June 09, 2006 Earnings Announcement Press Conference

Hello everyone. Thank you for joining us today.
Today, I will explain the outline of the financial results. After that, the Managing Director in charge of accounting, Beppu, who is present at the meeting, will answer all your questions.

We decided to hold the first general meeting of shareholders on June 27th at the board of directors meeting held today and send a notice of convocation to shareholders. There are two important decisions we made today. The first point is the overview of financial results, and the second point is the selection of officers.

First, I will explain the financial results.
We have received reports from accounting auditors and the Board of Corporate Auditors that the financial statements we are handing out are appropriate.
Our company took over the business from the former Japan Highway Public Corporation and started as a new company on October 1, last year. This financial report is the first time for us to summarize the half-year period.

I will give you an explanation based on the materials for the first-term financial results we are giving out, but before that, I would like you to understand the nature of the first-term financial results. I would like to make two points.
The first point is that this settlement of accounts covers the half year from October 1, last year.
The other point was that the period of this settlement was legally based on the provisional agreement. It was the preparation period until the conclusion of this agreement as a new company, and the preparation period for formulating a business plan as a full-scale joint stock company this year.
In that sense, this financial statement has the character of the financial statements of the second half of the former public corporation. Please listen to the explanation after understanding them.

Let's start with the income statement. Please listen while referring to pages 1 to 3 of the document.

Regarding the business results for the current term, ordinary income for the current term was a surplus of 23.5 billion yen. Income before income taxes was 23.7 billion yen, and after tax it was 11.9 billion yen. After making some technical adjustments, unappropriated retained earnings were 12.5 billion yen.
I would like to describe this by segment.
The operating income of the Expressway business is a surplus of 19.9 billion yen. In the related businesses, operating income is 2.7 billion yen.

The surplus is about 11 billion yen for Expressway about 1.4 billion yen for related businesses. There are some differences when rounded off, but the total is 12.5 billion yen.
There are 3 pages of materials on how to dispose of this surplus.
Basically, this 12.5 billion yen remains as surplus.
This settlement is during the preparation period. Management as a full-fledged private company begins in April of this year. In that sense, we will not touch on the surplus under the provisional agreement during this preparation period.
Expressway will be fully repaid in 45 years. This is legally required. It is a segment that needs to be considered a 45-year settlement. So that, Expressway about 110 billion yen came in, in the sense that prepare for the future of the redemption plan, Expressway I would like to reserves as a business reserve. It means that we will not touch it as a profit disposal.
Similarly, in the related businesses, it was April 1 of this year that the assets were taken over from the foundation in earnest. Full-scale management will start on April 1. As such, we recognize that this 1.4 billion yen-to be exact, 1,482 million yen-is the amount that the shareholders added to the capital. Therefore, I think it is important to make shareholders' equity even thicker for future management. That's why I recorded it as a separate reserve fund without any modification.
As a result, the profit for the next period will be 0. From April 1st, on a zero basis, but in a favorable situation where stockholders' equity is thicker, we have started to make full-scale efforts to realize our business plan.

The above is a general explanation of our business results for the current fiscal year.

As a result, we were able to avoid financial statements that would have seriously damaged shareholders' equity, which we initially thought we had to avoid. However, I do not think that I should be discouraged, and I think I should keep three things in mind.

The first point is that you shouldn't be optimistic that you've made some profit in the first period.
Even in the last 10 or 15 years, there have been times when the fee income has changed significantly. Due to economic conditions, disasters, etc., the fee income will surely vary. Fortunately, in the second half of the year, traffic volume was higher than expected, and toll revenue was only 3% upward. In the past, it was sometimes more than 10% downward. Similarly, there is a big upward blur.
But we have to make sure that it will be redeemed in 45 years. I have such an obligation. When the new company was launched, I promised that to all the people. Don't be optimistic that you've made some semi-annual profits this time around. Don't worry about it. I think so.
Our point of view is to fully redeem in 45 years. For the next 45 years, it may shake upward or downward. Do not be discouraged here and dispose of profits. This time I made 100%. I believe that the basic stance should continue to be that way of thinking.

The second thing is the same thing, but with the current financial results, I think it would be a problem if you think that you can achieve your business plan if you keep going.
We must make further efforts to reduce and reduce expenses, streamline, and maximize operating revenue. It would be a problem for me to think that if I could continue this fiscal year, I would be able to complete my fiscal year.
I don't know what will happen for the next 45 years. Many things have happened in the past. The average interest rate that is the basis for the redemption plan is 4%, but will this interest rate be fulfilled? This is a fairly conservative estimate, so I think it will be within the range of 4%, but I think that this is beyond the range that humans can predict. Therefore, we must continue to make every possible effort and further strengthen it. If we have the tendency to think that “we were able to achieve the expense plan in the second half of the year. We were able to achieve the operating income above the target. With this, no further efforts are needed.” I think this is our defeat. Therefore, this is just a preparation period, and we keep ourselves in mind that it is a grace period given to us by our shareholders, and we will make every effort to further reduce costs, improve management efficiency, and maximize operating revenue. I have to go. This is the second point to keep in mind.

The third is the point to keep in mind about B / S that I will talk about.
First of all, please see page 4 for B / S. Balance sheet. The total assets are about 800 billion yen. Although it is a company with fairly large total assets, what can be said characteristically in terms of assets is that the ratio of current assets is extremely high, and conversely, the ratio of fixed assets is relatively small. . Fixed 2 for flow 6. One of the main reasons for the large amount of current assets is work in progress assets, which is 339 billion yen, which accounts for more than half of current assets. This is the work-in-progress asset of the Expressway that we are currently constructing, and is an asset item that is transferred to the holding and debt repayment mechanism each time it is completed. In that sense, it is recorded in the current assets section. As a result, the asset mix is in the form of 6 current assets and 2 fixed assets.
I would like to take a look at creditors, but one thing that can be said characteristically in terms of liabilities is that the ratio of current liabilities is relatively small. Fixed liabilities plus shareholders 'equity are 6 fixed liabilities plus shareholders' equity, compared to 2 current liabilities. One more thing to keep in mind here.
Certainly, the fixed ratio is small in terms of assets, and the current liabilities are small in terms of liabilities. However, this does not mean that we should allow capital to be fixed. It may not be a big deal in terms of money, but I think there is still room for liquidation in some fixed assets. Therefore, except for land, buildings, and other fixed assets that we must have for our business, we must continue to make efforts to liquidize as much liquid assets as possible.
In terms of capital, shareholders' equity happened to have accumulated about 12.5 billion as a result of this financial statement, which is added to the 130 billion yen received from shareholders as capital and capital reserve. As you can see from the announcement of Challenge V, we need to make various investments for the future.
In addition, for road construction, it will be necessary to raise funds without relying on government guarantees for the next 15 years. In Challenge V, we declare that we want the government guarantee to be zero within five years. In that sense, I think it is necessary to make further efforts to never damage shareholders 'equity, to do as little as possible to the reserve fund this time, and to increase shareholders' equity by accumulating surplus. I will. I think we shouldn't be cautious in such a direction just because some results came out in the first fiscal period for 6 months. That is the third point to keep in mind.

Next, I will talk about the appointment of officers. I would like you to listen while referring to the personnel affairs of the materials distributed.
At today's Board of Directors, candidates for Directors and Audit & Supervisory Board Members to be submitted to the Ordinary General Meeting of Shareholders have been decided. The name is as written here. There are five candidates for directors and four candidates for corporate auditors.
There are two new employees.
Hironori Yano, a candidate for director. I'm giving you a brief biographer, so I would like you to refer to it, but I joined Toshiba in 1963. In 1999, Nikkeiren merged with Nikkeiren and Keidanren, and he has been the Senior Managing Director of Keidanren until the end of last month. As announced by the Minister of Land, Infrastructure, Transport and Tourism the other day, Hironori Yano is a candidate for chairman. I am planning to retire at the shareholders meeting on the 27th, so I am assuming that I will take over.
The other new candidate for Audit & Supervisory Board Member is Shiji Nishiyama. As for the bio, I would like you to refer to the materials that you are giving away, but I joined Toyota Motor Corporation in 1965 and was appointed as Managing Director of Tokai Rika Denki Seisakusho in 1998, and I am now the managing director of the company. I understand that at the General Meeting of Shareholders, Tokai Rika will be retired as Senior Managing Director.
As a result, the number of corporate auditors will be two full-time and two part-time. As you know, the roles of Audit & Supervisory Board Members and Audit & Supervisory Board are extremely important under the New Company Law. Therefore, I would like to request Mr. Nishiyama as an outside corporate auditor as well as a full-time corporate auditor, which is the reason for the increase in new candidates.

I've only talked about this, and I'll answer any further questions.