Financial Statement March 2019

18 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) ASSETS 2019 2018 2019 Current assets: Cash and bank deposits (Note 10) ¥ 31,820 ¥ 36,682 $ 289,275 Notes and accounts receivable, trade (Notes 4 and 10) 89,145 79,344 810,410 Allowance for doubtful accounts (317) (296) (2,889) Real estate for sale 2,571 3,963 23,373 Cost on construction contracts in progress and other (Note 4) 6,912 6,466 62,843 Advanced money (Note 10) 15,417 7,524 140,155 Other current assets (Notes 3 and 4) 6,910 5,945 62,822 Total current assets 152,459 139,631 1,385,991 Investments and other assets: Investments in securities (Notes 4, 10 and 11) 12,415 14,609 112,864 Long-term loans (Note 4) 285 309 2,593 Deferred tax assets (Notes 3 and 14) 7,180 7,225 65,274 Other (Note 4) 1,817 1,833 16,526 Allowance for doubtful accounts (559) (567) (5,089) Total investments and other assets 21,138 23,409 192,169 Property, plant and equipment: Land (Note 4) 18,652 17,913 169,566 Buildings and structures 15,049 15,442 136,816 Machinery, vehicles and equipment 20,053 20,430 182,308 Leased assets 656 596 5,972 Construction in progress 1,412 10 12,844 Total property, plant and equipment 55,825 54,393 507,508 Less accumulated depreciation (27,776) (27,719) (252,509) Property, plant and equipment—net 28,049 26,673 254,999 Intangible fixed assets: 867 562 7,883 Total assets ¥ 202,514 ¥ 190,276 $ 1,841,044 The accompanying notes are an integral part of these financial statements. CONSOLIDATED BALANCE SHEET TOA CORPORATION and its consolidated subsidiaries As of March 31, 2019 and 2018 19 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) LIABILITIES AND NET ASSETS 2019 2018 2019 Current liabilities: Short-term borrowings (Notes 3, 4 and 10) ¥ 13,997 ¥ 13,928 $ 127,252 Notes and accounts payable, trade (Notes 4 and 10) 40,090 34,351 364,456 Electoronically recorded obligations, operating (Note 10) 19,324 13,556 175,673 Accrued income taxes 507 353 4,617 Advances received on construction contracts in progress 10,067 8,554 91,524 Reserve for indemnity on completed contracts 571 587 5,192 Reserve for loss on construction works (Note 4) 1,306 1,072 11,880 Deposits received (Note 10) 15,450 14,019 140,460 Reserve for loss on construction defects 4,741 10,776 43,101 Other current liabilities (Notes 3, 4 and 10) 6,245 3,678 56,776 Total current liabilities 112,302 100,878 1,020,936 Long-term liabilities: Long-term debt (Notes 4 and 10) 14,254 14,703 129,590 Liability for retirement benefits (Note 13) 3,246 2,889 29,511 Deferred tax liabilities on revaluation of land (Notes 3, 4 and 14) 2,321 2,348 21,102 Other long-term liabilities (Notes 3 and 10) 1,544 1,708 14,036 Total long-term liabilities 21,366 21,650 194,240 Total liabilities 133,669 122,529 1,215,177 Net assets (Note 8) : Shareholders' equity: Common stock, Authorized—60,000,000 shares Issued—22,494,629 shares at March 31, 2019 and 2018 18,976 18,976 172,515 Capital surplus 18,115 18,115 164,684 Retained earnings 27,390 24,791 249,008 Treasury stock, at cost 1,594 thousand shares and 1,594 thousand shares at March 31, 2019 and 2018, respectively (2,059) (2,058 ) (18,722) Total shareholders' equity 62,423 59,824 567,485 Accumulated other comprehensive income: Net unrealized gains (losses) on securities (Note 11) 3,334 4,634 30,310 Net deferred gains (losses) on hedges (Notes 10 and 12) (36) (17) (329) Revaluation reserve for land (Note 4) 3,661 3,606 33,287 Retirement benefits liability adjustments (Note 13) (1,166) (857) (10,603) Total accumulated other comprehensive income 5,793 7,366 52,664 Non-controlling interests 628 555 5,716 Total net assets 68,845 67,747 625,866 Commitments and contingent liabilities (Note 4): Total liabilities and net assets ¥ 202,514 ¥ 190,276 $ 1,841,044 The accompanying notes are an integral part of these financial statements. 20 CONSOLIDATED STATEMENT OF INCOME TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2019 and 2018 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2019 2018 2019 Net sales (Note 5) ¥ 173,692 ¥ 161,045 $ 1,579,021 Cost of sales (Note 5) 159,087 148,029 1,446,249 Gross profit 14,604 13,015 132,772 Selling, general and administrative expenses (Note 5) 10,624 10,135 96,588 Operating income 3,980 2,879 36,183 Other income (expenses): Interest and dividend income 381 314 3,470 Interest expense (312) (342) (2,840) Provision for doubtful accounts, non-trade (16) (16) (146) Loss on impairment of fixed assets (Note 5) (74) (59) (677) Gain on sale of fixed assets (Note 5) 109 81 994 Gain on sale of investment in securities (Note 3) 412 0 3,748 Guarantee fee (85) (62) (780) Loss on sale of fixed assets (Note 5) (28) (5) (263) Loss on disposal of fixed assets (Note 5) (72) (37) (660) Other, net (Note 3) (19) (193) (176) 292 (322) 2,664 Profit before income taxes 4,272 2,557 38,847 Income taxes (Note 14) : Current 377 307 3,431 Deferred 750 476 6,824 1,128 783 10,255 Profit 3,144 1,773 28,59 2 Profit attributable to: Non-controlling interests ¥ 73 ¥ 23 $ 666 Owners of parent ¥ 3,071 ¥ 1,750 $ 27,925 The accompanying notes are an integral part of these financial statements. 21 Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2019 2018 2019 Profit ¥ 3,145 ¥ 1,773 $ 28,597 Other comprehensive income: Net unrealized gains on securities (1,300) 441 (11,820) Net deferred gains on hedges (18) (17) (170) Revaluation reserve for land (Note 4) — (1) Retirement benefits liability adjustments (Note 13) (309) 594 (2,812) Total other comprehensive income (Note 6) (1,628) 1,016 (14,801) Comprehensive income ¥ 1,517 ¥ 2,790 $ 13,794 Total comprehensive income attributable to (Note 6) : Owners of parent ¥ 1,444 ¥ 2,767 $ 13,127 Non-controlling interests ¥ 73 ¥ 23 $ 666 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2019 and 2018 The accompanying notes are an integral part of these financial statements. 22 The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2019 and 2018 Millions of Japanese Yen Shareholders' equity Accumulated other comprehensive income Non-controlling interests Total net assets Common stock Capital surplus Retained earnings Treasury stock, at cost Net unrealized gains (losses) on securities (Note 11) Net deferred gains (losses) on hedges Revaluation reserve for land (Note 4) Retirement benefits liability adjustments (Note 13) Balance at March 31, 2017 ¥ 18,976 ¥ 18,115 ¥ 23,020 ¥ (2,056 ) ¥ 4,193 ¥ － ¥ 3,629 ¥ (1,452 ) ¥ 532 ¥ 64,958 Cash dividends － Profit attributable to owners of parent for the period 1,750 1,750 Acquisition of treasury stock (1 ) (1 ) Reversal of revaluation reserve for land 20 20 Net changes in items other than shareholders' equity 441 (17 ) (22) 594 23 1,019 Balance at March 31, 2018 ¥ 18,976 ¥ 18,115 ¥ 24,791 ¥ (2,058 ) ¥ 4,634 ¥ (17) ¥ 3,606 ¥ (857 ) ¥ 555 ¥ 67,747 Cash dividends (418) (418) Profit attributable to owners of parent for the period 3,072 3,072 Acquisition of treasury stock (1 ) (1 ) Reversal of revaluation reserve for land (54) (54) Net changes in items other than shareholders' equity (1,300) (18 ) 54 (309) 73 (1,500) Balance at March 31, 2019 ¥ 18,976 ¥ 18,115 ¥ 27,390 ¥ (2,059 ) ¥ 3,334 ¥ (36 ) ¥ 3,661 ¥ (1,166 ) ¥ 628 ¥ 68,845 Thousands of U.S. Dollars (Note 1) Shareholders' equity Accumulated other comprehensive income Non-controlling interests Total net assets Common stock Capital surplus Retained earnings Treasury stock, at cost Net unrealized gains (losses) on securities (Note 11) Net deferred gains (losses) on hedges Revaluation reserve for land (Note 4) Retirement benefits liability adjustments (Note 13) Balance at March 31, 2018 $ 172,515 $ 164,684 $ 225,375 $ (18,712 ) $ 42,131 $ (159) $ 32,790 $ (7,791 ) $ 5,050 $ 615,883 Cash dividends (3,800) (3,800) Profit attributable to owners of parent for the period 27,930 27,930 Acquisition of treasury stock (10 ) (10 ) Reversal of revaluation reserve for land (497) (497) Net changes in items (11,820) (170 ) 497 (2,812) 666 (13,639) other than shareholders' equity Balance at March 31, 2019 $ 172,515 $ 164,684 $ 249,008 $ (18,722 ) $ 30,310 $ (329 ) $ 33,287 $ (10,603 ) $ 5,716 $ 625,866 23 The accompanying notes are an integral part of these financial statements. Millions of Japanese Yen Thousands of U.S. Dollars (Note 1) 2019 2018 2019 Cash flows from operating activities: Profit before income taxes ¥ 4,273 ¥ 2,557 $ 38,852 Adjustments to reconcile income before income taxes and Non-controlling interests to net cash (used in) provided by operating activities: Depreciation and amortization 1,786 1,771 16,244 Loss on impairment of fixed assets 74 59 677 Exchange (gain) loss, net (44) 62 (400) (Gain) loss on sale or disposal of fixed assets and intangible assets (45) (64) (412) (Gain) loss on sale of investment in securities (Note 3) (412) 7 (3,748) Increase (decrease) in liability for retirement benefits (356) (988) (3,238) Increase (decrease) in allowance for doubtful accounts 13 (262) 123 Increase (decrease) in provision for loss on construction defects (6,035) (3,323) (54,866) Changes in: Notes and accounts receivable, trade (9,800) (1,056) (89,095) Real estate for sale 416 229 3,784 Cost on construction contracts in progress and other (446) 1,236 (4,060) Notes and accounts payable, trade 11,514 8,464 104,672 Advances received on construction contracts in progress 1,513 931 13,761 Other, net (Note 3) (4,631) 779 (42,103) Sub-total (2,179) 10,405 (19,810) Interest and dividend income received 381 328 3,471 Interest paid (310) (378) (2,825) Income taxes paid (239) (426) (2,180) Net cash (used in) provided by operating activities (2,347) 9,928 (21,345) Cash flows from investing activities: Payments for acquisition of investment in securities (126) (33) (1,150) Proceeds from sale of investment in securities 830 22 7,554 Payments for acquisition of property, plant and equipment (2,072) (1,072) (18,844) Proceeds from sale of property, plant and equipment 338 483 3,077 Other, net (466) (114) (4,237) Net cash (used in) provided by investing activities (1,496) (714) (13,600) Cash flows from financing activities: Net increase (decrease) in short-term borrowings 242 52 2,207 Proceeds from long-term debt 4,790 4,920 43,545 Repayment of long-term debt (5,412) (5,535) (49,201) Acquisition of treasury stock (1) (1) (10) Cash dividends paid (418) (0) (3,808) Other, net (243) (109) (2,212) Net cash (used in) provided by financing activities (1,042) (674) (9,480) Effect of exchange rate changes on cash and cash equivalents 34 (74) 312 Net increase (decrease) in cash and cash equivalents (4,852) 8,464 (44,113) Cash and cash equivalents at beginning of year 36,652 28,187 333,202 Cash and cash equivalents at end of year (Note 8) ¥ 31,799 ¥ 36,652 $ 289,089 CONSOLIDATED STATEMENT OF CASH FLOWS TOA CORPORATION and its consolidated subsidiaries For the years ended March 31, 2019 and 2018 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 1.Significant Respects for the Basis of Preparing Consolidated Financial Statements: The accompanying consolidated financial s t a t e m e n t s o f T O A C O R P O R A T I O N ( t h e “ Company ” ) and its consolidated subsidiaries (the “ Companies ” ) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. Certain reclassifications and rearrangements were made for the convenience of readers outside of Japan. As permitted by the Financial Instruments and Exchange Law of Japan, amounts of less than one million yen have been rounded down to the nearest million Japanese yen. Ⅰ . Basis of consolidation T h e C o m p a n y h a s 1 7 m a j o r i t y - o w n e d s u b s i d i a r i e s a s o f M a r c h 3 1 , 2 0 1 9 . T h e consolidated financial statements for the year ended March 31, 2019 include the accounts of the Company and 11 majority-owned subsidiaries. Principal consolidated subsidiaries were TOA Agency Co., Ltd., Shinko Corporation, TOA Kikai Kogyo Co., Ltd. Consolidated subsidiaries have the same financial period as the Company that ends on March 31. Other 6 subsidiaries are not consolidated as they are at small scale and not significant in terms of total assets, net sales, retained earnings or net income in aggregate. Investments in unconsolidated subsidiaries (Human Affair Co., Ltd. and others) and affiliates (Sengenyama Developing Co., Ltd. and others) are excluded from application of the equity method as they are not significant in terms of net income or retained earnings in aggregate. Ⅱ . Basis of accounting treatment (1) Basis of valuation for significant assets a) Securities Securities held by the Companies are classified into two categories; Held-to-maturity debt securities are carried at amortized cost. Other securities for which market quotations are available are stated at fair value. Net unrealized gains or losses on these securities are included directly in the net assets and cost of securities sold is computed by the moving average method. Other securities for which market quotations are unavailable are stated at moving average cost method. b) Derivatives With changes in fair value included in net income or loss for the period in which they arise, derivatives are stated at fair value. c) Inventories Cost on construction contracts in progress, PFI projects and real estate for sale are stated at specific cost method for each contract. Materials and supplies are stated at moving average cost method. However, in the case that net selling value falls below the acquisition cost at the end of the period, inventories except for cost on construction contracts in progress are carried at the net selling value on the balance sheet, regarded as decreased profitability of assets. (2) Depreciation for property, plant and equipment and other Except for leased assets, depreciation is principally computed by the declining-balance method at rates based on the estimated useful lives. However, depreciation of buildings which the Companies acquired on or after April 1, 1998, and facilities attached to buildings and other non- building structures acquired on or after April 1, 2016 are computed on a straight-line basis over the estimated period. Useful lives and residual value are in conformity with the provisions of the Corporation Tax Law of Japan. As for intangible fixed assets excluding leased assets and long-term prepaid expenses, amortization is computed by the straight-line method and the useful lives are in conformity with the provisions of the Corporation Tax Law of Japan. As for leased assets related to finance lease, other than those which are deemed to transfer ownership of the leased assets to the lessee, depreciation is principally computed by the straight- line method over the useful lives equivalent to lease term and residual value is equal to zero. (3) Reserve and allowance a) Allowance for doubtful accounts Allowance for general receivables are established in amounts considered to be appropriate based upon credit loss experience. For specific receivables such as doubtful accounts, allowance for these are established in amounts considered to be uncollectible based upon an evaluation of possibility of collection in each outstanding receivable. b) Reserve for indemnity on completed contracts Reserve for indemnity on completed contracts is provided for the future defect expenses based upon the estimated indemnity amount for net sales for the year. c) Reserve for loss on construction works Reserve for loss on construction works is provided for the amount equivalent to cover future loss by evaluating individual construction form which loss is assumed and estimated. d) Reserve for loss on construction defects Reserve for loss on construction defects is provided for the amount equivalent to cover future defect expenses based upon the estimated repair costs for construction defects for soil investment projects. (4) Retirement benefits Liabilities for retirement benefits has been provided on an accrual basis as of the balance sheet date based on an estimate of the projected benefit obligation and the employees' pension plan assets. To calculate projected benefit obligation, the benefit formula method is used to allocate expected retirement benefit payments to the each period through current fiscal year-end. Actuarial gain or loss is amortized by the straight-line method over a defined period (13 years), not exceeding t h e a v e r a g e r e m a i n i n g service period of the employees from the next fiscal year after the incurrence. Certain consolidated subsidiaries apply the simplified method which assumes retirement benefit obligation to be equal to the benefits payable assuming voluntary retirement of all employees at fiscal year-end. (5) Recognition of contract revenue and cost The Companies adopt the percentage-of- completion method for revenue recognition for the construction-type contracts where the outcome of the construction activities by the end of this year can be reliably estimated. Completion method is adopted otherwise. The percentage of completion is measured by the ratio of the costs incurred to the estimated total costs for each contract. (6) Hedge accounting Gains or losses arising from changes in fair value of the derivatives designated as “ hedging instruments ” are deferred as a component of net assets and included in net income or loss in the same period during which the gains and losses on the hedged items or transactions are recognized. For interest rate swaps, if certain hedging criteria are met, interest rate swaps are not recognized at their fair values but an alternative (short-cut) method under Japanese accounting standards is applied by which the amounts received or paid for such interest swap arrangements are recognized as interest over the life of each of the arrangements. The derivatives designated as hedging instruments by the Companies are principally interest swaps and forward exchange contracts. The related hedged items are bank loans, foreign currency monetary liabilities and forecasted 25 transactions. The Companies have a policy to utilize the above hedging instruments in order to reduce the Company's exposure to the risk of interest rate fluctuation and foreign exchange fluctuation. Thus, the Company's purchases of the hedging instruments are limited to, at maximum, the amounts of the hedged items. The Companies evaluate effectiveness of its hedging activities by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the commencement of the hedges. (7) Scope of cash and cash equivalents Cash and cash equivalents in the consolidated statement of cash flows and composed of cash on hand, bank deposits which are able to be withdrawn on demand and short-term investment with an original maturity of three months or less and which represent a minor risk of fluctuation in value. (8) Consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. (9) U.S. Dollar amounts The dollar amounts included in the financial statements and notes thereto represent the arithmetical results of translating yen to dollars at rate of ¥110=US$1, the approximated rate of exchange prevailing on March 31, 2019. The inclusion of such dollar amounts is solely for the convenience of readers outside of Japan and is not intended to imply that yen and assets and liabilities originating in Yen have been or could be readily converted, realized or settled in dollars at this or any other rates. Amounts less than one thousand have been rounded down to the nearest thousand dollars. 2.Issued but not yet adopted accounting standard and others Accounting Standard and Implementation Guidance on Revenue Recognition. O n M a r c h 3 0 , 2 0 1 8 , t h e A S B J i s s u e d "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29) and "Implementation Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No. 30). (1) Overview This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes the following five-step model that will apply to revenue from customers: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when (or as) the entity satisfies a performance obligation (2) Scheduled date of adoption The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending March 31, 2022. (3) Impact of the adoption of accounting standard and implementation guidance The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its consolidated financial statements. 3.Changes in Presentation The Companies have changed the presentation of items in the consolidated balance sheet as follows: Securities, presented separately in the previous year, are included in Other current assets of Current assets in the current year. To reflect this change in presentation, the Companies reclassified items of the previous year in the consolidated balance sheet for the current year. Consequently, Securities in the amount of ¥15 million were included in Other current assets. Also, Other current assets in the previous year were shown in the amount of ¥5,945 million, compared with ¥5,930 million previously presented. Current portion of long-term debt, presented separately in the previous year, is included in Short- term borrowings in the current year. To reflect this change in presentation, the Companies reclassified items of the previous year in the consolidated balance sheet for the current year. Consequently, Current portion of long-term debt in the amount of ¥5,412 million was included in Short-term borrowings. Also, Short-term borrowings in the previous year was shown in the amount of ¥13,928 million, compared with ¥8,516 million previously presented. The Companies have changed the presentation of items in the consolidated statement of income as follows: C o m m i s s i o n f e e , A d d i t i o n a l s e v e r a n c e payment, Compensation for damage, presented separately in the previous year, are included in Other, net of Other income (expenses) in the current year. Gain on sale of investment in securities, included in Other, net of Other income (expenses) in the previous year, is presented separately in the current year. To reflect this change in presentation, the Companies reclassified items of the previous year in the consolidated statement of income for the current year. Consequently, Commission fee in the amount of ¥(110) million, Additional severance payment in the amount of ¥(46) million, Compensation for damage in the amount of ¥(72) million were included in Other, net and Gain on sale of investment in securities was newly shown in the amount of ¥0 million. Also, Other, net of Other income (expenses) in the previous year was shown in the amount of ¥(193) million, compared with ¥36 million previously presented. The Companies have changed the presentation of items in the consolidated statement of cash flows as follows: (Gain) loss on sale of investment in securities, included in Other, net of Cash flow from operating activities in the previous year, is presented separately in the current year. To reflect this change in presentation, the Companies reclassified items of previous year in the consolidated statement of cash flows of the current year. Consequently, (Gain) loss on sale of investment in securities was newly shown in the amount of ¥ 7 million. Also Other, net of Cash flow from operating activities in the previous year was shown in the amout of ¥ 779 million, compared with ¥ 787 million previously presented. Partial Amendments to Accounting Standard for Tax Effect Accounting. The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018 ) (hereinafter, the “Partial Amendments”) from the beginning of the fiscal year ended March 31, 2019. As such, deferred tax assets and deferred tax liabilities are included within investments and other assets and long term liabilities respectively , and related income tax disclosures have been expanded. As a result, ¥6,027 million of deferred tax assets in the current assets previously presented in consolidated balance sheet as of March 31, 2018 have been reclassified and included within ¥7,225 million of deferred tax assets in investments and other assets. Also, ¥20 million of deferred tax assets in current assets and ¥61 million of deferred tax liabilities in current liabilities have been reclassified and included within deferred tax liabilities included in other in long term liabilities. Also, “Note 14 Tax Effect Accounting” in the Notes to the consolidated financial statements has been expanded in accordance with Note 8 and Note 9 of Interpretive Notes to Accounting for Tax Effect Accounting. However, comparative information for the year ended March 31, 2018 has not been disclosed in Note 13 in accordance with the transitional provisions set forth in Article 7 of the Partial Amendments. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 4.Notes to Consolidated Balance Sheet Ⅰ .Cost on construction contracts in progress and other Cost on construction contracts in progress and other as of March 31, 2019 and 2018 consisted of: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Cost on construction contracts in progress ¥5,422 ¥4,702 $49,295 PFI projects 958 1,152 8,715 Other inventories 531 611 4,832 Cost on construction contracts in progress and other ¥6,912 ¥6,466 $62,843 Ⅱ .Reserve for loss on construction works Cost on construction contracts in progress and reserve account in relation to the construction works, which loss is assumed, are represented in current assets and liabilities, respectively without setoff. Among cost on construction contracts in progress, the aggregate amounts corresponding to reserve for loss on construction works as of March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥335 ¥249 $3,051 Ⅲ .Investments in securities Among investments in securities, the aggregate amounts corresponding to unconsolidated subsidiaries and affiliates as of March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Investments in affiliates ¥222 ¥252 $2,022 Ⅳ .Revaluation of land In accordance with the "Act on Revaluation of Land" (Act No.34 promulgated on March 31, 1998) and the "Act on Partial Revision of the Act on Revaluation of Land" (Act No.19 promulgated on March 31, 2001), the Company revalued its land held for the business purpose and accounted for the amount equivalent to tax related to this differences on revaluation as "deferred tax liabilities on revaluation of land" in liabilities and accounted for the amount that tax amount were deducted from the differences on revaluation as "revaluation reserve for land" in net assets. Furthermore, reviewing a collectability of "deferred tax assets for land revaluation" individually, among the amount equivalent to tax related to the differences on revaluation of land, the amount that were difficult to anticipate collectability were reduced from "revaluation reserve for land". Revalued method The Company revalued its land held for business purposes based on the value appraised by an appraiser, as regulated by Article No.2-4 of the "Enforcement Ordinance of the Law Concerning Land Revaluation (Article No.119 issued on March 31, 1998) with certain necessary adjustments. Revalued date March 31, 2002 Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Differences of the land after revaluation exceeded its fair value ¥3,980 ¥4,066 $36,187 Ⅴ .Assets pledged as collateral and secured liabilities Assets pledged as collateral and secured liabilities as of March 31, 2019 and 2018 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars Assets pledged as collateral: 2019 2018 2019 Current assets Other current assets ¥28 ¥28 $258 Investment and other assets Investment in securities 2,040 1,900 18,552 Long-term loans 167 194 1,521 Total ¥2,236 ¥2,122 $20,332 27 As of March 31, 2019, the assets listed above are pledged as collateral to secure contingent liabilities amounting to ¥1,746million (US$15,878 thousand) and liabilities based on the loan agreements with credit line between 12 PFI companies and financial institutions. As of March 31, 2018, secured liabilities were in the amount of ¥1,707 million and liabilities were for 12 PFI companies. Ⅵ .Securities lent Among investments in securities, securities lent to financial institution under the security lending agreement at March 31, 2019 and 2018 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥162 ¥174 $1,480 Ⅶ .Commitments and contingent liabilities (a)The Companies are contingently liable for the following as of March 31, 2019 and 2018: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Employees (Loan guarantee to bank) ¥15 ¥22 $138 National Federation of Promotion for Fishing Ports and Villages 65 86 595 Fisheries Cooperative Association (Loan guarantee) MORIMOTO CO., LTD (Deposit Money Guarantee) 989 — 8,991 Others 14 53 131 Total ¥1,084 ¥161 $9,857 Ⅷ .Short-term borrowings The Company had commitment lines for efficient financing from 7 banks at March 31, 2019 and 2018 as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Total amount of contracts of commitment lines ¥20,000 ¥20,000 $181,818 Outstanding borrowings — — — Balance ¥20,000 ¥20,000 $181,818 Ⅸ .Non-recourse debt The following non-recourse debts are included in current portion of long-term debt and long-term debt with PFI business pledged as collateral. The amount of non-recourse debts as of March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Non-recourse debt included in current portion of long term debt ¥545 ¥567 $4,955 Non-recourse debt included in long-term debt 1,201 1,746 10,919 Total ¥1,746 ¥2,314 $15,875 The amount of PFI assets pledged as collateral for non-recourse debt as of March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥4,008 ¥4,570 $36,441 X .Notes receivable and notes payables March 31, 2019 and 2018 was a holiday for financial institutions in Japan, and therefore the following notes receivable and payable maturing on that date were included in the balance sheet and were settled on the next business day. Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Notes receivable ¥174 ¥26 $1,587 Notes payable 117 103 1,068 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 5.Notes to Consolidated Statement of Income Ⅰ .Net sales The amounts of contract revenue which are accounted for by the percentage-of-completion method were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥159,781 ¥148,177 $1,452,557 Ⅱ .Loss on valuation of inventory The ending inventory was the carrying value after writing down due to the decreased profitability. Among the cost of sales, the aggregate amounts corresponding to loss on valuation of inventory were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥152 ¥123 $1,385 Ⅲ .Reserve for loss on construction works Among the cost of sales, amount in aggregate corresponding to reserve for loss on construction works were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥877 ¥438 $7,980 Ⅳ .Selling, general and administrative expenses The significant items of selling, general and administrative expenses were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Salaries to employees ¥4,567 ¥4,271 $41,521 Expenses for retirement benefits for employees 253 271 2,306 Research expenses 939 891 8,539 Provision for doubtful accounts, trade 0 (0) 0 Ⅴ .Research and development expenses Among the general and administrative expenses and the cost on contract, the aggregate amounts corresponding to research and development expenses were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 ¥1,013 ¥960 $9,212 Ⅵ .Gain on sale of fixed assets The breakdown of the gain on sale of fixed assets was as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Machinery and equipment ¥43 ¥0 $397 Land 42 51 382 Vessels 21 24 191 Others 2 3 22 Total ¥109 ¥81 $994 29 Ⅶ .Loss on sale of fixed assets The breakdown of the loss on disposition of fixed assets was as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Land ¥16 ¥0 $151 Machinery and equipment 8 — 79 Others 3 5 32 Total ¥28 ¥5 $263 Ⅷ .Loss on disposal of fixed assets The breakdown of the loss on retirement of fixed assets was as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Buildings and structures ¥66 ¥37 $604 Others 6 0 55 Total ¥72 ¥37 $660 Ⅸ .Impairment of fixed assets For the year ended March 31, 2019, the Companies recognized losses on impairment of the following assets: Use Type of assets Location Number of groups Idle properties Land and building Singapore and others 5 The construction business assets were grouped by each branch unit, the real estate leasing assets and the idle properties were grouped individually. The carrying amount of the relevant assets was written down to the recoverable value due to the drop in fair value and ¥74 million (US$677 thousand) was accounted for as loss on impairment of fixed assets, which consisted of ¥26 million (US$238 thousand) for Land,¥48 million (US$439 thousand) for Buildings. Meanwhile, the recoverable value of the relevant assets was based on the anticipated net sale value. Furthermore, the anticipated net sale value of land whose carrying amount was significant was applied to the appraisal value by the licensed real-estate appraiser. For the year ended March 31, 2018, the Companies recognized losses on impairment of the following assets: Use Type of assets Location Number of groups Idle properties Land and building Hiroshima and others 5 The construction business assets were grouped by each branch unit, the real estate leasing assets and the idle properties were grouped individually. The carrying amount of the relevant assets was written down to the recoverable value due to the drop in fair value and ¥59 million was accounted for as loss on impairment of fixed assets, which consisted of ¥58 million for Land, ¥1 million for buildings. Meanwhile, the recoverable value of the relevant assets was based on the anticipated net sale value. Furthermore, the anticipated net sale value of land whose carrying amount was significant was applied to the appraisal value by the licensed real-estate appraiser. 30 6.Notes to Consolidated Statement of Comprehensive Income Reclassifications adjustments and tax effects in relation to the other comprehensive income were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Unrealized gains (losses) on securities: Amount arising during the year (¥1,460) ¥635 ($13,278) Amount of reclassification adjustments (412) (0) (3,748) Amount before tax effect (1,872) 635 (17,026) Tax effect 572 (194) 5,206 Unrealized gains (losses) on securities (1,300) 441 (11,820) Deferred gains (losses) on hedges: Amount arising during the year (26) (25) (245) Amount of reclassification adjustments — － — Amount before tax effect (26) (25) (245) Tax effect 8 7 75 Deferred gains (losses) on hedges (18) (17) (170) Revaluation reserve for land: Tax effect — (1) — Revaluation reserve for land — (1) — Retirement benefits liability adjustments: Amount arising during the year (712) 557 (6,479) Amount of reclassification adjustments 266 299 2,425 Amount before tax effect (445) 856 (4,053) Tax effect 136 (261) 1,241 Retirement benefits liability adjustments (309) 594 (2,812) Total other comprehensive income (¥1,628) ¥1,016 ($14,803) 7.Notes to Consolidated Statement of Changes in Net Assets Ⅰ. Type and number of shares For the year ended March 31, 2019 Thousands of shares Type of shares Number of shares at beginning of year Increase Decrease Number of shares at end of year Issued stock Common stock 22,494 — — 22,494 Treasury stock Common stock 1,594 0 — 1,594 Notes: The principal details for increase and decrease in treasury stock were as follows: Increase due to purchase of odd stock 0 thousand shares For the year ended March 31, 2018 Thousands of shares Type of shares Number of shares at beginning of year Increase Decrease Number of shares at end of year Issued stock Common stock 22,494 — — 22,494 Treasury stock Common stock 1,593 0 — 1,594 Notes: The principal details for increase and decrease in treasury stock were as follows: Increase due to purchase of odd stock 0 thousand shares NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 31 Ⅱ. Dividend payment For the year ended March 31, 2018 Millions of Japanese Yen Resolution Type of share Dividend resource Total amount of dividends Cash dividends per share (Yen) Record date Effective date Annual Shareholders' Meeting held on June 28, 2018 Common stock Retained earnings ¥425 ¥20 March 31, 2018 June 29, 2018 Ⅲ. Among dividends whose record date belong in the current fiscal year, dividends which become effective in the following fiscal year was as follows: For the year ended March 31, 2019 Millions of Japanese Yen Thousands of U.S. Dollars Resolution Type of share Dividend resource Total amount of dividends Cash dividends per share (Yen) Total amount of dividends Cash dividends per share (Dollars) Record date Effective date Annual Shareholders' Meeting held on June 27, 2019 Common stock Retained earnings ¥637 ¥30 $5,795 $0.27 March 31, 2019 June 28, 2019 8.Notes to Consolidated Statement of Cash Flows Cash and cash equivalents consisted of: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Cash and bank deposits ¥31,820 ¥36,682 $289,275 Time deposits due over three months (20) (30) (185) Cash and cash equivalents ¥31,799 ¥36,652 $289,089 9.Leases Operating lease The scheduled maturities of future operating lease payments, including an interest portion on such lease contracts as of March 31, 2019 and 2018, are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Due within one year ¥143 ¥139 $1,306 Due over one year 276 372 2,510 Total ¥419 ¥512 $3,817 32 10.Financial Instruments Ⅰ. Summary of financial instruments a) Policy for financial instruments The Companies limit its fund management to low-risk financial instruments, such as bank deposits in a short period and have a policy to raise low-interest funds through bank borrowings flexibly. The Companies utilize derivatives in order to reduce the risk of fluctuation in interest rates and foreign exchange rates for debts and credits in foreign currencies. The Companies, furthermore, utilize the hedging instruments for the purpose of stabilizing the cost on contracts and do not enter into derivatives for speculative purpose. b) Contents of financial instruments, related risk and risk management Notes and accounts receivable which categorized into operating receivables are exposed to client's credit risk. These risks are reviewed at entering into a contract and the concerned counterparts are managed by the administration headquarters in each case. Investments in securities are exposed to fluctuation risks of market price. Those securities are mainly shares of other companies with which the Company has business relationships and the Company monitors the monthly fair value. Among the debt, short-term borrowings are principally applicable to funds for business activities and long-term debt (maturities are within five years in principle) are funds for capital investments. Long-term debt with variable interest rates are exposed to the risk of interest rate fluctuation. The Company utilizes derivatives which are the interest swaps in each contracts in order to avoid fluctuation risk of interest expenses and stabilize interest cost. In addition, the Company utilizes foreign currency exchange contracts to hedge foreign currency exposure of certain transactions related to construction work denominated in foreign currencies. Conducting of derivative transactions is managed by gaining approval by directors and derivatives provided by the highly-rated financial institutions are utilized in order to avoid credit risk. c) Supplemental explanation for fair value of financial instruments Notional amounts of derivatives are not indicative of the actual market risk involved in derivative transactions. Ⅱ. Fair value of financial instruments As of March 31, 2019, carrying amount, fair value and unrealized gain (loss) are as follows: Carrying amount Fair value Unrealized gain (loss) Carrying amount Fair value Unrealized gain (loss) Millions of Japanese Yen Thousands of U.S. Dollars Cash and bank deposits ¥31,820 ¥31,820 ¥ — $289,275 $289,275 $ — Notes and accounts receivable, trade 89,145 89,145 — 810,410 810,410 — Advanced money 15,417 15,417 — 140,155 140,155 — Investments in securities Other securities 10,561 10,561 — 96,012 96,012 — Total assets 146,943 146,943 — 1,335,853 1,335,853 — Notes and accounts payable, trade 40,090 40,090 — 364,456 364,456 — Electronically recorded obligations, operating 19,324 19,324 — 175,673 175,673 — Short-term borrowings 8,758 8,758 — 79,625 79,625 — Deposits received 15,450 15,450 — 140,460 140,460 — Long-term debt (*1) 19,493 19,604 110 177,217 178,220 1,003 Total liabilities 103,117 103,228 110 937,433 938,436 1,003 Derivative transactions (*2) (¥52) (¥52) ¥ — $475.0 $475.0 $ — (*1) Current portion of long-term debt of ¥ 5,238 million (US$47,626 thousand) is included in long-term debt and carrying amount and fair value are represented. (*2) The assets and liabilities are reported as net amount. As of March 31, 2018, carrying amount, fair value and unrealized gain (loss) are as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 33 Carrying amount Fair value Unrealized gain (loss) Millions of Japanese Yen Cash and bank deposits ¥36,682 ¥36,682 ¥ — Notes and accounts receivable, trade 79,344 79,344 — Advanced money 7,524 7,524 — Investments in securities Held-to-maturity debt securities 15 15 0 Other securities 12,724 12,724 — Total assets 136,291 136,291 0 Notes and accounts payable, trade 34,351 34,351 — Electronically recorded obligations, operating 13,556 13,556 — Short-term borrowings 8,516 8,516 — Deposits received 14,019 14,019 — Long-term debt (*1) 20,116 20,235 119 Total liabilities 90,558 90,677 119 Derivative transactions (*2) 25 25 ¥ — (*1) Current portion of long-term debt of ¥ 5,412 million is included in long-term debts and carrying amount and fair value are represented. (*2) The assets and liabilities are reported as net amount. a) Computation of fair value for financial instruments, investment in securities and derivative transactions Assets Cash and bank deposits, and advanced money in other current assets Those accounts are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Notes and accounts receivable, trade The most of its account are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Investments in securities Fair value of investments in securities is based on market price at Stock Exchange or asking price from correspondent financial institutions. Liabilities Notes and accounts payable, trade, electronically recorded obligations, operating, short-term borrowings, and deposits received in other current liabilities. Those accounts are carrying value, since those are settled in a short period and their fair value is equivalent to carrying amount approximately. Long-term debt For the fair value of long-term debt by variable interest rates, the market rate is almost equal to the book price because it reflects the interest rates in a short time. Fair value of long-term debt by fixed rate is based on the present value of the total of principal and interest discounted by the interest rate to be applied, provided that the equivalent loans are newly entered into. In addition, long-term debt by some variable interest rates is subject to the special treatment of interest rate swaps. The total amount of the principal that is being treated as a combination of interest rate swaps is calculated by discounting the interest rate to be applied,provided that the equivalent loans are newly entered into. Derivative Transactions Please refer to Note 12, Derivative Transactions, of the notes the consolidated financial statements. b) Financial instruments for which it is extremely difficult to determine fair value Unlisted stocks are not included in Investments in securities, since those have no market price and it is extremely difficult to determine fair value. 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Unlisted stocks ¥1,853 ¥1,884 $16,582 c) Projected redemption The projected redemption of monetary claims as of March 31, 2019 was as follows: within one year over one year within five years over five years within ten years over ten years within one year over one year within five years over five years within ten years over ten years Millions of Japanese Yen Thousands of U.S.Dollars Cash and bank deposits ¥31,820 ¥— ¥— ¥— $289,275 $— $— $— Notes and accounts receivable, trade 83,307 5,822 14 — 757,338 52,935 135 — Investments in securities Other securities with maturities — 43 — — — 392 — — (Government bonds) — — — — — — — — Total ¥115,127 ¥5,866 ¥14 ¥— $1,046,614 $53,327 $135 $— The projected redemption of monetary claims as of March 31, 2018 was as follows: within one year over one year within five years over five years within ten years over ten years Millions of Japanese Yen Cash and bank deposits ¥36,682 ¥— ¥— ¥— Notes and accounts receivable, trade 74,681 4,641 21 — Investments in securities Held-to-maturity debt securities (Governmental bonds) 15 — — — Other securities with maturities (Government bonds) — 43 — — Total ¥111,379 ¥4,684 ¥21 ¥ — d) The projected repayment of short-term borrowings, long-term debt and lease obligation as of March 31, 2019 was as follows: within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Millions of Japanese Yen Short-term borrowings ¥8,758 ¥— ¥— ¥— ¥ — ¥— Long-term debt 5,238 5,965 4,673 2,421 1,180 14 Lease obligation 151 148 117 4 3 — Total ¥14,149 ¥6,114 ¥4,791 ¥2,426 ¥1,183 ¥14 35 within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Thousands of U.S. Dollars Short-term borrowings $79,625 $ — $ — $ — $ — $ — Long-term debt 47,626 54,229 42,486 22,015 10,731 127 Lease obligation 1,376 1,354 1,068 42 29 0 Total $128,628 $55,583 $43,555 $22,058 $10,760 $127 The projected repayment of short-term borrowings, long-term debt and lease obligation as of March 31, 2018 was as follows: within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Millions of Japanese Yen Short-term borrowings ¥8,516 ¥— ¥— ¥— ¥— ¥— Long-term debt 5,412 5,157 4,787 3,495 1,243 20 Lease obligation 139 124 122 99 — — Total ¥14,067 ¥5,281 ¥4,909 ¥3,595 ¥1,243 ¥20 11.Securities (1) The following is certain information related to the aggregate acquisition costs, carrying amount and fair value of securities. At March 31, 2019 Millions of Japanese Yen Thousands of U.S. Dollars Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Other securities whose consolidated balance sheets amount exceeds its acquisition cost Stock ¥4,989 ¥9,903 ¥4,913 $45,363 $90,034 $44,671 Government bond 40 43 2 368 392 23 Sub total 5,030 9,946 4,916 45,731 90,426 44,694 The securities consolidated balance sheets amount does not exceed its acquisition cost Stock 827 614 (213) 7,525 5,585 (1,939) Government bond — — — — — — Sub total 827 614 (213) 7,525 5,585 (1,939) Total ¥5,858 ¥10,561 ¥4,703 $53,257 $96,012 $42,755 At March 31, 2018 Millions of Japanese Yen Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Held-to-maturity debt securities whose consolidated balance sheet amount exceeds its acquisition cost Government bond ¥15 ¥15 ¥0 Sub total 15 15 0 The securities whose consolidated balance sheet amount does not exceed its acquisition cost Government bond — — — Sub total — — — Total ¥15 ¥15 ¥0 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries Millions of Japanese Yen Acquisition cost Fair value (Carrying value) Unrealized gain (loss) Other securities whose consolidated balance sheets amount exceeds its acquisition cost Stock ¥5,702 ¥12,392 ¥6,689 Government bond 39 43 3 Sub total 5,742 12,435 6,692 The securities consolidated balance sheets amount does not exceed its acquisition cost Stock 406 289 (117) Government bond — — — Sub total 406 289 (117) Total ¥6,149 ¥12,724 ¥6,575 (2) Other securities sold during the financial years ended March 31, 2019 and 2018 were as follows: At March 31, 2019 Millions of Japanese Yen Thousands of U.S. Dollars Sales Gain on sales Loss from sales Sales Gain on sales Loss from sales Stock ¥831 ¥412 ¥— $7,560 $3,758 $— Other — — — — — — Total ¥831 ¥412 ¥ — $0 $0 $ — At March 31, 2018 Millions of Japanese Yen Sales Gain on sales Loss from sales Stock ¥0 ¥0 — Other — — — Total ¥0 ¥0 ¥ — 12.Derivative Transactions Derivative transactions for the year ended March 31, 2019 were classified into: a) Hedge accounting unapplied Not applicable b) Hedge accounting applied Notional amounts and fair value conditioned on contracts in each hedge accounting method are as follows: (1) Currency related derivatives Millions of Japanese Yen Thousands of U.S. Dollars Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Notional amount Maturing over one year Fair value Accounting in principle Forward foreign exchange contracts Buying U.S. Dollars Accounts payable ¥1,354 ¥756 (¥7) ( * ) $12,315 $6,874 ($68) ( * ) ( * ) Fair value is calculated based on presented price by correspondent financial institution. (2) Interest rate related derivatives Millions of Japanese Yen Thousands of U.S. Dollars Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Notional amount Maturing over one year Fair value Accounting in principle Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥3,806 ¥3,078 (¥44) (*1) $34,604 $27,986 ($406) (*1) Short-cut Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥2,263 ¥888 (*2) $20,579 $8,076 (*2) 37 (*1) Fair value is calculated based on presented price by correspondent financial institution. (*2) Fair value based on the short-cut method is included in fair value of these long-term debt, since the derivative transactions are treated with the hedged long-term debts collectively. Derivative transactions for the year ended March 31, 2018 were classified into: a) Hedge accounting unapplied Not applicable b) Hedge accounting applied Notional amounts and fair value conditioned on contracts in each hedge accounting method are as follows: Interest Rate related derivatives Millions of Japanese Yen Hedge accounting method Types of derivative Hedged item Notional amount Maturing over one year Fair value Accounting in principle Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥2,912 ¥2,576 ¥25 (*1) Short-cut Interest rate swaps Pay/fixed and receive/ floating Long-term debt ¥4,162 ¥2,263 (*2) (*1) Fiar Fair value is calculated based on presented price by correspondent financial institution. (*2) Fair value based on the short-cut method is included in fair value of these long-term debt, since the derivative transactions are treated with the hedged long-term debts collectively. 13.Reserve for Retirement Benefits and Pension Plan The Company and some of its consolidated subsidiaries have the funded/unfunded defined benefit retirement plans. The Company has the funded defined benefit plan, the cash balance plan and sets up the retirement benefit trust. Some consolidated subsidiaries have the unfunded retirement lump sum plans. Furthermore, additional severance payment covering substantially all employees. (1)The changes in the retirement benefit obligation during the years ended March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Retirement benefit obligation balance at the beginning of the year ¥21,485 ¥21,596 $195,323 Service cost 771 776 7,009 Interest cost 92 107 837 Actuarial gain 104 418 948 Retirement benefit paid (1,317) (1,413) (11,979) Retirement benefit obligation balance at the end of the year ¥21,135 ¥21,485 $192,140 (2)The changes in plan assets during the years ended March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Plan assets balance at the beginning of the year ¥18,595 ¥17,160 $169,052 Expected return on plan assets 224 215 2,037 Actuarial gain (loss) (608) 975 (5,530) Contributions by the Company 947 1,640 8,613 Retirement benefits paid (1,269) (1,397) (11,543) Plan assets balance at the end of the year ¥17,889 ¥18,595 $162,629 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries (3)The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2019 and 2018 for the Company’s and the consolidated subsidiaries’ defined benefit plans: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Funded retirement benefit obligation ¥20,721 ¥21,070 $188,379 Plan assets at fair value (17,889) (18,595) (162,629) 2,832 2,474 25,750 Unfunded retirement benefit obligation 413 415 3,761 Net liability for retirement benefits in the balance sheet 3,246 2,889 29,511 Liability for retirement benefits 3,246 2,889 29,511 Net liability for retirement benefits in the balance sheet ¥3,246 ¥2,889 $29,511 (4)The components of retirement benefit expense for the years ended March 31, 2019 and 2018 are as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Service cost ¥771 ¥776 $7,009 Interest cost 92 107 837 Expected return on plan assets (224) (215) (2,037) Amortization of actuarial loss 266 299 2,425 Other 11 46 103 Retirement benefit expense ¥917 ¥1,014 $8,338 Notes: 1. Service cost does not include the amounts contributed by employees with respect to welfare pension fund plans. 2. Retirement benefit expenses for consolidated subsidiaries adopting the simplified method which assumes retirement benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year end are included in “Service cost.” (5)Unrecognized actuarial gain (loss) included in other comprehensive income (before tax effect) as of March 31, 2019 and 2018 is as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Actuarial gain (loss) (¥445) ¥856 ($4,053) (6)Unrecognized actuarial gain (loss) included in accumulated other comprehensive income (before tax effect) as of March 31, 2019 and 2018 is as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Unrecognized actuarial gain (loss) ¥1,681 ¥1,235 $15,283 (7)The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2019 and 2018 is as follows: 2019 2018 Stocks 38% 43% Bonds 28% 28% General account assets 17% 16% Other 18% 13% Total 100% 100% The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets held in each category. (8) The assumptions used in accounting for the above plans as of March 31, 2019 and 2018 were as follows: (Weighted average) 2019 2018 Discount rate 0.4% 0.4% Expected rate of return on plan assets 2.0% 2.0% Expected rate of future salary increase 2.5%~7.1% 2.6%~6.9% 39 14.Tax Effect Accounting 1.The significant components of deferred tax assets and liabilities at March 31, 2019 and 2018 were as follows: Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Deferred Tax Assets: Net liability for retirement benefits ¥1,949 ¥1,874 $17,722 Loss carried forward 2,801 1,106 25,467 Reserve for loss on construction works 400 330 3,641 Accrued bonus to employees 616 501 5,602 Unrealized losses on securities — 201 — Loss on valuation of utility rights 258 258 2,350 Loss on valuation of investment in securities 170 170 1,553 Loss on impairment of fixed assets 324 314 2,948 Loss on construction defects 1,451 3,299 13,197 Others 1,957 3,024 17,792 Total gross deferred tax assets ¥9,930 ¥11,082 $90,275 Valuation allowance for tax loss carried forward (¥223) — (2,030) Valuation allowance for deductible temporary differences (¥1,077) — (9,791) Total valuation allowance (¥1,300) (¥1,686) (11,820) Total deferred Tax assets ¥8,629 ¥9,395 78,453 Deferred Tax Liabilities: Revaluation reserve for land (¥545) (¥545) (4,963) Unrealized gains on securities (1,368) (2,142) (12,444) Other (151) (82) (1,380) Total deferred tax liabilities (2,066) (2,770) ($18,788) Net Deferred Tax Assets ¥6,563 ¥6,624 $59,665 (Note) A breakdown of tax loss carried forward and valuation allowance by expiry date as of March 3, 2019 is as follows: At March 31, 2019 within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Total Millions of Japanese Yen Tax loss carried forward (*1) ¥0 ¥15 ¥25 ¥— ¥— ¥2,759 ¥2,801 Valuation allowance (0) (13) (21) — — (187) (223) Deferred tax assets 0 2 3 — — 2,572 2,578 (*2) within one year over one year within two years over two years within three years over three years within four years over four years within five years over five years Total Thousands of U.S. Dollars Tax loss carried forward (*1) $ 5 $142 $229 $— $ — $25,089 $25,467 Valuation allowance (4) (122) (196) — — (1,706) (2,030) Deferred tax assets 0 20 32 — — 23,382 23,436 (*2 ) (*1) The amount is determined by multiplying the corresponding loss carried forward by effective statutory tax rate. (*2) Deferred tax assets of ¥2,578 million (US$23,436 thousand) for the tax loss carried forward of ¥2,801 million (US$25,467 thousand) (the amount is determined by multiplying the corresponding effective statutory tax rate) were recorded. Deferred tax assets of ¥2,578 million (US$23,436 thousand) mainly consist of the balance of tax loss carried forward of ¥2,567 million (the 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries amount is determined by multiplying the corresponding effective statutory tax rate). The tax loss carried forward within deferred tax assets was mainly due to the reversal of a portion of the ¥14,100 million (US$128,181 thousand) provision for loss on construction defects recorded in the fiscal year ended March 31, 2017. The Companies consider that it is likely the tax loss carried forward will be realized based on estimates of future taxable income; therefore, a related valuation allowance has not been recognized. 2. A reconciliation between the normal effective statutory tax rates for the years ended March 31, 2019 and 2018, and the actual effective tax rates reflected in the accompanying consolidated statements of income is as follows: 2019 2018 Normal effective statutory tax rate 30.6% 30.9% Expenses not deductible for income tax purposes 4.6 7.2 Non-taxable income (0.8) (1.0) Per capita levy of inhabitant taxes 2.7 4.4 Change in valuation allowance (8.7) (11.3) Other-net (1.9) 0.5 Actual effective tax rates 26.4% 30.7% 15.Asset Retirement Obligations Because the amounts of asset retirement obligations are inmaterial, the Companies have omitted a disclosure in the Notes to Consolidated Financial Statements for the years ended March 31, 2019 and 2018. 16.Investment and Rental Property Because the amounts of investment and rental property are inmaterial, the Companies have omitted a disclosure in the Notes to Consolidated Financial Statements for the year ended March 31, 2019 and 2018. 17.Information on Reportable Segments Ⅰ. Outline of the reportable segments The reportable segments of the Companies are components for which discrete financial information is available and prepared for the regular review, so that the board of directors can make decisions on the distribution of management resources and evaluate the operating performance. The Company comprises "Civil Engineering General Headquarters" and "Building Construction General Headquarters", which control domestic construction businesses, and "International Division" for overseas businesses. Those Headquarters and International Division develop strategies comprehensively in each line of business and expand business activities. Accordingly, the Company's businesses consist of segments classified by products and services based on the headquarters. The reportable segments are composed of "Domestic Civil Engineering Businesses", "Domestic Architectural Businesses", "Overseas Businesses" and principal activities in each segment are the following: 1) Domestic Civil Engineering Businesses: domestic civil engineering contracts, contracts related to design and others 2) Domestic Architectural Building Businesses: domestic architectural contracts, contracts related to design and others 3) Overseas Businesses: general overseas contracts Ⅱ .Computation for the amount of net sales, profits or losses and other items in each reportable segment The accounting policies of the reportable segments are substantially equivalent to the description in Significant Respects for the Basis of Preparing Consolidated Financial Statements. Intersegment net sales and transfers are based on the current market price. Meanwhile, assets are not allocated to the business segments. Ⅲ .Information on net sales, profits or losses and other items in the reportable segments For the year ended March 31, 2019 41 Millions of Japanese Yen Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers ¥93,980 ¥51,907 ¥19,564 ¥165,452 ¥8,239 ¥173,692 ¥ — ¥173,692 Inter-segment — 72 — 72 31,108 31,181 (31,181) — Total ¥93,980 ¥51,980 ¥19,564 ¥165,525 ¥39,348 ¥204,873 (¥31,181) ¥173,692 Segment profits or losses 5,203 2,042 (1,056) 6,189 1,079 7,268 (3,288) 3,980 Other items Depreciation and amortization ¥616 ¥0 ¥448 ¥1,065 ¥389 ¥1,455 ¥331 ¥1,786 For the year ended March 31, 2018 Thousands of U.S. Dollars Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers $854,371 $471,890 $177,855 $1,504,116 $74,903 $1,579,021 $ — $1,579,021 Inter-segment — 659 — 659 282,805 283,464 (283,465) — Total $854,371 $472,550 $177,855 $1,504,776 $357,708 $1,862,485 ($283,465) $1,579,021 Segment profits or losses 47,301 18,571 (9,605) 56,268 9,809 66,078 (29,894) 36,183 Other items Depreciation and amortization $5,603 $6 $4,078 $9,688 $3,545 $13,233 $3,010 $16,244 Notes : 1. "Other" is excluded from the reportable segments and inclusive of Real Estate Business, Manufacture / Sale / Repairing of construction machineries. 2. Adjustment of the segment profits amounting to ¥(3,288) million (US$(29,894) thousand) is inclusive of inter-segment elimination amounting to ¥265 million (US$2,415 thousand) and Selling, General and Administrative Expenses amounting to ¥(3,554) million (US$(32,309) thousand) which are not attributed to any reportable segments. 3. Segment profits or losses are adjusted to the operating income in the consolidated statements of income. 4. Assets are not described due to no allocation to the business segments. For the year ended March 31, 2018 Millions of Japanese Yen Reportable Segments Domestic Civil Engineering Domestic Architectural Building Overseas Total Others (Note 1) Total Adjustments (Note 2) Consolidated (Note 3) Net sales: External customers ¥74,939 ¥53,035 ¥23,217 ¥151,192 ¥9,852 ¥161,045 ¥ — ¥161,045 Inter-segment 159 67 — 226 19,841 20,067 (20,067) — Total ¥75,098 ¥53,102 ¥23,217 ¥151,419 ¥29,693 ¥181,113 (¥20,067) ¥161,045 Segment profits or losses 2,223 2,206 961 5,390 807 6,198 (3,318) 2,879 Other items Depreciation and amortization ¥437 ¥0 ¥570 ¥1,008 ¥460 ¥1,468 ¥302 ¥1,771 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries Notes : 1. "Other" is excluded from the reportable segments and inclusive of Real Estate Business, Manufacture / Sale / Repairing of construction machineries. 2. Adjustment of the segment profits amounting to ¥(3,318) million is inclusive of inter-segment elimination amounting to ¥(23) million and Selling, General and Administrative Expenses amounting to ¥(3,295) million which are not attributed to any reportable segments. 3. Segment profits or losses are adjusted to the operating income in the consolidated statements of income. 4. Assets are not described due to no allocation to the business segments. 18.Related Information Ⅰ .Information on products and services Description is excluded since the similar information is disclosed in the segment information. Ⅱ .Geographical information 1) Net sales For the year ended March 31, 2019 Millions of Japanese Yen Thousands of U.S. Dollars 2019 2019 Japan ¥154,140 $1,401,279 South East Asia 12,639 114,901 Other 6,912 62,840 Total ¥173,692 $1,579,021 For the year ended March 31, 2018 Millions of Japanese Yen 2018 Japan ¥137,828 South East Asia 12,783 Other 10,433 Total ¥161,045 Note) Net sales are based on the customers' location and categorized into the countries or areas. 2) Tangible fixed assets Description is excluded since the amounts of the tangible fixed assets in Japan exceed 90% of those amounts in the consolidated balance sheets. Ⅲ .Information on principal customers For the year ended March 31, 2019 Net sales Name of Customer Related segments Millions of Japanese Yen 2019 Thousands of U.S. Dollars 2019 Japanese Ministry of Land, Infrastructure, Transport and Tourism Domestic Civil Engineering Businesses,others ¥32,025 $291,142 For the year ended March 31, 2018 Net sales Name of Customer Related segments Millions of Japanese Yen 2018 Japanese Ministry of Land, Infrastructure, Transport and Tourism Domestic Civil Engineering Businesses,others ¥28,334 Ⅳ . Information on the loss on impairment of fixed assets in each reportable segment The losses on impairment of fixed assets were not allocated to the reportable segments of the Companies. Description of the amounts and contents is excluded since the similar information is disclosed in the notes related to the consolidated statements of income for the years ended March 31, 2019 and 2018. 43 Ⅴ .Information on amortization and the unamortized balance of goodwill in each reportable segment Amortization was not applicable for the years ended March 31, 2019 and 2018. Ⅵ .Information on gain on negative goodwill in each reportable segment The Companies did not allocate the gain on negative goodwill to the reportable segments. The gain was not applicable for the years ended March 31, 2019 and 2018. 19.Per Share Data Japanese Yen U.S. Dollars 2019 2018 2019 Net assets ¥3,263.98 ¥3,214.86 $29.672 Net income 147.00 83.74 1.336 Note 1 Diluted net income per share was not disclosed because there were no dilutive shares for the year ended March 31, 2019. Note) The basic information for calculation of per share data was as follows: 1.Per share data on net assets Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Net assets ¥68,845 ¥67,747 $625,866 Net assets amount for common stock 68,216 67,191 620,149 Significant breakdown of differences Non-controlling interests ¥628 ¥555 $5,716 Thousands of shares 2019 2018 Numbers of issued shares of common stock 22,494 22,494 Numbers of shares of treasury stock 1,594 1,594 Numbers of shares of common stock which were used for calculation for per share data on net assets 20,899 20,900 2.Per share data on net income Millions of Japanese Yen Thousands of U.S. Dollars 2019 2018 2019 Profit attributable to owners of parent ¥3,072 ¥1,750 $27,930 Profit attributable to owners of parent not attributable to common stockholders — — — Profit attributable to owners of parent for common stock ¥3,072 ¥1,750 $27,930 Thousands of Shares 2019 2018 Average number of shares of common stock 20,900 20,900 44 20.Significant Subsequent Events Not applicable Consolidated table for detailed statements Table for borrowing Millions of Japanese Yen Thousands of U.S. Dollars Average rates Beginning balance Closing Balance Beginning balance Closing Balance % Repayment deadline Short-term borrowings ¥8,516 ¥8,758 $77,418 $79,625 0.72% Current portion of Long-term debt 4,844 4,693 44,038 42,671 1.20% Current portion of Non-recourse debt 567 545 5,163 4,955 1.74% Current portion of lease obligations 139 151 1,267 1,376 — Long-term debt (excluding current portion) 12,957 13,053 117,796 118,670 1.15% from 2020 to 2024 Non-recourse debt (excluding current portion) 1,746 1,201 15,875 10,919 1.93% from 2020 to 2026 Lease obligation (excluding current portion) 347 274 3,155 2,495 — from 2020 to 2024 Other debt — — — — Total ¥29,118 ¥28,678 $264,715 $260,714 — Notes : 1.The "average rates" are balanced by the weighted average. The average rates of lease obligations are not listed because interest is included in the lease obligation in the consolidated balance sheets. 2.The amount scheduled to be repaid of long-term debt, non-recourse debt and lease obligations (excluding current portions) within 5 years after the consolidated closing date were as follows: Millions of Japanese Yen Thousands of U.S. Dollars over one year within two years over two years within three years over three years within four years over four years within five years over one year within two years over two years within three years over three years within four years over four years within five years Long-term debt ¥5,909 ¥3,596 ¥2,373 ¥1,174 $53,726 $32,692 $21,575 $10,676 Non-recourse debt 542 455 183 6 4,933 4,138 1,664 54 Lease obligations 148 117 4 3 1,354 1,068 42 29 Table for asset retirement obligation The indication omitted due to the beginning balance and closing balance of asset retirement obligation were less than or equal to hundredth part of the beginning balance and closing balance of liabilities and net assets. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TOA CORPORATION and its consolidated subsidiaries 47 Quarterly Financial Information For the fiscal year ended March 31, 2019 Millions of Japanese Yen Thousands of U.S. Dollars Cumulative period First quarter Second quarter Third quarter Consolidated accounting period First quarter Second quarter Third quarter Consolidated accounting period Net sales ¥34,893 ¥71,203 ¥118,021 ¥173,692 $317,209 $647,307 $1,072,921 $1,579,021 Profit before income taxes or quarterly profit before income taxes 947 951 2,995 4,273 8,613 8,652 27,233 38,852 Profit attributable to owners of parent or quarterly profit attributable to owners of parent ¥576 ¥514 ¥2,189 ¥3,072 $5,242 $4,676 $19,901 $27,930 Japanese Yen U.S. Dollars Cumulative period First quarter Second quarter Third quarter Consolidated accounting period First quarter Second quarter Third quarter Consolidated accounting period Per share data on profit or per share data on quarterly profit ¥27.59 ¥24.61 ¥104.74 ¥147.00 $0.250 $0.223 $0.952 $1.336 Japanese Yen U.S. Dollars Accounting period First quarter Second quarter Third quarter Fourth quarter First quarter Second quarter Third quarter Fourth quarter Per share data on quarterly profit (loss) ¥27.59 (¥2.98) ¥80.13 ¥42.26 $0.250 ($0.027) $0.728 $0.384