guidelines. Marketable and investment securities are managed by monitoring the market values and financial position of issuers on a regular basis. The Group assesses the stock price risk quantitatively so as to account for significant declines in market value as impairment losses. Liquidity risk management Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on their maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets along with timely adequate financial planning. (4) Fair Values of Financial Instruments Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, another rational valuation technique is used instead. Also, please see Note 14 for the detail of fair value for derivatives. 23 Consolidated Financial Statements Consolidated Financial Statements 24 - 23 - - 24 - Notes to Consolidated Financial Statements (a) Fair values of financial instruments March 31, 2013 March 31, 2013 Thousands of U.S. Dollars Cash and cash equivalents Held-to-maturity securities—current Short-term investments Notes and accounts receivable Costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture Investment securities Total Current portion of long-term debt Notes and accounts payable—trade Income taxes payable Long-term debt Total March 31, 2012 Cash and cash equivalents Short-term investments Notes and accounts receivable Costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture Investment securities Total Current portion of long-term debt Notes and accounts payable—trade Income taxes payable Long-term debt Total Unrealized Gain (Loss) Unrealized Gain (Loss) Carrying Amount ¥180,229 2,400 226 37,917 27,477 94,696 21,334 Millions of Yen Fair Value ¥ 180,229 2,400 226 37,917 27,477 94,696 21,334 ¥364,280 ¥ 364,280 ¥ 88 117,769 8,500 10,132 ¥ 88 117,769 8,500 10,132 ¥136,490 ¥ 136,490 Carrying Amount ¥173,769 307 30,051 13,788 65,794 13,885 Millions of Yen Fair Value ¥ 173,769 307 30,051 13,788 65,794 13,885 ¥297,597 ¥ 297,597 ¥ 10,000 86,211 1,162 198 ¥ 10,000 86,211 1,162 198 ¥ 97,572 ¥ 97,572 Cash and cash equivalents Held-to-maturity securities—current Short-term investments Notes and accounts receivable Costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture Investment securities Total Current portion of long-term debt Notes and accounts payable—trade Income taxes payable Long-term debt Total Unrealized Gain (Loss) Carrying Amount $1,917,333 25,531 2,407 403,376 Fair Value $1,917,333 25,531 2,407 403,376 292,309 1,007,408 226,960 292,309 1,007,408 226,960 $3,875,327 $3,875,327 $ 941 1,252,863 90,429 107,794 941 $ 1,252,863 90,429 107,794 $1,452,028 $1,452,028 Cash and Cash Equivalents, Held-to-Maturity Securities—Current, Short-Term Investments, Notes and Accounts Receivable, and Costs and Estimated Earnings on Long-Term Construction Contracts The carrying values of accounts mentioned above approximate fair value because of their short maturities. Jointly Controlled Assets of Joint Venture The jointly controlled assets of the joint venture are jointly controlled cash recognized based on the Company's share of the venture. The carrying values of jointly controlled assets of the joint venture approximate fair value because of their short maturities. Investment Securities The fair values of investment securities are measured at the quoted market price of the stock exchange for the equity instruments. The information of the fair value for investment securities by classification is included in Note 5. The above schedules do not include investment securities whose fair value cannot be reliably determined. Notes and Accounts Payable—Trade and Income Taxes Payable The carrying values of accounts mentioned above approximate fair value because of their short maturities. 25 Consolidated Financial Statements Consolidated Financial Statements 26 - 25 - - 26 - Notes to Consolidated Financial Statements Current Portion of Long-Term Debt (Bank Loans)/Long-Term Debt (Bank Loans) March 31, 2012 The fair value of fixed rate loans is calculated by discounting total principal and interest payments to present value using a discount rate equal to the rate that would be charged if the loan was newly borrowed. The fair value of floating rate loans, which are subject to a specific method for interest rate swaps, is calculated by discounting total principal and interest payments, which are handled together with interest rate swaps, to present value using a discount rate equal to the rate that would be charged if the loan was newly borrowed. Derivatives The information of the fair value for derivatives is included in Note 14. (b) Carrying amount of financial instruments whose fair values cannot be reliably determined Millions of Yen 2013 2012 Thousands of U.S. Dollars 2013 Investment securities that do not have a quoted market price in an active market Investments in equity instruments that do not have a quoted market price in an active market Investments in unconsolidated subsidiaries and associated companies that do not have a quoted market price in an active market ¥2,403 ¥1,639 $ 25,565 2 2 31 4,686 2,662 49,858 (5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities March 31, 2013 Millions of Yen Due after 1 Year through 5 Years Due after 5 Years through 10 Years Due after 10 Years Due in 1 Year or Less ¥180,194 2,400 226 64,861 ¥ 532 94,696 Cash and cash equivalents Held-to-maturity securities—current Short-term investments Notes and accounts receivable, and costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture Total ¥342,378 ¥532 27 Consolidated Financial Statements - 27 - Cash and cash equivalents Short-term investments Notes and accounts receivable, and costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture March 31, 2012 Total March 31, 2013 Cash and cash equivalents Short-term investments Notes and accounts receivable, and Cash and cash equivalents costs and estimated earnings on Held-to-maturity securities—current long-term construction contracts Short-term investments Jointly controlled assets of joint Notes and accounts receivable, and venture costs and estimated earnings on long-term construction contracts Total Jointly controlled assets of joint venture March 31, 2013 Total Millions of Yen Due after 1 Year through 5 Years Due after 5 Years through 10 Years Due after 10 Years Due in 1 Year or Less ¥173,684 307 43,731 ¥ 109 65,794 ¥283,517 ¥109 Millions of Yen Due after 5 Years Thousands of U.S. Dollars through Due after 10 Years 5 Years through 10 Years Due after 1 Year through Due after 5 Years 1 Year through 5 Years Due after 10 Years Due after 10 Years ¥ 109 Due in 1 Year or Less Due in 1 Year ¥173,684 or Less 307 $1,916,958 25,531 43,731 2,407 65,794 690,018 ¥283,517 $5,667 ¥109 1,007,408 $3,642,324 Due in 1 Year or Less $5,667 Thousands of U.S. Dollars Due after 5 Years through 10 Years Due after 1 Year through 5 Years Due after 10 Years Please see Note 7 for annual maturities of long-term debt and Note 12 for obligations under finance leases. Cash and cash equivalents Held-to-maturity securities—current Short-term investments Notes and accounts receivable, and costs and estimated earnings on long-term construction contracts Jointly controlled assets of joint venture $1,916,958 25,531 2,407 690,018 $5,667 1,007,408 Total $3,642,324 $5,667 Please see Note 7 for annual maturities of long-term debt and Note 12 for obligations under finance leases. Consolidated Financial Statements 28 - 28 - - 28 - Notes to Consolidated Financial Statements 14. DERIVATIVES March 31, 2013 Derivative Transactions to Which Hedge Accounting Is Not Applied March 31, 2013 Foreign currency forward contracts: Selling U.S.$/buying yen Selling Euro/buying yen Selling GBP/buying yen Selling AUD/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Total March 31, 2012 Foreign currency forward contracts: Selling U.S.$/buying yen Selling Euro/buying yen Selling GBP/buying yen Selling AUD/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Buying Euro/selling U.S.$ Total Millions of Yen Contract Amount Due after One Year Fair Value (Loss) Unrealized Gain (Loss) ¥ (15 ) ¥(15) ¥36 51 ¥87 (4 ) 52 12 (4) 52 12 ¥ 45 ¥ 45 Millions of Yen Contract Amount Due after One Year Fair Value (Loss) Unrealized Gain (Loss) ¥ (34 ) 7 ¥(34) 7 (6 ) 3 (5 ) (6) 3 (5) ¥ (34 ) ¥(34) Contract Amount ¥14,267 11,243 284 1,933 276 79 ¥28,085 Contract Amount ¥18,468 4,492 182 81 119 42 3 391 ¥23,781 Foreign currency forward contracts: Selling U.S.$/buying yen Selling Euro/buying yen Selling GBP/buying yen Selling AUD/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Thousands of U.S. Dollars Contract Amount Due after One Year $387 548 Fair Value (Loss) $ (162 ) (2 ) (1 ) (46 ) 561 135 Unrealized Gain (Loss) $(162) (2) (1) (46) 561 135 Contract Amount $151,781 119,609 3,026 20,571 2,945 844 Total $298,778 $935 $ 483 $ 483 Derivative Transactions to Which Hedge Accounting Is Applied March 31, 2013 Foreign currency forward contracts— Accounted for under deferred hedge accounting method: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Total Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Total Millions of Yen Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forecasted transaction ¥ 1,863 4,489 584 221 ¥ 513 1,056 461 ¥(220) 851 116 3 ¥ 7,158 ¥ 2,031 ¥ 752 Receivables Payables ¥ 693 948 372 18 ¥ 101 ¥ 2,032 ¥ 101 Interest rate swaps*2 (fixed rate payment, Long-term debt ¥10,000 ¥ 10,000 floating rate receipt) Total ¥10,000 ¥ 10,000 29 Consolidated Financial Statements - 29 - - 30 - Consolidated Financial Statements 30 Notes to Consolidated Financial Statements March 31, 2012 March 31, 2013 Foreign currency forward contracts— Accounted for under deferred hedge accounting method: Selling U.S.$/buying yen Selling GBP/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Total Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Total Millions of Yen Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forecasted transaction ¥ 1,785 25 6,492 1,041 46 ¥ 581 2,995 100 ¥ (39) (1) 242 14 2 ¥ 9,391 ¥ 3,677 ¥218 Receivables Payables ¥ 43 267 6 ¥ 60 ¥ 317 ¥ 60 ¥10,000 ¥ 10,000 Interest rate swaps*2 (fixed rate payment, floating rate receipt) Current portion of long-term debt Thousands of U.S. Dollars Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forward contracts— Accounted for under deferred hedge accounting method: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Foreign currency forecasted transaction $ 19,823 47,759 6,217 2,357 $ 5,466 11,234 4,907 $(2,343) 9,058 1,244 42 Total $ 76,158 $ 21,608 $ 8,001 Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying SGD/selling yen Total Receivables Payables $ 7,375 10,092 3,959 195 $ 1,077 $ 21,622 $ 1,077 Interest rate swaps*2 (fixed rate payment, Long-term debt $106,382 $ 106,382 floating rate receipt) Total ¥10,000 ¥ 10,000 Total $106,382 $ 106,382 *1 Foreign currency forward contracts, which are applied to the foreign currency translation at the contract rate of the assets and liabilities on construction contracts denominated in foreign currencies. *2 Interest rate swap contracts accounted under a specific method, are treated as part of the hedged long-term debt, thus their fair values are integrally computed with those of the hedged long-term debt. See Note 13 for the fair value of long-term debt. 15. CONTINGENT LIABILITIES At March 31, 2013, the Group had the following contingent liabilities: Guarantees on employees' housing loans Performance bond for an unconsolidated subsidiary ¥ 130 1,743 $ 1,387 18,544 Millions of Yen Thousands of U.S. Dollars 31 Consolidated Financial Statements Consolidated Financial Statements 32 - 31 - - 32 - Notes to Consolidated Financial Statements 16. COMPREHENSIVE INCOME There is no dilutive effect for the year ended March 31, 2013. The components of other comprehensive income for the years ended March 31, 2013 and 2012, were as follows: Year Ended March 31, 2012 Unrealized gain on available-for-sale securities: Gains arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Deferred gain on derivatives under hedge accounting: Gains (losses) arising during the year Adjustment to acquisition cost of assets Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Foreign currency translation adjustments— Adjustments arising during the year Total Share of other comprehensive income (loss) in associates—Gains (losses) arising during the year Total Millions of Yen 2012 2013 Thousands of U.S. Dollars 2013 ¥7,564 231 7,796 (2,721) ¥2,156 250 2,406 (668 ) $80,478 2,460 82,938 (28,947) ¥5,075 ¥1,738 $53,991 ¥6,362 (2,299) (117) 3,945 (1,497) ¥ (424 ) 549 6 131 (34 ) $67,690 (24,464) (1,248) 41,977 (15,934) Millions of Yen Net Income Thousands of Shares Weighted-Average Shares Yen EPS Basic EPS—Net income available to common shareholders ¥ 14,364 259,086 ¥ 55.44 There is no dilutive effect for the year ended March 31, 2012. 18. SUBSEQUENT EVENT The following appropriation of retained earnings at March 31, 2013, was approved at the Company's shareholders' meeting on June 25, 2013: Year-end cash dividends, ¥19.00 ($0.20) per share ¥4,921 $52,360 Millions of Yen Thousands of U.S. Dollars ¥2,448 ¥ 97 $26,042 19. SEGMENT INFORMATION ¥1,081 ¥ (361 ) $ 11,508 ¥1,081 ¥ (361 ) $11,508 ¥ 85 ¥ (105 ) $ 913 ¥ 85 ¥ (105 ) $ 913 Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures" and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Segment Information Disclosures," an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. Total other comprehensive income ¥8,690 ¥1,368 $92,456 (1) Description of Reportable Segments 17. NET INCOME PER SHARE A reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March 31, 2013 and 2012, is as follows: Year Ended March 31, 2013 Millions of Yen Net Income Thousands of Shares Weighted-Average Shares Yen U.S. Dollars EPS Basic EPS—Net income available to common shareholders ¥ 16,077 259,053 ¥ 62.06 $0.66 The Group's reportable segments are those for which separate financial information is available and regular evaluation by the Company's management is being performed in order to decide how resources are allocated within the Group. The Group globally provides "Engineering" services, including planning, engineering, construction, procurement, commissioning, and maintenance, adapting the most appropriate functions of each related company. (2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, and Other Items for Each Reportable Segment The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting Policies." The profit in reporting segments is based on the operating income. Intersegment income and transfer are measured at the quoted market price. 33 Consolidated Financial Statements - 33 - - 34 - Consolidated Financial Statements 34 Notes to Consolidated Financial Statements (3) Information about Sales, Profit (Loss), Assets, Liabilities, and Other Items Year Ended March 31, 2013 Year Ended March 31, 2013 Millions of Yen Reportable Segment Reconcili- Consoli- Engineering Other*1 Total ations*2 dated*3 Sales: Sales to external customers Intersegment sales or transfers ¥392,037 9 ¥ 6,881 8,504 ¥398,918 8,513 ¥ (8,513) ¥398,918 Total ¥392,046 ¥15,385 ¥407,432 ¥ (8,513) ¥398,918 Segment profit Segment assets Segment liabilities Other: Depreciation Amortization of goodwill Investment in associated companies Increase in property, plant, and equipment and intangible assets Year Ended March 31, 2012 ¥ 24,499 429,400 236,130 ¥ 848 4,874 1,943 ¥ 25,348 434,274 238,073 ¥ (235) 1,104 7,949 ¥ 25,113 435,379 246,023 2,593 5 1,151 22 35 2,616 41 1,151 (36) 2,580 41 1,151 9,215 43 9,259 (300) 8,958 Thousands of U.S. Dollars Reportable Segment Reconcili- Consoli- Engineering Other*1 Total ations*2 dated*3 Sales: Sales to external customers Intersegment sales or transfers $4,170,609 $ 73,205 $4,243,814 $4,243,814 97 90,472 90,570 $ (90,570) Total $4,170,707 $163,677 $4,334,384 $ (90,570) $4,243,814 Segment profit Segment assets Segment liabilities Other: Depreciation Amortization of goodwill Investment in associated companies Increase in property, plant, and equipment and intangible assets $ 260,636 $ 4,568,088 2,512,023 9,025 $ 269,662 $ (2,501) $ 267,160 4,631,695 2,617,267 4,619,946 2,532,698 11,748 84,568 51,858 20,675 27,591 59 12,250 244 378 27,836 438 12,250 (386) 27,450 438 12,250 98,038 463 98,501 (3,195) 95,306 Notes for the year ended March 31, 2013: Millions of Yen *1 "Other" represents industry segments, which are not included in the reportable segment, consisting of temporary staffing services, IT services, and travel services. Reportable Segment Reconcili- Consoli- *2 The detail of the reconciliations is as follows: Engineering Other*1 Total ations*2 dated*3 Sales: Sales to external customers Intersegment sales or transfers ¥247,849 2 ¥ 6,826 8,508 ¥254,675 8,510 ¥ (8,510) ¥254,675 Total ¥247,851 ¥15,334 ¥263,186 ¥ (8,510) ¥254,675 Segment profit Segment assets Segment liabilities Other: Depreciation Amortization of goodwill Investment in associated companies Increase in property, plant, and equipment and intangible assets ¥ 23,755 358,155 185,832 ¥ 531 8,165 3,671 ¥ 24,287 366,321 189,503 ¥ (89) (525) 7,553 ¥ 24,197 365,795 197,057 2,664 945 21 84 2,685 84 945 (48) 2,637 84 945 3,631 4 3,635 (180) 3,455 (1) The reconciliation in segment profit of ¥(235) million ($(2,501) thousand) is the elimination of intersegment trades. (2) The reconciliation in segment assets of ¥1,104 million ($11,748 thousand) is the result of the elimination of intersegment trades of ¥(2,066) million ($(21,985) thousand) and the Group's assets of ¥3,170 million ($33,733 thousand), which are not included in the reportable segment. (3) The reconciliation in segment liabilities of ¥7,949 million ($84,568 thousand) is the result of the elimination of intersegment trades of ¥(2,050) million ($(21,814) thousand) and the Group's liabilities of ¥10,000 million ($106,382 thousand), which are not included in the reportable segment. (4) The reconciliation in depreciation of ¥(36) million ($(386) thousand) is the elimination of intersegment trades. (5) The reconciliation in increase in property, plant, and equipment and intangible assets of ¥(300) million ($(3,195) thousand) is the elimination of intersegment trades. *3 The calculation of the segment profit is based on the operating income on the consolidated statement of income. 35 Consolidated Financial Statements Consolidated Financial Statements 36 - 35 - - 36 - Notes to Consolidated Financial Statements Notes for the year ended March 31, 2012: Year Ended March 31, 2012 *1 "Other" represents industry segments, which are not included in the reportable segment, consisting of temporary staffing services, IT services, and travel services. *2 The detail of the reconciliations is as follows: (1) The reconciliation in segment profit of ¥(89) million is the elimination of intersegment trades. (2) The reconciliation in segment assets of ¥(525) million is the result of the elimination of intersegment trades of ¥(2,740) million and the Group's assets of ¥2,214 million, which are not included in the reportable segment. (3) The reconciliation in segment liabilities of ¥7,553 million is the result of the elimination of intersegment trades of ¥(2,446) million and the Group's liabilities of ¥10,000 million, which are not included in the reportable segment. (4) The reconciliation in depreciation of ¥(48) million is the elimination of intersegment trades. (5) The reconciliation in increase in property, plant, and equipment and intangible assets of ¥(180) million is the elimination of intersegment trades. *3 The calculation of the segment profit is based on the operating income on the consolidated statement of income. Related Information (1) Information about Products and Services The proportion of engineering business is more than 90% of the total sales of the Group. Accordingly, the presentation of the information about each service is not required under Japanese accounting standards. (2) Information about Geographical Areas (a) Revenue Year Ended March 31, 2013 Japan Malaysia Papua New Guinea Australia Others Total Millions of Yen Thousands of U.S. Dollars ¥150,800 83,685 66,143 44,559 53,729 $1,604,255 890,274 703,655 474,040 571,589 ¥398,918 $4,243,814 Japan Papua New Guinea Malaysia Middle East Others Total Millions of Yen ¥ 94,925 70,508 30,575 30,398 28,267 ¥254,675 Note: Revenue is classified in countries or regions based on location of construction site. (b) Property, plant, and equipment Year Ended March 31, 2013 Japan Asia Others Total Year Ended March 31, 2012 Millions of Yen Thousands of U.S. Dollars ¥12,935 1,377 234 $137,611 14,653 2,496 ¥14,547 $154,761 The proportion of fixed assets placed in Japan is more than 90% of the total fixed assets of the Group. Accordingly, presentation of the information about fixed assets is not required under Japanese accounting standards. (3) Information about Major Customers Year Ended March 31, 2013 Name Related Segment Millions of Yen Thousands of U.S. Dollars Tokuyama Malaysia Sdn. Bhd Esso Highlands Ltd. Ichthys Lng Pty Ltd. Year Ended March 31, 2012 Engineering Engineering Engineering ¥82,921 65,159 42,185 $882,146 693,190 448,783 Name Related Segment Millions of Yen Esso Highlands Ltd. Tokuyama Malaysia Sdn. Bhd Engineering Engineering ¥69,856 28,815 37 Consolidated Financial Statements - 37 - - 38 - Consolidated Financial Statements 38 Notes to Consolidated Financial Statements INDEPENDENT AUDITOR’S REPORT (4) Information about Goodwill by Segments Ending balance of goodwill as of March 31, 2013 and 2012, was as follows: Millions of Yen Engineering Other* Total 2013 ¥180 494 ¥675 * Other involves temporary staffing services and IT services. * * * * * * Thousands of U.S. Dollars 2013 $1,917 5,265 2012 ¥ 716 ¥ 716 $7,182 39 Consolidated Financial Statements - 39 - Consolidated Financial Statements 40 Minato Mirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Tel: (81)45-225-7777 (voice guidance) http://www.chiyoda-corp.com/en/ CORPORATE PHILOSOPHY Enhance our business in aiming for harmony between energy and the environment, and contribute to the sustainable development of a society as an integrated engineering company through the use of our collective wisdom and painstakingly developed technology. (As of August 2013) Selected in FTSE Group’s responsible investment index Consolidated Financial Statements For the Year Ended March 31, 2013, and Independent Auditor's Report