ANNUAL REPORT. Year ended March 31, 2007 TOENEC CORPORATION

Transcription

1 ANNUAL REPORT Year ended March 31, TOENEC CORPORATION

2 Greetings from the Top During our 89th fiscal year, which ran from April 1, to March 31,, the Japanese economy continued to recovery gradually, characterized by increasing capital investment thanks to favorable corporate profitability and brisk consumer spending bolstered by a greatly improved job market. Although private capital investment in our industry has also been increasing, reduced public spending on both the national and municipal level has resulted in fewer public works projects, and with continued deregulation leading to reduced capital investment in the electrical power industry as well as increasing cost competitiveness reducing profitability of general contractor work, we find ourselves operating under increasingly difficult circumstances. Given this situation, and based on the Mid-Term Business Plan that went into effect at the start of fiscal, we are promoting strategies for sustainable growth as well as concentrating management resources in our core business areas in order to reduce costs and increase efficiency of operation in ensuring profitability as we work together facing our present difficulties. As a result of these efforts, we enjoyed the following increases in both orders and sales for the term: Orders: JY billion (up 2.8% from last term) Sales: JY billion (up 9.2% from last term) This increase in sales was accompanied by a major increase in profitability: Operating profits: JY4.988 billion (up 34.6% from last term) Net profit: JY2.382 billion (up 61.3% from last term) Prospects for the coming year include increased capital expenditure based on favorable results during the past FY and in expectation that the Japanese economy will continue its self-sustained recovery centered on strong domestic demand. Increasingly severe cost competition in our industry, however, means that we expect to find ourselves operating once again under increasingly difficult circumstances as further deregulation continues to restrict capital investment in the electrical power industry. Given these circumstances, the tender offer by Chubu Electric Power Co., Inc. for TOENEC shares made in March of this year as well as the restructuring of our business in conjunction with C-Tech Corporation scheduled for this coming October is expected to strengthen our affiliation with Chubu Electric as we promote greater efficiency in management and business organization and the establishment of a resilient corporate makeup capable of ensuring stable profitability. We look forward to your continued understanding and support. July President Yasuhiro Noda

3 Non-consolidated Balance Sheet TOENEC CORPORATION 31st March, and ASSETS Current assets: Cash and time deposits... Marketable securities... Notes and accounts receivable: Notes... Accounts... Others... Allowance for doubtful receivables... Inventories... Deferred income taxes... Others... Total current assets... Property and equipment: Buildings and structures... Machinery and equipment... Land... Construction in progress... Accumulated depreciation... Total property and equipment... Investments and other assets: Investments in securities... Deferred income taxes... Others... Total investments and other assets... Total assets... 21,320 1,002 5,467 49,824 1,514 56,805 (347) 56,458 17, , ,497 41,380 7,678 25,626 74,684 (34,012) 40,672 11,677 11,163 2,691 25, ,699 20,593 5,498 6,298 45,967 1,337 53,602 (304) 53,298 12,633 2,016 7, ,391 41,348 8,004 24, ,058 (33,447) 40,611 12,456 12,016 3,079 27, , ,602 8,490 46, ,055 12, ,195 (2,940) 478, ,572 8,408 61, , ,526 65, , ,645 (288,116) 344,529 98,916 94,563 22, ,272 1,445,992 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term bank loans... Convertible bond within a year... and accounts payable: Notes... Accounts... Advances received on work in progress... Income taxes payable... Others... Total current liabilities... Fixed liabilities: Liability for employees' severance payments... Liability for directors' and statutory auditors' severance payments... Others... Total fixed liabilities... Total liabilities... Shareholders' equity: Common stock Authorized 200,000,000 shares Issued 96,649,954 shares... Capital surplus... Retained earnings... Treasury stock, at cost... Accumulated other comprehensive income(loss)... Total shareholders' equity... Total liabilities and shareholders' equity... NET ASSETS Shareholders' capital: Common stock Authorized 200,000,000 shares Issued 96,649,954 shares... Capital surplus... Retained earnings... Treasury stock, at cost... 3,700 7,554 43,879 51,433 3,580 2,587 7,637 68,937 35, , ,487 7,681 6,839 45,415 (1,190) 3,700 4,998 7,030 37,734 44,765 3,792 1,601 10,561 69,418 37, , ,998 7,681 6,838 43,999 (990) 5,028 62, ,554 31,343 63, , ,689 30,328 21,916 64, , ,735 1, , ,109 65,064 57, ,711 (10,078) Total shareholders' capital... 58, ,629 Valuation and translation adjustments: Net unrealized gain on other securities... Deferred gain on deferred hedges... 4,625 2,843 39,175 24,079 Total valuation and translation adjustment... Total net assets... Total libilities and net assets... 7,467 66, ,699 63, ,883 1,445,992

4 Non-Consolidated Statement of Income and Retained Earnings Non-Consolidated Statement of Cash Flows TOENEC CORPORATION for the years ended 31st March, and TOENEC CORPORATION for the years ended 31st March, and Net sales: Construction contracts... Cost of sales: Construction contracts... Gross profit... Selling, general and administrative expenses... Operating income... Other income (expenses): Interest income... Interest expenses... Other, net... Income before income taxes... Income taxes expense(benefit): Current... Deferred... Net income... Per share of common stock: Net income... Cash dividends , ,371 19,424 14,960 4, (67) ,122 2, ,382 Yen 180, ,062 18,153 14,955 3, (93) ,257 1, ,477 1,667,052 1,502, , ,728 37,815 2,119 (571) 4,022 5,569 43,384 21,202 2,003 20, Cash flows from operating activities Income before income taxes... Depreciation... Increase (decrease) in allowance for doubtful receivables... liability for director's bonuses... liability for employees' severance payments... liability for director's and statutory auditor's severance payment... other allowance... Interest and dividend income... Interest expenses... Exchange losses (gains)... Loss on valuation of marketable securities... Losses (gains) on sale of marketable securities... Losses (gains) on sale of investment parent company... Losses (gains) on sales and disposals of properties... Decrease (increase) in accounts receivable-trade... inventories... Increase (decrease) in accounts payable-trade... advances received on work in progress... consumption tax payable... Bonuses to directors and statutory auditors... Others, net... Income taxes expenses... Net cash (used in) provided by operating activities... Cash flows from investing activities Payments for time deposits... Time deposits received... Payments for purchases of marketable securities... Proceeds from sales of marketable securities... Payments for purchases of investments in securities... Proceeds from sales of investments in securities... Payments for long-term loans receivable... Collections from long-term loans receivable... Payments for purchases of property and equipment... Proceeds from sales of property and equipment... Interest and dividends income... Interest expenses... Others, net... 5,122 1, (1,913) (118) 1,282 (250) (310) (567) (1) (3,220) (4,788) 6,595 (211) 62 (23) 588 4,175 (1,526) 2,649 (472) 548 (1,903) 5,909 (317) 1,075 (103) 13 (1,241) (64) (4) 3,257 1, (1,494) (197) 106 (141) 93 (13) 87 (376) 10 (1,402) 1,153 2,027 (2,882) (413) (27) (1,502) (267) (2,031) (2,298) (571) 1,028 (9,839) 5,841 (319) 1,781 (65) (346) (88) (341) 43,384 10,852 2, (16,209) (999) 10,863 (2,119) ,010 (2,627) (4,806) (9) (27,276) (40,559) 55,864 (1,790) 525 (196) 4,984 35,368 (12,929) 22,439 (3,996) 4,644 (16,120) 50,054 (2,682) 9,107 (870) 109 (10,510) 1,028 1,982 (544) (32) Net cash (used in) provided by investing activities 3,798 (2,678) 32,170 Cash flows from financing activities Increase(decrease) in loans payable... Redemption of bonds... Payments for purchases of treasury stock... Proceeds from sales of treasury stock... Dividends paid... (4,998) (218) 19 (944) (400) (35) 15 (945) (42,338) (1,846) 164 (7,994) Net cash (used in) provided by financial activities Effect of exchange rate changes on cash... Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year... Cash and cash equivalents at end of the year... (6,140) (1) ,094 21,400 (1,365) 13 (6,329) 27,423 21,094 (52,013) (6) 2, , ,281

5 Consolidated Balance Sheet TOENEC CORPORATION 31st March, and ASSETS Current assets: Cash and time deposits... Marketable securities... Notes and accounts receivable: Notes... Accounts... Others... Allowance for doubtful receivables... Inventories... Deferred income taxes... Others... Total current assets... Property and equipment: Buildings and structures... Machinery and equipment... Leasing property... Land... Construction in progress... Accumulated depreciation... Total property and equipment... 21,798 1,002 5,613 50,360 1,608 57,581 (361) 57,220 17,722 1,160 7, ,279 42,704 29,509 2,264 25, ,163 (51,078) 49,085 21,143 5,498 6,477 45,957 1,156 53,590 (391) 53,199 12,764 2,209 7, ,191 42,661 27,009 1,921 24, ,356 (48,653) 47, ,653 8,490 47, ,600 13, ,771 (3,059) 484, ,120 9,829 62, , , ,971 19, , ,485 (432,683) 415,802 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term bank loans... Convertible bond within a year... and accounts payable: Notes... Accounts... Advances received on work in progress... Income taxes payable... Others... Total current liabilities... Fixed liabilities: Long-term bank loans... Liability for employees' severance payments Liability for directors' and statutory auditors' severance payments... Others... Total fixed liabilities... Total liabilities... Shareholders' equity: Common stock Authorized 200,000,000 shares Issued 96,649,954 shares... Capital surplus... Retained earnings... Treasury stock, at cost... Accumulated other comprehensive income(loss)... Total shareholders' equity... Total liabilities and shareholders' equity... 6,323 7,661 44,270 51,931 3,786 2,802 8,126 72,969 4,281 35, , ,873 5,571 4,998 7,001 38,071 45,072 3,808 1,660 10,958 72,067 3,857 37, , ,560 7,681 6,838 45,652 (990) 5,028 64, ,769 53,560 64, , ,907 32,075 23,735 68, ,115 36, ,750 1, , ,149 Investments and other assets: Investments in securities... Deferred income taxes... Others... Total investments and other assets... Total assets... 11,563 10,941 2,988 25, ,857 12,356 12,075 3,444 27, ,769 97,950 92,681 25, ,944 1,532,033 NET ASSETS Shareholders' capital: Common stock Authorized 200,000,000 shares Issued 96,649,954 shares... Capital surplus... Retained earnings... Treasury stock, at cost... Total shareholders' capital... 7,681 6,839 47,220 (1,190) 60,550 65,064 57, ,998 (10,078) 512,915 Valuation and translation adjustments: Net unrealized gain on other securities... Deferred gain on deferred hedges... Foreign currency translation adjustments Total valuation and translation adjustment... Total net assets... Total libilities and net assets... 4,625 2,843 (34) 7,434 67, ,857 39,175 24,079 (285) 62, ,885 1,532,033

6 Consolidated Statement of Income and Retained Earnings Consolidated Statement of Cash Flows TOENEC CORPORATION for the years ended 31st March, and TOENEC CORPORATION for the years ended 31st March, and Net sales: Construction contracts... Cost of sales: Construction contracts... Gross profit... Selling, general and administrative expenses... Operating income... Other income (expenses): Interest income... Interest expenses... Other, net... Income before income taxes , ,169 20,807 15,500 5, (76) , , ,651 19,009 15,379 3, (103) (97) (176) 3,454 1,693,995 1,517, , ,304 44, (646) 3,098 2,953 47,904 Cash flows from operating activities Income before income taxes... Depreciation... Increase (decrease) in allowance for doubtful receivables... liability for director's bonuses... liability for employees' severance payments... liability for director's and statutory auditor's severance payment... other allowance... Interest and dividend income... Interest expenses... Exchange losses (gains)... Loss on valuation of marketable securities... Losses (gains) on sale of marketable securities... Losses (gains) on sale of investment parent company... Losses (gains) on sales and disposals of properties... Decrease (increase) in accounts receivable-trade... inventories... Increase (decrease) in accounts payable-trade... advances received on work in progress... consumption tax payable... Bonuses to directors and statutory auditors... Others, net... 5,655 3, (1,922) (100) 1,282 (241) (310) (567) 228 (3,492) (4,528) 6,570 (559) 84 (29) 372 3,454 3, (1,522) (206) 105 (141) 103 (13) 87 (376) 184 (1,920) 1,136 1,993 (2,904) (396) (33) (751) 47,904 28,085 2, (16,285) (846) 10,863 (2,040) ,010 (2,627) (4,806) 1,932 (29,582) (38,362) 55,651 (4,732) 708 (245) 3,145 Income taxes expense(benefit): Current... Deferred... Net income... Per share of common stock: Net income... Cash dividends... 2, ,690 Yen 1, ,565 23,300 1,819 22, Income taxes expenses... Net cash (used in) provided by operating activities Cash flows from investing activities Payments for time deposits... Time deposits received... Payments for purchases of marketable securities... Proceeds from sales of marketable securities... Payments for purchases of investments in securities... Proceeds from sales of investments in securities... Payments for long-term loans receivable... Collections from long-term loans receivable... Payments for purchases of property and equipment... Proceeds from sales of property and equipment... Interest and dividends income... Interest expenses... Others, net... 6,409 (1,618) 4,791 (472) 548 (1,903) 5,909 (316) 1,061 (103) 13 (5,339) (73) (153) 1,924 (2,102) (179) (1,071) 1,528 (9,839) 5,841 (320) 1,781 (65) (2,645) (98) (551) 54,287 (13,706) 40,581 (3,996) 4,644 (16,120) 50,054 (2,682) 8,989 (870) 109 (45,225) 3,181 2,022 (619) (1,292) Net cash (used in) provided by investing activities (213) (4,983) (1,806) Cash flows from financing activities Increase(decrease) in loans payable... Additions to long-term bank loans Reductions of long-term bank loans... Redemption of bonds Payments for purchases of treasury stock... Proceeds from sales of treasury stock... Dividends paid... (1,871) 3,660 (659) (4,998) (218) 19 (944) (400) 2,990 (2,512) (35) 15 (945) (15,852) 31,004 (5,582) (42,338) (1,846) 164 (7,994) Net cash (used in) provided by financial activities Effect of exchange rate changes on cash... Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year... Increase due to inclusion of subsidiaries in consolidasion... Cash and cash equivalents at end of the year... (5,010) (0) (433) 21, ,878 (887) 13 (6,035) 27,680 21,645 (42,443) (2) (3,670) 183,355 5, ,332

7 Breakdown by Business Sector (April 1, to March 31, ) Topics Bookings and Revenues for the Term(units: JY millions) Bookings (performance against prior term shown in parentheses) Revenues (performance against prior term shown in parentheses) Following the completion of the JR Central Towers, high-rise buildings have gone up one after the other in the vicinity of Nagoya Station, demonstrating the vitality of the region's economy. As one of the area's leading general contractors, TOENEC, too, has been involved in the of two more projects representative of the Nagoya skyline: Midland Square and Nagoya Lucent Tower. Air-conditioning ductwork 10,213 (76.9%) Product sales 6,440 (118.2%) Indoor-wiring 75,247 (92.7%) Total 189,463 (102.8%) Electrical wiring 71,454 (110.9%) Communications 13,151 (141.2%) Undergraund cable 5,812 (123.0%) Generation, transmission, transforming, and civil engineering 7,142 (119.5%) Air-conditioning ductwork 11,687 (94.5%) Product sales 6,440 (118.2%) Indoor-wiring 83,926 (107.6%) Total 196, %) Electrical wiring 71, %) Communications 13,001 (145.7%) Undergraund cable 5,339 (97.2%) Generation, transmission, transforming, and civil engineering 5,042 (90.3%) Midland Square Performance trends (April 1, to March 31, ) Bookings and revenues (units: JY millions) Operating profit and pre-tax profit (units: JY millions) Bookings Revenues 189, ,795 Operating profit Pre-tax profit 4, , , , , , ,215 4,272 3,705 3,431 2,494 2,382 1,476 1,127 FY2004 (87nd term) FY2003 (86st term) FY2005 (88rd term) FY (89th term; current term) FY2005 (88rd term) FY2004 (87nd term) FY2003 (86st term) FY (89th term; current term)

8 Topics Topics Nagoya Lucent Tower The recently completed Nagoya Lucent Tower is the third tallest high-rise building in Nagoya, housing high-grade rental office space. TOENEC was responsible for the light electrical system of the entire building as well as the heavy electrical system from the third underground level to the 18th floor, and undertook the installation of major facilities such as power substations, bus lines, and power lines as well as other equipment for emergency power generation, communications, and security/disaster prevention systems. TOENEC was also involved in the installation of electrical equipment within the Lucent Avenue underground mall that connects Lucent Towers with Nagoya Station. "Development of original technology" and "creation of a human corporation" are basic management principles that underscore the importance placed on developing both technological and human resources at TOENEC. In addition to our efforts in the field of electricity being recognized with a Shibusawa Award, strong performances by TOENEC associates at the Japan Skill Olympics were among the other fruits of our efforts in these areas. Our efforts promoting environmental awareness were also rewarded by Aichi Prefecture with an Aichi Environmental Award for Excellence. Aichi Environmental Award for Excellence Aichi Prefecture's Aichi Environmental Awards are given in recognition of the development of advanced technology or the undertaking of educational programs, social initiatives, and other activities for recycling resources or reducing the burden on the environment, in order that these achievements may be better known to society at large. TOENEC was recipient of an Aichi Environmental Award for Excellence for promoting energy conservation through its Static Energy Conservation Solution business, developed in cooperation with its customers. customers. Shibusawa Award The Shibusawa Award is given by the Prof. Motoharu Shibuzawa Commemorative Distinguished Achievement Award Committee of the Japan Electric Association to individuals who have contributed to the electrical industry through research or invention as well as educational or safety programs. Two TOENEC associates from our Technology Development Office were recipients of Shibusawa Awards for the development of a support system for harmonic countermeasures and one associate from our Education and Training Center received a Shibuzawa Award for development of human resources.

9 Topics Topics Silver, Bronze, and Honorable Mention at the Japan Skill Olympics The 44th Japan Skill Olympics was held in Kagawa Prefecture under the auspices of the Japan Vocational Ability Development Association, and three participating TOENEC associates employed at our Education and Training Center came away with one silver medal, one bronze medal, and one honorable mention. The Skill Olympics is a competition where young skilled workers vie against each other to demonstrate their superiority at a particular skill. This competition is intended to provide young people who wish to hone their skills with a worthy goal as well as to promote the necessity of technical skills and to generate respect among the general public for those individuals who have developed them. TOENEC is also involved in data communications, and was responsible for installation of the latest data communications equipment during the of a new data communications facility at Kinki University. Kinki University TOENEC was involved in the installation of equipment for an audio-visual network in Building No. 21 and November Hall Language Center on the main campus of Kinki University. Also, during the of Building No. 38 of that same campus, TOENEC was responsible for installation of the electrical and data communications systems to be used for a Remote Lecture System intended to link Kinki University campuses in other prefectures with the main campus. The TOENEC Information and Communication Headquarters was in charge of system design and operational support, in which the in the Osaka Headquarters's Sales Division worked together with the Electrical Power and Communication divisions to perform the installation.

10 Company Overview Organization (As of July 1, ) Trade Name Head Office TOENEC CORPORATION Sakae 1chomeNaka-Ku Nagoya Management Appraisal Office Secretarial Office Aichi JAPAN Corporate Planning Office Established Capitalization Employees October 1, 1944 JY7,680,785,924(as of March 31, ) 4,816 (as of March 31, ) Information Systems Office Development Office Education and Training Center General Affairs Division Business Lines Personnel Division Safety and Environment Division Financial and Accounting Division Electrical and communications Pipe-laying Fire-control system Construction and building works Scaffolding, earthworks, and concrete works Road surfacing Painting Waterproofing work Waterworks Steel-structure Machinery and tool installation Interior finishing work Cleaning-facility Hot and cold water systems, and other work related to power provision, including steam and thermal generation, and wind and solar power generation Electrical transmission For all the items above, surveying, design, supervision, maintenance, and consultation services, along with associated commissioned research, planning, development, etc. Procurement, manufacture, sale, and leasing of the goods listed below A. For the items listed above, power cables, utility poles, power stringing tools, etc. B. Control equipment for power generation and transmission, lighting equipment, and wiring materials C. Electrical appliances, furniture, kitchen equipment, medical equipment, health and hygiene equipment, home-care devices, home-care goods, fitness equipment, sporting goods, apparel, and sundry items D. Building plant and equipment, air-conditioning equipment, and compressors E. Power-transmission equipment, computer systems, data terminals, and parts related to these 18. Ordinary freight vehicles 19. Sale, leasing, and management of real estate 20. Investment and financing in other companies 21. Manpower dispatching 22. Any business related to any of the items above Head Office Building Head Office Annex Education and Training Center Create Hall President Meeting of Auditors Board of Directors Management Committee Compliance Promotion Committee New Company Promotion Committee Management Reform Project Office Auditors Distribution Headquarters Electric Power Headquarters Information and Communication Headquarters Sales Headquarters Materials Division Energy Solutions Division Overseas Division Distribution Control Division Business Development Division Administrative Group Construction Division Underground Cable Division Information and Communication Control Division Sales Division Network Engineering Division Mobile Engineering Division Sales Control Division Construction Audit Division Sales Division Planning Division Engineering Division Wiring Works Division Air Conditioning Management Facilities Division Customer Service Division Tokyo Headquarters Osaka Headquarters Nagoya Branch Okazaki Branch Shizuoka Branch Mie Branch Gifu Branch Nagano Branch Auditor Office

11 Corporste Directory (As of July 1, ) Directors, Auditors and Officers President and Director Yasuhiro Noda Senior Managing Director Yoshinao Miyahara Managing Director Yuzuru Jogo (Executive Officer) Akio Okamiya Atsushi Katsuragawa (Executive Officer) Takashi Niizawa Masahiro Mikawa (Executive Officer) Director Toyoo Tanaka (Executive Officer) Kenji Hirata (Executive Officer) Hiroshi Yamada (Executive Officer) Mikio Niwa (Executive Officer) Tadashi Yamauchi Yuji Kume Corporate Auditor (full-time) Genzo Kuno Koichi Kumagai Corporate Auditor Tetsu Ito Shinji Ishihara Executive Officer Yutaka Takase Yasumasa Moriyama Yukio Sekiguchi Akira Ito Akira Okamoto Yuichi Kawahara Keisei Ishihara Tsutomu Morita Yoshitaka Yasui Networks TOENEC CONSTRUCTION (SHANGHAI) CO., LTD. 2F Chang Fa Building (East Area), No. 128 Wei Hai Road, Huang Pu District, Shanghai ,China Phone: (86) Fax: (86) ,7 TOENEC (TAIWAN) CO., LTD. 10F-2, No. 16 Sec. 1, Chang-Ane Road, Taipei 104,Taiwan Phone: (886) Fax: (886) TOENEC PHILIPPINES INC. Room 301, 3rd Floor, L&F Building, 107 Aguirre Street, Legaspi Village, Makati City 1229,Philippines Phone: (63) ,88,89 (63) ,71 Fax: (63) TOENEC (THAILAND) CO., LTD. Room 1402 Bangkok Tower, 2170 New Petchburi Road, Bangkapi, Huaykwang, Bangkok Thailand Phone: (66) ,21 Fax: (66)