ANNUAL REPORT FY2014 For the year ended March 31, 2015 Courtesy of Mizushima LNG Co., Ltd. Financial Highlights Profile Founded in 1948 in the post war period to reconstruct Japan, Chiyoda started its engi- neering business for domestic projects mainly in petroleum refining, gas processing and petrochemical fields, and expanded into overseas projects in the 1960s. Since then, Chiyoda has been and is growing steadily under the corporate philosophy of enhancing its business by aiming for harmony between energy and the environment and contributing to the sustainable development of society. Aiming to raise corporate value, the Group announced in 2013 a four-year business plan, “Seize the moment, Open up new frontiers”. The Medium-Term Management Plan includes a growth strategy and an operating foundation strategy. The Group aims to maintain growth as a constant provider of the value and service required by society and customers, by identifying the current trend. The operating foundation strategy provides the base for achieving the sustainable growth of the Group. The management team and employees of the Group will adhere to Compliance, Health, Safety and Environment (HSE) and risk management to fulfil Corporate Social Responsibility (CSR) when implementing each action plan. Contents 01 Financial Highlights 02 At a Glance 03 To Our Shareholders 04 Management’s Discussion and Analysis 06 Topics 08 Commitment to CSR 12 Corporate Governance 14 Corporate Information 16 Directors and Officers 17 Stock Information Years Ended March 31, 2015, 2014, 2013, 2012, and 2011 For the Year (Millions of Yen) Revenues Cost of revenue Operating income Income before income taxes and minority interests Net income At Year-End (Millions of Yen) 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) 2015 2014 2013 2012 2011 ¥480,979 ¥446,147 ¥398,918 ¥254,675 ¥247,082 435,327 21,466 22,012 11,029 404,685 21,079 22,538 13,447 356,402 25,113 26,747 16,077 215,783 24,197 23,543 14,364 215,563 17,544 11,476 7,979 ¥515,839 ¥475,288 ¥435,379 ¥365,795 ¥353,392 208,405 151.0 198,031 156.3 189,356 166.3 168,737 165.5 155,758 173.8 ¥42.58 796.89 13.0 4.5 5.5 ¥51.91 758.31 16.0 5.0 7.0 ¥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 Note: Yen amounts are rounded down to the nearest million and percentages are rounded to the nearest unit. Revenues (Billions of yen) Operating Income (Billions of yen) Net Income (Billions of yen) Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen Billions of yen 30 30 30 25 25 25 25.1 25.1 25.1 24.2 24.2 24.2 21.1 21.1 21.1 21.5 21.5 21.5 481.0 481.0 481.0 446.1 446.1 446.1 20 20 20 17.5 17.5 17.5 800 800 800 700 700 700 600 600 600 500 500 500 400 400 400 300 300 300 247.1 254.7 247.1 254.7 247.1 254.7 398.9 398.9 398.9 200 200 200 100 100 100 0 0 0 2011 2011 2011 2012 2012 2012 2013 2013 2013 2014 2014 2014 2015 2015 2015 15 15 15 10 10 10 5 5 5 0 0 0 30 30 30 20 20 20 10 10 10 8.0 8.0 8.0 16.1 16.1 16.1 14.4 14.4 14.4 13.4 13.4 13.4 11.0 11.0 11.0 2011 2011 2011 2012 2012 2012 2013 2013 2013 2014 2014 2014 2015 2015 2015 0 0 0 2011 2011 2011 2012 2012 2012 2013 2013 2013 2014 2014 2014 2015 2015 2015 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, 2015. 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 regula- tions, addition or elimination of products, and exchange rate fluctuation, among others. 1 CHIYODA CORPORATION ANNUAL REPORT FY2014 At a Glance To Our Shareholders Revenues New Orders Backlog of Contracts 8 9 22 8 54 5 8 7 7 5 2 12 2 74 78 481.0 Billion yen 746.8 Billion yen 1,416.9 Billion yen 257.9 (54%) 550.8 (74%) 1,103.0 (78%) 38.0 (8%) 49.6 (7%) 33.3 (2%) 106.7 (22%) 49.1 (7%) 170.0 (12%) 41.9 (9%) 36.5 (8%) 39.6 (5%) 57.7 (8%) 33.1 (2%) 77.6 (5%) Major Projects in Progress (As of June 2015) *3 *4 *5 *6 EPC: Engineering, Procurement and Construction * ** EPCm: Engineering, Procurement and Construction management *** EPsCm: Engineering, Procurement support and Construction management **** EPCI: ***** FEED: Front-end Engineering and Design Engineering, Procurement, Construction and Installation Shogo Shibuya President & CEO Chiyoda Corporation Thank you for your continued support over the past 12 months. We present Chiyoda Group΄s corporate overview for the fiscal year ended March 31, 2015, the halfway our Medium-Term management Plan entitled “Seize the moment, Open up New Frontiers”. As a result of implementing various measures in accordance with the growth strategies and operation foundation strategies defined in the Plan, we have achieved impressive results, especially in the LNG and gas related field, or our core business. An LNG plant in Papua New Guinea, and LNG receiving terminal projects in Japan were successfully completed. Now we are moving forward with the EPC works in Australia, the USA, Russia and Japan. All of them are progressing steadily. As the global market environment in this field is becoming more uncertain in the short-term, we have to carefully explore the possible market opportunities while continuing to build our technical expertise to strengthen and maintain our competitiveness. In the Petroleum, Petrochemicals and Gas chemical field, which is also our core business, we have maintained stable operations. Several projects in Japan and a large scale complex in Saudi Arabia have also been completed successfully. In this field, the Group will aim to earn handsome profits by implementing measures to select and concentrate on business opportunities in Asia and the Middle East and by seeking projects which inevitably require our own technologies. In the new business field in which we have been taking several measures, we have achieved good results including two EPC contracts for an airport as social infrastructure and an Engineering, Procurement, Construction and Installation (EPCI) contract in the offshore/upstream field. The Group will continue and accelerate the business development to produce more profits early. In the pharmaceutical industry, the Group was newly awarded EPC works for manufacturing facilities of active pharmaceutical ingredients and vaccines. The Group aims to advance into the life science field by enhancing our function to provide advanced solutions. In these two years, the business environment surrounding the Group has changed drastically, such as a plunge in oil prices. Now is the time for the Group to “seize the moment”, create new added value and “open up new frontiers.” We have decided to pay a dividend of ¥13 per share, in line with our earnings for the fiscal year 2014. We ask all of our shareholders for your continued support in our ongoing efforts. June 2015 *1: Classified as “Other Gas Related Works” in “Consolidated Financial Results” *2: Classified as “General Chemicals/Industrial Facilities” in “Consolidated Financial Results” *3: Courtesy of ExxonMobil PNG Limited *4: Courtesy of Shell *5: Courtesy of Solar Frontier K.K. *6: Courtesy of Kashima Aromatics Co., Ltd. 2 3 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014Puerto La CruzCameron LNGUSA/LNGFreeport LNGUSA/LNGFEED*****/Feasibility Study EPC*/EPCm**/EPsCm***/EPCI****Titanium Sponge PlantSaudi Arabia/MetalYamal LNGRussia/LNGLaffan Refinery Phase 2 Project Long Term Service Agreement (RasGas/Qatargas/Shell) Qatar/LNG, GTLIchthys LNGAustralia/LNGLong Term Service Agreement Shell Asia/DownstreamJangkrik FPU Indonesia/OffshoreNghi Son RefineryLNG CanadaCanada/LNGMozambique LNG Area 4Mozambique/LNGAbadi LNGIndonesia/FLNGTangguh Tr. 3Indonesia/LNGNew Ulaanbaatar International AirportMongolia/InfrastructureGolden Pass LNGUSA/LNGAlaska LNGUSA/LNGMozambique LNG Area 1Mozambique/LNGNew Bohol AirportPhilippines/InfrastructureRAPIDMalaysia/Refinery & PetrochemicalPuerto La CruzCameron LNGUSA/LNGFreeport LNGUSA/LNGFEED*****/Feasibility Study EPC*/EPCm**/EPsCm***/EPCI****Titanium Sponge PlantSaudi Arabia/MetalYamal LNGRussia/LNGLaffan Refinery Phase 2 Project Long Term Service Agreement (RasGas/Qatargas/Shell) Qatar/LNG, GTLIchthys LNGAustralia/LNGLong Term Service Agreement Shell Asia/DownstreamJangkrik FPU Indonesia/OffshoreNghi Son RefineryLNG CanadaCanada/LNGMozambique LNG Area 4Mozambique/LNGAbadi LNGIndonesia/FLNGTangguh Tr. 3Indonesia/LNGNew Ulaanbaatar International AirportMongolia/InfrastructureGolden Pass LNGUSA/LNGAlaska LNGUSA/LNGMozambique LNG Area 1Mozambique/LNGNew Bohol AirportPhilippines/InfrastructureRAPIDMalaysia/Refinery & PetrochemicalLNGGas Processing*1Petroleum and PetrochemicalsFine Industries*2Others Management’s Discussion and Analysis Results of Operations Analysis of Results project management services under an Enterprise Framework Agreement for downstream projects within Asia. In Japan, we have completed an EPC work for a Trans-Alkylation Unit and continued to perform diagnosis of existing facilities, maintenance and upgrading works, studies and construction works aimed at energy saving in the facilities, and studies to strengthen the infrastructure of a refinery against possible catastrophe damage. The global economic environment surrounding the Chiyoda Group has become more increasingly uncertain during this fiscal year, mainly due to economic slowdowns in several regions, geopolitical fears and a plunge in crude oil prices Mining/Mineral Refining/General Chemicals/Industries/Environment in the latter half of this fiscal year, while the US economy has continuously been relatively stable. Notwithstanding the The Group has been moving forward with an EPC execution of the international airport in Mongolia and newly positive outlook for long-term future global energy demand, near-term investment decision making in numerous oil and awarded one in the Philippines, and the preparation of tenders for future transport infrastructure projects. In gas-related facilities is becoming unpredictable. The recovery of the Japanese economy is only moderate as demand has an effort to expand its business into medium-small sized water treatment systems, the Group is operating a not fully recovered following the increase of consumption tax, despite government fiscal and monetary policies easing demonstration plant for an industrial wastewater treatment/water recycling system in Saudi Arabia and is estab- and the depreciation of the Yen in global financial markets. lishing a framework within the Group to execute these works in the Middle East and Asia. Meanwhile, we are Under such circumstances, the Group has continued to strengthen its core business in the conventional fields of oil also responding to the expansion in demand of overseas Japanese clients΄ businesses in non-hydrocarbon fields. and gas, according to strategies defined in its Medium-Term Management Plan. In parallel, the Group has accelerated In Japan, the Group has been awarded a number of EPC works for large-scale photovoltaic power generation expansion in new business spheres including offshore and upstream business, new and renewable energy, such as the systems and further business opportunities are expected in this field. In pharmaceutical industry, the Group Hydrogen Supply Chain, utilizing Chiyoda΄s own technologies, and solar power generation utilizing photovoltaic and was newly awarded EPC works for manufacturing facilities of active pharmaceutical ingredient and vaccine. The concentrating solar power technology. Group also executed several EPC works for manufacturing facilities of active pharmaceutical ingredients and Ongoing projects including LNG plants in Australia, the USA and Russia, refinery projects in Vietnam, Qatar and nanotechnology research development facilities in cooperation with industry, government and academia. Venezuela, the Mongolian international airport project and LNG receiving terminals and photovoltaic power generation systems in Japan have all progressed properly. New Business Fields Consequently, consolidated new orders for the fiscal year amounted to 746,791 million yen (26.6% increase The Group, in cooperation with our strategic alliance partner Xodus Group, has started providing integrated services in the year on year). The backlog and revenues were 1,416,901 million yen (32.1% increase) and 480,979 million yen (7.8% offshore/upstream field especially for Japanese customers. The EPCI execution of a floating production unit in Indonesia is increase) respectively. in progress. The Group is actively proceeding with business activities in the Subsea/Subsurface Engineering field. As part of The operating income amounted to 21,466 million yen (1.8% increase), ordinary income to 22,271 million yen (2.5% this strategy, the Group has formed a new joint venture company with Xodus Group and Saipem International BV in order to decrease year on year), and net income resulted in 11,029 million yen (18.0% decrease). The decrease in incomes resulted from the increase in selling, general and administrative expenses, equity in losses of associated companies, delays in recovery of overseas subsidiaries and reversal of deferred tax assets due to tax rate reduction. Results by Business Segment LNG Plants/Other Gas Related Works The Group has been moving forward with the EPC works for LNG plants in Australia, the USA and Russia, and Front End Engineering Design (FEED) works in Indonesia, Mozambique, Canada and the USA, all of which have progressed properly. Our Qatari subsidiary has been executing Engineering, Procurement and Construction management (EPCm) works for the maintenance and modification of existing LNG and gas processing plants, most of which were originally built by the Group. In Japan, two LNG receiving terminal projects have been completed and a further one is in the execution phase. enter into the subsea engineering business, while the Group also invested in a company established to develop commercially viable technology for exploiting seabed methane hydrate. As for the concentrating solar power system, the Group continues to operate a demonstration plant in Italy with the aim of developing business opportunities in this field. Furthermore, we have developed our own technology to transport and deliver large volumes of hydrogen and are actively collaborating with various parties in order to establish a hydrogen supply chain to achieve a hydrogen-based society. Moreover, the Group is considering to focus newly on the growing market for life science field symbolized by iPS cells, applying our pharmaceutical and medical technologies. Outlook for the Next Fiscal Year Modification studies and construction works for existing plants have been awarded and under execution. The Group will With its highest backlog of contracts, the Group will continue to work diligently on the execution of existing continue to pursue opportunities within LNG plants and other gas-related fields as the Group΄s core business, whether large projects in Australia, Russia and U.S. which enhance its core business. To materialize The Medium-Term onshore or offshore, overseas or domestic, and conventional or unconventional. Management Plan, the Group will also continue to accelerate our growth strategy to diversify the business portfo- Petroleum/Petrochemicals/Gas Chemicals lio by expanding new business fields. In consideration of these circumstances, and assuming an exchange rate of ¥120/dollar, our forecasts for the The Group was awarded an Engineering, Procurement, Construction and Commissioning (EPCC) contract for a Residue fiscal year ending March 31, 2016 include 350.0 billion yen in consolidated new contracts and 600.0 billion yen Fluid Catalytic Cracking (RFCC) plant in Malaysia. EPC works have been ongoing for a refinery and petrochemical complex in revenues. Our forecast for the consolidated operating profit is 20.0 billion yen, consolidated ordinary income is in Vietnam, a refinery project in Qatar and the Engineering, Procurement support and Construction management (EPsCm) 22.0 billion yen, and the consolidated net income is 12.0 billion yen. work for heavy crude oil upgrading facilities in Venezuela. Additionally, our subsidiary in Singapore has been performing 4 5 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 Topics North America/Challenges in LNG Business Mozambique/Qatar/Saudi Arabia/UAE/ Engineering Training for Young Engineers from Overseas EPC projects in the USA, which were awarded last year, started smoothly and ground breaking cere- monies were held for Cameron LNG and Freeport LNG respectively. The Group is performing at the forefront FEED works for Golden Pass LNG and LNG Canada, and a feasibility study for Alaska LNG, all of which are expected to be potential EPC targets. Aiming to carry out each project properly, we have established a scheme including the alliance with local partners and carefully worked out each individual construction plan. As we are entering the field construction stage, we will reinforce our execution scheme and plan to improve efficiency through measures such as positive adoption of a modular construction method to achieve successful completion. Having anticipated the complicated situations because of the simultaneous execution of several mega projects in North America, we are enhancing our scheme of the Group as a whole for North America. The scheme is intended to carry out those projects efficiently while preparing the environment for producing a synergy effect with operation foundation strategies implemented according to our Medium-Term Management Plan. Philippines/Awarded the New Bohol Airport Since 1970s, the Group has been accommodating over 4,100 engineers as trainees from overseas for engineering train- ing, and in 2014, 34 engineers were trained from countries such as Mozambique, Qatar, Saudi Arabia and UAE. Nowadays, the demand for such human resources development is even more increasing, especially in the oil and gas producing countries. The training provided by the Group is intended to meet such demand, and the trainees were given a chance to understand the Japanese people and culture as well, which we believe is meaningful. The Group will work constantly on human resources development, expecting to strengthen the relationship with countries worldwide. Japan/Commitment to CSR As an integrated engineering company, the Group pledges to contribute to the sustainable development of society through its business activity including the construction of energy plant and social infrastructure, and to take a variety of social contribution activities such as supporting human resources development. In addition to our contribution from our business activity, the Group constantly conducts CSR activities, for example, dispatching volunteers to the disaster In March, the Group and joint venture partner, Mitsubishi Corporation (MC) had reached an agreement with the Department of Transportation and Communications of the Government of the Republic of the Philippines to construct the New Bohol Airport in the Philippines. The New Bohol Airport will have facilities such as a 2000-meter runway, a passenger terminal building which can affected areas by the Great East Japan Earthquake, inviting vision-impaired people to a Japan Philharmonic Orchestra Concert and sale of goods made by challenged people (Heart-made Sale), both in collaboration with the Yokohama City Council of Social Welfare, and supporting educational programs for elementary school and accommodate 1 million passengers annually, and airport special equipment. Built under the “Eco Airport” concept junior high school. and employing advanced Japanese technology, the airport will be furnished with a photovoltaic power generation system and a filtering system to avoid polluting the surrounding environment by drainage during the construction. It is the second airport construction project jointly executed by “Chiyoda and MC,” the first being the new Ulaanbaatar International Airport project in Mongolia, now under construction. As an integrated engineering company, the Group will continue to explore its business opportunities in the trans- portation infrastructure industry, including the airport sector. Moreover, the Group has continuously supported and will continue to support the spirit of the United Nations Global Compact (UNGC) which is a voluntary global initiative that encourages businesses to act as good corporate citizens and achieve sustainable growth. Scene from the Heart-made Sale 6 7 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 Commitment to CSR The Chiyoda Group’s CSR As an integrated engineering company, the Chiyoda Group pledges to contribute to the sustainable development Environmental Initiatives ◆ CT-CO2 AR®: High Efficiency Synthetic Gas Production Process Using CO2 of society through its business activities, and to constantly strive to increase corporate value and earn the trust and Chiyoda Group has accomplished effective utilization of CO2 by developing a high-efficiency reforming process—CT-CO2 understanding of all stakeholders by adhering to the following principles. AR®—employing a novel catalyst. This catalyst was already commercialized in an existing synthetic gas plant last year, Chiyoda Group CSR Visions exhibiting smooth and safe operation. The technology, comprising a catalyst with high resistance to carbon formation, produces synthetic gas from natural gas with higher efficiency than conventional reforming technology. It reduces energy consumption by around 10% and UN Global Compact Activities in FY2014 reduces carbon dioxide emission drastically. CSR Visions 1 A Reliable Company We strive to be a reliable company to our customers and other business partners by providing world-class technologies and knowledge. - CSR Visions 2 Environmental Initiatives ● Initiatives for a stable supply of energy and reduction of greenhouse gas ● Plant construction that lives up to customer trust ● Enhancement of information security awareness We will work to remain an invaluable company to society by utilizing refined technologies to promote harmony between the global environment and eco- nomic and social activities. ● Continuous research and development for a low carbon economy (energy conservation/effective utilization of CO2) ● Promotion of business development towards a hydro- Environment gen-based society ● Expansion and promotion of renewable energy ● Execution of environmentally friendly projects ● Implementation of biodiversity preservation activities Social Contributions through Business Activities Through our engineering business in Japan and overseas, we contribute to local communities in ways including human resources development, technol- ogy transfer and environmental protection. ● Contribution to local economic development and human resource development ● Tie-ups and cooperation with educational institutions to - educate the next generation ● Continuous response to the Great East Japan Earthquake ● Cooperation with the community and NPO ● Support to challenged people CSR Visions 4 Respect for Human Rights We are dedicated to respecting the human rights of all people. We will create a corporate culture where the diversity, individuality and character of employ- ees are respected, where people are motivated to do their best, and of which employees and their families are proud. ● Creation of a pleasant work environment ● Enhancement of the human resource development system ● Enhancement of the safety culture ● Enhancement of the crisis management system Human Rights / Labor CSR Visions 5 Commitment to Fairness We are dedicated to achieving even greater transpar- ency and stability by conducting our operations fairly in accordance with the highest ethical standards. Anti- Corruption ● Review of the compliance program and execution of its brief explanation session to employees ● Assignment of a compliance manager in each division, group companies and project teams ● Continuous compliance training and monitoring ● Continuous export control training and auditing ● Operation of the consultation and reporting system “Welcome to All about Compliance” CT-CO2 AR® can not only reduce energy consumption by replacing the existing catalyst with a superior one, but can also achieve remarkable environmental benefits when applied to grass-root plants. Furthermore, it leads to resource min- imization by downsizing facilities, and is expected to effectively utilize the CO2 contained in natural gas. The technology succeeds in greatly reducing the environmental burden from chemical plants, such as oxo-alcohols and acetic acid. ◆ Commercialization of Hybrid Titania Catalysts for the Hydrodesulfurization (HDS) of Diesel Oil The Group has successfully developed and commercialized the Hybrid Titania catalysts by combining the advantages of titania, which has significantly high activity, and alu- mina carriers, which have superiority in material. We have already established both a production method for Hybrid Titania catalysts and a supply system. The Hybrid Titania catalysts, with high HDS activity and high hydrodenitrogenation selectivity, are highly promising in hydrotreating difficult desulfurization oils such as Light Cycle Oil (LCO) from Fluid Catalytic Cracking (FCC), thermal cracked oil and vac- uum gas oil. The Hybrid Titania catalyst was adopted for use in the HDS unit of the Yamaguchi Oil Refinery of Seibu Oil Company, Limited in Japan. This refinery started to produce sul- fur-free kerosene and diesel oil at the beginning of 2014. ◆ The Development of a New Manufacturing Process for Production of Propylene Propylene, one of the basic industrial chemicals, is mainly produced by thermal steam-cracking of hydrocarbon feedstock such as naphtha at present,and alter- native methods are desired to improve both high energy consumption and low propylene selectivity. The Group has been developing an energy saving propylene manufacturing process by means of fixed-bed-type catalytic cracking using our own zeolite catalysts, and we have received high appraisal for the results and won the Best Paper Award in the Fuels & Petrochemical Division of the American Institute of Chemical Engineers. The Group will accelerate its research and development to commercialize this technology and contribute to saving energy and reducing CO2 emissions by applying it to non-conventional fossil resources such as shale gas and oil. 8 9 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014CSR Visions 3 Respect for Human Rights ◆ Establishment of a Safety Culture by Sharing On-site Practices Commitment to Fairness ◆ Compliance Activities in 2014 In order to share knowledge and expertise from both outside and inside Chiyoda about Safety, Quality and the In recent years broader and stricter requirements for compliance have been sought by the global community including Environment (SQE), the Group has been holding a series of Corporate SQE Conventions. its clients, business partners. Chiyoda Corporation has reviewed and reinforced its overall compliance program to man- In November 2014, the 7th Convention titled “Establishment of a Safety Culture by Sharing On-site Practices” was age the Group-wide program as follows: a great success attended by more than 500 ardent participants including corporate management executives, where the safety activities of the Papua New Guinea LNG Project (PNG) were introduced. Their methods and practices were presented, then two-way communication in a pleasant atmosphere was demonstrated in front of the audience so that everyone there could share one and the same understanding as the members of the PNG Project, which has achieved the result of “over 65 million man-hours without lost time injury”, the best safety record in Chiyoda’s history. In this way, the Group will constantly make efforts to instill the corpo- rate policy “Safety is a core value.” ◆ Activities on United Nations Global Compact (UNGC) The Group has been supporting the principles of the UNGC for human rights, labor, environment and anti-corruption to promote and enhance our CSR activities since November 2012. This year, as a member of the study groups in Global Compact Network Japan on anti-corruption and supply chain management, the Group has discussed and studied how to cope with the relevant global issues, and also assisted the Network Japan in the Roundtable conducted among Japan, China and Korea by assigning language-aid staffers: ● Anti-corruption: Recognizing that corruption is a risk which will severely damage corporate governance, trust and reputation in civil or administrative disposition and criminal impeachment, effective measures are studied and discussed. ● Supply Chain Management: Through the attendance at monthly sessions or seminars by experts, the study is deepened on how to promote CSR procurement in collaboration between buyers and suppliers while respecting the environment, the workplace and human rights. Continuous Social Contribution The Group has been supporting its members to promote their social contribution in regional areas under the motto of “CSR to be promoted by each as a participant”. As part of that, volunteer members of the Group employees have been dispatched twice a year to the disaster-affected areas of the Great East Japan Earthquake. This year, volunteer activities have included the interaction with kindergarten children through environmental lessons, reforestation activities, supporting the community in developing an energy circulation system, supporting the construction of a workplace for making regional products. Then, those products have been sold in the Group in-house sale in Yokohama. Furthermore, the Group΄s employees visited a junior high school in the area and gave a lecture to the students on its global activities, and also accepted them on their school trip to Chiyoda Global Headquarters in Yokohama. The Group constantly continues with its efforts to improve its activities by way of exchanging views with regional experts or local residents, and through discussion among volunteer members including in-house questionnaires. 10 ● To raise awareness and deepen knowledge of compliance through training courses and manuals among the employees. ● To recognize and evaluate compliance risk our Group is faced with. ● To implement preventive measures* for major risks with periodic reporting. ● To review, improve and respond to the results by monitoring. ● Chiyoda has launched its management system of PDCA cycle on a periodical basis to cope with compliance risk. * Chiyoda applies due diligence when deciding on business partners including vendors, subcontractors and consultants in terms of anti-corruption including prevention of bribery to foreign public servants. ◆ Establishment of Corporate Risk Management Policy The Chiyoda Group has established its Corporate Risk Management Policy. Under that Policy, the Group aims to pro- mote the risk management activities and planning/implementing its Corporate Strategy, to maintain and enhance its Corporate Value. The Group ensures that it discloses its business risk information to the stakeholders so as to increase transparency, to mitigate the risk by taking proactive countermeasures, then to achieve the business target. ◆ Establishment of Business Continuity Plan (BCP) In 2014, the Group established its BCP, anticipating various risks that would disrupt its business. The BCP provided the direction and course of action in order to avoid such risks, or recover quickly even if such a disruption may occur, and was known to all employees. When a disaster including a fire/an earthquake or any epidemic, terrorism/turmoil, occurs, and if the impact on the Group is anticipated to be large enough to disrupt its Group business/operation, the Group imme- diately declares the imposition of BCP. Then, based on the basic philosophy of “Employees’ safety First”, the Group makes utmost efforts to continue its minimally required important business and to make a quick return to normal operation as well as to contribute to the restoration of communities affected by such a disaster. Main Activities in FY2014 (Including Domestic Group Companies) Dispatch of lecturers to university Training for interns Visiting seminars Community cleanup campaigns Food aid activity TABLE FOR TWO 16 people 67 people 7 times 32 people 1,817 meals ECOCAP program to enable the purchase of vaccines For 231 people Dispatch of volunteers to disaster-hit areas 37 people Collaboration with NPO (Second Harvest Japan, Food Bank Yamanashi) Support to challenged people • In-house sale events of goods made by challenged people: 7 times • Inviting 50 people from the Yokohama Blind Association to a concert Soil preparation for afforestation 11 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 Corporate Governance The Chiyoda Group believes that CSR-oriented management that earns the support and trust of all its stakeholders, including shareholders, customers, and employees, is the basis of its corporate activities. We are therefore working in var- ious ways to enhance corporate governance and actively implement CSR-oriented management, including maintaining transparency and soundness. Corporate Governance System Chiyoda has established the Compliance Unit and the Internal Audit Unit to raise the quality and transparency of manage- ment, improve response to stakeholders and reinforce risk management and the compliance system. We also established the Safety, Quality and Environmental (SQE) Unit and an internal control system directly linked to management. To ensure speedy and accurate decision-making to deal with rapidly changing social and economic conditions, Chiyoda has adopted the executive officer system, which separates the functions of directors, who are responsible for management supervision, from those of executive officers, who are responsible for the execution of business operations. The Board of Directors and Meetings of the Board of Directors The Board of Directors is composed of 10 directors as of June 25, 2015. Important matters concerning the Company are reported and resolved at meetings of the Board of Directors. The Executive Committee, made up of the four representative directors, examines matters before they are submitted for resolution at meetings of the Board of Directors. It makes decisions about business execution matters by unanimous resolution. Audit & Supervisory Board Chiyoda has also adopted the corporate auditor system. The Corporate Auditors Committee is made up of three outside corporate auditors who closely monitor the execution of duties by directors and executive officers. The corporate auditors attend meetings of the Executive Committee and express their opinion when necessary. In addition, their responsibilities include deciding the content of resolutions submitted to the General Meeting of Shareholders, such as the appointment or dismissal of accounting auditors, auditing consolidated financial documents in close cooperation with the accounting auditors, and preparing audit reports. Executive Officer System Where necessary, executive officers cooperate with outside specialists such as corporate lawyers in carrying out duties Corporate Governance and Internal Controls General Shareholders’ Meeting Election Submit/Report Election Report Election Directors Board of Directors Election Supervision Election Submit/ Report Executive Officers 4 Representative Directors Executive Officer Meeting Executive Committee Report Report Audit Audit Corporate Auditors Audit Referral (advice) Submit/Report Submit/ Report Compliance Committee Audit & Supervisory Board Survey, Report Request Internal Controls Management Committee (ICMC) Scheduled Reports (deliverables, etc.) Organization Staffing Submit/Report Report Accounting Auditor Group Companies Business Execution Departments (Risk Manager) Self-Assessment Department Internal Controls Global Operation Unit Corporate Planning Unit Corporate Services Unit, HRM* Unit Finance & Accounting Unit Legal & Project Audit Unit *HRM: Human Resource Management Internal Audit Unit Risk Management Division SQE Unit Compliance Unit Crisis Management Unit (Crisis Manager) Financial Audit ■ : Important organizations and arms of the Company ■ : Departments with internal control functions Risk Management To manage individual project risk and profitability, the Group is increasing management transparency by implementing a double-check/internal control function in administration divisions in addition to a self-auditing system in project operation divisions. Professional auditing teams from administration divisions have effectively implemented project audits to verify the validity of the project execution plans formulated by the project operation divisions. In accordance with our Corporate Risk Management Policy, the Group has established risk management and crisis management systems to deal with significant risks and has appointed risk managers and crisis managers. We constantly work to prevent the occurrence of problems. In the event that a problem occurs, we shall immediately activate a Crisis Control Center that will minimize damage by mobilizing the entire workforce. assigned to them at meetings of the Board of Directors and the Executive Committee. Executive officers provide regular Disaster Prevention Measures progress reports at executive officer and Executive Committee meetings attended by directors and corporate auditors. Reinforcing Internal Controls The Chiyoda Group constantly conducts self-assessments of existing internal control functions and reinforces internal con- trol systems. In addition, the Group has established the Internal Audit Unit as an autonomous unit to perform evaluations. Chiyoda has a system in place for auditing the development and operation of a suitable overall internal control framework and constituent components, and for submitting reports to the Executive Committee. • To ensure the transparency of information and raise the effectiveness of audits, Chiyoda aims to establish an integrated framework of internal controls and a real-time monitoring system for senior management. • To prevent insider trading, an information management system is in place that encompasses Group companies. All important information is appropriately reported to the Board of Directors and the Executive Committee. The Group has prepared Disaster Response Manual (Japanese and English versions) as part of its BCP. The Manual compiles the actions to be taken in the event of a disaster by those working in the Group including all the directors, employees, temporary staff members, customers and partners, and so on. Once a disaster occurs, the Chiyoda Disaster Prevention Force is to be formed, and an emergency communication route is also to be set up to confirm the safety of all the above personnel and their family members as a first priority. Further to be prepared for a disaster, the Group has been taking the following measures: • Stock of emergency supplies such as PHS, drinking water, foods, blankets • Provision of helmets and emergency bags to all the personnel • Formation of self-protective disaster prevention unit • Participation in an emergency drill to be conducted twice a year both in Chiyoda Global Headquarters and in Koyasu Office & Research Park • Safety confirmation drill to be conducted a few times a year 12 13 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 Corporate Information (As of March 31, 2015) Corporate Data Chiyoda Global Headquarters Minato Mirai 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 May 1, 2015) Number of Employees 1,573 (Non-Consolidated) 6,097 (Consolidated) Annual Fiscal Close March 31 Shareholders’ Meeting June Board of Directors Audit & Supervisory Board Executive Committee President Internal Audit Unit Executive Office Unit Risk Management Division Technology & Engineering Division Downstream & Non Hydrocarbon Project Operations SQE Unit Compliance Unit Crisis Management Unit Corporate Planning & Management Division Corporate Planning Unit IR, PR & CSR Section Corporate Services Unit HRM* Unit Finance & Accounting Unit Legal & Project Audit Unit Business Development Division Strategic Business Planning & Administration Unit Corporate Relations Sec. Business Development Unit 1 Business Development Unit 2 Business Development Unit 3 Energy Infrastructure Planning Unit Global Project Management Division Project Administration Unit Project Management Unit IT Management Unit Global Operation Unit Global Human Resource Planning Unit Work Process Innovation Task Team Chiyoda Globalization Task Force Team Change the Mindset 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 Project Logistics & Construction Division PLC* Planning & Administration Unit Procurement Unit Construction Unit Commissioning Unit Offshore & Upstream Project Operations Offshore & Upstream Business Planning Unit Offshore & Upstream Business Operation Unit Gas & LNG Project Operations No. 1 Gas & LNG Project Unit No. 1 Strategic Project Development Unit Gas & LNG Project Operations No. 2 Gas & LNG Project Unit No. 2 HRM: Human Resource Management PLC: Project Logistics & Construction IP: Infrastructure Project Downstream & Chemical Project Unit International Downstream Project Unit Metals & Mining Project Unit Global Collaboration Unit Infrastructure Project Operations IP* Planning & Administration Unit Strategic Business & Investment Management Unit Hydrogen Supply Chain Development Unit Green Infrastructure Project Unit Environmental Project Unit Technology Development Unit Research & Development Center ChAS & Life Science Project Operations ChAS/Life Science Business Planning & Administration Unit ChAS Marketing Unit Advanced Process Engineering Unit Plant Diagnosis Unit Consulting Unit Pharmaceutical Industries Project Unit Space & Bio Engineering Unit 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 Xodus Group (Holdings) Ltd Xodus Subsea Ltd. Milan Representative Office Chiyoda Corporation Netherlands B.V. Chiyoda & Public Works Co., Ltd. Sales Base Engineering Center Procurement Center Project Execution Base Operation Support Chiyoda International Corporation Beijing Office Chiyoda Corporation (Shanghai) Korea Representative Office The Netherlands UK Italy Saudi Arabia Qatar UAE India China Myanmar Thailand Malaysia Korea JapanUSA Philippines Chiyoda Philippines Corporation Singapore Indonesia Australia Mozambique Chiyoda Oceania Pty Limited Brazil PT. Chiyoda International Indonesia Chiyoda Human Resources International (Pte) Limited Chiyoda Singapore (Pte) Limited Chiyoda Malaysia Sdn. Bhd. Chiyoda Sarawak Sdn. Bhd. Chiyoda Mozambique Limitada Chiyoda (Thailand) Limited Chiyoda do Brasil Representações Ltda. 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 15 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 Directors and Officers (As of June 25, 2015) Stock Information (As of March 31, 2015) Board of Directors Representative Directors Directors President & CEO Shogo Shibuya Executive Vice President Katsuo Nagasaka Senior Executive Vice President Senior Executive Vice President Executive Vice President & CFO Keiichi Nakagaki Executive Vice President Masahiko Kojima Hiroshi Ogawa Senior Vice President Ryosuke Shimizu Masahito Kawashima Senior Vice President Arata Sahara Director Director Masaji Santo*1 Nobuo Tanaka*1 Audit & Supervisory Board Members Munehiko Nakano*2 Mikio Kobayashi*2 Yukihiro Imadegawa*2 Executive Officers Executive Vice President Tadashi Izawa Vice President Eisuke Oki Senior Vice President Masao Ishikawa Vice President Masao Fujiwara Senior Vice President Mamoru Nakano Vice President Yasumitsu Abe Senior Vice President Akira Fujisawa Vice President Jinei Yamaguchi Senior Vice President Nobuyuki Uchida Vice President Toshiyuki Kariya Senior Vice President Hiromi Koshizuka Vice President Seiichiro Ikeda Vice President Shuichi Wada Vice President Terunobu Iio Vice President Noriyuki Kasuya Vice President Hideaki Tomiku *1: External Director *2: Outside Corporate Auditor 16 Authorized Shares 570,000,000 Number of Shareholders 24,863 Capital Stock Issued 260,324,529 Number of Shares 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, 2015) 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 BNP Paribas Securities (Japan) Limited Meiji Yasuda Life Insurance Company State Street Bank and Trust Company 505041 Trust & Custody Services Bank, Ltd. Japan Trustee Services Bank, Ltd. (Trust Account 7) Breakdown by shareholder 86,931 11,991 10,759 9,033 5,888 3,564 2,265 2,245 2,179 1,728 Ratio Shares Owned (%) 33.39 4.60 4.13 3.47 2.26 1.36 0.87 0.86 0.83 0.66 Total Number of Shares Issued: 260,325 thousand 20.84 22.98 15.13 37.43 3.62 Financial Institutions Securities Companies Other Corporations Foreign Investors and Others Individuals and Others Monthly Stock Price Range on the Tokyo Stock Exchange Share Price (left) Volume (right) Nikkei Stock Average (right) (Yen) 2,100 1,400 700 0 (Yen) 21,000 14,000 7,000 (Thousands of shares) 100,000 50,000 4 5 6 7 8 9 101112 2010 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 2011 2012 2013 2014 0 1 2 3 2015 17 CHIYODA CORPORATION ANNUAL REPORT FY2014CHIYODA CORPORATION ANNUAL REPORT FY2014 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 2015) Selected in FTSE Group’s responsible investment index Consolidated F i n a n c i a l S t a t e m e n t s FY2014 For the Year Ended March 31, 2015, and Independent Auditor’s Report 200,834 497,234 136,059 1,523,793 97,483 57,750 3,704,817 43,884 115,958 6,016 60,096 137 226,093 (102,538 ) Consolidated Balance Sheet Chiyoda Corporation and Consolidated Subsidiaries Chiyoda Corporation and Consolidated Subsidiaries (March 31, 2015) Consolidated Balance Sheet March 31, 2015 Consolidated Balance Sheet March 31, 2015 Millions of Yen ASSETS ASSETS 2015 2015 2014 Millions of Yen Thousands of U.S. Dollars (Note 1) 2014 2015 Thousands of U.S. Dollars (Note 1) 2015 LIABILITIES AND EQUITY LIABILITIES AND EQUITY CURRENT ASSETS: CURRENT ASSETS: Cash and cash equivalents (Note 13) Cash and cash equivalents (Note 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 contracts (Notes 3 and 13) contracts (Notes 3 and 13) Costs of construction contracts in process Accounts receivable—other Jointly controlled assets of joint venture (Note 13) Deferred tax assets (Note 10) Prepaid expenses and other Costs of construction contracts in process Accounts receivable—other Jointly controlled assets of joint venture (Note 13) Deferred tax assets (Note 10) Prepaid expenses and other ¥ 113,246 69 29,740 (56 ) ¥ 113,246 ¥ 145,303 69 64 29,740 56,502 (56 ) (3 ) ¥ 145,303 943,719 $ 575 64 247,838 56,502 (3 ) (472 ) $ CURRENT LIABILITIES: Short-term bank loans (Note 13) Current portion of long-term debt (Notes 6, 12 and 13) Notes and accounts payable—trade (Note 13) Advance receipts on construction contracts CURRENT LIABILITIES: Short-term bank loans (Note 13) Current portion of long-term debt (Notes 6, 12 and 13) Notes and accounts payable—trade (Note 13) Advance receipts on construction contracts 943,719 575 247,838 (472 ) Income taxes payable (Note 13) Income taxes payable (Note 13) 24,100 59,668 16,327 182,855 11,697 6,930 16,503 24,100 33,826 59,668 4,936 16,327 127,466 182,855 11,697 18,868 6,930 5,629 200,834 16,503 497,234 33,826 4,936 136,059 1,523,793 127,466 18,868 97,483 5,629 57,750 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 Accrued expenses and other Accrued expenses and other Millions of Yen Millions of Yen 2015 2015 2014 Thousands of U.S. Dollars (Note 1) 2014 2015 Thousands of U.S. Dollars (Note 1) 2015 ¥ 991 51 137,652 123,869 1,366 3,352 364 3,988 22,703 ¥ ¥ 991 1,283 82 51 145,392 137,652 80,182 123,869 1,366 5,513 4,985 3,352 507 364 4,002 3,988 22,703 19,730 ¥ $ 1,283 8,258 82 431 1,147,104 145,392 1,032,241 80,182 5,513 11,384 27,935 4,985 3,035 507 33,241 4,002 19,730 189,197 $ 8,258 431 1,147,104 1,032,241 11,384 27,935 3,035 33,241 189,197 Total current assets Total current assets 444,578 444,578 409,096 409,096 3,704,817 PROPERTY, PLANT AND EQUIPMENT: PROPERTY, PLANT AND EQUIPMENT: Land Land Buildings and structures Buildings and structures Machinery and equipment Machinery and equipment Tools, furniture, and fixtures Tools, furniture, and fixtures Construction in progress Construction in progress Total Total Accumulated depreciation Accumulated depreciation 5,266 13,915 721 7,211 16 27,131 (12,304 ) 5,265 5,266 12,557 13,915 721 944 7,211 7,106 16 286 26,159 27,131 (12,304 ) (11,201 ) 43,884 5,265 115,958 12,557 6,016 944 7,106 60,096 137 286 26,159 226,093 (11,201 ) (102,538 ) Total current liabilities Total current liabilities 294,339 294,339 261,679 261,679 2,452,831 2,452,831 LONG-TERM LIABILITIES: Long-term debt (Notes 6, 12 and 13) Liability for retirement benefits (Note 7) Provision for treatment of PCB waste Asset retirement obligations Other (Note 10) LONG-TERM LIABILITIES: Long-term debt (Notes 6, 12 and 13) Liability for retirement benefits (Note 7) Provision for treatment of PCB waste Asset retirement obligations Other (Note 10) 10,063 1,070 339 983 636 10,063 10,040 1,070 2,080 365 339 970 983 636 2,121 10,040 83,863 2,080 8,920 2,831 365 8,196 970 2,121 5,301 83,863 8,920 2,831 8,196 5,301 Total long-term liabilities Total long-term liabilities 13,093 13,093 15,578 15,578 109,113 109,113 COMMITMENTS AND CONTINGENT LIABILITIES COMMITMENTS AND CONTINGENT LIABILITIES Net property, plant and equipment Net property, plant and equipment 14,826 14,826 14,958 14,958 123,555 123,555 (Notes 6, 12, 14 and 15) (Notes 6, 12, 14 and 15) INVESTMENTS AND OTHER ASSETS: Investment securities (Notes 4 and 13) Investments in and advances to unconsolidated subsidiaries and associated companies (Note 5) INVESTMENTS AND OTHER ASSETS: Investment securities (Notes 4 and 13) Investments in and advances to unconsolidated subsidiaries and associated companies (Note 5) Goodwill Software Asset for retirement benefits Other assets (Note 10) Allowance for doubtful accounts Goodwill Software Asset for retirement benefits Other assets (Note 10) Allowance for doubtful accounts 23,940 23,940 21,131 21,131 199,501 8,547 12,034 7,393 33 4,717 (231 ) 8,547 8,155 12,395 12,034 7,056 7,393 33 34 4,717 2,528 (231 ) (68 ) 8,155 71,227 100,283 12,395 61,611 7,056 280 34 2,528 39,314 (68 ) (1,930 ) Total investments and other assets Total investments and other assets 56,434 56,434 51,233 51,233 470,288 EQUITY (Notes 8 and 18): Common stock—authorized, 570,000 thousand shares; issued, 260,324 thousand shares in 2015 and 2014 EQUITY (Notes 8 and 18): Common stock—authorized, 570,000 thousand shares; issued, 260,324 thousand shares in 2015 and 2014 199,501 71,227 100,283 61,611 280 39,314 (1,930 ) 470,288 Capital surplus Retained earnings Treasury stock—at cost, 1,323 thousand shares in 2015 and Capital surplus Retained earnings Treasury stock—at cost, 1,323 thousand shares in 2015 and 1,310 thousand shares in 2014 1,310 thousand shares in 2014 Accumulated other comprehensive income (loss): Unrealized gain on available-for-sale securities Deferred (loss) gain on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Total Minority interests Accumulated other comprehensive income (loss): Unrealized gain on available-for-sale securities Deferred (loss) gain on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Total Minority interests 43,396 37,112 115,831 43,396 43,396 37,112 37,112 115,831 109,525 361,636 43,396 309,272 37,112 109,525 965,260 361,636 309,272 965,260 (1,405 ) (1,405 ) (1,390 ) (1,390 ) (11,712 ) (11,712 ) 7,218 (2,064 ) 5,229 1,076 206,395 2,010 7,218 4,920 648 (2,064 ) 2,486 5,229 (287 ) 1,076 196,411 206,395 2,010 1,619 4,920 60,152 (17,201 ) 648 43,576 2,486 8,974 (287 ) 1,719,959 196,411 1,619 16,756 60,152 (17,201 ) 43,576 8,974 1,719,959 16,756 TOTAL TOTAL ¥ 515,839 ¥ 515,839 ¥ 475,288 ¥ 475,288 $ 4,298,660 $ 4,298,660 TOTAL TOTAL ¥ 515,839 ¥ 515,839 ¥ 475,288 ¥ 475,288 $ 4,298,660 $ 4,298,660 Total equity Total equity 208,405 208,405 198,031 198,031 1,736,715 1,736,715 See notes to consolidated financial statements. See notes to consolidated financial statements. - 2 - - 2 - 1 2 Consolidated Financial StatementsConsolidated Financial Statements Consolidated Statement of Income Chiyoda Corporation and Consolidated Subsidiaries (Year Ended March 31, 2015) Consolidated Statement of Comprehensive Income Chiyoda Corporation and Consolidated Subsidiaries (Year Ended March 31, 2015) Consolidated Statement of Income Year Ended March 31, 2015 Consolidated Statement of Comprehensive Income Year Ended March 31, 2015 Millions of Yen 2015 2014 Thousands of U.S. Dollars (Note 1) 2015 Millions of Yen 2015 2014 Thousands of U.S. Dollars (Note 1) 2015 ¥ 480,979 ¥ 446,147 $ 4,008,160 NET INCOME BEFORE MINORITY INTERESTS ¥ 11,212 ¥ 13,210 $ 93,441 OTHER COMPREHENSIVE INCOME (LOSS) (Note 16): Unrealized gain (loss) on available-for-sale securities Deferred loss on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Share of other comprehensive income of associates accounted for using the equity method 2,298 (2,712 ) 2,815 1,364 (1,664 ) (2,242 ) 3,625 19,151 (22,601 ) 23,461 11,367 142 104 1,189 Total other comprehensive income (loss) 3,908 (176 ) 32,568 COMPREHENSIVE INCOME ¥ 15,121 ¥ 13,034 $ 126,009 TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Minority interests ¥ 14,722 398 ¥ 13,087 (53 ) $ 122,687 3,322 See notes to consolidated financial statements. REVENUE COST OF REVENUE 435,327 404,685 3,627,728 Gross profit 45,651 41,462 380,432 SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (Note 11) 24,185 20,383 201,543 Operating income 21,466 21,079 178,889 OTHER INCOME (EXPENSES): Interest and dividend income Interest expense Equity in losses of associated companies Foreign exchange loss Loss on valuation of investment securities Retirement benefit expenses (Note 7) Other—net Other income—net 3,111 (255 ) (783 ) (1,182 ) (258 ) (85 ) 545 2,590 (233 ) (374 ) (145 ) (299 ) (78 ) 1,459 25,925 (2,128 ) (6,532 ) (9,851 ) (2,157 ) (708 ) 4,547 INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 22,012 22,538 183,436 INCOME TAXES (Note 10): Current Deferred Total income taxes 6,257 4,542 13,101 (3,773 ) 10,799 9,327 NET INCOME BEFORE MINORITY INTERESTS 11,212 13,210 MINORITY INTERESTS IN NET INCOME 183 (236 ) 52,144 37,851 89,995 93,441 1,529 NET INCOME ¥ 11,029 ¥ 13,447 $ 91,911 PER SHARE OF COMMON STOCK (Notes 2.y and 17): Basic net income Cash dividends applicable to the year Yen U.S. Dollars ¥ 42.58 13.00 ¥ 51.91 16.00 $ 0.35 0.10 See notes to consolidated financial statements. - 3 - - 4 - 3 4 Consolidated Financial StatementsConsolidated Financial Statements Consolidated Statement of Changes in Equity (Year Ended March 31, 2015) Chiyoda Corporation and Consolidated Subsidiaries Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Changes in Equity Year Ended March 31, 2015 Consolidated Statement of Changes in Equity Year Ended March 31, 2015 Thousands Thousands Outstanding Number of Shares of Common Stock Outstanding Number of Shares of Common Stock Capital Surplus Common Stock Millions of Yen Millions of Yen Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) Common Stock Retained Earnings Capital Surplus Treasury Stock Unrealized Gain on Available- for-Sale Securities Retained Earnings Deferred (Loss) Gain on Derivatives under Hedge Accounting Treasury Stock Unrealized Gain on Available- for-Sale Securities Foreign Currency Translation Adjustments Deferred (Loss) Gain on Defined Derivatives Retirement Benefit under Hedge Accounting Plans Foreign Currency Translation Adjustments Total Defined Retirement Benefit Plans Minority Interests Total Equity Total Minority Interests Total Equity BALANCE, APRIL 1, 2013 BALANCE, APRIL 1, 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 ¥ (1,235 ) ¥ 188,386 ¥ 969 ¥ 188,386 ¥ 189,356 ¥ 969 ¥ 189,356 Net income Cash dividends, ¥19.00 per share Change of scope of consolidation Purchase of treasury stock Net change in the year Net income Cash dividends, ¥19.00 per share Change of scope of consolidation Purchase of treasury stock Net change in the year (31 ) BALANCE, MARCH 31, 2014 BALANCE, MARCH 31, 2014 (APRIL 1, 2014, as previously reported) (APRIL 1, 2014, as previously reported) 259,014 13,447 (4,921 ) 12 13,447 (4,921 ) 12 (31 ) (40 ) (40 ) (1,664 ) (2,242 ) (1,664 ) 3,721 (2,242 ) ¥ (287 ) 13,447 (4,921 ) 12 (40 ) (472 ) 3,721 ¥ (287 ) 650 13,447 (4,921 ) 12 (40 ) (472 ) 13,447 (4,921 ) 12 (40 ) 178 650 13,447 (4,921 ) 12 (40 ) 178 43,396 259,014 37,112 43,396 109,525 37,112 (1,390 ) 109,525 4,920 (1,390 ) 648 4,920 2,486 648 (287 ) 2,486 196,411 (287 ) 1,619 196,411 198,031 1,619 198,031 Cumulative effect of accounting change Cumulative effect of accounting change (579 ) (579 ) (579 ) (579 ) (579 ) (579 ) BALANCE, APRIL 1, 2014 (as restated) BALANCE, APRIL 1, 2014 (as restated) 259,014 Net income Cash dividends, ¥16.00 per share Purchase of treasury stock Net change in the year Net income Cash dividends, ¥16.00 per share Purchase of treasury stock Net change in the year (12 ) 43,396 259,014 37,112 43,396 108,946 37,112 (1,390 ) 108,946 4,920 (1,390 ) 648 4,920 2,486 648 (287 ) 2,486 195,831 (287 ) 1,619 195,831 197,451 1,619 197,451 11,029 (4,144 ) 11,029 (4,144 ) (12 ) (15 ) (15 ) 2,298 (2,712 ) 2,298 2,743 (2,712 ) 1,363 11,029 (4,144 ) (15 ) 3,693 2,743 1,363 391 11,029 (4,144 ) (15 ) 3,693 11,029 (4,144 ) (15 ) 4,084 391 11,029 (4,144 ) (15 ) 4,084 Chiyoda Corporation and Consolidated Subsidiaries BALANCE, MARCH 31, 2015 259,001 BALANCE, MARCH 31, 2015 Chiyoda Corporation and Consolidated Subsidiaries ¥ 43,396 259,001 ¥ 37,112 ¥ 43,396 ¥ 115,831 ¥ 37,112 ¥ (1,405 ) ¥ 115,831 ¥ 7,218 ¥ (1,405 ) ¥ (2,064 ) ¥ 7,218 ¥ 5,229 ¥ (2,064 ) ¥ 1,076 ¥ 5,229 ¥ 206,395 ¥ 1,076 ¥ 2,010 ¥ 206,395 ¥ 208,405 ¥ 2,010 ¥ 208,405 Consolidated Statement of Changes in Equity Year Ended March 31, 2015 Consolidated Statement of Changes in Equity Year Ended March 31, 2015 BALANCE, MARCH 31, 2014 BALANCE, MARCH 31, 2014 Common Stock Capital Surplus Common Stock Retained Earnings Capital Surplus Treasury Stock Thousands of U.S. Dollars (Note 1) Thousands of U.S. Dollars (Note 1) Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss) Unrealized Gain on Available- Retained for-Sale Earnings Securities Deferred (Loss) Gain on Derivatives Treasury under Hedge Stock Accounting Unrealized Foreign Gain on Currency Available- Translation for-Sale Securities Adjustments Deferred Defined (Loss) Gain on Retirement Derivatives Benefit under Hedge Accounting Plans Foreign Currency Translation Adjustments Total Defined Retirement Benefit Plans Minority Interests Total Equity Total Minority Interests Total Equity (APRIL 1, 2014, as previously reported) (APRIL 1, 2014, as previously reported) $ 361,636 $ 309,272 $ 361,636 $ 912,715 $ 309,272 $ (11,586 ) $ 912,715 $ 41,001 $ (11,586 ) 5,400 $ $ 41,001 $ 20,717 5,400 $ (2,392 ) $ $ 20,717 $ 1,636,765 $ (2,392 ) $ 13,494 $ 1,636,765 $ 1,650,259 $ 13,494 $ 1,650,259 Cumulative effect of accounting change Cumulative effect of accounting change (4,831 ) (4,831 ) (4,831 ) (4,831 ) (4,831 ) (4,831 ) BALANCE, APRIL 1, 2014 (as restated) BALANCE, APRIL 1, 2014 (as restated) 361,636 309,272 361,636 907,883 309,272 (11,586 ) 907,883 41,001 (11,586 ) 5,400 41,001 20,717 5,400 (2,392 ) 20,717 1,631,933 (2,392 ) 13,494 1,631,933 1,645,427 13,494 1,645,427 Net income Cash dividends, $0.13 per share Purchase of treasury stock Net change in the year Net income Cash dividends, $0.13 per share Purchase of treasury stock Net change in the year 91,911 (34,535 ) (125 ) 91,911 (34,535 ) 19,151 (125 ) (22,601 ) 19,151 22,858 (22,601 ) 11,366 91,911 (34,535 ) (125 ) 30,775 22,858 11,366 3,262 91,911 91,911 (34,535 ) (34,535 ) (125 ) (125 ) 30,775 34,038 3,262 91,911 (34,535 ) (125 ) 34,038 BALANCE, MARCH 31, 2015 BALANCE, MARCH 31, 2015 $ 361,636 $ 309,272 $ 361,636 $ 965,260 $ 309,272 - 5 - $ (11,712 ) $ 965,260 $ 60,152 - 5 - $ (11,712 ) $ (17,201 ) $ 60,152 $ 43,576 $ (17,201 ) $ 8,974 $ 43,576 $ 1,719,959 $ 8,974 $ 16,756 $ 1,719,959 (Continued) $ 1,736,715 $ 16,756 (Continued) $ 1,736,715 See notes to consolidated financial statements. See notes to consolidated financial statements. 5 6 - 6 - - 6 - (Concluded) (Concluded) Consolidated Financial StatementsConsolidated Financial Statements Consolidated Statement of Cash Flows Chiyoda Corporation and Consolidated Subsidiaries (Year Ended March 31, 2015) Consolidated Statement of Cash Flows Year Ended March 31, 2015 Chiyoda Corporation and Consolidated Subsidiaries Consolidated Statement of Cash Flows Year Ended March 31, 2015 OPERATING ACTIVITIES: Income before income taxes and minority interests ¥ 22,012 ¥ 22,538 $ 183,436 Net cash used in operating activities—(Forward) ¥ (24,145 ) ¥ (17,177 ) $ (201,211 ) Millions of Yen 2015 2014 Thousands of U.S. Dollars (Note 1) 2015 Millions of Yen 2015 2014 Thousands of U.S. Dollars (Note 1) 2015 Adjustments for: Income taxes paid Depreciation Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Decrease in allowance for warranty costs for completed works (Decrease) increase in allowance for losses on construction contracts Increase (decrease) in liability for retirement benefits Loss on sales and disposals of fixed assets Foreign exchange gain—net Equity in losses of associated companies Loss on valuation of investment securities Changes in operating assets and liabilities: Decrease (increase) in trade notes and accounts receivable, and costs and estimated earnings on long-term construction contracts Increase in costs of construction contracts in process (Decrease) increase in trade notes and accounts payable Increase (decrease) in advance receipts on construction contracts (Increase) decrease in accounts receivable—other Increase in jointly controlled assets of joint venture Decrease in deposits received Decrease (increase) in interest and dividend receivable Other—net Total adjustments (12,550 ) 3,569 1,469 216 (13,709 ) 3,196 825 (12 ) (104,587 ) 29,745 12,248 1,801 (170 ) (47 ) 100 338 (499 ) 783 258 21,217 (25,282 ) (9,759 ) 43,019 (4,872 ) (55,246 ) (1,710 ) 109 (7,101 ) (46,157 ) (4 ) (1,424 ) 2,534 (768 ) 31 (224 ) 374 (1,896 ) (16,974 ) 23,650 (2,111 ) 2,519 (31,955 ) (2,141 ) (713 ) (2,334 ) (39,715 ) (395 ) 839 2,820 (4,164 ) 6,532 2,157 176,813 (210,689 ) (81,330 ) 358,494 (40,602 ) (460,391 ) (14,251 ) 913 (59,176 ) (384,648 ) Net cash used in operating activities—(Forward) ¥ (24,145 ) ¥ (17,177 ) $ (201,211 ) INVESTING ACTIVITIES: Net decrease in time deposits Proceeds from redemption 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 Purchase of shares of subsidiaries resulting in change in scope of consolidation Payments of short-term loans receivable Payments of long-term loans receivable Proceeds from collections of long-term loans Other—net 192 2,400 (1,981 ) 90 (3,294 ) (7 ) (4,046 ) (9,134 ) (445 ) (712 ) 101 41 (1,441 ) 146 (2,431 ) (1,245 ) (605 ) 118 14 (12,014 ) 1,224 (20,259 ) (10,377 ) (5,048 ) 985 123 Net cash used in investing activities (5,444 ) (16,796 ) (45,366 ) FINANCING ACTIVITIES: Net (decrease) increase in short-term bank loans Repayments of long-term debt Payments of cash dividends Other—net (390 ) (4 ) (4,139 ) (34 ) 11 (264 ) (4,914 ) (81 ) (3,257 ) (40 ) (34,493 ) (284 ) Net cash used in financing activities (4,569 ) (5,249 ) (38,078 ) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 2,101 3,974 17,514 NET DECREASE IN CASH AND CASH EQUIVALENTS (32,057 ) (35,249 ) (267,141 ) INCREASE IN CASH AND CASH EQUIVALENTS FROM NEWLY CONSOLIDATED SUBSIDIARY 323 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 145,303 180,229 1,210,861 CASH AND CASH EQUIVALENTS, END OF YEAR ¥ 113,246 ¥ 145,303 $ 943,719 See notes to consolidated financial statements. - 7 - (Continued) - 8 - (Concluded) 7 8 Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements Chiyoda Corporation and Consolidated Subsidiaries (Year Ended March 31, 2015) Notes to Consolidated Financial Statements Year Ended March 31, 2015 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 ("Japanese GAAP"), 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 have been made in the 2014 consolidated financial statements to conform to the classifications used in 2015. 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 ¥120 to $1, the approximate rate of exchange at March 31, 2015. 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, 2015, include the accounts of the Company and its 30 significant (29 in 2014) subsidiaries (together, the "Group"). Under the control and influence concepts, 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 six (five in 2014) associated companies are accounted for by the equity method in 2015. 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. Most of the foreign consolidated subsidiaries have a December 31 year-end which does not accord with that of the Company. As a result, adjustments have been made for any significant transactions which took place during the period between the year-end of these subsidiaries and the year-end of the Company. 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 5 to 20 years. 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 also eliminated. b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements." PITF No. 18 prescribes that the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) exclusion of minority interests from net income, if contained in net income. c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—In March 2008, the ASBJ issued ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments." The new standard requires adjustments to be made to conform the associate's accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate's financial statements are used in applying the equity method unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and (e) exclusion of minority interests from net income, if contained in net income. - 9 - 9 10 - 10 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements d. Construction Contracts—In December 2007, 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 as follows: 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 cost of revenue. e. 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, certificates of deposit, and commercial paper, all of which mature or become due within three months of the date of acquisition. f. Investment Securities—All marketable securities are classified as available-for-sale securities and are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. The cost of securities sold is determined based on the moving-average method. 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. g. 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. h. 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. i. 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. j. 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 lease is depreciated by the straight-line method over the respective lease periods. k. Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance 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. l. Software—Software for internal use is amortized on a straight-line basis over its estimated useful life (five years at the maximum). m. Other Assets—Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line method over their estimated useful lives. n. Allowance for Warranty Costs for Completed Work—The allowance for warranty costs for completed work is provided based on past rate experience. o. 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 in the balance sheet. p. 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. q. Retirement and Pension Plans—The Company and consolidated subsidiaries have funded or unfunded defined benefit pension plans and a defined contribution pension plans for employees. Certain consolidated subsidiaries have defined benefit corporate pension plans or severance lump-sum payment plans, and calculate retirement benefit expenses by using the simplified method. Effective April 1, 2000, the Company and its domestic consolidated subsidiaries adopted a new accounting standard for 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 projected benefit obligations are attributed to periods on a straight-line basis. Actuarial gains and losses are amortized on a straight-line basis over 10 years within the average remaining service period. Past service costs are amortized on a straight-line basis over 10 years within the average remaining service period. 11 12 - 11 - - 12 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements The transitional obligation of ¥5,696 million ($47,466 thousand) is being amortized and charged to income over 15 years using the straight-line amortization method and included in an operating expense in the consolidated statements of income for the years ended March 31, 2015 and 2014. In May 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 were followed by partial amendments from time to time through 2009. (a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). (b) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining service period 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 are 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, are treated as reclassification adjustments. (c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods, the discount rate, and expected future salary increases. This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, all 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 applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014, and for (c) above, effective April 1, 2014. With respect to (c) above, the Company changed the method of attributing expected benefit to periods from a straight-line basis to a benefit formula basis, the method of determining discount rate from using the period which approximates the expected average remaining service period to using a single weighted average discount rate reflecting the estimated timing and amount of benefit payment, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. As a result, liability for retirement benefits as of April 1, 2014, increased by ¥901 million ($7,513 thousand), and retained earnings as of April 1, 2014, decreased by ¥579 million ($4,831 thousand). The effect on the profit and loss for the year ended March 31, 2015, was not material. r. Asset Retirement Obligations—In March 2008, the ASBJ issued 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. s. Research and Development Costs—Research and development costs are charged to income as incurred. t. 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 notes 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. All other leases are accounted for as operating leases. u. 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 income tax rates to the temporary differences. The Company and its wholly owned domestic subsidiaries file 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. v. 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. 13 14 - 13 - - 14 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements w. Foreign Currency Financial Statements—Balance sheet accounts of consolidated foreign subsidiaries are z. Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement No. 24, 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. x. Derivatives and Hedging Activities—The Group 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 Group does not enter into derivatives for trading or speculative purposes. Derivative financial instruments are classified and accounted for as follows: "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 gains or losses 3. CONSTRUCTION CONTRACTS 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. y. 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. Diluted net income per share is not disclosed because there is no potential stock that has a dilutive effect for the fiscal years ended March 31, 2015 and 2014. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year. Costs and estimated earnings recognized with respect to construction contracts which are accounted for by the percentage-of-completion method at March 31, 2015 and 2014, were as follows: Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 Costs and estimated earnings Amounts billed ¥ 397,990 (373,890 ) ¥ 379,837 (363,334 ) $ 3,316,590 (3,115,755 ) Net ¥ 24,100 ¥ 16,503 $ 200,834 4. INVESTMENT SECURITIES Investment securities at March 31, 2015 and 2014, consisted of the following: Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 Noncurrent—Equity securities ¥ 23,940 ¥ 21,131 $ 199,501 The costs and aggregate fair values of investment securities at March 31, 2015 and 2014, were as follows: March 31, 2015 Millions of Yen Cost Unrealized Gains Unrealized Losses Fair Value Securities classified as— Available-for-sale—equity securities ¥ 11,471 ¥ 10,426 ¥ 21,898 15 16 - 15 - - 16 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements March 31, 2014 6. LONG-TERM DEBT Securities classified as— Available-for-sale—equity securities March 31, 2015 Millions of Yen Cost Unrealized Gains Unrealized Losses Fair Value ¥ 11,465 ¥ 7,128 ¥ 2 ¥ 18,591 Thousands of U.S. Dollars Unrealized Gains Unrealized Losses Fair Value Cost Securities classified as— Available-for-sale—equity securities $ 95,597 $ 86,888 $ 182,485 Available-for-sale securities whose fair value cannot be reliably determined at March 31, 2014, were as follows. Similar information for 2015 is disclosed in Note 13. March 31, 2014 Securities classified as—Available-for-sale—equity securities Carrying Amount Millions of Yen ¥ 2,540 5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES Investments in and advances to unconsolidated subsidiaries and associated companies at March 31, 2015 and 2014, were as follows: Long-term debt at March 31, 2015 and 2014, consisted of the following: Long-term loans principally from banks, due serially through 2018, with interest rates at 2.0% (2015) and ranging from 1.9% to 2.0% (2014)—Unsecured Obligations under finance leases Total Less current portion Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 10,020 95 10,115 (51 ) ¥ 10,023 99 10,122 (82 ) $ 83,502 792 84,295 (431 ) Long-term debt, less current portion ¥ 10,063 ¥ 10,040 $ 83,863 Annual maturities of long-term debt, excluding finance leases, at March 31, 2015, were as follows: Year Ending March 31 2016 2017 2018 2019 2020 2021 and thereafter Total Millions of Yen Thousands of U.S. Dollars ¥ 4 5 10,005 3 1 $ 40 43 83,376 25 16 ¥ 10,020 $ 83,502 Millions of Yen ¥ 15,000 ¥ 15,000 Thousands of U.S. Dollars $ 125,000 $ 125,000 Investments Long-term receivables Total Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 7,387 1,159 ¥ 7,183 971 $ 61,566 9,661 ¥ 8,547 ¥ 8,155 $ 71,227 Commitment-line contracts at March 31, 2015, were as follows: Commitment-line contracts Unused commitments 7. RETIREMENT AND PENSION PLANS The Company and consolidated subsidiaries have funded or unfunded defined benefit pension plans and a defined contribution pension plans for employees. Under defined benefit corporate pension plans, all of which are funded, employees are entitled to certain lump-sum payments or pension payments based on cumulated points which are granted in accordance with years of continuous employment, occupational classification and performance evaluation. Under severance lump-sum payment plans, employees are entitled to certain lump-sum payments based on salary and service period. 17 18 - 17 - - 18 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements Certain consolidated subsidiaries have defined benefit corporate pension plans or severance lump-sum payment plans, and calculate retirement benefit expenses by using the simplified method. (3) The changes in the liability recorded in the consolidated balance sheet by using the simplified method for the years ended March 31, 2015 and 2014, were as follows: (1) The changes in defined benefit obligation for the years ended March 31, 2015 and 2014, were as follows: Balance at beginning of year (as previously reported) Cumulative effect of accounting change Balance at beginning of year (as restated) Current service cost Interest cost Actuarial losses Benefits paid The amount of obligation processing with the changes from simplified method to the principle method Others Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 21,787 901 22,689 913 198 6 (1,709 ) ¥ 20,630 20,630 593 326 176 (1,691 ) 1,751 $ 181,562 7,513 189,076 7,609 1,657 58 (14,247 ) 52 441 Balance at beginning of year Benefit costs Benefits paid Contribution to the plans Decrease by implementation of defined contribution plans The amount of expense processing with the changes from simplified method to the principle method Change of scope of consolidation Others Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 629 235 (95 ) (107 ) 39 ¥ 943 300 (46 ) (332 ) (173 ) (433 ) 71 299 $ 5,249 1,959 (799 ) (895 ) 326 Balance at end of year ¥ 700 ¥ 629 $ 5,839 (4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined Balance at end of year ¥ 22,151 ¥ 21,787 $ 184,594 benefit obligation and plan assets (2) The changes in plan assets for the years ended March 31, 2015 and 2014, were as follows: Balance at beginning of year Expected return on plan assets Actuarial losses Contributions from the employer Benefits paid The amount of obligation processing with the changes from simplified method to the principle method Others Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 20,370 405 1,495 1,195 (1,709 ) ¥ 17,705 707 853 1,477 (1,691 ) $ 169,757 3,381 12,458 9,963 (14,247 ) 1,318 57 481 Balance at end of year ¥ 21,815 ¥ 20,370 $ 181,795 Funded defined benefit obligation Plan assets Unfunded defined benefit obligation Net liability arising from defined benefit obligation Liability for retirement benefits Asset for retirement benefits Net liability arising from defined benefit obligation Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 23,441 (23,073 ) 367 669 ¥ 23,088 (21,511 ) 1,577 469 $ 195,345 (192,282 ) 3,062 5,576 ¥ 1,036 ¥ 2,046 $ 8,639 Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 1,070 (33 ) ¥ 2,080 (34 ) $ 8,920 (280 ) ¥ 1,036 ¥ 2,046 $ 8,639 19 20 - 19 - - 20 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements (5) The components of net periodic benefit costs for the years ended March 31, 2015 and 2014, were as follows: (8) Plan assets Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized actuarial losses Amortization of transitional obligation Benefit costs in simplified method Others Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 913 198 (405 ) (176 ) 134 608 235 ¥ 593 326 (707 ) (176 ) 2 608 300 299 $ 7,609 1,657 (3,381 ) (1,468 ) 1,116 5,073 1,959 a. Components of plan assets Plan assets as of March 31, 2015 and 2014, consisted of the following: Debt investments Equity investments General accounts Others Total 2015 2014 24 % 40 24 12 26 % 37 25 12 100 % 100 % Net periodic benefit costs ¥ 1,507 ¥ 1,248 $ 12,566 b. Method of determining the expected rate of return on plan assets (6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2015 and 2014 The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets. Prior service cost Actuarial losses Transitional obligation Total Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ (176 ) 1,620 608 ¥ 2,053 $ (1,468 ) 13,507 5,073 $ 17,112 (7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2015 and 2014 Unrecognized prior service cost Unrecognized actuarial (gains) losses Unamortized transitional obligation Millions of Yen 2015 2014 ¥ (146 ) (1,463 ) ¥ (323 ) 157 608 Thousands of U.S. Dollars 2015 $ (1,224 ) (12,199 ) Total ¥ (1,610 ) ¥ 442 $ (13,423 ) (9) Assumptions used for the years ended March 31, 2015 and 2014, were set forth as follows: 2015 2014 Discount rate Expected rate of return on plan assets Mainly 0.7% Mainly 1.9% Mainly 1.5% Mainly 3.7% (10) Payables to defined contribution plans of the Company and consolidated subsidiaries for the years ended March 31, 2015 and 2014, were ¥824 million ($6,871 thousand) and ¥550 million, respectively. 8. EQUITY 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: 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 criteria. 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. 21 22 - 21 - - 22 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements b. Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus 10. INCOME TAXES 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 within equity 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. 9. SUPPLEMENTAL CASH FLOW INFORMATION Acquisition cost and net payments for assets and liabilities of Xodus Group (Holdings) Limited ("Xodus Group"), a newly consolidated subsidiary acquired through share purchase, for the year ended March 31, 2014, were as follows: Current assets Fixed assets Goodwill Current liabilities Fixed liabilities Foreign currency translation adjustments Minority interests Acquisition cost of Xodus Group's shares Cash and cash equivalents Exchange gain on the acquisition Net payments for the acquisition Millions of Yen ¥ 5,061 2,540 6,283 (2,856 ) (166 ) (77 ) (380 ) 10,405 (1,265 ) (5 ) ¥ 9,134 There was no significant acquisition of newly consolidated subsidiaries for the year ended March 31, 2015. 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 36% and 38% for the years ended March 31, 2015 and 2014, respectively. The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities at March 31, 2015 and 2014, were as follows: Deferred tax assets: Cost of revenue Tax loss carryforwards Allowance for losses on construction contracts Allowance for employees' bonus Deferred gain/loss on derivatives under hedge accounting Future deductible depreciation Costs of construction contracts in process Other Less valuation allowance Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 5,087 4,971 1,276 1,258 ¥ 14,927 1,305 1,438 $ 42,398 41,428 10,635 10,490 885 811 709 4,082 (1,161 ) 1,079 657 3,871 (1,084 ) 7,381 6,758 5,916 34,023 (9,683 ) Total 17,922 22,195 149,350 Deferred tax liabilities: Unrealized loss/gain on available-for-sale securities Deferred gain/loss on derivatives under hedge accounting Profit/loss in joint venture Other 3,207 2,460 26,731 433 145 457 384 3,207 Total 3,592 3,496 29,939 Net deferred tax assets ¥ 14,329 ¥ 18,699 $ 119,411 Prior to April 1, 2014, "Defined retirement benefit plans" was disclosed separately. From this fiscal year ended March 31, 2015, the amounts are included in "Other" within the deferred tax assets section due to the decrease in materiality. Net deferred tax assets as of March 31, 2015 and 2014, were recorded in the accompanying consolidated balance sheet as follows: Current assets—Deferred tax assets Investments and other assets—Other assets Long-term liabilities—Other Millions of Yen 2015 2014 ¥ 11,697 2,631 ¥ 18,868 685 (854 ) Thousands of U.S. Dollars 2015 $ 97,483 21,927 23 24 - 23 - - 24 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statement of income for the year ended March 31, 2015, with the corresponding figures for 2014, is as follows: Normal effective statutory tax rate Expenses not deductible for income tax purposes Tax benefits not recognized on operating losses of subsidiaries Difference in tax base between corporate income tax and enterprise tax Change in valuation allowance Effect of reduction of income tax rates on deferred tax assets Other—net Actual effective tax rate 2015 2014 36% 1 (4) 4 3 6 3 38 % 1 (1) (5) 2 3 3 49 % 41 % New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate from approximately 36% to 33% for the fiscal year beginning on or after April 1, 2015, and to 32% for the fiscal year beginning on or after April 1, 2016. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, by ¥977 million ($8,148 thousand) and deferred loss on derivatives under hedge accounting by ¥71 million ($599 thousand) and increase accumulated other comprehensive income for unrealized gain on available-for-sale securities by ¥346 million ($2,886 thousand) and defined retirement benefit plan by ¥58 million ($483 thousand), in the consolidated balance sheet as of March 31, 2015, and to increase income taxes—deferred in the consolidated statement of income for the year then ended by ¥1,310 million ($10,919 thousand). 11. RESEARCH AND DEVELOPMENT COSTS Research and development costs charged to income were ¥2,456 million ($20,471 thousand) and ¥2,424 million for the years ended March 31, 2015 and 2014, respectively. 12. LEASES The Group leases certain machinery, computer equipment, and other assets. Future minimum payments under noncancelable operating leases were as follows: Due within one year Due after one year Total Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 449 773 ¥ 214 917 $ 3,746 6,442 ¥ 1,222 ¥ 1,132 $ 10,189 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. 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 have short maturities 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.x and 14 for more details about derivatives. 25 26 - 25 - - 26 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements (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 counterparties 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 details of fair value for derivatives. (a) Fair values of financial instruments March 31, 2015 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 Short-term bank loans Current portion of long-term debt Notes and accounts payable—trade Income taxes payable Long-term debt Total March 31, 2014 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 Short-term bank loans 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 ¥ 113,246 69 29,740 24,100 182,855 21,898 Millions of Yen Fair Value ¥ 113,246 69 29,740 24,100 182,855 21,898 ¥ 371,909 ¥ 371,909 ¥ 991 4 137,652 1,366 10,015 ¥ 991 4 137,652 1,366 10,015 ¥ 150,030 ¥ 150,030 Carrying Amount ¥ 145,303 64 56,502 16,503 127,466 18,591 Millions of Yen Fair Value ¥ 145,303 64 56,502 16,503 127,466 18,591 ¥ 364,431 ¥ 364,431 ¥ 1,283 4 145,392 5,513 10,018 ¥ 1,283 4 145,392 5,513 10,018 ¥ 162,212 ¥ 162,212 27 28 - 27 - - 28 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements March 31, 2015 Current Portion of Long-Term Debt (Bank Loans) and Long-Term Debt (Bank Loans) Thousands of U.S. Dollars Carrying Amount Fair Value Unrealized Gain (Loss) 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 Short-term bank loans Current portion of long-term debt Notes and accounts payable—trade Income taxes payable Long-term debt Total $ 943,719 575 247,838 $ 943,719 575 247,838 200,834 1,523,793 182,485 200,834 1,523,793 182,485 $ 3,099,248 $ 3,099,248 $ 8,258 40 1,147,104 11,384 83,462 $ 8,258 40 1,147,104 11,384 83,462 $ 1,250,250 $ 1,250,250 Cash and Cash Equivalents, Short-Term Investments, Notes and Accounts Receivable, and Costs and Estimated Earnings on Long-Term Construction Contracts The carrying values of the 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. Fair value information for investment securities by classification is included in Note 4. The above schedules do not include investment securities whose fair value cannot be reliably determined. Short-Term Bank Loans, Notes and Accounts Payable—Trade and Income Taxes Payable The carrying values of the accounts mentioned above approximate fair value because of their short maturities. 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 Fair value information for derivatives is included in Note 14. (b) Carrying amount of financial instruments whose fair values cannot be reliably determined 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 Millions of Yen 2014 2015 Thousands of U.S. Dollars 2015 ¥ 2,038 ¥ 2,537 $ 16,990 2 2 24 7,387 7,183 61,566 The impairment losses on investment securities for the year ended March 31, 2015, were ¥258 million ($2,157 thousand). (5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities March 31, 2015 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 Millions of Yen Due after 1 Year through 5 Years Due after 5 Years through 10 Years ¥ 882 ¥ 672 Due in 1 Year or Less ¥ 113,206 69 52,285 182,855 Total ¥ 348,415 ¥ 882 ¥ 672 29 30 - 29 - - 30 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements March 31, 2014 14. DERIVATIVES 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 Total March 31, 2015 Millions of Yen Due after 1 Year through 5 Years Due after 5 Years through 10 Years Due in 1 Year or Less ¥ 145,266 64 71,347 127,466 ¥ 1,658 ¥ 344,144 ¥ 1,658 Thousands of U.S. Dollars Due after 1 Year through 5 Years Due after 5 Years through 10 Years Due in 1 Year or Less 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 $ 943,384 575 435,708 1,523,793 $ 7,356 $ 5,607 Total $ 2,903,462 $ 7,356 $ 5,607 Please see Note 6 for annual maturities of long-term debt. Derivative Transactions to Which Hedge Accounting Is Not Applied March 31, 2015 Foreign currency forward contracts: Selling U.S.$/buying yen Selling Euro/buying yen Selling GBP/buying yen Selling AUD/buying yen Selling MYR/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying Euro/selling U.S.$ Buying AUD/selling Euro Total March 31, 2014 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 AUD/selling Euro Buying TWD/selling U.S.$ Millions of Yen Contract Amount Due after One Year ¥ 509 2 109 Contract Amount ¥ 36,414 4,738 4,704 13,571 2,640 17 3 210 795 Fair Value (Loss) ¥ (124 ) (6 ) (9 ) 31 1 2 (22 ) 5 Unrealized Gain (Loss) ¥ (124 ) (6 ) (9 ) 31 1 2 (22 ) 5 ¥ 63,094 ¥ 621 ¥ (122 ) ¥ (122 ) Millions of Yen Contract Amount Due after One Year ¥ 2 22 Fair Value (Loss) ¥ (18 ) (1 ) 13 8 5 (59 ) Unrealized Gain (Loss) ¥ (18 ) (1 ) 13 8 5 (59 ) Contract Amount ¥ 21,406 4,771 1,259 6,939 56 13 1,699 39 Total ¥ 36,185 ¥ 24 ¥ (54 ) ¥ (54 ) 31 32 - 31 - - 32 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements March 31, 2015 March 31, 2014 Foreign currency forward contracts: Selling U.S.$/buying yen Selling Euro/buying yen Selling GBP/buying yen Selling AUD/buying yen Selling MYR/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Buying Euro/selling U.S.$ Buying AUD/selling Euro Thousands of U.S. Dollars Contract Amount Due after One Year Fair Value (Loss) Unrealized Gain (Loss) $ 4,246 17 911 $ (1,034 ) (52 ) (82 ) 261 14 17 (3 ) (187 ) 49 $ (1,034 ) (52 ) (82 ) 261 14 17 (3 ) (187 ) 49 Contract Amount $ 303,456 39,485 39,201 113,093 22,006 141 25 1,751 6,627 Total $ 525,789 $ 5,176 $ (1,018 ) $ (1,018 ) Derivative Transactions to Which Hedge Accounting Is Applied March 31, 2015 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 Euro/selling U.S.$ Buying TWD/selling U.S.$ Buying KRW/selling U.S.$ Total Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Millions of Yen Total Millions of Yen Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forecasted transaction ¥ 9,921 909 22 10,074 84 4,029 ¥ 5,689 193 5,329 2,766 ¥ (405 ) 29 7 296 (1 ) 184 ¥ 25,041 ¥ 13,978 ¥ 111 Receivables Payables ¥ 32 365 186 ¥ 584 Interest rate swaps*2 (fixed rate payment, floating rate receipt) Long-term debt ¥ 10,000 ¥ 10,000 Total ¥ 10,000 ¥ 10,000 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 Euro/selling U.S.$ Buying KRW/selling U.S.$ Total Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Total Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forecasted transaction ¥ 16,971 673 186 7,271 3,347 ¥ 5,396 207 102 726 616 ¥ (2,295 ) 36 (19 ) (1,453 ) 65 ¥ 28,450 ¥ 7,049 ¥ (3,666 ) Receivables Payables ¥ 342 242 100 ¥ 28 ¥ 685 ¥ 28 Interest rate swaps*2 (fixed rate payment, Long-term debt ¥ 10,000 ¥ 10,000 floating rate receipt) Total ¥ 10,000 ¥ 10,000 33 34 - 33 - - 34 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements March 31, 2015 16. OTHER COMPREHENSIVE INCOME Thousands of U.S. Dollars The components of other comprehensive income for the years ended March 31, 2015 and 2014, were as follows: 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 Euro/selling U.S.$ Buying KRW/selling U.S.$ Total Other*1: Selling U.S.$/buying yen Buying U.S.$/selling yen Buying Euro/selling yen Total Hedged Item Contract Amount Contract Amount Due after One Year Fair Value (Loss) Foreign currency forecasted transaction $ 141,427 5,613 1,555 60,596 27,893 $ 44,971 1,726 850 6,054 5,138 $ (19,129 ) 302 (162 ) (12,108 ) 542 $ 237,086 $ 58,741 $ (30,556 ) Receivables Payables $ 2,851 2,023 835 $ 235 $ 5,710 $ 235 Interest rate swaps*2 (fixed rate payment, Long-term debt $ 83,333 $ 83,333 floating rate receipt) Total $ 83,333 $ 83,333 *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 for 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, 2015, the Group had the following contingent liabilities: Unrealized gain (loss) on available-for-sale securities: Gains (losses) arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Deferred loss on derivatives under hedge accounting: (Losses) gains 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 Defined retirement benefit plans: Adjustments arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Share of other comprehensive income of associates accounted for using the equity method— Gains arising during the year Millions of Yen Thousands of U.S. Dollars Total Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 2,787 258 3,046 (747 ) ¥ (2,619 ) (2,619 ) 955 $ 23,227 2,157 25,384 (6,233 ) ¥ 2,298 ¥ (1,664 ) $ 19,151 ¥ (591 ) (3,464 ) 100 (3,955 ) 1,243 ¥ 2,651 (3,573 ) (2,729 ) (3,652 ) 1,410 $ (4,926 ) (28,874 ) 835 (32,965 ) 10,364 ¥ (2,712 ) ¥ (2,242 ) $ (22,601 ) ¥ 2,815 ¥ 3,625 $ 23,461 ¥ 2,815 ¥ 3,625 $ 23,461 ¥ 1,486 566 2,053 (689 ) ¥ 1,364 $ 12,391 4,721 17,112 (5,745 ) $ 11,367 ¥ ¥ 142 142 ¥ ¥ 104 104 $ $ 1,189 1,189 Guarantees on employees' housing loans Performance bond for an unconsolidated subsidiary 69 ¥ 1,113 $ 580 9,280 Total other comprehensive income (loss) ¥ 3,908 ¥ (176 ) $ 32,568 35 36 - 35 - - 36 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements 17. NET INCOME PER SHARE (1) Description of Reportable Segments A reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March 31, 2015 and 2014, is as follows: Year Ended March 31, 2015 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. Millions of Yen Net Income Thousands of Shares Weighted-Average Shares Yen U.S. Dollars (2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, and Other Items for EPS Each Reportable Segment Basic EPS—Net income available to common shareholders ¥ 11,029 259,006 ¥ 42.58 $ 0.35 There is no dilutive effect for the year ended March 31, 2015. Year Ended March 31, 2014 Millions of Yen Net Income Thousands of Shares Weighted-Average Shares Yen EPS Basic EPS—Net income available to common shareholders ¥ 13,447 259,030 ¥ 51.91 There is no dilutive effect for the year ended March 31, 2014. 18. SUBSEQUENT EVENT The following appropriation of retained earnings at March 31, 2015, was approved at the Company's shareholders' meeting held on June 25, 2015: Millions of Yen Thousands of U.S. Dollars Year-end cash dividends, ¥13.00 ($0.10) per share ¥ 3,367 $ 28,058 19. SEGMENT INFORMATION 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. 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 transfers are measured at the quoted market price. (3) Information about Sales, Profit, Assets, Liabilities, and Other Items Year Ended March 31, 2015 Millions of Yen Reportable Segment Engineering Other*1 Total Reconcili- ations*2 Consoli- dated*3 Sales: Sales to external customers Intersegment sales or transfers ¥ 476,499 136 ¥ 4,479 6,678 ¥ 480,979 6,814 ¥ (6,814 ) ¥ 480,979 Total ¥ 476,635 ¥ 11,157 ¥ 487,793 ¥ (6,814 ) ¥ 480,979 Segment profit Segment assets Segment liabilities Other: Depreciation Amortization of goodwill Investment in associated companies Increase in property, plant and equipment and intangible assets ¥ 21,146 509,992 297,441 ¥ 314 5,418 2,248 ¥ 21,460 515,411 299,690 ¥ 6 427 7,742 ¥ 21,466 515,839 307,433 3,545 1,439 5,479 24 29 3,569 1,469 5,479 3,943 17 3,960 3,569 1,469 5,479 3,960 37 38 - 37 - - 38 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements Year Ended March 31, 2014 Notes for the year ended March 31, 2015: Millions of Yen Reportable Segment Engineering Other*1 Total Reconcili- ations*2 Consoli- dated*3 Sales: Sales to external customers Intersegment sales or transfers ¥ 441,615 14 ¥ 4,532 6,280 ¥ 446,147 6,295 ¥ (6,295 ) ¥ 446,147 Total ¥ 441,629 ¥ 10,813 ¥ 452,443 ¥ (6,295 ) ¥ 446,147 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, 2015 Sales: Sales to external customers Intersegment sales or transfers ¥ 20,788 470,188 267,501 ¥ 282 4,773 1,781 ¥ 21,070 474,961 269,283 ¥ 8 326 7,973 ¥ 21,079 475,288 277,257 3,175 795 5,375 21 29 3,196 825 5,375 4,126 27 4,154 3,196 825 5,375 4,154 Thousands of U.S. Dollars Reportable Segment Engineering Other*1 Total Reconcili- ations*2 Consoli- dated*3 $ 3,970,828 $ 37,332 $ 4,008,160 55,650 1,135 56,786 $ (56,786 ) $ 4,008,160 Total $ 3,971,964 $ 92,982 $ 4,064,947 $ (56,786 ) $ 4,008,160 Segment profit Segment assets Segment liabilities Other: Depreciation Amortization of goodwill Investment in associated companies Increase in property, plant and equipment and intangible assets $ 4,249,937 2,478,681 176,217 $ 2,618 $ 178,835 $ 53 $ 45,156 18,740 4,295,094 2,497,422 3,566 64,522 178,889 4,298,660 2,561,944 200 249 29,545 11,998 45,663 29,745 12,248 45,663 32,858 144 33,003 29,745 12,248 45,663 33,003 *1 "Other" represents industry segments, which are not included in the reportable segment, consisting of temporary staffing services and travel services. *2 The details of the reconciliations are as follows: (1) The reconciliation in segment profit of ¥6 million ($53 thousand) is the elimination of intersegment trades. (2) The reconciliation in segment assets of ¥427 million ($3,566 thousand) is the result of the elimination of intersegment trades of ¥(2,275) million ($(18,962) thousand) and the Group's assets of ¥2,703 million ($22,528 thousand), which are not included in the reportable segment. (3) The reconciliation in segment liabilities of ¥7,742 million ($64,522 thousand) is the result of the elimination of intersegment trades of ¥(2,257) million ($(18,811) thousand) and the Group's liabilities of ¥10,000 million ($83,333 thousand), which are not included in the reportable segment. *3 The calculation of the segment profit is based on the operating income in the consolidated statement of income. Notes for the year ended March 31, 2014: *1 "Other" represents industry segments, which are not included in the reportable segment, consisting of temporary staffing services and travel services. *2 The details of the reconciliations are as follows: (1) The reconciliation in segment profit of ¥8 million is the elimination of intersegment trades. (2) The reconciliation in segment assets of ¥326 million is the result of the elimination of intersegment trades of ¥(2,047) million and the Group's assets of ¥2,374 million, which are not included in the reportable segment. (3) The reconciliation in segment liabilities of ¥7,973 million is the result of the elimination of intersegment trades of ¥(2,026) million and the Group's liabilities of ¥10,000 million, which are not included in the reportable segment. *3 The calculation of the segment profit is based on the operating income in 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. 39 40 - 39 - - 40 - Consolidated Financial StatementsConsolidated Financial Statements Notes to Consolidated Financial Statements (2) Information about Geographical Areas (a) Revenue Year Ended March 31, 2015 Japan Australia Russia Asia Middle East Others Total Year Ended March 31, 2014 Japan Australia Papua New Guinea Malaysia Others Total Millions of Yen ¥ 113,341 151,255 52,087 73,935 50,624 39,735 Thousands of U.S. Dollars $ 944,508 1,260,461 434,059 616,128 421,869 331,133 ¥ 480,979 $ 4,008,160 Millions of Yen ¥ 128,743 114,894 68,990 53,380 80,138 ¥ 446,147 Year Ended March 31, 2014 Japan Asia Others Total (3) Information about Major Customers Year Ended March 31, 2015 Name Ichthys Lng Pty Ltd. OJSC Yamal LNG Year Ended March 31, 2014 Name Ichthys Lng Pty Ltd. Esso Highlands Ltd. Tokuyama Malaysia Sdn. Bhd Millions of Yen ¥ 12,454 1,746 757 ¥ 14,958 Related Segment Revenue Millions of Yen Thousands of U.S. Dollars Revenue Engineering Engineering ¥ 143,688 51,948 $ 1,197,404 432,900 Related Segment Engineering Engineering Engineering Millions of Yen Revenue ¥ 109,964 68,788 49,934 Note: Revenue is classified by country or region based on the location of construction sites. (4) Information about Goodwill by Segment (b) Property, plant and equipment Year Ended March 31, 2015 Japan Asia Others Total Millions of Yen ¥ 12,183 1,974 668 Thousands of U.S. Dollars $ 101,530 16,453 5,571 ¥ 14,826 $ 123,555 The ending balance of goodwill as of March 31, 2015 and 2014, was as follows: Millions of Yen 2015 2014 Thousands of U.S. Dollars 2015 ¥ 11,599 434 ¥ 11,930 464 $ 96,658 3,624 ¥ 12,034 ¥ 12,395 $ 100,283 Engineering Other* Total * Other involves temporary staffing services. * * * * * * 41 42 - 41 - - 42 - Consolidated Financial StatementsConsolidated Financial Statements Independent Auditor’s Report 43 Consolidated Financial Statements 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 2015) Selected in FTSE Group’s responsible investment index