A Commitment to Creating - Tyrepress · 2014-11-14 · automotive tires, industrial rubber, ... seeking to grow our global branding content through participation in a sport with

Please refer to our corporate website and Corporate Profile for more details about our business.

Corporate Website Corporate Profile

Corporate Philosophy

A Commitment to Creating New Value through Innovation in Advanced Proprietary TechnologiesThe main business of the Toyo Tires Group is the manufacture and sale of

automotive tires, industrial rubber, polyurethane products, and automotive

anti-vibration rubber products.

Since our founding in 1945, we have continued to create original markets

in technologies and products. Currently, we offer goods and services that

accurately meet the diversifying needs of markets in more than 100

countries worldwide.

We will continue to be a good corporate citizen, maximizing each employ-

ee’s efforts to improve our technical, product quality, and sales capabilities.

Contents

02 At a Glance

04 Message from the President

06 Special Feature: 2014 Medium-Term Business Plan GO BEYOND

12 Review of Operations

13 Tire Business

16 DiverTech Business

18 ESG Information

18 Corporate Governance

20 Environmental and Social Contribution

22 Financial Section

22 Management’s Discussion and Analysis

26 Consolidated Financial Statements and Notes

51 Independent Auditor’s Report

52 Domestic Facilities / Consolidated Subsidiaries

53 Corporate Data / Investor Information

Forward-looking statementsThe statements contained in this report concerning the performance forecasts, plans, strategies, and similar topics that are not historical facts are forward-looking state-ments. These statements are management’s judgments based on information available as of March 28, 2014, and contain inherent risks and uncertainties. Consequently, readers are cautioned against making any management decision solely on the basis of these performance forecasts.

driven to perform

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013

Nano Balance Technology materials design platform technologyNano Balance Technology is Toyo Tires’ advanced proprietary materials design

foundation technology, which manages the development of the tire’s rubber materials

at the molecular (nano) level. NANOENERGY ZERO, Toyo Tires’ new fuel-efficient tire

brand, was developed using this technology, achieving the top ranking within Japan’s

tire labeling system* for both rolling resistance and wet-grip performance. We are

striving to continue evolving the highly eco-friendly NANOENERGY tire lineup and the

Nano Balance Technology materials design platform technology that supports it as

we proceed with the innovations in tire technology demanded by the next generation.

* This labeling system was established by the Japan Automobile Tyre Manufacturers Association (JATMA) as the industry’s voluntary standards for labeling to provide proper information to consumers as well as to define “fuel-efficient tires” as those that meet certain levels of both rolling resistance and wet-grip performance.

ATOM production systemThe Advanced Tire Operation Module, or ATOM, is Toyo Tires’ proprietary, highly

automated, next-generation system designed for the multiple-item, small-lot

manufacture of quality products with reduced space needs. This new system has

changed the stereotype of the tire factory as being heavy industry. The implementation

of the ATOM system enables flexible response to changes in production plans.

Currently, we are engaged in installing this system at four factories, in Japan, the United

States, China, and Malaysia, and have adopted a policy of always transferring ATOM

component technology to new factories we build ourselves. This approach enables us

to offer the world a stable supply of high-performance, high-quality tires.

Toyo Tires becomes premium sponsor of AC MilanIn 2014, we became a premium sponsor of renowned association football club AC Milan,

seeking to grow our global branding content through participation in a sport with

overwhelming international popularity. We will continue to boost the prestige of the TOYO

TIRES brand in ways that are consistent with our “driven to perform” brand statement.

NITTO brand tiresNITTO brand tires, characterized by their unique tread pattern, boast an enthusiastic

following that has given the brand a distinctive, prominent presence in the luxury sports

and SUV large-diameter tire market. The NITTO Tire Facebook page has generated

more than eight million “Likes”*, and we plan to continue using digital media effectively

to raise the profile of this unique, customer-supported brand.

* According to Toyo Tire data as of July 14, 2014; the most “Likes” of any tire brand and eighth in the auto industry overall.

in Production

in Operations

in Global Markets

driven to perform

TOYO TIRE & RUBBER CO., LTD. Annual Report 2013 0101

At a Glance

’09/4 ’10/3 ’11/3 ’12/3 ’12/12 ’13/120

40

80

160

120

30

0

60

120

90

’09/4 ’10/3 ’11/3 ’12/3 ’12/12 ’13/120

150

300

600

450

Dubai Oil and Domestic Naphtha PricesUS$ / bbl Thousands of yen / kl

Natural Rubber TSR 20 Price (SICOM)US¢ / kg

Source: Singapore Commodity Exchange Limited (SICOM)

Sales by Business Segment Sales by Geographic Segment

Global Production System: Production Capacity (New Rubber Consumption)

DiverTech Business

21.7%

Other Areas

17.6%

North America

37.6%

Japan

44.8%

Tire Business

78.2%

29,000 tons 140,000

tons

45,000 tons

Other Asia

14.0%

North America

21.0%

Japan

65.0%

Year ended December 31,

2013

214,000 tons


2013


2013

Market Data

North America

Japan

Dubai Crude Oil Price Domestic Naphtha Price (right)Sources: Dubai crude oil Tokyo, Spot Price, FOB Domestically produced naphtha Custom Clearance Statistics,

Ministry of Finance

Other Asia


0

3

6

12

9

12

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

’10/3 ’11/3 ’12/3 ’12/12 ’13/120

100

200

400

0

20

40

300 60

80370.2

61.7

Net Sales / Overseas Sales Ratio Billions of yen / %

0

120

240

480

360

433.3

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Total Assets Billions of yen

141.5

31.8

0

40

80

160

0

10

20

120 30

40

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Net Assets / Capital Ratio Billions of yen / %

0

4

8

16

12

9.59.6

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Return on Assets (ROA) / Return on Equity (ROE)%

0

15

30

60

45

45.7

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Net Income per Share Yen

Cash Dividends per Share Yen

0

10

20

40

0

3

6

30 9

1237.2

10.1

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Operating Income / Operating MarginBillions of yen / %

0

4

8

16

0

2

4

12 6

8

11.5

3.1

’10/3 ’11/3 ’12/3 ’12/12 ’13/12

Net Income / Net Income Margin Billions of yen / %

Please refer to the Company’s Financial Fact Book for more financial data.

Financial Fact Book

Net Sales

Overseas Sales Ratio (right)

Operating Income

Operating Margin (right)

Net Assets

Capital Ratio (right)

ROA

ROE

Net Income

Net Income Margin (right)


Message from the President

Not Resting in Place, We “GO BEYOND”Early Achievement of 2011 Medium-Term Business Plan

Performance TargetsIn June 2014, we announced our 2014 Medium-Term Business Plan, under the

slogan “GO BEYOND.”

Vision 2020, our long-term management vision for the Company in 2020, and

the 2011 Medium-Term Business Plan targeting the five-year period through 2015

were announced just three years ago, but rather than wait until the end of the

period of our 2011 Medium-Term Business Plan we are launching a new plan now.

We have chosen to do so because we hit several of our 2011 Medium-Term

Business Plan performance targets in the fiscal year ended December 31, 2013.

Net sales and operating income reached record highs of ¥370.2 billion and ¥37.2

billion, respectively, meeting the plan’s operating income and operating margin

targets two years ahead of schedule. Net sales are forecast to be on target in the

term ending December 31, 2014, as well.

Although emerging economies’ high rates of growth have begun to level off,

the North American economy has rebounded strongly, helping to turn the tide

of the global economy. Against this backdrop, we have been making steady

progress with the implementation of measures based on the 2011 Medium-Term

Business Plan, including strengthening our tire supply capacity, and we succeeded

in greatly improving our results thanks to the good fit of our product portfolio,

which is unique in its large-diameter tires, with the North American market.

The correction to the high yen and stabilizing oil prices were part of an

improved external environment that helped us move forward, but I believe that

2014 Medium-Term Business Plan(Fiscal Years Ending December 31, 2014 to 2016)

Business Policy through 2018

Slogan

GO BEYOND

2014 2015 2016 2017


Not Resting in Place, We “GO BEYOND”our early achievement of the 2011 Medium-Term Business Plan performance

targets was also due to successful efforts at leveraging specific portfolio

strengths by improving our product and market mix and strategically deploying

our resources.

Drawing Up a Medium-Term Growth Scenario

and Rising to the Next StageThe income level we recently succeeded in reaching is well above the previous

year’s level. We recognize that as a company we have reached a new stage.

Based on this achievement, we realized we needed to draw up a new medium-

term growth scenario based on foreseeable trends in the global economy. This

understanding led to our formulation of the 2014 Medium-Term Business Plan,

which embodies our intention to move up to the next stage rather than simply be

content with the way things are.

The realization of the growth scenario that we have envisioned will require

employees to work as one under the slogan “GO BEYOND,” with the aim of

becoming a unique company with a robust global presence. We thank all of

our stakeholders, including our shareholders and other investors, for their

understanding and support of our business.

August 2014

Akira Nobuki, President

Vision 2020Our Long-Term Vision for the Company in 2020

A company that has a strong presence, with distinctive technologies and marketing strategies, and sees things from the customer’s perspective

A company that is trusted by society, with each employee keen to fulfill CSR

A company that overflows with energy and vitality, rich with imaginative freedom and the spirit to take on challenges

2018 2019 2020 2021 2022 2023 2024

Not content with the present or resting in place, we are striving to rise to the next stage.


131.7

300.2

4.4

320.4

2.9

3.7

–0.9

3.0

4.1 4.05.4

10.1

11.1

151.7

189.4

357.2

328.4

287.7 294.1320.6

291.1

370.2

470.0

600.0

More than 10.0

177.9151.2 158.9

181.6 180.7

228.6

’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 ’14/12 ’15/12 ’16/12 ’20/12

Establishment of Toyo Tyre (UK) Ltd. for auto tire sales in the United Kingdom

Establishment of Toyo Tire Benelux B.V. for auto tire sales in the Netherlands

Subsidiary acquisition of Italian sales company (currently Toyo Tire Italia S.p.A.)

Business and capital alliance with Bridgestone Corporation

Iberia representative office opened in Spain

Establishment of Toyo Tire North America OE Sales LLC for auto tire sales in the United States

Establishment of TOYO TIRE RUS LLC for auto tire sales in Russia (Moscow)

Revision of the 2008 Medium-Term Business Plan due to rapid changes in the manage-ment environment

Establishment of auto tire manufacturing subsidiary Toyo Tire (Zhangjiagang) Co., Ltd., in China

Subsidiary acquisition of Silverstone Berhad, a Malaysian auto tire manufacturer and seller, through share purchase

Special Feature: 2014 Medium-Term Business Plan

GO BEYONDThe present is built upon the accumulated results of past achievements. The Company has always taken a medium-term perspective

in executing diverse strategies and investment while striving for growth. We will continue to hit our new targets.

2005 Medium-Term Business Plan

GLOBAL CHALLENGE

Basic strategies

Increase corporate value through global growth

Concentrate management resources on core activities with growth and income potential

Implement structural reform of business operations

Develop basic and differentiated technologies with the potential to generate business and income.


Global Growth

Basic strategies

Enhance corporate value by accelerating global growth strategies

Concentrate management resources on core businesses

Change business models to promote structural reform

Target and promote proprietary differentiated technologies


Charge our Dreams

Basic strategies

Focus management resources on growing markets and strategic businesses

Establish business model for increasing profitability

Create new demand with unique technology

Continue to implement corporate restructuring

Net Sales (Billions of yen) Overseas Sales (Billions of yen)

Operating Margin (%)

Establishment of Toyo Tire Japan Co., Ltd., through the integration of 10 sales companies in Japan

Establishment of Toyo Chemical Industrial Products Sales Co., Ltd., through the integration of two chemical products sales companies

Establishment of Nitto Tire Canada Inc. for auto tire sales in Canada


131.7

300.2

4.4

320.4

2.9

3.7

–0.9

3.0

4.1 4.05.4

10.1

11.1

151.7

189.4

357.2

328.4

287.7 294.1320.6

291.1

370.2

470.0

600.0

More than 10.0

177.9151.2 158.9

181.6 180.7

228.6

’06/3 ’07/3 ’08/3 ’09/3 ’10/3 ’11/3 ’12/3 ’12/12 ’13/12 ’14/12 ’15/12 ’16/12 ’20/12

Establishment of Toyo Tyre Manufacturing (Malaysia) Sdn Bhd (currently Toyo Tyre Malaysia Sdn Bhd), a Malaysian auto tire manufacturer and seller

Acquisition of equity interest (subsidiary acquisition) in auto tire manufacturer and seller Shandong Silverstone Luhe Rubber & Tyre Co., Ltd., in China

Establishment of joint venture with Wuxi Meifeng Rubber Products Manufacturing Co., Ltd., of China, to manufac-ture and sell parts for railway cars

Establishment of TOYO RUBBER ChEMICAL PRODUCTS (ThAILAND) LIMITED to manufacture and sell cleaning blades used in OA equipment

2014 Medium-Term Business Plan GO BEYONDBusiness Policies

Tire Business■ Establish firm brand position in SUV/CUV market, where Toyo Tires has

strong presence

■ Realize differentiated technologies to achieve top-class product competitiveness

■ Strengthen product development capabilities for truck and bus tires

DiverTech Business■ Build profit structures to promote business management based on

business units

■ Fortify businesses with key strengths and build solid foundation in Japan

■ Strategically develop overseas markets to improve cost-competitiveness and expand growth foundation

Business Targets

Secure an operating margin of more than 10% and target further business expansion

Net Sales ¥ 470.0 billion

Operating Income ¥ 52.0 billion

Operating Margin 11.1%

ROA more than 10.0%

Capital Investment ¥ 130.0 billion(Three years)

Integration of the chemical products segment of the DiverTech Business to establish Toyo Chemical Industrial Products Co., Ltd.

Establishment of Toyo Tires (Thailand) Co., LTD., for auto tire sales in Thailand

Transfer of headquarters on the occasion of our 70th anniversary


Special Feature: 2014 Medium-Term Business Plan—GO BEYOND

A New Growth StageAs we expect to meet all management targets of the 2011 Medium-Term Business Plan, we give high marks to the plan’s overall effectiveness.

The 2011 Medium-Term Business Plan set targets for net sales of

¥400 billion and operating income of ¥30 billion. We set these targets

when our highest figures so far had been net sales of ¥357.2 billion,

in the fiscal year ended March 31, 2008, and operating income of

¥15.4 billion, in the fiscal year ended March 31, 2002. Therefore,

in no sense did our targets seem easily achievable.

Nevertheless, we hit our target for operating income two years

early, while the operating margin exceeded the 10% set in Vision

2020. We predict that net sales will reach ¥400 billion in the fiscal

year ending December 31, 2014. Up to this point, the Company’s

rate of supply chain expansion had not kept up with the growing

pace of demand, and progress on business selection and concentra-

tion had not enabled us to break out of the ¥300 billion range over

the long term. It appears that finally we will be able to step up to a

new growth stage.

We have steadily executed each measure in the 2011 Medium-

Term Business Plan, such as expanding the tire supply base and

investing in strong product lines, based on the business strategies

described below. having begun to reap the benefits of resolute deter-

mination in developing new business and increasing on-site capabili-

ties, we give high overall marks to the effectiveness of the strategies

set out in the 2011 Medium-Term Business Plan.

Tire BusinessBusiness Strategies

■ Establish optimal supply system

■ Establish proprietary brand strategy

■ Innovate marketing and brand strategies

■ Develop embodiment of world’s premier eco-friendly technology

Primary Initiatives

■ Opened new plants in China and Malaysia, equipped with ATOM production system

■ Completed third expansion of North American plant; started fourth expansion

■ Further expanded Group’s two top brands: TOYO TIRES and NITTO

■ Developed new business in markets in ASEAN, Russia, and Eastern Europe; established sales subsidiaries and other bases

■ Focused on expanding tire sales in North America for SUVs, CUVs, and pickup trucks

■ Established Nano Balance Technology as new design platform technology

■ Launched flagship fuel-efficient NANOENERGY series in Japan and Europe

DiverTech BusinessBusiness Strategies

■ Expand automotive parts business

■ Grow urethane business in Asia

■ Expand overseas railway car parts business

■ Develop embodiment of world’s premier eco-friendly technology

Primary Initiatives

■ Developed overseas business platform; established manufactur-ing and sales bases in China, Thailand, and Mexico

■ Began manufacture of OA devices and components in Thailand

■ Established Chinese joint venture for railway car parts

■ Launched to market “Aitas” line of heat-insulating rigid polyurethane foam for buildings

■ Launched to market low-GWP spray rigid urethane foaming agent

Review of 2011 Medium-Term Business Plan

In this section, the Company’s President, Akira Nobuki, explains

the 2014 Medium-Term Business Plan, announced in June 2014.


Aiming HigherAs a result of taking a good look at and verifying our current position, we decided to establish a new three-year medium-term business plan that challenges us to hit higher targets.

Our Corporate Mission, Corporate Philosophy, and Brand Statement

form the core of our corporate existence. At the same time, the

medium-term business plan and long-term management vision set

the course for corporate growth and, therefore, must change with

each new stage. To not change course when we reach a different

stage would not be acceptable to our stakeholders, including our

shareholders and other investors.

Although we are still looking back on and examining the 2011

Medium-Term Business Plan, based on our expectations that we will

reach its management targets and broadly increase profit levels, we

now consider it necessary to closely reexamine our current position

and draw up a new growth scenario.

Our repeated verification of the aforementioned achievements led

to the decision to formulate a new three-year medium-term business

plan that challenges us to hit higher targets. Taking 2014 as a starting

point, the new 2014 Medium-Term Business Plan sets out firm objec-

tives to be reached over the three years through 2016, placing us in

the condition we view as necessary by 2018.

The goals for the year ending December 31, 2016, the final year

in the plan, are net sales of ¥470.0 billion, operating income of

¥52.0 billion, and an operating margin of 11.1%. We aim to expand

our business while maintaining return on assets (ROA) of 10.0% or

more and an operating margin higher than 10.0%. Moreover, we are

planning capital investment totaling ¥130.0 billion over the course

of the 2014 Medium-Term Business Plan against the backdrop of

increasing income levels. This investment level over a three-year

period is the highest in the Company’s history. We are poised to enter

a growth stage, and we will continue to invest as necessary to

expand our operations.

Positioning of New Medium-Term Business Plan

Course for Corporate Growth

Long-Term Management Vision

Medium-Term Business Plan

Foundation for Company’s Continuance

Brand Statement driven to perform

Pursuit of top performance

Corporate Philosophy A Commitment to Creating New Value through Innovation in Advanced Proprietary Technologies

Corporate Mission Statement

For each of us to give our best where we work, so that our customers will always have a better product

at a better price, more today than yesterday.

Vision 2020



Special Feature: 2014 Medium-Term Business Plan—GO BEYOND

Clarifying Our Course of ActionOur 2014 Medium-Term Business Plan is aimed at clarifying our course of action. Our growth scenario consists of making further progress in developing our unique portfolio.

In the 2014 Medium-Term Business Plan, I have sought to clarify our

future course of action. Basically, I want to show the direction in

which we are heading. Once that has been determined, the target

figures and the issues we need to grapple with become visible in

drawing up the growth scenario.

In the Tire Business, the plan spells out business policies to be

focused on through 2018 of establishing a firm brand position in the

SUV/CUV market, where we are already strong; gaining top-class

product competitiveness through differentiated technologies; and

increasing our truck and bus tire development capabilities.

The impetus for the great strides we made under the 2011

Medium-Term Business Plan has been provided by our large-

diameter tires, including those for SUV/CUVs, particularly in the North

American market. While economic improvement in North America

helped us move forward, a major factor behind our rapid growth was

getting the right fit for the product and market mix we have steadily

built up to now.

Our strength lies in this kind of revenue structure, and the Tire

Business growth scenario calls for further development of this mix

based on the business policies outlined here. The five strategy pillars

are our product, market, brand, supply, and technological strategies,

and by improving on our inherent strengths we can firm up our own

market presence, which is characterized by our originality, amid

global competition that grows ever more stringent.

We have also embarked on policies in the DiverTech Business

that call for us to build profit structures to promote management and

growth based on business units; strengthen businesses where we

enjoy a unique advantage and build a solid domestic platform; and

strategically develop overseas markets in the aim of improving cost-

competitiveness and expanding our growth platform.

The product lines developed through the DiverTech Business are

easily affected by changes in the market environment and economic

trends, so we must proceed through a twin approach of “improving

cost-competitiveness” and “promoting the development of areas in

which we enjoy a unique advantage.” We are actively dealing with the

switch by automakers to modular production and globalization, and

we will optimize our current resources to build solid profit structures.

We aim to generate new business, centered on our fundamental

technologies involving rubber and urethane materials.

For more information on the Tire Business and the DiverTech Business strategies, please see pages 14 and 16.

Tire Business Supply Strategy

Going Beyond Our Current Global Supply CapacityOur 2011 Medium-Term Business Plan aimed to create an optimal global supply chain focused on three areas—North America, Japan, and other parts of Asia. New plants in China and Malaysia went on line, and we completed the third expan-sion phase at our U.S. tire plant, strengthening production capacity. We also began a fourth expansion phase at the plant in response to increased demand stemming from improvement in the North American economy and the premier market position of our products. As a result, while 10% of our production was overseas in 2010, in 2013 we conducted 35% of our total production outside Japan.

Under the 2014 Medium-Term Business Plan, we intend to expand tire production on a new rubber volume basis by around 25%, to 270,000 tons, from the 2013 figure of 214,000 tons. We are expanding supply capacity in North America in particular and will bring the overseas production rate to about 50% by the end of 2016. Also, we will clarify the role of each factory in conjunction with product demand in each market it supplies. This approach should make operations more effective and efficient. In addition, we will consider to establish new production bases.

GO BEYOND Supply Capacity

’13/12 ’14/12 ’15/12 ’16/120

70,000

140,000

280,000

210,000

270,000

214,000

50%

30%

20%

60%

21%

19%14%

21%

65%

Production Capacity (New Rubber Consumption)Tons

Japan North America

Other Asia


P14,16

Transforming Our ConsciousnessOur business management is shifting from an emphasis on reactive measures that ensure survival to one focused on proactive ways to make our growth sustainable. We aim to reach the next stage by transforming the consciousness of our employees.

The 2014 Medium-Term Business Plan expresses our intention to step

up to the next stage and serves as a message to our employees.

The 2011 Medium-Term Business Plan substantially altered our

base of operations, boosting operating income from ¥10 billion to the

¥30 billion level. The 2014 Medium-Term Business Plan aims to take

us higher, to operating income of about ¥50 billion.

We are drawing on these stronger financial fundamentals to shift

our management from the reactive, in other words ensuring survival,

to the proactive, in other words making our growth sustainable.

Despite strong demand for our products, our need to concentrate

on survival has resulted in a number of missed opportunities. To seize

on such opportunities in the future, the Company must make up-front

investments for growth. We also must change our employees’ con-

sciousness from a survival mode to a focus on sustaining our growth.

By that, I mean employees having the ability to see the future and take

on new opportunities rather than just surmounting current challenges.

We have reached our current level suddenly, with our figures

advancing more quickly than the thinking of our employees. I intend

to change employee consciousness by demonstrating the Company’s

strong will “not to be content with the current situation, but to sharpen

our corporate power to reach a higher level,” demonstrating earnest-

ness both within and outside the Company. To that end, we formulated

a new business plan during the course of the 2011 Medium-Term

Business Plan and selected “GO BEYOND” as its slogan.

Also, a greater sensitivity to risk is required. We always have to be

cautious about getting into situations where a single risk could result

in a major loss of what we have achieved so far. Sustainable growth,

on the other hand, requires each employee to be aware of safety and

compliance. This is a prerequisite to competition, which we reempha-

size in our basic policy on corporate functions in the 2014 Medium-

Term Business Plan. This policy calls for a stronger emphasis on

environmental, social, and governance efforts to support sustainable

growth and development.

Toyo Tires is engaged in changing from a consciousness of sur-

vival to one of sustainable growth and achieving its management

goals based on the 2014 Medium-Term Business Plan, aiming to

reach the next stage both in spirit and in reality. We will transcend our

present circumstances and go even further beyond, always striving to

take the Company to the next stage.

For more information on the 2014 Medium-Term Business Plan, please refer to the Investor Relations section of our corporate website.

Corporate website, Investor Relations section


Review of Operations

Net Sales

¥ 370.2billion

Operating Income

¥ 37.2billion

Sales by Business Segment

78.2%

Operating Income by Business Segment

90.7%

Operating Income by Business Segment

9.3%


21.7%

Tire BusinessMain Products

■ Tires for passenger cars

■ Tires for trucks and buses

■ Tires for construction vehicles

Business Overview

We are developing the Tire Business by exploiting the special

characteristics of our two core brands, TOYO TIRES and

NITTO. Under the technologically trusted TOYO TIRES brand,

we market the OPEN COUNTRY SUV tire, the TRANPATh

minivan tire, and the NANOENERGY fuel-efficient tire.

Meanwhile, our NITTO brand is mainly focused on large-

diameter tires, such as the GRAPPLER series for pickups,

luxury sports cars, and SUVs, with sales centering on North

America, where the brand is known for combining sophisticated

design with innovation.

DiverTech BusinessMain Products

■ Seismic isolation rubber ■ Air springs

■ Seismic isolation rubber for buildings ■ Road materials

■ heat insulation materials ■ OA equipment parts

Business Overview

Through the DiverTech Business, we supply a variety of indus-

trial sectors with a wide range of products that leverage the

advanced rubber and materials composition technologies and

the vibration control technologies we have developed as a tire

manufacturer. In particular, we have a proven track record in

supplying automotive anti-vibration rubber and railway car air

springs to automakers and railway equipment manufacturers

around the world, and we have gained a high degree of trust

for the safety and comfort of our products.

Polishing pads for semiconductor manufacturing

Seismic isolation rubber

Coupling

hydraulic engine mount


Tire Business

* Calculations are based on the same period during the previous term.

New Car Tires Japanese auto production fell below that of the previous fiscal year due to the ending of

eco-car subsidies and other factors. Consequently, sales volumes for new car tires continued

on a downward trend, but net sales were favorable due to such factors as expanded sales of

value-added products.

Replacement Tires in JapanIn addition to efforts to promote higher sales of passenger car tires by expanding the size

lineup of NANOENERGY 3 fuel-efficient tires, an improving Japanese economy underpinned

sales of truck and bus tires, leading to a favorable sales volume. Nonetheless, net sales were

in line with the previous term, due to the impact of a worsening product mix and other factors.

Replacement Tires OverseasOverall, overseas markets trended favorably in terms of volume and net sales. Market trends

were as follows in the fiscal year ended December 2013.

North American market

In conjunction with economic improvement in North America, sales of high-value-added

products, such as OPEN COUNTRY A/T II SUV tires and NITTO brand GRAPPLER series

pickup truck tires, were strong. In addition, sales volumes and net sales trended favorably

due to the launch of the NT421Q crossover utility vehicle (CUV) tire and other factors.

European market

Although the sluggish European economy had an adverse effect, volumes and net sales were

firm thanks to efforts to attract new customers. Sales increased for our new PROXES CF2,

which complies with the EU grading system, NANOENERGY 3, and the OBSERVE G3-ICE

studless snow tire, which features enhanced performance on snowy and icy roads.

Southeast Asian market

Due to strong sales in Malaysia, where we maintain a production base, and other factors,

overall sales volumes and net sales in the Southeast Asian market were favorable.

Fiscal 2013 summary*

Net sales ¥ 289.7 billion Up 15.2%

Net SalesBillions of yen


Operating Income Operating Margin (right)

Operating income ¥ 33.8 billion Up 152.1%

’12/3’10/3 ’11/3 ’12/12* ’13/12

300

200

100

0

36

24

12

0

12

8

4

0’12/3’10/3 ’11/3 ’12/12* ’13/12

* Fiscal year ended December 2012 was a nine-month period due to a change in the Company’s fiscal year-end.

Note: Above figures include intersegment sales and transfers.


Product StrategyIn passenger car tires, we are aiming at aggressive sales growth in the SUV/CUV/pickup truck

category, which is expected to constitute 40% of our global unit sales by the fiscal year

ending December 2016, compared with 32% in the year ended December 2013. Products in

this category, which are focused on the North American market, are earning high marks for

their originality in terms of function, quality, and design. Through bold and aggressive efforts to

increase sales of this very competitive product line, we can establish a solid presence in the

global market, optimize our product mix, and make our revenue platform even stronger.

We are also taking our truck and bus tire development efforts to the next level. Trucks and

buses are mainly used for industrial purposes, so there is demand for high performance in

terms of fuel efficiency and lifespan. While we have already been engaging in the development

of products that satisfy such requirements, issues concerning product development speed

remain. The 2014 Medium-Term Business Plan calls for using Nano Balance Technology, our

original materials design foundation technology, and other technologies to strengthen our ability

to develop the high levels of performance and quality that enable us to get high-value-added

products to market promptly.

Market StrategyUnder the 2014 Medium-Term Business Plan, our markets are categorized into three

groupings: North America; Japan, Europe, and the Middle East; and China, Southeast Asia,

and Central and South America. We execute market strategies corresponding to each area.

North America

The North American market is important to us as a revenue source, and by focusing on

increasing sales and supply capacity for the SUV/CUV/pickup truck product category, which

is our strong point, we plan to increase that market’s relative importance to us.

North America is currently experiencing an economic upturn, and sales of new cars are

also up markedly. Automakers are introducing new models, and about 40% are in the SUV/

CUV/pickup truck category, making it a major category. We are already engaged in strengthen-

ing all functions within this category, such as our supply and sales capabilities, to earn even

greater support from customers. In this way, we are building an even firmer revenue platform to

bring our market share for this category to 6% in the fiscal year ending December 2016.

Review of OperationsTire Business

SUV/CUV/Pickup Truck Tires as a Percentage of Global Unit Sales

’13/12

’16/12Target

Other

32% 40%

Unit sales: Up 45%

Tire Sales by Market

The Group’s Share of the North American Market for SUV/CUV/Pickup Truck Tires

4.5% 4.6%

6.0%

’14/12(target)

’16/12(target)

’13/12 ’15/12

15%

39%

46%

16%

39%

45%

15%

35%

50%

’13/12 ’15/12’14/12(target)

’16/12(target)

North America Japan / Europe / Middle East China / Southeast Asia / Central and South America

Takuji YamamotoRepresentative Director, Executive Corporate Officer,Group Executive Officer, Tire Business

■ Establish firm brand position in SUV/CUV market, where Toyo Tires has strong presence

■ Realize differentiated technologies to achieve top-class product competitiveness

■ Strengthen product development capabilities for truck and bus tires

Business Policies Targets for Fiscal 2016Business Strategies of 2014 Medium-Term Business Plan

Net Sales ¥ 380.0billion

Operating Income ¥ 46.0billion



Expanding Lines of Eco-Friendly Products

Sales of NANOENERGY 3 in Malaysia

Japan, Europe, and the Middle East

We are working in the medium term to strengthen our business platform in Japan, Europe, and

the Middle East, taking into consideration the characteristics of each market.

We are bringing new, specialized products to market in Japan, such as minivan tires,

premier light vehicle tires, fuel-efficient tires, and studless tires, and strengthening our

product lineup.

In Europe, where automobile environmental regulations are particularly strict, our energy-

efficient tires are highly rated, and we are working to expand their sales. In addition, given the

use of winter tires in Europe, we are planning aggressive efforts to open up markets for those

tires as well. We are seeking to strengthen sales of SUV/CUV products in Russia, in particular.

Demand for large vehicles is now stable in the Middle East, so we believe there is strong

potential demand for our tires. We intend to enhance ties with local representatives, in parallel

with strengthening our supply capacity, to aggressively bring our SUV/CUV products to market

and cultivate a stable growth market that can contribute to revenue.

China, Southeast Asia, and Central and South America

China, Southeast Asia, and Central and South America are markets with great potential for

growth, but causes of instability, such as intrinsic social and political conditions, as well as the

degree of market maturity, make it necessary to keep a close eye on trends and conditions in

the operating environment.

Vehicle demand in China has been rising thanks to economic development, especially for

large, expensive vehicles like SUV/CUVs. In response to such market changes, we have been

expanding the sales ratio of higher-priced goods, such as SUV tires, with the goal of improving

our product mix.

We are proceeding with the stabilization and expansion of supply volumes in Southeast

Asia, and we are working to expand sales channels and bring to market such high-value-

added products as fuel-efficient and large-diameter tires.

We are also seeking to strengthen sales of ultra-high performance (UhP) tires and SUV

tires in Central and South America.

Market Demand Forecast Strategies

Japan Trend toward increase in demand for high-value-added products

Launch new TRANPATh products; Expand NANOENERGY sales

Europe Moderate recovery, trend toward increase in tire demand

Respond to environ-mental regulations through NANOENERGY sales expansion; Aggressively develop markets in Northern and Eastern Europe, where winter tires are used; Increase sales of SUV/CUV and winter tires in Russia

Middle East

Steady demand for large-size vehicles

Increase sales of SUV/CUV tires

Market Demand Forecast Strategies

China Trend toward increase in demand focused on SUV/CUV and other high-end vehicles

Improve product mix; Expand sales ratio of SUV and high-end products

South-east Asia

Potential growth markets, where currently low-priced products are mainstay

Boost stratification of target products based on market needs;Launch NANOENERGY products manufactured at Malaysian plant

Central and South America

Trend toward increase in tire demand

Increase sales of UhP and SUV tires

In May 2014, Toyo Tires launched NANOENERGY

3 in Malaysia. Automobile use in Malaysia—unlike

neighboring countries in Southeast Asia—is char-

acterized by an overwhelming number of sedans

and compact passenger cars. In addition, the

Malaysian government has given preferential tax

treatment to the manufacture and importation of

hybrids and electric cars, and as a result demand

for fuel-efficient tires for installation on such cars

is expected to grow. We took this background

into consideration in our decision to launch our

flagship fuel-efficient NANOENERGY series in that

market. The NANOENERGY 3 was developed

using Nano Balance Technology, our original

materials design foundation technology. By

switching to a newly developed tread compound

and a wider tread, we have been able to combine

fuel efficiency and anti-wear performance in a

standard passenger car tire.Production at our factory in Malaysia, which came on line in May 2013


DiverTech Business

Transportation Equipment In automotive anti-vibration rubber products and automobile seat cushions, demand in Japan

declined as a result of the end of eco-car subsidies, but overall transportation equipment net

sales were even with the previous year due to strong auto production overseas, especially in

North America.

Net sales of anti-vibration rubber and air springs for railway cars were also favorable, due

to sales for new rolling stock in Japan and to the overseas replacement parts market.

Thermal Insulation and Waterproofing Materials Sales of rigid urethane undiluted solution to housing materials manufacturers were strong;

however, sales of materials for livestock buildings were lower. As a result, net sales were on a

par with the previous year.

Waterproofing materials shipments increased, with sales trending favorably.

Industrial and Construction Materials Orders for architectural base isolation rubber and construction-use hoses were strong, and

sales were firm.

Review of Operations

Business Unit PolicyIn 2014, we divided the DiverTech Business into three units: automotive rubber products,

automotive urethane products, and chemical & industrial products. We have adopted clear

policies for each business unit and implemented strategies to achieve numerical targets.

In addition, we are developing new growth areas, such as environment and energy, life innovation,

traffic and mobility, and horticulture/agriculture, in our core rubber and urethane products,

which should lead to new business.



Operating Income Operating Margin

Sales by Business UnitBillions of yen

35%

8%

57%

80.5 82.590.0

39%

7%

54%

40%

10%

50%

’14/12(target)

’16/12(target)

’13/12 ’15/12 ’18/12

New Business Auto Rubber Products Auto Urethane Chemical & Industrial

Products Products


* Calculations are based on the same period during the previous term.

Fiscal 2013 summary*

Net sales ¥ 80.5 billion Up 0.2% Operating income ¥ 2.6 billion Down 5.0%

Haruhiro ShinshoDirector, Corporate Officer,Group Executive Officer, DiverTech Business

■ Build profit structures to promote business management based on business units

■ Fortify businesses with key strengths and build solid foundation in Japan

■ Strategically develop overseas mar-kets to improve cost-competitive-ness and expand growth foundation

Net Sales ¥ 90.0billion

Operating Income ¥ 6.0billion


’12/3’10/3 ’11/3 ’12/12* ’13/12

90

60

30

0

’12/3’10/3 ’11/3 ’12/12* ’13/12

4.5

3.0

1.5

0

6

4

2

0

* Fiscal year ended December 2012 was a nine-month period due to a change in the Company’s fiscal year-end.

Note: Above figures include intersegment sales and transfers.

Business Policies Targets for Fiscal 2016Business Strategies of 2014 Medium-Term Business Plan


Expanding Lines of Eco-Friendly Products

“Aitas” Rigid Polyurethane Foam Insulation for Houses for Better Energy Conservation

Automotive rubber products business unit

We are strengthening our overseas business platform, focusing on such important issues as

securing our position as a global supplier and shoring up our global supply chain. We plan

to raise auto parts as a percentage of overseas sales to 45% by the fiscal year ending

December 2016.

The automakers with which we trade are shifting to globalized, modular production. We are

reinforcing our overseas business platform to deal with this trend as we step up efforts based

on such themes as dramatic cost reduction. Further, we are centering efforts on Mexico and

the ASEAN countries to localize technical development and enhance cost-competitiveness.

Automotive urethane products business unit

In this unit, we are mainly focusing on our sales strategy, with technical ability at the core, and

the rebuilding of our domestic supply chain. By strengthening our sales of high-performance

products and increasing the unit’s sales ratio to 10% by the fiscal year ending December 2016,

we will increase the business value of this unit.

Although the scale of the business is currently small, the sophistication of the unit’s high-

performance products is well regarded. This competitive capability will spark product growth

for the expansion of the business platform. Furthermore, we will continue to improve the

domestic supply chain through our efforts to optimize our domestic business bases.

Chemical & industrial products business unit

This unit is grappling with the issues of expanding and further cultivating priority businesses

and opening up markets in emerging economies. The business unit covers a broad field, from

transportation equipment through thermal insulation, waterproofing materials, and industrial

and construction materials, with our original rubber and urethane materials compounding and

processing technologies at its core. Among industrial products, the focus is on growth in the

railway car parts business. With the start-up of our factory in China, we plan to raise the over-

seas production ratio of railway car parts to 35% by the fiscal year ending December 2016.

In our urethane business, thermal insulating urethane has the top share domestically, and

we are strengthening sales of that product. We plan to grow our insulating urethane product

sales by 20% during the course of the 2014 Medium-Term Business Plan by developing

overseas markets, focusing on emerging economies.

Soflan Aitas installation

Auto Rubber Products Business Unit Strategies

Business development strategy: Bolster business in Mexico and ASEAN countries

Technology strategy: Localize development

Sales strategy: Boost market share, particularly in Japan

Manufacturing strategy: Improve cost-competitiveness

Auto Urethane Products Business Unit Strategies

Expand sales of highly functional products

Secure optimal supply locations in Japan

Chemical & Industrial ProductsBusiness Unit Strategies

Develop global railway car parts business

Gain dominant share in heat-resistant urethane products and expand overseas

The demand for housing insulation materials is

increasing as the focus on highly energy-efficient

housing grows stronger. While generally used in

detached houses in the past, fiber-type insulation

tends to fall apart over time due to pressure and

humidity. In July 2013, Soflan Wiz Co., Ltd.*,

launched its “Aitas” line of non-fluorocarbon

polyurethane foam insulation. Soflan Wiz marked

the first successful development of low-density

insulation product technology in Japan, offering

high-performance insulating properties equal to

those of fiber insulation. Aitas is self-supporting

expanded foam that maintains insulation perfor-

mance over many years without falling over time.

Through the development of insulating materials,

our chemical & industrial products business unit

will continue to contribute to creating energy-

efficient housing.

* A subsidiary within the chemical & industrial products business unit handling the rigid polyurethane business.


ESG Information

Establishment of CSR PolicyIn May 2014, the Toyo Tires Group established a new CSR policy,

comprising a basic policy and priority themes. The basic policy

redefines the philosophy and values that have guided us up to now,

while the priority themes, which have been determined based on

importance (materiality) to the Group and its stakeholders, summarize

the issues that take priority in our CSR initiatives. Under this new

policy, we aim to strengthen our ESG efforts.

Corporate GovernanceCorporate Governance System

The Toyo Tires Group has established a corporate governance

structure that enables each body within the structure to perform its

assigned function. This structure comprises the Board of Directors,

responsible for managerial decision making and supervision; the

Management Strategy Council, charged with determining the course

of business execution; the Special Committees, deliberative and

consultative bodies for their respective areas; the Board of Corporate

Officers, responsible for business execution; and the Audit &

Supervisory Board, which audits the performance of the Board

of Directors and overall business execution.

The Board of Directors, which has been reduced to eight mem-

bers, three of whom are outside directors, including one woman,

makes decisions on important matters, such as management policies,

goals, and strategies, and supervises business operations.

We have also inaugurated the Directors’ Roundtable for deeper

exchanges of opinion and decision-making discussions with outside

directors, who have either expertise or extensive experience gained

during their careers at other companies, with the aim of improving the

quality of the Board of Directors’ meetings and enhancing corporate

value. The Management Strategy Council was created in April 2014

and is charged with deliberating and making decisions concerning

business execution matters, such as medium-to-long-term strategy,

investment, and other important items. The Board of Corporate Officers

is composed of 18 members, including five corporate officers concur-

rently serving as directors*. It is responsible for reporting on the status

of business execution and on the decisions made by the Board of

Directors. The committee also offers opinions to the Board of Directors.

The Company has adopted a system of audit & supervisory

board members. The Audit & Supervisory Board has four members*,

three of whom are outside audit & supervisory board members

appointed to strengthen management auditing functions.

Outside directors and outside audit & supervisory board

members offer proposals based on their respective knowledge from

an objective position, thereby fulfilling their supervisory and oversight

functions from an external standpoint. As stipulated in the rules of the

Tokyo Stock Exchange, the outside directors and outside audit &

supervisory board members have been registered with the stock

exchange as independent executives posing no possible conflict of

interest with general shareholders.

* As of March 28, 2014


CSR Policy

Basic Policy

The Toyo Tires Group seeks to remain a company admired by individuals and society, each member keenly aware of their “connection” with society.

Priority Themes

Seven Priority Themes Ideal status in 20201. Product and service reliability and innovation ............................. Providing eco-friendly products and services founded on high quality

and safety

2. Contribution to the global environment .......................................... Promoting environmental management on a Group-wide basis

3. Respect for human rights and diversity .......................................... Diverse employees actively working in an environment with a global sense of human rights

4. Collaboration with business partners .............................................. Entire supply chain engaging in CSR activities

5. Harmony with local communities ....................................................... Contributing to local community development while responding to stakeholders’ voices

6. Creation of safe and healthy workplaces ....................................... With priority given to safety, promoting the creation of workplaces that ensure well-being and security

7. Reinforcement of corporate governance and compliance .... Engaging in business activities with integrity while constantly improving management transparency

Directors, Audit & Supervisory Board Members, and Corporate Officers (As of July 16, 2014)

*1: Outside director*2: Outside audit & supervisory board member*3: Concurrent with directorial position

Audit & Supervisory Board Members

Audit & Supervisory Board

Members (standing)

hiroyasu Uejima

Toshiro Fujita*2

hiroshige Nose*2

Audit & Supervisory Board

Member

Kazumasa Kawaki*2

Executive Emeritus

Kenji Nakakura

Directors

Representative Directors

A Akira Nobuki

B Takuji Yamamoto

Directors

C Tetsuya Kuze

D Kazuyuki Ito

E haruhiro Shinsho

F Toshihiro Kanai*1

G Yuzo Kawamori*1

H hiroko Namura*1

Corporate Officers

President

Akira Nobuki*3

Executive Corporate

Officer

Takuji Yamamoto*3

Senior Corporate Officers

Tetsuya Kuze*3

Kazuyuki Ito*3

James L. hawk

Corporate Officers

haruhiro Shinsho*3

Koichi Ono

Sadao Ichihara

Michihiro Kawada

Tomoshige Mizutani

Tetsuo Tatara

Tamotsu Sakuramoto

Gentaro Aoki

Toshiaki Okazaki

Shinji Tanabe

Yoshikazu Nishiwaki

Masaji Ishino

Takashi Shimizu

General Meeting of Shareholders

Board of DirectorsDirectors

8 Directors (including 3 outside directors) Audit & Supervisory BoardAudit & supervisory board members

Independent Auditor

To

yo T

ires

Gro

up C

hart

ero

f C

orp

ora

te B

ehav

ior

To

yo T

ires

Gro

up C

od

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f C

ond

uct

Co

mp

lianc

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rain

ing

Consulting Law

yers

President

Management Strategy Council

Divisions responsible for the execution of business operations

Board of Corporate Officers

Corporate officers

Special Committees

Risk Management Committee

Human Resources Committee

R&D Committee

Quality Assurance Committee

Safety & Environment Committee

Compliance Committee

Compliance Unification Section

Operation Auditing Group

Hotline Consultation Desk

Appoint / DismissReport

Delegate authority

Delegate authority

Submit proposalsSubmit proposals

Investigate

Report

Select

Make decisions /Supervise

Instruct

Auditing

Report /Cooperate

Cooperate

Cooperate

Advise

Cooperate

Report /Offer opinion

Appoint / Dismiss

Report

Report

Cooperate

Cooperate

Appoint / Dismiss

Report

AuditingAuditing

Report

Execution of business operations

AC H F GBDE


Corporate Governance Structure (As of April 1, 2014)

Compliance Promotion System

The Toyo Tires Group Charter of Corporate Behavior and the Toyo

Tires Group Code of Conduct have been established as principles of

action to ensure that all directors, officers, and employees of Group

companies act in accordance with all applicable laws and regulations,

articles of incorporation, and ethical standards.

Our Compliance Promotion System has been constructed upon

these principles, with the Compliance Committee established to

discuss and determine compliance-related policies and measures for

the entire Group. The implementation and promotion of these policies

and measures are undertaken by the Group-Wide Compliance

Promotion Subcommittee and the CSR Center. Moreover, compliance

promotion leaders are in place at each department and operation

base in Japan and overseas, creating a system for promoting educa-

tion and awareness-raising efforts. In addition, regional meetings

are held outside Japan with the goal of sharing compliance-related

information among operation bases.

We also operate an internal reporting system aimed at proactive

prevention and early detection of compliance violations. Reporting

hot Lines have been established both inside and outside the

Company to enable reporting by our business partners as well as

our employees.

Risk Management System

The Toyo Tires Group has established the Toyo Risk Avoidance Main

Standard (TRAMS) as its risk management guidelines, upon which

the risk management system is based. The Group’s risk management

system gives priority to business continuity plans (BCPs) and has

been shored up by the placement of a chief risk management officer,

charged with overseeing risk management of the entire Group, and

the establishment of the Risk Management Committee. In addition,

in the case of Group-wide emergency situations, the Crisis Manage-

ment Subcommittee of the Risk Management Committee functions

as the Group-Wide Risk Management Secretariat in assisting the

head of the Risk Management Committee in the execution of duties.

Further, special committees are organized to discuss and

respond to specific risk management needs.

Environmental and Social ContributionEnvironmental Management

The Toyo Tires Group established the Corporate Environment

Improvement Committee, currently the Safety & Environment Com-

mittee, in 1972, and since the Group has sought to lead the industry

in efforts to resolve environmental issues. In 1992, we established the

Toyo Global Environmental Charter, which clarified this stance.

This charter forms the basis of the Toyo Global Environmental

Action Plan, which in turn guides our active environmental efforts from

a medium-to-long-term management perspective. The Environmental

Subcommittee of the Safety & Environment Committee formulates the

plan for Group environmental efforts each fiscal year, with efforts in

fiscal 2013 focusing on the themes of “improving environmental

compliance,” “promoting reduction of environmental impact,” and

“promoting biodiversity.”

ESG Information

Compliance Promotion System

President

CSR Center

Group-Wide Compliance Promotion Subcommittee

Compliance Committee

CSR Promotion Dept.

Reporting hot Lines

Antitrust Law hot Line

Compliance Promotion Leader (each department / site)

Internal Audit Dept.

Legal Dept.


President

Chief Risk Management Officer

Head of Risk Management Committee■ Gather information from across the Group■ hold emergency response meetings■ Lead the emergency response operations until the emergency response

organization is activated

Group-Wide Risk Management Secretariat■ Assist the head of the Risk Management Committee

Emergency Response Meeting■ Determine how to respond to the emergency■ Establish teams to respond to the emergency■ Communicate decisions and give instructions on response operations

to the entire Group

Emergency Response System (for Group-wide emergency situations)

Environmental Management System

Tire Working Group DiverTech Working Group

President

Safety & Environment Committee

Safety, Health and Disaster Prevention Subcommittee

Environmental Subcommittee

Efforts as a Good Corporate Citizen

As a good corporate citizen, the Toyo Tires Group is committed to

contributing to the development of local communities. To this end,

we strive to resolve social issues in collaboration with governmental

agencies as well as with various stakeholders.

As part of this effort, the Toyo Tires Group Environmental Protec-

tion Fund was established to provide financial assistance to nonprofit

organizations (NPOs) involved in environmental protection activities.

This fund employs a system by which we support the good intentions

of our employees by matching their donations. In fiscal 2014, a total

of ¥17.74 million will be donated to 42 organizations, for a total of

¥410 million in financial assistance to 718 organizations since the

fund’s establishment in 1992. Some of our other initiatives include the

participation of personnel in forest restoration activities near our work-

sites. The Millennium hope hills Project is undertaken by the city of

Iwanuma, Miyagi Prefecture, as part of efforts to recover from the

Great East Japan Earthquake, and we have supported this project

through both funding and the voluntary efforts of employees at our

Sendai Factory, who participate in the project’s tree-planting festival.

Please refer to Toyo Tires Group CSR Report for more details about our ESG activities.

Toyo Tires Group Environmental Protection Fund Financial Assistance (cumulative)

Activities

Tree-planting program of NPO Niranjana Sewa Sanga in Bihar State, India (funded 2011–2014)

Forest clearing using a wood chipper conducted by NPO Chikurinkyuentai, Gifu Prefecture, Japan (funded 2009–2014)

Demonstration of checking tire tread depth using a depth gauge as part of our Tire Safety Awareness Program

Areas of activities of the organizations to which funds will be provided

FY201442 organizations

Awareness-raisingactivities/events

12%

Ecosystem protection 21%

Local environmental maintenance5%

Satoyama woodland/forest management and tree-planting 17%

Recycling7%

Water and riverenvironmental

protection12%

Others 2%

Environmental education and hands-on learning 24%

Cumulative number of organizations to receive grants: 718Cumulative amount of grants: ¥ 410million

CSR report

Further, the Toyo Tires Group conducts the Tire Safety Awareness

Program to increase understanding of the importance of tire safety

inspections. In fiscal 2013, program’s activities included distributing

safety pamphlets and offering free tire

inspections at shopping malls near our

worksites. We will continue to conduct

our Tire Safety Awareness Program

with the aim of encouraging even more

people to start checking their tires daily.


Results of Efforts to Reduce CO2 Emissions

15.6% reduction compared with fiscal 1990 level

6.5% reduction compared with fiscal 2005 level

■ We have begun a new campaign to reduce CO2 emissions in light of our success in achieving the previous target of “reducing CO2 emissions per unit of production by 15% compared with the fiscal 1990 level by the end of fiscal 2015,” setting a new target of “reducing CO2 emissions per unit of production by 15% compared with the fiscal 2005 level by the end of fiscal 2020.”

■ We are seeking reductions across the value chain by adopting the “Scope 3” accounting and reporting standard.

t-CO2/t

20092005 2010 2012 2013 2014 20202011

120

90

60

30

0

100.0108.0 105.3

111.7 106.5

85.0(Target)

97.7

Notes: CO2 emissions volume is calculated according to the thermal power basic unit method pro-vided in the “Ministry of the Environment and Ministry of Economy, Trade and Industry ‘Manual for Calculating and Reporting Greenhouse Gas Emissions’ (Ver. 3.4) for Business Operators in the Rubber Industry,” issued by the Japan Rubber Manufacturers Association in June 2012. The actual receiving-end emission factor was used as the CO2 emission factor for electricity. Its denominator is the combined value for “new rubber consumption” and “amount of materi-als converted to new-rubber amount.”

Management’s Discussion and AnalysisDue to a change in the Company’s fiscal year-end, the previous fiscal year ended December 2012, serves as a transitional consolidated fiscal period covering nine months of results (from April 1, 2012 to December 31, 2012) for the parent company and its domestic consolidated subsidiaries and the normal 12 months of results (from January 1, 2012 to December 31, 2012) for overseas consolidated subsidiaries. Consequently, year-on-year comparisons of sales and profit growth have been omitted.

Business EnvironmentDuring the fiscal year ended December 31, 2013, the outlook for the global economy remained

uncertain. The U.S. economy was characterized by firm personal consumption and capital

investment, but in Europe recovery was weak, partly owing to austerity policies stemming from

the region’s debt crisis, and although the Chinese economy continued to grow, the pace of

growth remained slow. The Japanese economy experienced a gradual recovery, as economic

measures and financial policies prompted yen depreciation and higher share prices, and con-

sumer sentiment improved.

Against this backdrop, the Toyo Tires Group implemented a range of initiatives to meet

the targets in its five-year 2011 Medium-Term Business Plan. These initiatives were aimed at

expanding the Group’s business into growth and profitable markets, building an optimal supply

chain, increasing sales of high-value-added products, commercializing products that utilize

environmental technologies, and pushing ahead with further reductions to manufacturing costs.

As a result, the Group reported for the fiscal year ended December 2013 net sales of

¥370,218 million and gross profit of ¥115,810 million. Selling, general and administrative (SG&A)

expenses totaled ¥78,569 million, amounting to 21.2% of net sales. Operating income came to

¥37,241 million, resulting in an operating margin of 10.1%. Due to the recording of a loss on

alleged U.S. anti-trust law violation, the Group posted additional other expenses of more than

¥12,050 million, leading to income before income taxes and minority interests of ¥25,191 million.

Net income was ¥11,597 million, resulting in a net income margin of 3.1%. Net sales hit a

historic high for the first time since the fiscal year ended March 31, 2008, and operating income

set a new record for the second consecutive fiscal year. Adjusting figures for the fiscal year

ended December 2012 to allow comparison with the fiscal year ended December 2013, net

sales increased ¥38,518 million and operating income rose ¥20,641 million year on year.

Millions of yen

Compared with the same period

2013/12 2012/12 Change 2012/12* Change

Net sales ¥370,218 ¥291,110 ¥79,108 ¥331,700 ¥38,518

Operating income 37,241 15,651 21,590 16,600 20,641

Net income 11,597 13,218 (1,621) — —

* Based on 12 months of results for the parent company and domestic consolidated subsidiaries (January – December 2012) and 12 months of results for overseas consolidated subsidiaries (January – December 2012), provided for reference purposes only.

Segment Information by Business(Net sales include intersegment sales and transfers.)

Tire Business

The Tire Business reported net sales of ¥289,715 million, equivalent to 78.2% of total net sales.

Operating income was ¥33,785 million. Adjusting figures for the fiscal year ended December

2012 to enable comparison with the fiscal year ended December 2013, net sales increased

¥38,315 million and operating income rose ¥20,385 million year on year.

In original equipment (O.E.) tires for Japan, a decrease in domestic auto production caused

unit sales to fall. however, sales moved up steadily on a value basis, as sales of high-value-

added products expanded.


Gross Profit and Gross Profit MarginBillions of yen / %

SG&A Expenses and SG&A MarginBillions of yen / %

Operating IncomeBillions of yen

’12/3’10/3 ’11/3 ’12/12 ’13/12

400

300

100

200

0

40

30

20

10

0’12/3’10/3 ’11/3 ’12/12 ’13/12

120

90

30

60

0

’12/3’10/3 ’11/3 ’12/12 ’13/12

40

30

10

20

0

Gross Profit Gross Profit Margin (right)

40

30

20

10

0’12/3’10/3 ’11/3 ’12/12 ’13/12

80

60

20

40

0

SG&A Expenses SG&A Margin (right)


In replacement tires for Japan, the Group enhanced its size lineup of NANOENERGY 3

fuel-efficient tires, prompting an increase in sales of tires for passenger cars. The economic

recovery also led to favorable sales of truck and bus tires. Despite robust sales in this category

on a unit basis, on a value basis sales remained essentially flat due to such factors as a wors-

ening product mix.

In replacement tires for overseas markets, sales volume and value were both firm in the

North American market, as the economic rebound encouraged sales of our high-value-added

SUV tire, the OPEN COUNTRY A/T II; the GRAPPLER series of NITTO-brand pickup truck tires;

and NT421Q tires for crossover utility vehicles (CUVs).

In Europe, we strove to cultivate new customers and introduced new products compliant

with the European grading system—the PROXES CF2 and the NANOENERGY 3. Sales also

expanded for the OBSERVE G3-ICE, a studded tire that delivers enhanced performance on

snowy and icy roads. Consequently, sales were solid on both a unit and value basis.

In the Southeast Asian market, sales volume and value increased steadily year on year,

buoyed by sales in the Malaysian market, which is home to a new Group production base.

As a result, total overseas sales volume and net sales were both steady compared with

the previous fiscal year.

DiverTech BusinessThe DiverTech Business reported net sales of ¥80,456 million, equivalent to 21.7% of total net

sales. Operating income was ¥2,583 million. Adjusting figures for the fiscal year ended Decem-

ber 2012 to enable comparison with the fiscal year ended December 2013, net sales increased

¥156 million and operating income decreased ¥117 million year on year.

In transportation equipment, unit sales of automotive anti-vibration rubber products and

automobile seat cushions were down in Japan in line with the decline in domestic auto produc-

tion, but overseas sales were robust, particularly in North America, keeping overall sales steady

year on year. In railway car air springs and anti-vibration rubber, sales of new parts in Japan

and replacement parts overseas expanded, leading to firm sales on a value basis.

In thermal insulation materials, sales of rigid urethane undiluted solution to housing

materials manufacturers were favorable, but sales of materials for agricultural storehouses and

livestock buildings were lackluster, causing overall sales to remain unchanged from the previous

fiscal year. In waterproofing materials, sales volume increased and net sales were firm.

In industrial and construction materials, sales were steady thanks to favorable orders of

seismic isolation rubber and hoses used in the construction industry.

Millions of yen


2013/12 2012/12 Change 2012/12* Change

Tire Business

Net sales ¥289,715 ¥228,745 ¥60,970 ¥251,400 ¥38,315


DiverTech Business

Net sales ¥ 80,456 ¥ 62,343 ¥18,113 ¥ 80,300 ¥ 156

Operating income 2,583 2,228 355 2,700 (117)


Net IncomeBillions of yen

’12/3’10/3 ’11/3 ’12/12 ’13/12

16

12

4

8

0


Tire Business78.2%

DiverTech Business 21.7%

Sales by Geographic Segment

Japan44.8%

Other Areas17.6%

North America37.6%


Segment Information by RegionNet sales and operating income by region are outlined below.

In Japan, net sales totaled ¥165,878 million and operating income was ¥27,176 million.

In North America, net sales totaled ¥139,223 million and operating income was

¥7,904 million.

In other regions, net sales totaled ¥65,116 million and operating income was ¥3,300 million.

Adjusting figures for the fiscal year ended December 2012 to enable comparison with the

fiscal year ended December 2013, net sales in Japan decreased ¥4,610 million and operating

income rose ¥14,429 million year on year. In North America, net sales increased ¥33,740

million and operating income rose ¥3,831 million. In other regions, net sales increased ¥9,398

million and operating income rose ¥2,749 million.

Millions of yen


2013/12 2012/12 Change 2012/12* Change

Japan

Net sales ¥165,878 ¥129,909 ¥35,969 ¥170,488 ¥ (4,610)


North America

Net sales ¥139,223 ¥105,482 ¥33,741 ¥105,483 ¥33,740


Other regions

Net sales ¥ 65,116 ¥ 55,717 ¥ 9,399 ¥ 55,718 ¥ 9,398

Operating income 3,300 550 2,750 551 2,749


Financial PositionTotal assets at the end of the fiscal year stood at ¥433,327 million, up ¥79,041 million from the

end of the previous fiscal year. This rise was mainly attributable to an increase in investments in

securities as share prices rallied, to our augmentation of property, plant and equipment as an

investment in growth markets, and to higher cash and time deposits.

Total liabilities at the end of the fiscal year amounted to ¥291,817 million, an increase of

¥44,165 million. This chiefly reflected a provision for alleged U.S. anti-trust law violation and

higher income and enterprise taxes payable, while the balance of short-term bank loans declined.

Net assets at the end of the fiscal year were ¥141,510 million, up ¥34,876 million from a

year earlier. This rise was primarily due to increases in retained earnings, the valuation differ-

ence on available-for-sale securities, and foreign currency translation adjustments.

As a result, the capital ratio rose 2.5 percentage points from the end of the previous fiscal

year, to 31.8%.

Capital ExpendituresCapital expenditures for the fiscal year under review totaled ¥29,000 million, an increase of

¥6,042 million year on year. Of this amount, the Tire Business accounted for ¥23,813 million,

which mainly went toward business rationalization, improvements to product quality, the

expansion of production facilities at Toyo Tire (Zhangjiagang) Co., Ltd., and the establishment

of Toyo Tyre Malaysia Sdn Bhd. The DiverTech Business accounted for ¥2,832 million, which

was spent mainly on business rationalization and improvements to product quality. The remain-

ing ¥2,355 million principally went toward reinforcing basic research technologies.

Total AssetsBillions of yen

Net AssetsBillions of yen

Capital Ratio%

Capital ExpendituresBillions of yen

MD&A

’12/3’10/3 ’11/3 ’12/12 ’13/12

480

360

120

240

0

’12/3’10/3 ’11/3 ’12/12 ’13/12

160

120

40

80

0

’12/3’10/3 ’11/3 ’12/12 ’13/12

40

30

10

20

0

’12/3’10/3 ’11/3 ’12/12 ’13/12

40

30

10

20

0


Interest-Bearing DebtInterest-bearing debt at the end of the fiscal year totaled ¥129,849 million, a decrease of ¥3,005

million from the end of the previous fiscal year, mainly reflecting lower short-term bank loans.

Cash FlowsNet cash provided by operating activities was ¥41,558 million. Primary sources of cash were

income before income taxes and minority interests, depreciation and amortization, and an

increase in notes and accounts payable–trade, while major uses of cash were foreign exchange

gains and an increase in notes and accounts receivable–trade.

Net cash used in investing activities came to ¥22,504 million, mainly because of the pur-

chase of property, plant and equipment in line with capital expenditures. Free cash flow

accordingly amounted to a positive ¥19,054 million.

Net cash used in financing activities was ¥5,095 million, as uses of cash, such as repay-

ment of long-term debt and a net decrease in short-term bank loans, exceeded major sources

of cash, such as proceeds from long-term debt.

After combining the increases and decreases in cash flows described above with a rise in

the foreign exchange translation difference, cash and cash equivalents at the end of the year

totaled ¥36,352 million, up ¥16,778 million from a year earlier.

DividendsThe Company’s basic policy on the distribution of profits is to pay an appropriate dividend sup-

ported by a stable earnings structure over the long term, while taking into account a sufficient

level of internal reserves to strengthen the operating base and fund future business develop-

ment. In accordance with its basic policy and in light of results for the full year, the Company

paid a dividend of ¥12.0 per share for the fiscal year under review.

Outlook for the Fiscal Year Ending December 2014(Announced February 14, 2014)

During the upcoming fiscal year, the Company expects the environment to remain uncertain.

Although we anticipate economic recovery in the United States and Japan, we remain con-

cerned about potential downward impacts from the European debt crisis and slowing eco-

nomic growth in emerging markets. In this operating environment, the Company will continue

to pursue the long-term strategies of the five-year “2011 Medium-Term Business Plan,”

launched in the fiscal year ended March 31, 2012. In the Tire Business, the Company will con-

tinue to expand capacity at Toyo Tire North America Manufacturing Inc., its U.S. tire production

subsidiary, in response to robust tire demand in the North American market. Our establishment

of a tire production base in Malaysia will boost our supply capabilities, enabling us to take

advantage of free trade agreements to boost exports to other countries in the rapidly growing

Southeast Asian market as well as to expand sales in such key markets as North America,

Europe, and Russia. In the DiverTech Business, the Company will continue channeling man-

agement resources into three areas—automobile parts, urethane, and railway car parts—while

establishing a global supply chain and harnessing the Group’s proprietary technologies to

develop and expand sales of high-value-added products.

The consolidated performance outlook for the fiscal year ending December 2014 is as follows:

Net sales ¥400 billion

Operating income ¥40 billion

Net income ¥25 billion

The above forecasts are based on assumed exchange rates of US$1 = ¥100 and €1 = ¥135.

Interest-Bearing DebtBillions of yen

’12/3’10/3 ’11/3 ’12/12 ’13/12

160

120

40

80

0


Consolidated Balance SheetsToyo Tire & Rubber Co., Ltd. and Consolidated SubsidiariesDecember 31, 2013 and 2012

Millions of yenThousands of

U.S. dollars (Note 1)

2013 2012 2013

ASSETS

Current assets:

Cash and time deposits (Note 7) ¥ 36,356 ¥ 19,577 $ 344,966

Notes and accounts receivable:

Trade (Notes 5 and 7) 81,446 73,461 772,806

Other 5,065 3,800 48,060

Inventories (Note 6) 57,554 51,603 546,105

Deferred tax assets (Note 13) 7,016 4,305 66,572

Other current assets 4,606 3,670 43,704

Allowance for doubtful receivables (196) (93) (1,860)

Total current assets 191,847 156,323 1,820,353

Property, plant and equipment (Note 11):

Land 21,399 21,073 203,046

Buildings and structures 99,032 84,379 939,671

Machinery and equipment 320,120 296,157 3,037,480

Construction in progress 10,901 9,766 103,435

Lease assets 2,073 2,212 19,670

453,525 413,587 4,303,302

Accumulated depreciation (284,928) (267,392) (2,703,558)

Total property, plant and equipment 168,597 146,195 1,599,744

Intangible assets

Goodwill 3,011 2,665 28,570

Other assets 5,710 5,249 54,180

Total intangible assets 8,721 7,914 82,750

Investments and other assets:

Investment in securities (Notes 7, 8 and 10) 52,577 35,196 498,880

Investments in unconsolidated subsidiaries and affiliates 1,982 1,615 18,806

Long-term loans receivable 459 535 4,355

Deferred tax assets (Note 13) 3,162 2,998 30,003

Other assets 6,202 3,783 58,848

Allowance for doubtful receivables (220) (273) (2,087)

Total investments and other assets 64,162 43,854 608,805

Total assets ¥ 433,327 ¥ 354,286 $ 4,111,652

See the accompanying notes to the consolidated financial statements.




2013 2012 2013

LIABILITIES AND NET ASSETS

Current liabilities:

Short-term bank loans (Notes 7 and 11) ¥ 14,024 ¥ 19,919 $ 133,068

Current portion of long-term debt (Notes 7, 10 and 11) 20,393 18,042 193,500

Notes and accounts payable:

Trade (Notes 5 and 7) 66,215 58,593 628,285

Other 18,139 12,833 172,114

84,354 71,426 800,399

Accrued expenses 11,178 9,722 106,063

Income and enterprise taxes payable 10,196 3,017 96,745

Customers’ deposits 3,948 3,808 37,461

Provision for directors’ bonuses 59 26 560

Provision for sales returns 271 343 2,571

Provision for alleged U.S. anti-trust law violation 13,206 — 125,306

Other current liabilities 3,831 3,360 36,351

Total current liabilities 161,460 129,663 1,532,024

Long-term liabilities:

Long-term debt due after one year (Notes 7, 10 and 11) 94,804 94,113 899,554

Severance and retirement benefits (Note 12) 13,239 13,218 125,619

Provision for environmental remediation 83 135 788

Deferred tax liabilities (Note 13) 20,782 9,053 197,191

Other long-term liabilities 1,449 1,470 13,749

Total long-term liabilities 130,357 117,989 1,236,901

Contingent liabilities (Note 15)

Net assets (Note 16):

Shareholders’ equity

Common stock

Authorized - 400,000,000 shares

Issued - 254,358,146 shares 30,485 30,485 289,259

Capital surplus 28,507 28,507 270,491

Retained earnings 48,211 38,389 457,453

Treasury stock, at cost

2012 - 319,515 shares

2013 - 338,903 shares (117) (108) (1,110)

107,086 97,273 1,016,093

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 22,231 11,020 210,940

Deferred gains and losses on hedges (107) (240) (1,015)

Foreign currency translation adjustments 8,507 (4,208) 80,719

30,631 6,572 290,644

Minority interests 3,793 2,789 35,990

Total net assets 141,510 106,634 1,342,727

Total liabilities and net assets ¥ 433,327 ¥ 354,286 $ 4,111,652


Consolidated Statements of IncomeToyo Tire & Rubber Co., Ltd. and Consolidated SubsidiariesFor the year ended December 31, 2013 and nine months ended December 31, 2012



2013 2012(nine months)

2013

Net sales ¥ 370,218 ¥ 291,110 $ 3,512,838

Cost of sales (Note 6) 254,408 217,079 2,413,967

Gross profit 115,810 74,031 1,098,871

Selling, general and administrative expenses 78,569 58,380 745,507

Operating income 37,241 15,651 353,364

Other income (expenses):

Interest income 255 150 2,420

Dividends income 902 575 8,559

Equity in earnings of affiliates 277 217 2,628

Rent income 226 168 2,144

Foreign exchange gains 2,851 1,216 27,052

Interest expense (2,626) (2,402) (24,917)

Loss from liquidation of receivables (124) (75) (1,177)

Gain on sales of noncurrent assets 931 — 8,834

Gain on sales of subsidiaries and affiliates’ stocks — 309 —

Gain on sales of investment securities — 178 —

Loss on retirement of noncurrent assets (712) (330) (6,756)

Loss on litigation — (325) —

Loss on alleged U.S. anti-trust law violation (13,321) — (126,397)

Other net (709) (1,855) (6,728)

Income before income taxes and minority interests 25,191 13,477 239,026

Income taxes (Note 13):

Current 11,648 3,561 110,523

Deferred 1,414 (2,988) 13,417

13,062 573 123,940

Income before minority interests 12,129 12,904 115,086

Minority interests in net loss (income) of consolidated subsidiaries (532) 314 (5,047)

Net income ¥ 11,597 ¥ 13,218 $ 110,039

Yen U.S. dollars (Note 1)


2013

Net income per share ¥45.65 ¥52.03 $0.43

Diluted net income per share — — —

Dividends per share 12.00 7.00 0.11



Consolidated Statements of Changes in Net Assets Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012

Millions of yen

Number of shares of

common stock (thousands)

Common stock

Capital surplus

Retained earnings

Treasury stock

Valuation difference on available-for-

sale securities

Deferred gains and losses on

hedges

Foreign currency

translation adjustments

Minority interests

Total net assets

Balance at March 31, 2012 254,358 ¥30,485 ¥28,507 ¥26,441 ¥(106) ¥9,980 ¥(122) ¥(11,346) ¥2,714 ¥86,553

Cash dividends — — — (1,270) — — — — — (1,270)

Net income — — — 13,218 — — — — — 13,218

Purchases of treasury stock — — — — (2) — — — — (2)

Net changes in items other than shareholders’ equity — — — — — 1,040 (118) 7,138 75 8,135

Balance at beginning of year 254,358 30,485 28,507 38,389 (108) 11,020 (240) (4,208) 2,789 106,634

Cash dividends — — — (1,779) — — — — — (1,779)

Net income — — — 11,597 — — — — — 11,597

Purchases of treasury stock — — — — (9) — — — — (9)

Change in scope of consolidation — — — 4 — — — — — 4

Net changes in items other than shareholders’ equity — — — — — 11,211 133 12,715 1,004 25,063

Balance at December 31, 2013 254,358 ¥30,485 ¥28,507 ¥48,211 ¥(117) ¥22,231 ¥(107) ¥8,507 ¥3,793 ¥141,510

Thousands of U.S. dollars (Note 1)

Common stock

Capital surplus

Retained earnings

Treasury stock

Valuation difference on available-for-

sale securities

Deferred gains and losses on

hedges

Foreign currency

translation adjustments

Minority interests

Total net assets

Balance at beginning of year $289,259 $270,491 $364,256 $(1,025) $104,564 $(2,277) $(39,928) $26,464 $1,011,804

Cash dividends — — (16,880) — — — — — (16,880)

Net income — — 110,039 — — — — — 110,039

Purchases of treasury stock — — — (85) — — — — (85)

Change in scope of consolidation — — 38 — — — — — 38

Net changes in items other than shareholders’ equity — — — — 106,376 1,262 120,647 9,526 237,811

Balance at December 31, 2013 $289,259 $270,491 $457,453 $(1,110) $210,940 $(1,015) $80,719 $35,990 $1,342,727


Consolidated Statements of Comprehensive IncomeToyo Tire & Rubber Co., Ltd. and Consolidated SubsidiariesFor the year ended December 31, 2013 and nine months ended December 31, 2012




2013

Income before minority interests ¥ 12,129 ¥ 12,904 $ 115,087

Other comprehensive income

Valuation difference on available-for-sale securities 11,211 1,040 106,376

Deferred gains and losses on hedges 142 (118) 1,348

Foreign currency translation adjustments 12,850 7,360 121,928

Share of other comprehensive income of associates accounted for using equity method 317 158 3,008

Total other comprehensive income (Note 3) 24,520 8,440 232,660

Comprehensive income ¥ 36,649 ¥ 21,344 $ 347,746

Comprehensive income attributable to

Owners of the parent ¥ 35,665 ¥ 21,278 $ 338,410

Minority interests 984 66 9,336



Consolidated Statements of Cash Flows Toyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries For the year ended December 31, 2013 and nine months ended December 31, 2012




2013

Cash flows from operating activities:

Income before income taxes and minority interests ¥ 25,191 ¥ 13,477 $ 239,026

Adjustments to reconcile income before income taxes to net cash provided by operating activities:

Depreciation and amortization 19,512 15,126 185,141

Equity in earnings of affiliates (277) (217) (2,628)

Foreign exchange losses (gains) (1,075) 61 (10,200)

Increase (decrease) in provision for retirement benefits for employees 16 333 152

Interest and dividends income (1,157) (725) (10,978)

Interest expense 2,626 2,402 24,917

Loss on retirement of noncurrent assets 713 318 6,765

Loss (gain) on sales of noncurrent assets (931) — (8,834)

Loss (gain) on sales of investment securities — (178) —

Loss (gain) on sales of stocks of subsidiaries and affiliates — (309) —

Decrease (increase) in notes and accounts receivable-trade (1,570) (9,435) (14,897)

Decrease (increase) in inventories (200) 7,478 (1,898)

Increase (decrease) in notes and accounts payable-trade 2,724 (9,485) 25,847

Other, net 1,626 216 15,428

Subtotal 47,198 19,062 447,841

Interest and dividends income received 1,300 712 12,335

Interest expense paid (2,682) (2,337) (25,448)

Income taxes paid (4,258) (1,562) (40,402)

Net cash provided by operating activities 41,558 15,875 394,326

Cash flows from investing activities:

Purchase of property, plant and equipment (23,220) (22,736) (220,325)

Purchase of intangible assets (537) (576) (5,095)

Proceeds from sales of property, plant and equipment 1,746 501 16,567

Proceeds from sales and redemption of investment securities 51 550 484

Purchase of investments securities (16) (12) (152)

Purchase of investments in capital of subsidiaries (607) — (5,760)

Proceeds from sales of stocks of subsidiaries and affiliates — 1,186 —

Other, net 79 22 750

Net cash used in investing activities (22,504) (21,065) (213,531)

Cash flows from financial activities:

Proceeds from long-term debt 16,952 32,135 160,850

Repayment of long-term debt (11,784) (24,410) (111,813)

Redemption of bonds — (5,000) —

Net increase (decrease) in short-term bank loans (8,511) (7,339) (80,757)

Proceeds from issuance of bonds — 4,973 —

Cash dividends paid (1,775) (1,268) (16,842)

Cash dividends paid to minority shareholders (23) (31) (218)

Proceeds from stock issuance to minority shareholders 395 39 3,748

Other, net (349) (273) (3,312)

Net cash provided by (used in) financing activities (5,095) (1,174) (48,344)

Effect of exchange rate on cash and cash equivalents 2,669 1,286 25,325

Net increase (decrease) in cash and cash equivalents 16,628 (5,078) 157,776

Cash and cash equivalents at beginning of period 19,574 24,652 185,729

Cash and cash equivalents of newly consolidated subsidiaries 150 — 1,423

Cash and cash equivalents at end of period (Note 4) ¥ 36,352 ¥ 19,574 $ 344,928



Notes to Consolidated Financial StatementsToyo Tire & Rubber Co., Ltd. and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements

The accompanying consolidated financial statements of Toyo Tire & Rubber Co., Ltd. (the “Company”) and its consolidated subsidiaries have been prepared in accordance with the provi-sions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (Japanese GAAP), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards (“IFRS”). The financial statements of the Company’s consolidated overseas subsidiaries for consolidation purposes have been prepared in conformity with IFRS or generally accepted accounting principles in the United States of America (“US GAAP”), and partially reflect the adjustments which are neces-sary to conform with Japanese GAAP. The accompanying consolidated financial statements have been reformatted and

translated into English with some expanded descriptions from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appro-priate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompa-nying consolidated financial statements. The translations of the Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at December 31, 2013, which was ¥105.39 to U.S. $1.00. The translations should not be construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies

Consolidation and investments in affiliatesThe accompanying consolidated financial statements include the accounts of Toyo Tire & Rubber Co., Ltd. (the “Company”) and significant subsidiaries (together, the “Companies”) over which the Company has power of control through majority voting rights or the existence of certain other conditions evidencing control. Investments in affiliates over which the Company has the ability to exercise significant influence over operating and financial poli-cies are accounted for by the equity method. The consolidated financial statements include the accounts of the Company and its 46 significant majority owned subsid-iaries (43 in 2012). The increase in the number of consolidated subsidiaries was due to the establishment of new companies. All significant intercompany transactions and accounts have been eliminated in consolidation. Investments in 3 affiliates (3 in 2012) are accounted for by the equity method. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired control of the respective subsidiary.

Cash and cash equivalents In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.

Allowance for doubtful receivablesAllowance for doubtful receivables is provided to cover possible losses on collection. With respect to normal trade accounts receivable, it is stated at an amount based upon the actual rate of historical bad debts. For certain doubtful receivables, the uncollectable amount has been individually estimated.

Provision for sales returnsA provision for sales returns is calculated for losses incurred on the return of snow tires sold during the fiscal year but returned after the balance sheet date. The provision is based on an estimate using the historical rate of such returns in prior years.

Provision for alleged U.S. anti-trust law violationThe Company has been under investigation by the United States Department of Justice (the “DOJ”) for alleged violations of the U.S. anti-trust laws in connection with the sale of automotive parts. On November 26, 2013 (U.S. time), the Company entered into a plea agreement with the DOJ, agreeing to pay a fine of US$120 million based on charges that it violated U.S. anti-trust laws in connection with the sale of automotive anti-vibration rubber products and constant-velocity-joint boot products. With this investigation, a provision for the alleged U.S. anti-trust law violation has been recorded to provide for potential future losses reasonably estimated at the fiscal year-end. These losses, together with the related costs of attorneys’ fees and other, are charged to the income statement as ’Loss on alleged U.S. anti-trust law violation’. The Company paid this penalty in response to the judgment form the court on February 6, 2014 (U.S. time). In connection with this matter, in Canada, a class action lawsuit has been filed against the Company and certain subsidiaries, and the outcome may impact on the operating results, but it is difficult to reasonably estimate the impact at the present stage.

InventoriesInventories of the Company and its consolidated domestic subsidiaries (the “Domestic Companies”) are stated principally at the lower of weighted average cost or net realizable value. Inventories of consolidated overseas subsidiaries are stated principally at the lower of weighted average cost or market value.


Property, plant and equipment (except lease assets)Property, plant and equipment are stated at cost. Depreciation of buildings and certain tools and equipment of the Domestic Companies are computed by the straight-line method over the estimated useful life of the asset. The declining balance method is applied to the remaining assets. Consolidated overseas subsidiaries compute deprecation principally by the straight-line method over the estimated useful life of the asset. Expenditures for maintenance and repairs, including minor replacements and betterments, are charged to income as incurred.

The estimated useful lives of assets range as follows: Buildings and structures 3 – 50 years Machinery and equipment 2 – 17 years

Software costs (except lease assets) Software costs are included in intangible assets and depreciated by the straight-line method over the estimated useful life of 5 years.

Lease assetsProperty, plant and equipment capitalized under finance lease arrangements are depreciated over the lease term. The Domestic Companies account for finance leases that commenced prior to April 1, 2008 and that do not transfer the ownership of the leased property to the lessee as operating leases, with disclosures of certain “as if capitalized” information. The Domestic Companies have adopted a new accounting stan-dard for finance leases which commence after March 31, 2008 and are capitalized, except for certain immaterial or short-term finance leases accounted for as operating leases.

GoodwillGoodwill is amortized by the straight-line method over the period it is expected to have an effect, except minor goodwill which is expensed as incurred for the consolidated domestic subsidiaries.

SecuritiesThe Company classifies securities as (a) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securi-ties”), (b) equity securities issued by subsidiaries and affiliated companies, and (c) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”). The Companies have no securities held for trading purposes. Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliated companies which are not consolidated or accounted for using the equity method are stated at moving average cost. Available-for-sale securities with available fair market values are stated at fair market value. Securities with no available fair market value are stated at moving average cost. Unrealized gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on the sale of such securities are computed using moving average cost. If the fair market value of these securities declines signifi-cantly, the securities are stated at fair market value and the difference between the fair market value and the carrying amount is recognized as loss in the period of the decline. In this event, the fair market value will be the carrying amount of the securities at the beginning of the next year.

Derivatives and hedge accountingThe Companies state derivative financial instruments at fair value and recognize changes in the fair value as gain or loss unless the derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges and meet certain hedging criteria, the Companies defer recognition of gain or loss resulting from changes in the fair value of the derivative financial instrument until the related loss or gain on the hedged item is recognized. However, when forward foreign exchange contracts are used as hedges and meet certain hedging criteria, the foreign currency receivables or payables are translated at the contracted rate. Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the asset or liability for which the swap contract was executed.

Provision for environmental remediationThe provision for environmental remediation is estimated and recorded to provide for potential future costs such as costs related to the removal and disposal of PCB waste.

Provision for directors’ bonusesThe provision for directors’ bonuses is estimated and recorded to provide for directors’ bonuses based on the estimated amount of payment.

Severance and retirement benefits1) EmployeesThe Companies provide two types of post-employment benefit plans, unfunded lump-sum payment plans and funded noncon-tributory pension plans, under which all eligible employees are entitled to benefits based on the level of wages and salaries at the time of retirement or termination, length of service and certain other factors. The Companies provide for employees’ severance and retirement benefits based on the estimated amounts of projected benefit obligation and the fair value of plan assets at the end of the year. Actuarial gains and losses are recognized in income and expenses using the straight-line method over a period that is within the average of the estimated remaining service years of employees (mainly 15 years) commencing with the following period. Past service liabilities are amortized in expenses using the straight-line method over a period that is within the average of the estimated remaining service years of employees (15 years).2) Directors and statutory auditors In accordance with their internal rules, certain consolidated subsidiaries have included at their fiscal year-end amounts that will be necessary for the payment of retirement benefits to direc-tors and statutory auditors. The amounts included in the liability for severance and retirement benefits at December 31, 2013 and 2012 were ¥9 million ($85 thousand) and ¥17 million, respectively.

Research and development expensesResearch and development expenses are charged to income as incurred. Such expenses for the year ended December 31, 2013 and nine months ended December 31, 2012 were ¥8,489 million ($80,548 thousand) and ¥6,211 million, respectively.

Notes to Consolidated Financial Statements


Income taxesThe asset-liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Net income per shareComputations of basic net income per share of common stock are based on the weighted average number of shares outstanding during each financial period. Diluted net income per share was not disclosed because there were no dilutive common stock equivalents.

Dividends per share Declarations of dividends and appropriations of unappropriated retained earnings are approved at the annual shareholders’ meeting held after the end of the fiscal year. Therefore, cash divi-dends per share shown in the consolidated statements of income reflect the final dividends approved after the end of the relevant fiscal year.

Translation of foreign currenciesReceivables and payables denominated in foreign currencies are translated into Japanese yen at year-end rates. Balance sheet accounts of consolidated overseas subsid-iaries and affiliates are translated into Japanese yen at year-end rates, except for net assets accounts, which are translated at historical rates. Revenue and expense accounts of consolidated

overseas subsidiaries and affiliates are translated at average exchange rates for the year, except for transactions with the Company which are translated at the rates used by the Company.

(Unadopted Standard and Guidance)-Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, May 17, 2012) -Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012) 1) SummaryUnder the amended rule, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss would be recognized within the net asset section, after adjusting for tax effects, and the deficit or surplus would be recognized as a liability or asset without any adjustments. For determining the method of attributing expected benefits to periods, the standard now allows a choice of a benefit formula basis as well as straight-line basis. The method for determining the discount rate has also been amended.2) Effective datesEffective for the end of annual periods ending on or after December 31, 2014. Amendments relating to the determination of retirement benefit obligations and current service costs are effective from the beginning of annual periods ending on or after December 31, 2015.3) Effect of application of the standardThe Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these new standards on the consolidated financial statements.

3. Comprehensive Income

For the year ended December 31, 2013 and nine months ended December 31, 2012Amounts reclassified to net income (loss) in the current period that were recognized in other comprehensive income in the current or previous periods and the tax effects for each component of other comprehensive income are as follows:


U.S. dollars

2013 2012 (nine months)

2013

Valuation difference on available-for-sale securities Increase during the year ¥ 17,419 ¥ 1,722 $ 165,281 Reclassification adjustments (11) (107) (104) Subtotal, before tax 17,408 1,615 165,177 Tax (expense) or benefit (6,198) (575) (58,810) Subtotal, net of tax 11,210 1,040 106,367Deferred gains and losses on hedges Increase (decrease) during the year 207 (265) 1,964 Subtotal, before tax 207 (265) 1,964 Tax (expense) or benefit (65) 147 (617) Subtotal, net of tax 142 (118) 1,347Foreign currency translation adjustments Increase (decrease) during the year 12,850 7,360 121,929 Subtotal 12,850 7,360 121,929Share of other comprehensive income of affiliates accounted for using equity method Increase (decrease) during the year 318 158 3,017 Subtotal 318 158 3,017Total other comprehensive income ¥ 24,520 ¥ 8,440 $ 232,660


4. Statements of Cash Flows

Cash and cash equivalents in the consolidated statements of cash flows and cash and time deposits in the consolidated balance sheets at December 31, 2013 and 2012 were reconciled as follows:


U.S. dollars

2013 2012 2013

Cash and time deposits ¥ 36,356 ¥ 19,577 $ 344,966Less time deposits with maturities exceeding three months (4) (3) (38)Cash and cash equivalents ¥ 36,352 ¥ 19,574 $ 344,928

5. Effect of Year-end Date on Financial Statements

If the year-end date is a bank holiday, the Companies account for notes receivables and payables maturing on this date in their financial statements as if they had been settled on the year-end date. The notes outstanding at December 31, 2013 and 2012 were as follows:


U.S. dollars

2013 2012 2013

Notes receivable ¥ 1,071 ¥ 1,024 $ 10,162Notes payable 395 355 3,748

6. Inventories

(1) Inventories at December 31, 2013 and 2012 consisted of the following:


U.S. dollars

2013 2012 2013

Finished goods ¥ 42,441 ¥ 38,413 $ 402,704Work-in-process 3,125 2,693 29,652Raw materials and supplies 11,988 10,497 113,749

¥ 57,554 ¥ 51,603 $ 546,105

(2) The write-down of book values for inventories held for sale in the ordinary course of business due to decreased profitability for the years ended December 31, 2013 and 2012 was as follows:


U.S. dollars

2013 2012 2013

Cost of sales ¥ 900 ¥ (172) $ 8,540¥ 900 ¥ (172) $ 8,540



7. Financial Instruments

A. Status of financial instruments(1) Policies for using financial instrumentsThe Toyo Group engages primarily in the manufacture and sale of automotive tires, industrial and construction materials, transportation equipment and others and procures the capital required under plans of investment in plant and equipment primarily from bank loans and bond issues. The Toyo Group manages surplus capital using financial instruments that carry little or no risk and procures short-term working capital from bank loans. The Toyo Group uses derivatives to mitigate the risks that are described below and, as a matter of policy, does not use derivatives for speculative transactions.

(2) Financial instruments and exposures to riskNotes and accounts receivable expose the Toyo Group to customer credit risk. In addition, receivables denominated in foreign currencies, which arise as the result of doing business globally, expose the Toyo Group to the risk of exchange rate fluctuations. In principle, the Toyo Group hedges the risks with forward foreign exchange contracts to the net position of deducted notes and accounts payable denominated in foreign currencies. Investments in securities consist primarily of invest-ments in companies with whom the Toyo Group does business or has capital alliances and expose the Toyo Group to the risk of changes in market prices. Almost all notes and accounts payable are due within one year. The Toyo Group procures the capital required for its invest-ment in plant and equipment generally through bank loans and bond issues with maturities not exceeding 8 years and incurs lease liabilities for lease transactions. Although exposure to the risk of interest rate fluctuations may arise, the Toyo Group hedges the risk with derivatives transactions (interest rate swaps). The Toyo Group uses derivatives transactions, including forward foreign exchange contracts, to hedge the risk of exchange rate fluctuations associated with receivables denomi-nated in foreign currencies and interest rate swaps to hedge the risk of interest rate fluctuations associated with loans. “Deriva-tives and hedge accounting” in Note 2, “Summary of Significant Accounting Policies” explains hedge accounting issues, including methods, hedging policies, hedged items and recognition of gain or loss on hedged positions.

(3) Policies and processes for managing risk a) Credit risk management (counterparty risk)The Company monitors the financial status of counterparties and manages amounts and settlement dates under internal procedures for receivables. The Company works to quickly identify and mitigate payment risk that may result from situations such as the deterio-ration of the financial condition of a counterparty. Consolidated subsidiaries are subject to the same risk management rules. In using derivatives transactions, the Company mitigates counterparty risk by conducting transactions with highly credit-worthy financial institutions. The maximum credit risk as of December 31, 2013 is presented on the balance sheet as the carrying value of financial assets exposed to credit risk.

b) Managing market risk (risk of exchange rate and interest rate fluctuations)

For receivables denominated in foreign currencies, the Company uses principally forward foreign exchange contracts to hedge the risk of exchange rate fluctuations on a currency-by-currency basis evaluated monthly. In addition, the Company uses interest rate swaps to mitigate the risk of interest rate fluctuations asso-ciated with loans. For investment in securities, the Toyo Group periodically examines the fair value of the securities and the financial condition of the issuing entity. For derivatives transactions, the Financial Department handles the transactions, books them and makes reconciliations in accordance with the basic policy approved by the Board of Directors, on the basis of established internal control procedures for financial risk. In addition, the Financial Department reports the monthly amounts to finance officers and the Board of Directors.

c) Management of liquidity risk associated with capital procurement (payment default risk)

The Company manages liquidity risk by creating and updating a capital deployment plan based on reports from each division.

(4) Supplemental information on fair valuesThe contractual amounts of the derivatives transactions discussed in Note 9, “Derivative Financial Instruments and Hedging Transactions” do not reflect the market risk associated with the derivatives transactions themselves.


B. Fair values of financial instrumentsThe amounts for financial instruments presented in the consolidated balance sheets, their fair values and any differences as of December 31, 2013 and 2012 are in the tables below. Items whose fair market value was considered to be very difficult to assess are not presented in the tables below.

(1) Marketable securities, derivatives transactions and methods for estimating the fair value of financial instruments

AssetsCash and time depositsBecause cash and time deposits are highly liquid, their fair value is similar to their book value. Consequently, the fair value of cash and time deposits is based on book value.


U.S. dollars

2013 2012 2013

Amounts presented in the consolidated balance sheets ¥ 36,356 ¥ 19,577 $ 344,966Fair value 36,356 19,577 344,966Difference — — —

Notes and accounts receivable—tradeBecause notes and accounts receivable—trade are highly liquid, their fair value is similar to their book value. Consequently, the fair value of notes and accounts receivable—trade is based on book value.


U.S. dollars

2013 2012 2013


Investment securitiesThe fair value of shares, etc., is based on prices established on exchanges. In addition, Note 9, “Securities,” provides information on marketable securities by the intent for which they are held.


U.S. dollars

2013 2012 2013


LiabilitiesNotes and accounts payable—tradeBecause notes and accounts payable—trade are highly liquid, their fair value is similar to their book value. Consequently, the fair value of notes and accounts payable—trade is based on book value.


U.S. dollars

2013 2012 2013


Short-term bank loansBecause short-term bank loans are highly liquid, their fair value is similar to their book value. Consequently, the fair value of short-term bank loans is based on book value.


U.S. dollars

2013 2012 2013




Bonds payable (including the current portion of bonds)The fair value of bonds payable is based on the price provided by counterparty financial institutions.


U.S. dollars

2013 2012 2013

Amounts presented in the consolidated balance sheets ¥ 28,000 ¥ 28,000 $ 265,680Fair value 28,327 28,283 268,783Difference 327 283 3,103

Long-term bank loans (including the current portion of long-term bank loans)The fair value of these long-term bank loans is estimated as the discounted present value of the total principal and interest using the assumed interest rates for equivalent new loans. Interest rate swaps subject to special treatment are used for long-term, floating-rate loans. Principal and interest of the loans in which these interest rate swaps are embedded are discounted using an estimate of the interest rate on the loan at the time of issue.


U.S. dollars

2013 2012 2013

Amounts presented in the consolidated balance sheets ¥ 87,197 ¥ 84,155 $ 827,375Fair value 87,464 84,929 829,908Difference 267 774 2,533

Derivatives transactionsThe fair value of these derivatives transactions is stated at the price presented by the counterparty financial institutions. Derivatives transactions using interest rate swap contracts that meet specified conditions and receivables denominated in foreign currencies that meet specified conditions are treated with hedge items. The fair value of these derivatives transactions is included in the applicable accounts payable items and stated accordingly. Net asset or liability which results from derivatives transactions except for these show the net amount. As a result, if this account balance is a debt, it is indicated by parenthesis ( ).


U.S. dollars

2013 2012 2013

Amounts presented in the consolidated balance sheets ¥ 342 ¥ (480) $ 3,245Fair value 342 (480) 3,245Difference — — —

(2) Financial instruments for which determining fair value is difficultFinancial instruments for which fair value is considered to be very difficult to determine are shown below. These financial instruments do not have a fair market value, and it was considered very difficult to determine because their future cash flows could not be estimated. For these reasons, these financial instruments are not included among investment securities above.


U.S. dollars

2013 2012 2013

Non-listed equity securities ¥ 1,452 ¥ 1,371 $ 13,777

(3) The redemption schedule for receivables after the close of the fiscal year


U.S. dollars

(Notes and accounts receivable—trade) 2013 2012 2013

Within 1 year ¥ 81,446 ¥ 73,461 $ 772,806From 1 year to 5 years — — —From 5 years to 10 years — — —Over 10 years — — —


(4) The redemption schedule for bonds payable, long-term bank loans and lease obligations after the close of the fiscal year


U.S. dollars

2013 2012 2013

Within 1 year Bonds payable ¥ 8,000 ¥ — $ 75,908 Long-term bank loans 12,393 18,042 117,592 Lease obligations 342 359 3,245

¥ 20,735 ¥ 18,401 $ 196,745

From 1 year to 2 years Bonds payable ¥ — ¥ 8,000 $ — Long-term bank loans 26,586 12,867 252,263 Lease obligations 140 280 1,328

¥ 26,726 ¥ 21,147 $ 253,591

From 2 years to 3 years Bonds payable ¥ 10,000 ¥ — $ 94,886 Long-term bank loans 16,566 24,249 157,187 Lease obligations 66 87 626

¥ 26,632 ¥ 24,336 $ 252,699

From 3 years to 4 years Bonds payable ¥ 5,000 ¥ 10,000 $ 47,443 Long-term bank loans 20,394 10,562 193,510 Lease obligations 45 38 427

¥ 25,439 ¥ 20,600 $ 241,380

From 4 years to 5 years Bonds payable ¥ 5,000 ¥ 5,000 $ 47,443 Long-term bank loans 3,997 14,378 37,926 Lease obligations 19 13 180

¥ 9,016 ¥ 19,391 $ 85,549

Over 5 years Bonds payable ¥ — ¥ 5,000 $ — Long-term bank loans 7,261 4,043 68,897 Lease obligations 17 3 161

¥ 7,278 ¥ 9,046 $ 69,058



8. Securities

A. The following tables summarize acquisition costs and book values (fair values) of securities with available fair values as of December 31, 2013 and 2012:

Available-for-sale securities with available fair values exceeding acquisition costs


U.S. dollars

2013 2012 2013

Acquisition cost: Equity securities ¥ 17,050 ¥ 16,109 $ 161,780 Bonds — — — Other — — —

¥ 17,050 ¥ 16,109 $ 161,780Book value: Equity securities ¥ 51,621 ¥ 33,405 $ 489,809 Bonds — — — Other — — —

¥ 51,621 ¥ 33,405 $ 489,809Difference: Equity securities ¥ 34,571 ¥ 17,297 $ 328,029 Bonds — — — Other — — —

¥ 34,571 ¥ 17,297 $ 328,029

Available-for-sale securities with available fair values not exceeding acquisition costs


U.S. dollars

2013 2012 2013

Acquisition cost: Equity securities ¥ 346 ¥ 1,300 $ 3,283 Bonds — — — Other — — —

¥ 346 ¥ 1,300 $ 3,283Book value: Equity securities ¥ 292 ¥ 1,118 $ 2,771 Bonds — — — Other — — —

¥ 292 ¥ 1,118 $ 2,771Difference: Equity securities ¥ (54) ¥ (182) $ (512) Bonds — — — Other — — —

¥ (54) ¥ (182) $ (512)


B. Total sales of available-for-sale securities for the year ended December 31, 2013 and nine months ended December 31, 2012 were as follows:


U.S. dollars

2013 2012 (nine months)

2013

Amount of sales

Equity securities ¥ 41 ¥ 458 $ 389 Bonds — — — Other — — —

¥ 41 ¥ 458 $ 389Total gain on sales Equity securities ¥ 11 ¥ 177 $ 104 Bonds — — — Other — — —

¥ 11 ¥ 177 $ 104Total loss on sales Equity securities ¥ — ¥ 70 $ — Bonds — — — Other — — —

¥ — ¥ 70 $ —

9. Derivative Financial Instruments and Hedging Transactions

Nine months ended December 31, 2012

A. Derivatives transactions for which hedge accounting does not apply(1) Currency related

Millions of yen

Classification Type Contact amountPortion over

1 yearFair value

Recognized gain (loss)

Non-market transactionReceivable floating interest rate Payable fixed rate swaps

3,247 — (93) (93)

Note: Fair values were based on prices provided by relevant financial institutions.

(2) Interest rate relatedNone



B. Derivatives transactions for which hedge accounting applies(1) Currency related

Millions of yen

Hedge accounting method Type of transaction Hedge item Contract amountPortion over

1 yearFair value

Deferred hedges

Forward foreign exchange contracts

Accounts receivable—trade

Selling: USD 3,638 — (168)

Selling: EUR 2,019 — (187)

Selling: CAD 455 — (23)

Selling: AUD 233 — (9)

Designation method for forward foreignexchange contracts, etc.



Selling: USD 645 — (Note 2)

Selling: EUR 484 — (Note 2)

Selling: CAD 322 — (Note 2)

Selling: AUD 150 — (Note 2)

Note: 1. Fair values were based on prices provided by relevant financial institutions. 2. The fair value of gain or loss resulting from foreign exchange contracts embedded in receivables subject to hedging is included in the fair value of

corresponding receivable.

(2) Interest rate related

Millions of yen


1 yearFair value

Special treatment of interest rate swaps

Receivable floating interest rate Payable fixed rate swaps

Long-term loans payable

32,530 31,870 (Note)

Note: The fair value of interest rate swaps subject to special treatment embedded in long-term loans subject to hedging is included in the fair value of the corresponding long-term loans.

Year ended December 31, 2013

A. Derivatives transactions for which hedge accounting does not apply(1) Currency related

Millions of yen


1 yearFair value



14,228 — 514 625

Thousands of U.S. dollars


1 yearFair value



135,003 — 4,877 5,930

Note: Fair values were based on prices provided by relevant financial institutions.

(2) Interest rate relatedNone


B. Derivatives transactions for which hedge accounting applies(1) Currency related

Millions of yen


1 yearFair value

Deferred hedges



Selling: USD 3,224 — (147)

Selling: EUR 339 — (23)


Selling: AUD 46 — (0)




Selling: USD 351 — (Note 2)

Selling: EUR 538 — (Note 2)





1 yearFair value

Deferred hedges



Selling: USD 30,591 — (1,395)

Selling: EUR 3,217 — (218)


Selling: AUD 436 — 0




Selling: USD 3,330 — (Note 2)

Selling: EUR 5,105 — (Note 2)



Note: 1. Fair values were based on prices provided by relevant financial institutions. 2. The fair value of gain or loss resulting from foreign exchange contracts embedded in receivables subject to hedging is included in the fair value of

corresponding receivable.

(2) Interest rate related



Millions of yen

Hedge accounting method Type of transaction Hedge item Contract amountPortion over 1

yearFair value




29,330 27,930 (Note)


Hedge accounting method Type of transaction Hedge item Contract amountPortion over 1

yearFair value




278,300 265,016 (Note)

Note: The fair value of interest rate swaps subject to special treatment embedded in long-term loans subject to hedging is included in the fair value of the corresponding long-term loans.

10. Pledged Assets

The following assets were pledged as collateral for long-term debt of ¥2,900 million ($27,517 thousand) and ¥3,300 million at December 31, 2013 and 2012.


U.S. dollars

2013 2012 2013

Investment in securities ¥ 9,037 ¥ 5,711 $ 85,748Property, plant and equipment - net of accumulated depreciation 18,696 21,133 177,398

¥ 27,733 ¥ 26,844 $ 263,146

11. Short-term Bank Loans and Long-term Debt

Short-term bank loans at December 31, 2013 and 2012 consisted of short-term notes bearing interest at the average rate of 2.2%. In the past, these loans have been renewed as required. Long-term debt at December 31, 2013 and 2012 consisted of the following:


U.S. dollars

2013 2012 2013

Loans principally from banks and insurance companies at the weighted average interest rate of 2.5 % at December 31, 2013 and 2.3% at 2012 were as follows: Secured ¥ 2,900 ¥ 3,300 $ 27,517

Unsecured 84,297 80,855 799,857

0.98% bonds, due in 2014 8,000 8,000 75,9081.36% bonds, due in 2016 5,000 5,000 47,4430.77% bonds, due in 2016 5,000 5,000 47,4431.18% bonds, due in 2018 5,000 5,000 47,4430.73% bonds, due in 2017 5,000 5,000 47,443

115,197 112,155 1,093,054Less amounts due within one year (20,393) (18,042) (193,500)

¥ 94,804 ¥ 94,113 $ 899,554


Annual maturities of long-term debt at December 31, 2013 were as follows:

Years ended December 31, Millions of yenThousands of

U.S. dollars

2014 ¥ 20,393 $ 193,5002015 26,586 252,2632016 26,566 252,0732017 25,394 240,9532018 and thereafter 16,258 154,265

¥ 115,197 $ 1,093,054

Long-term loans include syndicated loan agreements with financial covenants. The covenants consist of the following:

1) On December 31 and June 30 of each year, the amount of total shareholders’ equity in the consolidated and nonconsolidated balance sheets should be more than 75% of the amount from the previous periods, ¥540 million (US$5,124 thousand) on the consolidated basis and ¥475 million (US$4,507 thousand) on the nonconsolidated basis.

2) Ordinary income recorded in the consolidated statement of income should not be negative for two consecutive fiscal years.

12. Severance and Retirement Benefits

The liability for severance and retirement benefits included in the consolidated balance sheets as of December 31, 2013 and 2012 consisted of the following:


U.S. dollars

2013 2012 2013

Employees’ retirement benefits Projected benefit obligation ¥ 31,616 ¥ 32,441 $ 299,990 Unrecognized actuarial differences 2,691 (4,812) 25,534 Less fair value of pension assets (21,429) (14,933) (203,330) Less unrecognized past service liabilities 11 13 104 Prepaid pension cost 341 493 3,236Directors’ and statutory auditors’ retirement benefits 9 16 85 Liability for severance and retirement benefits ¥ 13,239 ¥ 13,218 $ 125,619

Severance and retirement benefits, except for directors’ and statutory auditors’ benefits, for the year ended December 31, 2013 and nine months ended December 31, 2012 consisted of the following:


U.S. dollars


2013

Service costs - benefits earned during the year ¥ 1,626 ¥ 1,218 $ 15,428Interest cost on projected benefit obligation 491 452 4,659Expected return on plan assets (67) (51) (636)Amortization of actuarial differences 603 403 5,722Amortization of past service liabilities (1) (1) (9)Contribution paid to the defined contribution plan 221 162 2,097 Severance and retirement benefit expenses ¥ 2,873 ¥ 2,183 $ 27,261

The discount rate and the rate of expected return on plan assets used by the Company for the year ended December 31, 2013 were mainly 1.5% and 1.0%, respectively (mainly 1.5% and 1.0% for nine months ended December 31, 2012). The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using the estimated total number of service years. Actuarial differences are recognized in the income statement using the straight-line method mainly over fifteen years. Past service liabilities are recognized in the income statement using the straight-line method over fifteen years.



13. Income Taxes

The Company and its domestic subsidiaries are subject to corporate, inhabitants and enterprise taxes, which, in the aggregate, resulted in a statutory tax rate of approximately 38.0% for the year ended December 31, 2013 and 38.0% for nine months ended December 31, 2012.

Significant components of deferred tax assets and liabilities as of December 31, 2013 and 2012 were as follows:


U.S. dollars

2013 2012 2013

Current deferred tax assets Unrealized profits ¥ 1,682 ¥ 1,456 $ 15,960 Accrued bonuses 888 820 8,426 Accrued expenses 1,278 637 12,126 Loss carryforwards 1,494 — 14,176 Other 2,138 1,487 20,287 Valuation allowance (393) (70) (3,730)Total current deferred tax assets 7,087 4,330 67,245 Offset of deferred tax liabilities (71) (25) (673)Net current deferred tax assets ¥ 7,016 ¥ 4,305 $ 66,572

Current deferred tax liabilities Unrealized losses ¥ (99) ¥ (60) $ (939) Other (1) (81) (10)Total current deferred tax liabilities (100) (141) (949) Offset of deferred tax assets 72 25 683Net current deferred tax liabilities ¥ (28) ¥ (116) $ (266)


U.S. dollars

2013 2012 2013

Noncurrent deferred tax assets Excess severance and retirement benefits ¥ 4,615 ¥ 4,606 $ 43,790 Unrealized profits 1,165 1,076 11,054 Loss on write-down of investment securities 249 248 2,363 Loss on set up of employee retirement benefit trust 1,156 1,074 10,969 Loss carryforwards 8,937 5,880 84,799 Loss on write-down of golf club memberships 42 102 399 Loss on impairment of fixed assets 271 364 2,571 Other 2,148 2,086 20,381 Valuation allowance (9,884) (3,592) (93,785)Total noncurrent deferred tax assets 8,699 11,844 82,541 Offset of deferred tax liabilities (5,537) (8,846) (52,538)Net noncurrent deferred tax assets ¥ 3,162 ¥ 2,998 $ 30,003

Noncurrent deferred tax liabilities Accelerated depreciation of foreign consolidated subsidiaries ¥ (10,874) ¥ (9,064) $ (103,179) Net unrealized gains on securities (12,291) (6,091) (116,624) Undistributed profit of subsidiaries (1,087) (902) (10,314) Other (2,067) (1,842) (19,612)Total noncurrent deferred tax liabilities (26,319) (17,899) (249,729) Offset of deferred tax assets 5,537 8,846 52,538Net noncurrent deferred tax liabilities ¥ (20,782) ¥ (9,053) $ (197,191)


Significant items in the reconciliation of the statutory tax rate and the effective rate were as follows:2013 2012

(nine months)

Statutory tax rate 38.0 % 38.0 %

Amortization of goodwill 0.4 % 0.6 % Provision for alleged U.S. anti-trust law violation 19.1 % —% Difference in statutory tax rates of subsidiaries (2.0)% (0.5)% Equity in net income of unconsolidated subsidiaries and affiliates (0.4)% (0.6)% Undistributed profit of subsidiaries 0.7 % (0.7)% Valuation allowance 26.3 % (44.6)% Adjustment of deferred tax assets for enacted changes in tax laws and rates — % —% Other (30.2)% 12.1 %

Effective tax rate 51.9 % 4.3 %

14. Leases

(1) Finance leases, as lesseeInformation at December 31, 2013 and 2012 for finance leases which do not transfer ownership of the leased property to the lessee and which were commenced prior to April 1, 2008 was as follows:


U.S. dollars

2013 2012 2013

Original lease obligations, including finance charges, for machinery, equipment and other ¥ 631 ¥ 726 $ 5,987Payments made 266 323 2,524Balance remaining ¥ 365 ¥ 403 $ 3,463


U.S. dollars

2013 2012 2013

Future minimum payments Payments due within one year ¥ 33 ¥ 38 $ 313 Payments due after one year 332 365 3,150

¥ 365 ¥ 403 $ 3,463

Rental expenses under non-capitalized finance leases for the year ended December 31, 2013 and nine months ended December 31, 2012 were ¥38 million ($361 thousand) and ¥48 million, respectively.

(2) Operating leases, as lesseeLease obligations under operating leases at December 31, 2013 and 2012 were as follows:


U.S. dollars

2013 2012 2013

Future minimum payments Payments due within one year ¥ 2,219 ¥ 1,377 $ 21,055 Payments due after one year 5,141 4,371 48,781

¥ 7,360 ¥ 5,748 $ 69,836



15. Contingent Liabilities

Contingent liabilities at December 31, 2013 and 2012 were as follows:


U.S. dollars

2013 2012 2013

Loan guarantees: TOYO RETREAD CO., LTD., an equity method affiliate ¥ 98 ¥ 128 $ 930

16. Net Assets

Under the Japanese Corporate Law and regulations (“the Law”), the entire amount paid for new shares is required to be desig-nated as common stock. However, a company may, by a resolu-tion of the Board of Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus. Under the Law, in cases in which a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. Under the Law, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of Directors. Under the Law, both of these appropriations generally require a resolution of the share-holders’ meeting.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, however, on condition that the total amount of legal earnings reserve and additional paid-in capital remained equal to or greater than 25% of common stock, they were available for distribution by resolution of the shareholders’ meeting. Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, which are poten-tially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with the Law. At the annual shareholders’ meeting held on March 28, 2014, the shareholders approved cash dividends amounting to ¥3,048 million ($28,921 thousand). These appropriations have not been accrued in the Consolidated Financial Statements as of December 31, 2013. Such appropriations are recognized in the period in which they are approved by the shareholders.

18. Segment Information

(1) General information about reportable segmentsThe Company’s reportable segments are the units for which separate financial information is available and which are periodically reviewed by the Board of Directors for the purpose of deciding the allocation of management resources and evalu-ating business performance. The Company has two divisions corresponding to the operational headquarters of the Tires business and the Divertech business. Each division formulates comprehensive strategies for both domestic and overseas markets and develops business activities. Therefore, the Company identifies “Tires” and “Divertech” as reportable segments. The Tires segment includes the manufacture and sale of tires for a range of autos, buses and other vehicles and equipments. The Divertech segment includes the manufacture and sale of rubber vibration isolators, waterproof sheets, automotive cushion seats and other products.

(2) Measuring reportable segment income or loss, segment assets and other material items

The accounting policies for reportable business segments are generally the same as those described in “Significant Accounting Policies in the Preparation of Consolidated Financial State-ments.” Internal sales and transfers between segments are based mainly on prices for third-party transactions. Figures for reportable segment income are based on operating income.

17. Related Party Transactions

A description is omitted because there were no material related party transactions to disclose.


(3) Reportable segment income or loss, segment assets and other material items

For nine months ended December 31, 2012

Millions of yen

Reportable Segments

Other (Note 1) Total

Adjustments (Note 2) (Note 3)

Amount reported on

consolidated financial

statementsTires Divertech Subtotal

Net sales Sales to outside customers 228,730 62,321 291,051 59 291,110 — 291,110 Intersegment sales and transfers 15 22 37 148 185 (185) — Total 228,745 62,343 291,088 207 291,295 (185) 291,110Segment income (Operating income) 13,015 2,228 15,243 83 15,326 325 15,651Segment assets 257,189 47,727 304,916 20,164 325,080 29,206 354,286Other items Depreciation and amortization 12,519 2,097 14,616 510 15,126 (0) 15,126 Increase in property, plant and equipment and intangible assets 18,553 2,502 21,055 1,903 22,958 — 22,958

For the year ended December 31, 2013

Millions of yen

Reportable Segments



Amount reported on



Net sales Sales to outside customers 289,698 80,450 370,148 70 370,218 — 370,218

Intersegment sales and transfers 17 6 23 218 241 (241) —

Total 289,715 80,456 370,171 288 370,459 (241) 370,218

Segment income (Operating income) 33,785 2,583 36,368 118 36,486 755 37,241

Segment assets 304,100 51,769 355,869 24,053 379,922 53,405 433,327

Other items Depreciation and amortization 16,154 2,682 18,836 676 19,512 (0) 19,512

Increase in property, plant and equipment and intangible assets 23,813 2,832 26,645 2,355 29,000 — 29,000



Reportable Segments



Amount reported on



Net sales Sales to outside customers 2,748,819 763,355 3,512,174 664 3,512,838 — 3,512,838

Intersegment sales and transfers 161 57 218 2,069 2,287 (2,287) —

Total 2,748,980 763,412 3,512,392 2,733 3,515,125 (2,287) 3,512,838

Segment income (Operating income) 320,571 24,509 345,080 1,120 346,200 7,164 353,364

Segment assets 2,885,473 491,214 3,376,687 228,228 3,604,915 506,737 4,111,652

Other items Depreciation and amortization 153,278 25,449 178,727 6,414 185,141 (0) 185,141

Increase in property, plant and equipment and intangible assets 225,951 26,872 252,823 22,345 275,168 — 275,168

(Note1) “Other” is not included in reportable segments. It includes finance loans and purchasing credits to domestic affiliates and real-estate businesses and other.(Note2) “Adjustments” in segment income of ¥755 million and ¥325 million at December 31, 2013 and 2012, respectively, comprised the elimination of intersegment

transactions.(Note3) “Adjustments” in segment assets of ¥64,098 million and ¥40,289 million at December 31, 2013 and 2012, respectively, comprised mainly cash and

cash equivalents and investment securities of the Company.



Relative informationFor nine months ended December 31, 2012Information about products and servicesThis was omitted because the same information was disclosed in Segment Information.

Information about geographic areasNet sales

Millions of yen

Japan North America Other Total

110,389 105,494 75,227 291,110

(Note) Net sales are classified into countries and regions based on customer location.

Property, plant and equipmentMillions of yen


73,409 40,777 32,009 146,195

Information about major customersThis was omitted because there were no outside customers the sales to which comprised over 10% of net sales.

For the year ended December 31, 2013Information about products and servicesThis was omitted because the same information was disclosed in the Segment Information.

Information about geographic areasNet sales

Millions of yen


141,654 139,126 89,438 370,218

(Note) Net sales are classified into countries and regions based on customer location.



1,344,093 1,320,106 848,639 3,512,838

Property, plant and equipmentMillions of yen


73,083 47,204 48,310 168,597



693,453 447,898 458,393 1,599,744

Information about major customersThis was omitted because there were no outside customers the sales to which comprised over 10% of net sales.

Information on impairment loss in noncurrent assets by reportable segmentNothing to be noted.

Information on amortization of goodwill and unamortized balance by reportable segmentFor nine months ended December 31, 2012

Millions of yen

Reportable Segments

Other

Eliminations and corporate

assets TotalTires Divertech Subtotal

Amortization of goodwill 196 — 196 — — 196Balance at end of period 2,665 — 2,665 — — 2,665



Millions of yen

Reportable Segments

Other



Amortization of goodwill 264 — 264 — — 264Balance at end of period 3,011 — 3,011 — — 3,011


Reportable Segments

Other



Amortization of goodwill 2,505 — 2,505 — — 2,505Balance at end of period 28,570 — 28,570 — — 28,570

Information on negative goodwill by reportable segmentNothing to be noted.

19. Subsequent Events

Share ConsolidationAt its 98th shareholders’ meeting held on March 28, 2014, the Company passed a resolution for the consolidation of shares.

(1) Purpose of share consolidationThe Japanese Stock Exchanges have announced the “Action Plan for Consolidating Trading Units,” which aims to eventually unify the minimum trading units of shares of all listed domestic corporations to 100 shares. In accordance with this policy, the Company, as a listed corporation, decided to change its share trading unit from 1,000 shares to 100 shares. In addition, along with the change in the share trading unit, in order to improve the number of outstanding shares, the Company consolidates shares to keep the share price within a certain level set forth by the Tokyo Stock Exchange (50,000 yen or more and less than 500,000 yen) as a desirable level for an investment unit.

(2) Overview of share consolidation1 Type of shares: Common shares2 Consolidation ratio 2 shares to 1 share3 Decrease in number of shares Number of outstanding shares before consolidation

(as of December 31, 2013) 254,358,146 Decrease in number of shares due to consolidation 127,179,073 Number of outstanding shares after consolidation 127,179,0734 Treatment of fractional lots of less than 1 share, if any If, as a result of the consolidation of shares, fractional lots of

less than 1 share occur, such fractional lots shall be disposed in their entirety and the proceeds of the disposal shall be distributed to the shareholders with the fractional lots on a pro rata basis in accordance with Companies Act.

(3) Agenda of share consolidation

February 17, 2014 resolution date at Board of Directors’ meeting

March 28, 2014 resolution date at shareholders’ meeting

July 1, 2014 (tentative) effective date of share consolidation

(4) Impact on per unit informationAssuming that the share consolidation took place at the beginning of the previous fiscal year, the impact on net assets per share, net income per share and diluted net income per share would be as follows:


U.S. dollars

2013 2012 2013

Net assets per share ¥1,084.30 ¥817.55 $10.29Net income per share 91.30 104.06 0.87Diluted net income per share — — —




Domestic FacilitiesAs of January 1, 2014

Headquarters (Osaka)

Headquarters Dojima Office (Osaka)

Tokyo Branch Office (Tokyo)

Nagoya Office (Aichi)

Hiroshima Office (Hiroshima)

Sendai Plant (Miyagi)

Kuwana Plant (Mie)

Hyogo Manufacturing Complex, Akashi Plant (Hyogo)

Hyogo Manufacturing Complex, Hyogo Plant (Hyogo)

Corporate Technology Center (Hyogo)

Tire Technical Center (Hyogo)

Automotive Parts Technical Center (Aichi)

Miyazaki Tire Test Course (Miyazaki)

Saroma Tire Test Course (Hokkaido)

Consolidated SubsidiariesAs of January 1, 2014　

Tire Business DiverTech and Other Businesses

Japan

Fukushima Rubber Co., Ltd.

Toyo Soflan Co., Ltd.

Ayabe Toyo Rubber Co., Ltd.

Toyo Tires Logistics Co., Ltd.

Soflan Wiz Co., Ltd.

Toyo Advanced Technology Incorporated

Toyo Tire Japan Co., Ltd.

Nitto Japan Co., Ltd.

Toyo Chemical Industrial Products Co., Ltd.

Toyo Seiki Co., Ltd.

Showa Estate Co., Ltd.

Orient Koki Co., Ltd.

F.T.G Co., Ltd.

Sendai Service Co., Ltd.

Kuwana Service Co., Ltd.

F.C.C. Co., Ltd.

North America

Toyo Tire holdings of Americas Inc. (U.S.A.)

Toyo Tire U.S.A. Corp. (U.S.A.)

Nitto Tire U.S.A. Inc. (U.S.A.)

Toyo Tire North America OE Sales LLC (U.S.A.)

Toyo Tire North America Manufacturing Inc. (U.S.A.)

Toyo Tire Mexico LLC (U.S.A.)

Toyo Automotive Parts (USA), Inc. (U.S.A.)

Toyo Tire Canada Inc. (Canada)

Nitto Tire Canada Inc. (Canada)

NT Mexico S. de R.L. de C.V. (Mexico)

TOYO AUTOMOTIVE PARTS DE MEXICO, S.A. DE C.V. (Mexico)

Europe

Toyo Tire Europe Gmbh (Germany)

Toyo Tyre (UK) Ltd. (U.K.)

Toyo Tire Benelux B.V. (Netherlands)

Toyo Tire Italia S.p.A. (Italy)

TOYO TIRE RUS LLC (Russia)

Oceania

Toyo Tyre & Rubber Australia Ltd. (Australia)

Asia

Silverstone Berhad (Malaysia)

Silverstone Marketing Sdn Berhad (Malaysia)

Silverstone Polymer Industries Sdn Berhad (Malaysia)

Toyo Tyre Malaysia Sdn Bhd (Malaysia)

TOYO RUBBER ChEMICAL PRODUCTS (ThAILAND) LIMITED (Thailand)

Toyo Tire (Thailand) Co., LTD. (Thailand)

Toyo Tire (Shanghai) Co., Ltd. (China)

Toyo Tire (Zhangjiagang) Co., Ltd. (China)

Toyo Tire (Zhucheng) Co., Ltd. (China)

Toyo Automotive Parts (Guangzhou) Co., Ltd. (China)

Toyo Rubber Chemical & Industrial Products (hK) Ltd. (China)

Wuxi Toyo-Meifeng Rubber Products Co., Ltd. (China)

TOYO TGPM AUTOMOTIVE PARTS FOShAN Co., LTD. (China)


Stock InformationAs of December 31, 2013

Common Stock Issued: 254,358,146 sharesNote: The Company conducted a 1-for-2 reverse

share split on common stock with an effective date of July 1, 2014. As a result, the number of shares outstanding came to 127,179,073.

Number of Shareholders 10,892

Average Number of Shares Held per Shareholder 23,352

Stock Listing Tokyo

Shareholder Register Administrator and Transfer Account Management Institution for Special Accounts

Mitsubishi UFJ Trust and Banking Corporation

Independent Auditors KPMG AZSA LLC

Fiscal year January 1 – December 31

Annual General Meeting of Shareholders March

Major Shareholders

Corporate DataAs of December 31, 2013

Investor Information

Name of shareholdersNumber of shares held (Thousand)

Percentage of share ownership*

(%)

Japan Trustee Services Bank, Ltd. (Trust account) 23,644 9.30

Bridgestone Corporation 20,000 7.87

Mitsubishi Corporation 12,870 5.06

Toyota Motor Corporation 9,549 3.75

SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS 8,967 3.53

The Master Trust Bank of Japan, Ltd. (Trust account) 6,679 2.62

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 5,646 2.22

Nippon Life Insurance Company 4,881 1.92

Japan Trustee Services Bank, Ltd. (Trust account 9) 4,306 1.69

EVERGREEN 4,053 1.59

Note: Percentage of share ownership is calculated excluding treasury stock (338,903 shares).

Rating InformationAs of the date of this report’s publication

Rating institution Rating assigned Rating Announced

Japan Credit Rating Agency, Ltd. (JCR)

Long-term issuer rating A– July 16, 2014

Breakdown by the Number of Shares HeldThousand shares

More than 50,000 shares

228,62789.89%

10,000 to 49,999 shares 9,9693.92%

5,000 to 9,999 shares4,7411.86% Less than

5,000 shares11,0214.33%

Breakdown by Shareholder TypeThousand shares

Japanese financial institutions

76,43930.05%

Other Japanese corporations

69,64327.38%

Japanese individuals and other investors33,25213.07%

Foreign investors71,03427.93%

Japanese financial instruments firms3,9881.57%

Company Name Toyo Tire & Rubber Co., Ltd.

Website http://www.toyo-rubber.co.jp/english/

Establishment August 1, 1945

Paid-in Capital ¥30,484 million

Consolidated Subsidiaries 46 (Japan: 16 Overseas: 30)

Number of Employees Consolidated: 10,292Non-consolidated: 2,913


October 2014

Printed in Japan

Corporate Planning Division, Corporate Communications Planning Dept.

1-17-18, Edobori, Nishi-ku, Osaka 550-8661, Japan Tel: +81-6-6441-8803 Fax: +81-6-6446-1925

http://www.toyo-rubber.co.jp/english/

The names of products, services, and other items in this brochure are the trademarks or Japanese registered trademarks of Toyo Tire & Rubber Co., Ltd.

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