SEIKO EPSON CORPORATION
ANNUAL REPORT 2015
April 2014 - March 2015
Cautionary Statement
This report includes forward-looking statements that are based on management’s view from the information
available at the time of the announcement. These statements are subject to various risks and uncertainties.
Actual results may be materially different from those discussed in the forward-looking statements. The factors
that may affect Epson include, but are not limited to, general economic conditions, the ability of Epson to
continue to quickly introduce new products and services, consumption trends, competition, technology trends,
and exchange rate fluctuations.
In this annual report, “Epson” or the “Group” refers to the Epson Group, while “the Company” may refer to the
Group or the parent company, Seiko Epson Corporation.
1
Table of Contents
Consolidated Financial Highlights ..................................................................................................... 3
Information on the Company ............................................................................................................ 7
1. Overview of the business group .................................................................................................. 7
2. Major equipment and facilities................................................................................................. 10
3. Overview of capital expenditures ............................................................................................. 13
4. Plans for new additions or disposals ......................................................................................... 14
5. Major management contracts .................................................................................................. 15
Risks Related to Epson’s Business Operations ................................................................................. 16
Business Conditions ......................................................................................................................... 22
1. Overview of business results ..................................................................................................... 22
2. Manufacturing, orders received and sales ................................................................................ 25
3. Analysis of financial condition and results of operations .......................................................... 26
4. Research and development activities ........................................................................................ 29
5. Issues for Fiscal 2015 ............................................................................................................... 31
6. Dividend policy ........................................................................................................................ 33
Corporate Governance .................................................................................................................... 34
1. Approach to corporate governance .......................................................................................... 34
2. Details of audit remuneration................................................................................................... 44
3. Basic policy regarding company control ................................................................................... 45
Management ................................................................................................................................... 47
Index to Consolidated Financial Statements .................................................................................... 49
Consolidated Statement of Financial Position .............................................................................. 50
Consolidated Statement of Comprehensive Income ...................................................................... 52
Consolidated Statement of Changes in Equity.............................................................................. 54
Consolidated Statement of Cash Flows ........................................................................................ 56
Notes to Consolidated Financial Statements ................................................................................. 57
Report of Independent Auditors ................................................................................................. 116
Additional Information .................................................................................................................. 117
1. Principal subsidiaries and affiliates ......................................................................................... 117
2. Distribution of ownership among shareholders ...................................................................... 121
3. Major shareholders ................................................................................................................ 122
4. Epson stock price ................................................................................................................... 124
5. Corporate data and investor information ............................................................................... 125
2
Consolidated Financial Highlights
Seiko Epson Corporation and Subsidiaries
For the years ended March 31
IFRS
Millions of yen
2014
2015
Thousands of
U.S. dollars
2015
Statement of Comprehensive
Income
Revenue
1,008,407
1,086,341
9,040,034
Information-related equipment
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Adjustments
Gross profit
Selling, general and
administrative expenses
Profit from operating activities
Profit before tax
Profit for the period attributable
to owners of the parent company
Total comprehensive income for
the period
Statement of Cash Flows
Net cash provided by (used in)
operating activities
Net cash provided by (used in)
investing activities
Free cash flows
Net cash provided by (used in)
financing activities
Statement of Financial Position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Equity attributable to owners of
the parent company
841,228
907,296
7,550,105
148,779
156,297
1,300,632
16,174
23,396
194,690
1,333
891
1,390
(2,038)
11,566
(16,959)
362,589
395,924
3,294,699
(272,501)
(294,648)
(2,451,926)
79,549
77,977
84,203
131,380
132,536
1,093,284
1,102,904
112,560
936,673
120,480
145,483
1,210,643
114,859
108,828
905,617
(41,244)
(32,735)
(272,405)
73,615
76,093
633,212
(56,567)
(55,392)
(460,946)
560,645
348,245
908,890
336,087
208,045
362,371
650,383
355,898
1,006,282
355,442
153,531
5,412,191
2,961,629
8,373,820
2,957,826
1,277,624
494,325
4,113,547
3
IFRS
Millions of yen
2014
2015
Thousands of
U.S. dollars
2015
235.35
50.00
314.61
115.00
1,012.83
1,381.66
2.62
0.95
11.50
39.9
49.1
27.7
26.3
9.2
7.9
13.7
12.1
55,104
52,010
13,723
12,787
1,197
252
2,895
73,171
1,246
306
3,529
69,878
Per Share Data (yen and U.S. dollars)
Basic earnings per share (Note 2)
Cash dividends per share (Note 4)
Equity attributable to owners of the
parent company, per share (Note2)
Financial Ratios (%)
Equity attributable to owners of the
parent company, ratio
ROE (Profit for the period attributable to
owners of the parent company/
Beginning and ending balance average
equity attributable to owners of the
parent company)
ROA (Profit from operating activities/
Beginning and ending balance average
total assets)
ROS (Profit from operating activities/
Revenue)
Number of Employees
Information-related equipment
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Corporate
Total
Notes
1. The Consolidated Financial Statements have been prepared on the basis of International Financial Reporting Standards (IFRS) from
the year ended March 31, 2014.
2. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split into two shares with an effective date of
April 1, 2015. Per share data are calculated under the assumption that the share splits took effect at the beginning of the year ended
March 31, 2014.
3. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥120.17 =U.S.$1 as of March 31, 2015.
4. In this table, cash dividends per share refers to the amount paid for each share in each fiscal year.
5. Equity attributable to owners of the parent company is equity excluding non-controlling interests in subsidiaries.
4
For the years ended March 31
Statements of Income
Net sales
Information-related equipment
Electronic devices
Precision products
Other
2010
2011
985,363
712,692
248,001
57,746
19,714
973,663
702,918
231,235
68,276
1,279
Eliminations and corporate
(52,791)
(30,046)
Information-related equipment
business segment
Devices and precision products
business segment
Other
Eliminations and corporate
Information-related equipment
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Eliminations and corporate
Gross profit
Selling, general and
administrative expenses
Operating income
Ordinary income
Income (loss) before income
taxes and minority interests
Net income (loss)
Research and development costs
Capital expenditures
Depreciation and amortization
Net cash provided by (used in)
operating activities
Net cash provided by (used in)
investing activities
Free cash flows
Net cash provided by (used in)
financing activities
JGAAP
Millions of yen
2012
2013
2014
877,997
851,297
1,003,606
-
-
-
-
-
-
-
-
-
-
713,936
691,801
688,029
212,670
174,811
156,872
61,446
(14,390)
17,316
(5,932)
1,273
5,122
-
-
-
-
-
262,963
230,253
32,709
31,174
15,381
10,239
-
-
-
-
-
248,846
224,219
24,626
27,022
15,622
685,862
836,436
140,790
148,956
11,413
16,181
1,273
11,957
234,439
213,184
21,255
17,629
(3,479)
5,032
(10,091)
54,377
31,813
41,159
52,106
38,908
37,651
49,923
43,155
39,320
-
-
-
-
-
-
-
-
-
1,334
699
322,976
238,007
84,968
78,121
71,916
83,698
50,531
37,825
38,725
-
-
-
-
-
-
-
-
-
259,469
241,241
18,227
13,875
(799)
(19,791)
68,849
25,937
47,395
56,542
32,395
26,678
42,992
111,253
(43,203)
13,338
(41,087)
(23,615)
(31,528)
(39,511)
(39,519)
8,780
(4,849)
(42,691)
(57,406)
3,480
21,298
71,733
(56,567)
5
Balance Sheet
Current assets
Property, plant and equipment (net of
accumulated depreciation)
Total assets
Current liabilities
Non-current liabilities
Net assets
Number of Employees
Information-related equipment
Electronic devices
Precision products
Information-related equipment
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Corporate
Total
Per Share Data (yen and U.S. dollars)
Net income (loss) (Note 1)
Cash dividends (Note 3)
Shareholders’ equity (Note1)
Financial Ratios (%)
Shareholders’ equity ratio
ROE (net income (loss)/average
shareholders’ equity at beginning and
end of year)
ROA (ordinary income/average total
assets at beginning and end of year)
ROS (operating income/net sales)
2010
2011
JGAAP
Millions of yen
2012
2013
2014
596,210
225,354
870,090
328,652
258,574
282,864
45,863
22,439
5,839
-
-
-
543,530
213,623
798,229
315,422
211,999
270,808
44,711
20,659
5,985
-
-
-
590
3,206
77,936
245
2,951
74,551
487,190
213,086
740,769
313,314
179,314
248,140
-
-
-
519,457
217,388
778,547
326,688
193,052
258,806
-
-
-
602,452
216,170
865,872
313,636
200,505
351,730
-
-
-
55,841
50,823
55,104
16,101
13,859
13,723
-
249
3,112
75,303
-
241
3,838
68,761
(99.34)
7.00
1,407.92
51.25
20.00
26.22
26.00
1,347.71
1,377.60
(56.41)
20.00
1,435.20
32.3
(6.8)
1.6
1.8
33.7
33.3
3.7
3.7
3.4
2.0
3.5
2.8
33.0
(4.0)
2.3
2.5
1,197
252
2,895
73,171
233.94
50.00
976.41
40.3
27.6
9.5
8.5
Notes
1. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split into two shares with an effective date of
April 1, 2015. Per share data are calculated under the assumption that the share splits took effect at the beginning of the year ended
March 31, 2014.
2. Ordinary income is a common item on financial statements in Japan, which is calculated by adding to or subtracting from operating
income items such as interest income, rent income, interest expenses and foreign exchange gains or losses.
3. In this table, cash dividends per share refers to the amount paid for each share in each fiscal year.
4. Shareholders’ equity is net assets excluding minority interests.
6
Information on the Company
1. Overview of the business group
Epson is primarily engaged in developing, manufacturing, selling, and providing services for products in four
business segments: information-related equipment, devices and precision products, sensing and industrial
solutions, and other.
Epson is organized into operations divisions that come under consolidated management. The majority of
advanced R&D and product development is conducted in Japan (by Corporate R&D and R&D organizations in
the various operations divisions), while manufacturing and sales activities are conducted around the world by
Epson Group manufacturing and sales companies, both in Japan and abroad.
A brief description of Epson’s businesses is provided below along with a list of the main Epson Group
companies involved in each segment.
(1) Information-related equipment business segment
This segment comprises the printing systems business, visual communications business, and others. The
businesses in this segment leverage Epson’s unique Micro Piezo, a micro-display, and other technologies to
develop, manufacture, and sell products.
The main activities of these businesses are described below.
Printing systems business
This business is primarily responsible for home and office inkjet printers, page printers, and color image
scanners, as well as commercial inkjet printers, serial impact dot matrix (SIDM) printers, POS system products,
inkjet label printers, and related consumables.
Visual communications business
This business is primarily responsible for 3LCD projectors for business, education, and the home;
high-temperature polysilicon TFT panels for 3LCD projectors; and label printers and smart glasses.
Others
In the Others business, PCs are sold in the Japanese market through a domestic subsidiary.
The major Epson Group companies involved in each business of this segment are listed in the table below.
Business area
Main products
Main subsidiaries and affiliates
Manufacturing companies
Sales companies
Inkjet printers,
page printers,
color image scanners,
commercial inkjet printers,
serial impact dot matrix
printers,
printers for use in
POS systems,
inkjet label printers,
related consumables
and others
3LCD projectors,
high-temperature polysilicon
TFT panels for 3LCD
projectors,
smart glasses and others
Personal computers and
others
label printers,
Printing Systems
Visual
Communications
Others
Epson Sales Japan Corporation
Epson America, Inc.
Epson Europe B.V.
Epson (U.K.) Ltd.
Epson Deutschland GmbH
Epson France S.A.
Epson Italia s.p.a.
Epson Iberica, S.A.
Epson (China) Co., Ltd
Epson Korea Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.
Epson Sales Japan Corporation
Epson Direct Corporation
Tohoku Epson Corporation
Akita Epson Corporation
Epson Portland Inc.
Epson Telford Ltd.
Tianjin Epson Co., Ltd.
Epson Engineering (Shenzhen) Ltd.
P.T. Epson Batam
P.T. Indonesia Epson Industry
Epson Precision (Philippines), Inc.
Epson Engineering (Shenzhen) Ltd.
Epson Precision (Philippines), Inc.
－
7
(2) Devices and precision products business segment
This segment comprises the micro-devices business and precision products business. These businesses leverage
Epson’s traditional strengths in areas such as micromachining, low-power design, and high-density assembly to
develop, manufacture and sell a variety of products.
The main activities of these businesses are described below.
Micro-devices business
This business is primarily responsible for offering small electronic devices that are highly accurate and energy
efficient. It also develops and manufactures devices to meet the needs of other businesses within the Epson
Group.
Quartz device business
The business mainly provides crystal units, crystal oscillators, and quartz sensors for consumer, automotive,
and industrial equipment applications.
Semiconductor business
This business provides CMOS LSIs and other chips mainly for consumer electronics and automotive
applications.
Precision products business
Based on ultra-fine and ultra-precision processing technologies, and high-density mounting technologies, this
business develops and manufactures watches, and provides metal powders and surface finishing.
Watch business
This business develops and manufactures Seiko brand watches and develops, manufactures and sells watch
movements.
Others
Metal powder business
This business develops, manufactures and sells a variety of high-performance metal powders for use as
raw materials in the production of electronic components, etc.
Surface finishing business
This business provides high-value-added surface finishing in a wide variety of industrial fields.
The major Epson Group companies involved in each business of this segment are listed in the table below.
Business area
Main products
Main subsidiaries and affiliates
Manufacturing companies
Sales companies
Micro-devices
Precision products
[Quartz device business]
Crystal units,
crystal oscillators,
quartz sensors and others
Miyazaki Epson Corporation
Akita Epson Corporation
Epson Precision Malaysia Sdn. Bhd.
[Semiconductor business]
CMOS LSIs and others
Tohoku Epson Corporation
Singapore Epson Industrial Pte. Ltd.
[Watch business]
Watches, watch movements
and others
Epson Precision (Shenzhen) Ltd.
Orient Watch (Shenzhen) Ltd.
Epson Precision (Johor) Sdn. Bhd.
Epson Electronics America, Inc.
Epson Europe Electronics GmbH
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
Orient Watch Co., Ltd.
Time Module (Hong Kong) Ltd.
[Others]
Metal powders,
surface finishing
Epson Atmix Corporation
Singapore Epson Industrial Pte. Ltd.
8
(3) Sensing and industrial solutions business segment
This segment uses advanced precision mechatronics and other technologies to provide industrial robots and other
production systems that dramatically increase productivity. In the fields of personal health and sports, these
businesses combine sensing systems that have extremely accurate built-in sensors with cloud-based services to
provide products and services that improve quality of life.
The major Epson Group companies involved in business of this segment are listed in the table below.
Business area
Main products
Sensing and
industrial solutions
Industrial robots,
IC handlers,
industrial inkjet
printing systems,
sensing systems and others
Main subsidiaries and affiliates
Manufacturing companies
Sales companies
Akita Epson Corporation
Epson Engineering (Shenzhen) Ltd.
Epson Sales Japan Corporation
Epson America, Inc.
Epson Deutschland GmbH
Epson (China) Co., Ltd.
Epson Hong Kong Ltd.
(4) Other
This segment comprises the businesses of Epson Group companies that offer services for and within the Epson
Group.
9
2. Major equipment and facilities
Epson’s major equipment and facilities are as follows.
(1) Seiko Epson Corporation
Name of plant
(location)
Business segment
Type of facilities
As of March 31, 2015
Book value (Millions of yen)
Machinery,
Buildings and
equipment
structures
and
Land
(Area: m2)
Other
Total
vehicles
Number of
employees
(Persons)
Head Office
(Suwa-shi, Nagano)
Tokyo Office
(Shinjuku-ku, Tokyo)
Hirooka Office
(Shiojiri-shi, Nagano)
Matsumoto Minami
Overall
administration and
Other facilities
1,484
101
other
Overall
administration and
Other facilities
19
－
other
Printer development and
Information-related
design and component
equipment
manufacturing facilities
17,820
11,582
Other
Research and development
facilities
102
2,936
555
1
21
36
2,338
37,494
4,769
1,247
(43,322)
[3,171]
－
(－)
5,753
(189,347)
[22,989]
3,764
Plant
Information-related
Printer development and
(Matsumoto-shi,
equipment
design facilities
Nagano)
3LCD projector and smart
Information-related
glasses development and
Toyoshina Plant
equipment
design facilities
(Azumino-shi,
Sensing and
Factory automation
1,808
948
Nagano)
industrial solutions
development, design and
manufacturing facilities
Printer components and liquid
1,419
704
(179,759)
265
6,153
697
[1,758]
－
(－)
[108,004]
1,556
4,313
1,724
Suwa Minami Plant
Information-related
crystal panel manufacturing
1,443
(Fujimi-machi,
equipment
facilities
5,329
11,163
(113,082)
807
18,744
908
Suwa-gun, Nagano)
Other
Research and development
facilities
Chitose Plant
(Chitose-shi,
Hokkaido)
Ina Plant
Information-related
Liquid crystal panel
equipment
manufacturing facilities
2,082
904
(Minowa-machi,
Devices and
Crystal device development
Kamiina-gun,
precision products
and design facilities
Nagano)
Fujimi Plant
precision products
systems development and
Devices and
Semiconductor and sensing
(Fujimi-machi,
Sensing and
design facilities
7,872
1,355
Suwa-gun, Nagano)
industrial solutions
Research and development
Other
facilities
Sakata Plant
(Sakata-shi,
Yamagata)
Hino Office
Devices and
precision products
Devices and
(Hino-shi, Tokyo)
precision products
Semiconductor manufacturing
facilities
Other
5,918
3,578
Sales facilities
3,022
1
10
[28,909]
1,375
(160,528)
129
777
5,140
201
[1,502]
1,996
(247,143)
2,177
(538,828)
8,346
(40,725)
731
11,956
1,045
729
12,404
91
24
11,394
218
2,197
1,454
(39,943)
163
3,945
478
Name of plant
(location)
Business segment
Type of facilities
Book value (Millions of yen)
Machinery,
Buildings and
equipment
structures
and
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
vehicles
1,047
Watch manufacturing facilities
1,669
2,356
(41,836)
380
5,454
656
[5,764]
Shiojiri Plant
Devices and
(Shiojiri-shi, Nagano)
precision products
(2) Domestic subsidiaries
Company name
(location)
Business segment
Type of facilities
As of March 31, 2015
Book value (Millions of yen)
Buildings and
structures
Machinery,
Land
equipment
and vehicles
(Area:
m2)
Other
Total
Number of
employees
(Persons)
Tohoku Epson
Information-related
equipment
Devices and precision
products
Information-related
equipment
Devices and precision
products
Sensing and industrial
solutions
Corporation
(Sakata-shi,
Yamagata)
Akita Epson
Corporation
(Yuzawa-shi, Akita)
Epson Atmix
Corporation
Printer component and
semiconductor manufacturing
2
6
facilities
Printer component, crystal
device, and sensing system
1,714
148
manufacturing facilities
730
739
2,076
339
2,852
851
－
(－)
650
(65,436)
209
Devices and precision
Manufacturing facilities for
(Hachinohe-shi,
products
metal powders, etc.
Aomori)
(3) Overseas subsidiaries
Company name
(location)
Business segment
Type of facilities
2,640
1,719
(20,495)
131
4,701
196
[34,208]
As of March 31, 2015
Book value (Millions of yen)
Buildings and
structures
Machinery,
Land
equipment and
vehicles
(Area:
m2)
Other
Total
Number of
employees
(Persons)
Epson Engineering
(Shenzhen) Ltd.
(Shenzhen, China)
Information-related
Printer, 3LCD projector, liquid
equipment
crystal panel and factory
Sensing and industrial
automation manufacturing
solutions
facilities
3,395
3,349
Singapore Epson
Industrial Pte. Ltd.
(Singapore)
Information-related
Printer consumables,
equipment
semiconductor, and watch
Devices and precision
manufacturing facilities and
products
surface finishing facilities
P.T. Indonesia Epson
Industry
(Bekasi, Indonesia)
Information-related
equipment
Printer manufacturing facilities
3,505
4,629
11
4,157
10,902
10,449
－
(－)
[64,104]
66
[50,276]
－
(－)
[254,871]
4,684 12,819
8,754
3,822
7,720
(41,065)
1,047 12,657
5,687
Company name
(location)
Business segment
Type of facilities
Book value (Millions of yen)
Buildings and
structures
Machinery,
Land
equipment and
vehicles
(Area:
m2)
Other
Total
Number of
employees
(Persons)
Information-related
Printer and 3LCD projector
equipment
manufacturing facilities
8,709
3,150
(100,000)
3,152 15,633
8,946
621
Epson Precision
(Philippines), Inc.
(Lipa, Philippines)
Epson Precision
Malaysia Sdn. Bhd.
Devices and precision
Crystal device manufacturing
(Kuala Lumpur,
products
facilities
555
3,471
Malaysia)
[130,000]
379
(32,437)
36
4,443
2,107
Notes
1. The above figures do not include consumption tax.
2. “Other” under the book value column includes tools, furniture and fixtures and other property, plant and
equipment, but does not include construction in progress.
3. Portions of land are leased from companies not included in consolidated accounts. The size of each area of
leased land is indicated in brackets [ ].
4. Tohoku Epson Corporation uses a portion of the facilities of the Sakata Plant.
5. Figures for Singapore Epson Industrial Pte. Ltd. and Epson Precision (Philippines), Inc., are included in
consolidated business results.
6. The above book value amounts are after adjustments for consolidated accounts.
12
3. Overview of capital expenditures
Capital expenditures for the consolidated fiscal year under review were concentrated in key strategic areas,
primarily new products and rationalizing, upgrading and maintaining equipment and facilities to help foster the
development of new businesses and prepare for future growth. In addition, Epson continued to carefully select
investments and efficiently utilize existing facilities in an effort to generate stable cash flow.
As a result of these efforts, total capital expenditures (including property, plant and equipment, software and
lease rights) amounted to ¥45.4 billion.
No equipment with significant impact on production capacity was sold or removed.
Capital expenditures in each business segment are discussed below.
Information-related equipment segment
Investment used for commercializing new products such as printers and 3LCD projectors, etc., and for
rationalizing, upgrading and maintaining equipment and facilities amounted to ¥30.1 billion in the fiscal year
under review.
Devices and precision products segment
Investment used for commercializing new products such as crystal devices and watches, etc., and for
rationalizing, upgrading and maintaining equipment and facilities amounted to ¥7.7 billion in the fiscal year
under review.
Sensing and industrial solutions segment
Investment used for commercializing new products such as factory automation systems and sensing systems and
for rationalizing, upgrading and maintaining equipment and facilities amounted to ¥1.1 billion in the fiscal year
under review.
Other and overall
Investment in R&D and other activities amounted to ¥6.3 billion in the fiscal year under review.
13
4. Plans for new additions or disposals
Epson plans to allocate ¥70.0 billion to capital expenditures for the consolidated fiscal year ending March 31,
2016. The business segmentation method has been changed effective from the consolidated fiscal year ending
March 31, 2016.
Business segment
Printing solutions
Visual
communications
Wearable &
Industrial products
Other and overall
Total
Planned amount of
capital expenditures
(100 million yen)
Main type and purpose of equipment and facilities
320
90
90
200
700
Commercializing new products; rationalizing, upgrading and
maintaining equipment and facilities, etc.
Commercializing new products; rationalizing, upgrading and
maintaining equipment and facilities, etc.
Commercializing new products; rationalizing, upgrading and
maintaining equipment and facilities, etc.
Increase of production capacity, investment in research and
development, etc.
–
Notes
1. The above amounts do not include consumption tax.
2. Required funds will be covered by current funds in hand.
3. There are no plans to dispose of or sell major equipment and facilities with the exception of disposals and
sales associated with regular and ongoing upkeep of equipment and facilities.
14
5. Major management contracts
Reciprocal technical assistance agreements
Name of contracting
company
Name of other party
Country
Type of contract
Contract period
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Hewlett-Packard Company
U.S.A.
License to use patents relating to
information-related equipment
May 1, 2012 until the
expiry of the patents
International Business
Machines Corporation
U.S.A.
License to use patents relating to
information-related equipment
April 1, 2006 until the
expiry of the patents
Microsoft Corporation
U.S.A.
License to use patents relating to
information-related equipment and
software used by such equipment
September 29, 2006
until the expiry of the
patents
Eastman Kodak Company
U.S.A.
License to use patents relating to
information-related equipment
October 1, 2006 until
the expiry of the patents
Xerox Corporation
U.S.A.
Texas Instruments
Incorporated
U.S.A.
License to use patents relating to
electrophotography and inkjet
printers
License to use patents relating to
semiconductors and
information-related equipment
March 31, 2008 until
the expiry of the patents
April 1, 2008 until
March 31, 2018
Canon Incorporated
Japan
License to use patents relating to
information-related equipment
August 22, 2008 until
the expiry of the patents
15
Risks Related to Epson’s Business Operations
At present, we have identified the following significant factors as risks that could have a materially adverse
effect on our future business, financial condition or operating results and that should thus be taken into account
by investors. There may be other risk factors of which we are unaware at this time. We strive to recognize,
prevent, and control potential risks and to address risks that materialize. Also, all forward-looking statements
hereunder were made at Epson’s discretion as of the date this Annual Report was submitted.
1. Our financial performance could be adversely affected by fluctuations in printer sales.
The ¥907.2 billion in revenue in the information-related equipment segment in the year ended March 31, 2015
accounted for more than 80% of Epson’s consolidated revenue of ¥1,086.3 billion. Inkjet printers (including
printer consumables) for the home, emerging markets, as well as for office, commercial, and industrial
applications accounted for a large majority of our revenue and profit. Consequently, a decrease in revenue from
printers and printer consumables could have a materially adverse effect on our operating results.
2. Our financial performance could be adversely affected by competition.
Adverse effects of competition on sales
All of our products, including our core printer and projector products, are subject to the effects of vigorous
competition, which could cause, among other things, prices to fall, demand to shift toward lower-priced
products, and unit shipments to decline.
We are taking strategic action to address the risk of such declines in prices and unit shipments. On one hand, we
must provide products tailored to customer needs in each market along with high-value products and services.
On the other hand, we must reduce manufacturing costs by increasing design and development efficiency and
by reducing fixed costs.
However, there is no assurance we will succeed in these efforts, and if we are unable effectively to counteract
downward pressure on prices, our operating results could be adversely affected.
Adverse effects of competition on technology
Some of the products that we sell contain technology that places Epson in competition against other companies.
For example:
- The Micro Piezo technology1 that we use in our inkjet printers competes with the thermal inkjet
technologies2 of other companies;
- The 3LCD technology3 that we use in our projectors competes with other companies’ DLP technologies4.
We believe that the technologies we use in these products are superior to the alternative technologies of other
companies. However, if consumer opinion with respect to our technologies changes, or if other revolutionary
technologies appear on the market and compete with our technologies, we could lose our competitive advantage
and our operating results could be adversely affected.
1Micro Piezo technology is an inkjet technology created by Epson that manipulates piezoelectric elements to fire small
droplets of ink from nozzles.
2Thermal inkjet technology (also known as bubble-jet technology) is a printer technology in which the ink is heated to create
bubbles and the pressure from the bubbles is used to fire the ink.
33LCD technology uses high-temperature polysilicon TFT liquid-crystal panels as light valves. The light from the light source
is divided into the three primary colors (red, blue and green) using special mirrors, the picture is created on separate
LCDs for each color, and then the picture is recombined without loss and projected on the screen.
4DLP technology uses a digital micro-mirror device (DMD) as a display device. A DMD is a semiconductor on which a large
number of micro mirrors are arranged, each mirror directing light onto its own individual pixel. An image is formed by
the light from the light source being reflected from the mirrors onto the screen. DLP and DMD are registered trademarks
of Texas Instruments Incorporated.
The emergence of new competitors
We presently face competition from powerful companies that have advanced technological capabilities,
abundant financial resources, or strong financial compositions. We also face competition from companies
around the world that have market recognition, strong supply capacities, or the ability to compete on price.
There is, therefore, a possibility that other companies could use their brand power, technological strength,
16
ability to procure funds, marketing power, sales skills, low-cost production ability, or other advantages to enter
business areas where we are active.
3. Sudden changes in the business environment could affect Epson.
We are laying a strong foundation to achieve sustained growth by concentrating our management resources on
the four areas of printing, visual communications, quality of life, and manufacturing, as we believe these are
areas that promise future growth and where we can leverage our unique strengths. To achieve sustained growth,
we are executing strategies based on a long-range vision and a mid-range business plan. Since we consider
technological advantage to be a critical component of competitive strength, we are driving advances in our
unique core technologies, including Micro Piezo printheads, micro-displays, sensing systems, and robots, all of
which originated from the compact, energy-saving, high-precision technologies that have been Epson’s unique
strengths since the Company was founded. By driving advances and combining these technologies to create
platforms, we are developing and manufacturing products and providing services that meet the needs of our
customers.
However, the pace of technological change is generally rapid and product life cycles are usually short in the
product markets in which we are focusing our management resources. In addition, demand and capital
expenditure trends in Epson’s main markets move in tandem with the global economy and could hurt demand
for Epson’s products, and there is no guarantee that the mid-range plan and business strategies we are pursuing
will be successful.
We must understand the needs of markets and customers, and we must invest and conduct research and
development from a medium- and long-range perspective based on product market forecasts. We must also
pursue a strategy of creating development and design platforms that enable us to transition quickly and
smoothly from existing products to new products.
If we are unable to adequately adapt to changes in market needs and technological innovations, or if economic
downturns or other factors cause demand to fall and prevent a recovery, or if we are unable to adequately
accommodate sudden changes in demand in our main markets, our operating results could be adversely
affected.
4. Our revenue and earnings could be adversely impacted by sales of third-party inkjet printer
consumables.
Ink cartridges, which comprise the bulk of consumables sold for inkjet printers, are an important source of
revenue and profit for Epson. However, third parties also supply ink cartridges and other inkjet printer
consumables that can be used in Epson printers. These alternative products are typically sold for less than
genuine Epson brand consumables and are more prevalent in emerging markets compared to the markets of
developed countries.
To counter sales of third-party consumables for inkjet printers, we must emphasize the quality of genuine Epson
products and must look to continuously realize customer value by further enhancing customer convenience with
inkjet printers tailored to the needs of customers in each market. Printer models equipped with high-capacity ink
tanks are an example of such products. We also take legal measures if any of the patent rights or trademark
rights we hold over our ink cartridges are infringed upon.
However, there is no assurance that any of these efforts will be effective, and if our ink cartridge revenue
declines because unit shipments of Epson brand ink cartridges shrink as sales of alternative products expand and
as we lose market share, or if we must lower the prices of Epson brand products to stay competitive, our
operating results could be adversely affected.
5. Expanding businesses overseas entails risks for Epson.
We continue to expand our businesses overseas, and overseas revenue accounted for more than 70% of our
consolidated revenue for the business year ended March 31, 2015. We have production sites all over Asia,
including China, Indonesia, Singapore, Malaysia and the Philippines, as well as in the United States, the United
Kingdom, and other countries. We have also established many sales companies all over the world. As of the end
of March 31, 2015, our overseas employees accounted for more than 70% of our total workforce.
We believe that our global presence provides many advantages. For example, it enables us to undertake
marketing activities aligned with the market needs of individual regions. It also makes us cost-competitive by
reducing manufacturing costs and lead times. There are, however, unavoidable risks associated with overseas
manufacturing and sales operations. These include but are not limited to changes in national laws, ordinances,
17
or regulations related to manufacturing and sales; social, political or economic changes; transport delays;
damage to infrastructure (e.g., power supply); currency exchange restrictions; insufficient skilled labor; changes
in regional labor environments; changes in taxes, regulations or the like protective of trade; and laws,
ordinances, regulations or the like related to the import and export of Epson products.
6. Procuring products from certain suppliers entails risks for Epson.
We procure some parts and materials from third parties, but we generally conduct ongoing transactions without
entering into long-term purchase agreements. We try to multi-source parts and materials. However, certain parts
and materials are procured from a single source because procuring them from an alternative supplier is not
possible. We must have procurement operations that are stable and efficient, so we work with our suppliers to
maintain product quality, improve products, and reduce costs. However, if our manufacturing and sales
activities were to be disrupted due to things such as supplier parts shortages or supplier quality problems, our
operating results could adversely be affected.
7. Problems could arise relating to quality issues.
The existence of quality guarantees on Epson products and the details of those guarantees differ from one
customer account to another, depending on the agreement we have entered into with them. If an Epson product
is defective or does not conform to the required standard, it may have to be replaced or repaired or otherwise
reworked at Epson’s expense. Or, if the product causes personal injury or property damage, we could bear
product liability or hold other liability.
We could also be held liable to a customer and could incur expenses for repairs or corrections on the grounds
that we did not adequately display or explain an Epson product’s features or performance. Furthermore, product
quality problems could cause loss of trust in Epson products, and we could lose major accounts or see a drop in
demand for our products, any of which might adversely affect our operating results.
8. Epson’s intellectual property rights activities expose Epson to certain risks.
Patent rights and other intellectual property rights are extremely important for maintaining our competitiveness.
We have independently developed many of the technologies we need, and we acquire patent rights, trademark
rights, and other forms of intellectual property rights for them. We also license the intellectual property rights
for products and technologies. We must strengthen our intellectual property portfolio by placing personnel in
key positions to manage our intellectual property.
If any of the following situations relating to intellectual property were to occur, our operating results could
adversely be affected.
- An objection might be raised to, or an application to invalidate might be filed with respect to, an intellectual
property right of Epson, and as a result, that right might be recognized as invalid.
- A third party to whom we originally had not granted a license could come to possess a license as a result of a
merger with or acquisition by another party, potentially causing us to lose the competitive advantage
conferred by that intellectual property.
- New restrictions could be imposed on an Epson business as a result of a buyout or a merger with a third
-
party, and we could be forced to spend money to find a solution to those restrictions.
Intellectual property rights that we hold might not give us a competitive advantage, or we might not be able
to use them effectively.
- We or any of our customers could be accused by a third party of infringing on intellectual property rights,
which could force us to spend a large amount of time and money to resolve this and associated issues, or
which could interfere with our efforts to focus our management resources.
If a third-party’s claim of intellectual property right infringement were to be upheld, we could incur material
damage if required to pay large amounts in compensation or royalties or if forced to stop using the
applicable technology.
-
- A suit could be brought against Epson by an employee or other person seeking remuneration for an invention
or the like, potentially forcing us to spend significant time and money to resolve the issue and, depending on
the outcome, potentially requiring us to pay a large sum as remuneration.
9. Epson is vulnerable to risks of problems arising relating to the environment.
Epson is subject, both in Japan and overseas, to various environmental regulations concerning industrial waste
and emissions into the atmosphere that arise from manufacturing processes. Environmental conservation is one
18
of our most important management policies, and we proactively engage in environmental conservation efforts
on a variety of fronts, in line with “Environmental Vision 2050” and our mid-range action plans. For example,
we have programs to develop and manufacture products that have a small environmental footprint. We also have
programs to reduce energy use, promote the recovery and recycling of end-of-life products, ensure compliance
with international substance regulations (primarily the RoHS Directive and REACH regulations in the EU), and
improve environmental management systems. Thanks to these efforts, we have not had any serious
environmental issues to date. In the future, however, it is possible that an environmental problem could arise
that would require us to pay damages and/or fines, bear costs for cleanup, or force a halt of production.
Moreover, new regulations could be enacted that would require major expenditures, and, if such a situation
should occur, Epson’s operating results could be adversely affected.
10. Epson faces risks concerning the hiring and retention of personnel.
We must hire and retain talented personnel both in Japan and overseas to develop advanced new technologies
and manufacture advanced new products, but the competition for such personnel is becoming increasingly
intense. We must hire and retain talented personnel by, for example, introducing compensation and benefit
packages that are commensurate with roles and by proactively promoting people with the right skills overseas.
If we are unable to continue to hire and keep enough of such employees, or if we are unable to pass along
technologies and skills, we could find it difficult or impossible to execute our business plans.
11. Fluctuations in foreign currency exchanges create risks for Epson.
A significant portion of our revenue is denominated in U.S. dollars or the euro. We expanded our overseas
procurement and moved our production sites overseas, causing our dollar-denominated expenses to rise, and
although our dollar-denominated revenue and expenses are more or less counterbalanced, our euro-denominated
revenue is still greater than our euro-denominated expenses. Also, although we use currency forwards and other
means to hedge against the risks inherent in foreign currency exchanges, unfavorable movements in the
exchange rates of foreign currencies such as the U.S. dollar or euro against the yen could adversely affect our
financial situation and financial results.
12. There are risks inherent in pension systems.
We have a defined-benefit pension plan and a lump-sum payment on retirement as defined-benefit plans.
We revised the defined-benefit retirement pension plan in April 2014 in response to a drop in the rate of return
on pension assets and an increase in the number of beneficiaries. The revisions are designed to enable us to
adapt to future market changes and maintain stable operations into the future. However, if there is a change in
the operating results of the pension assets or in the ratio used as the basis for calculating retirement allowance
liabilities, our financial position and operating results could be adversely affected.
13. Epson is vulnerable to proceedings relating to antitrust laws and regulations.
With business operations that span the globe, Epson is subject in Japan and overseas to proceedings relating to
antitrust laws and regulations, such as those prohibiting private monopolies and those protecting fair trade.
Overseas authorities sometimes investigate or gather information on certain industries and, in conjunction with
this, Epson’s market conditions and sales methods may come under investigation. Such investigations and
proceedings, or violations of applicable statutes, could interfere with our sales activities. They could also
potentially damage Epson’s credibility or result in a large civil fine. Any of these could adversely affect our
operating results.
Seiko Epson and certain of its consolidated subsidiaries are currently under investigation by the European
Commission and other anti-trust law regulatory authorities regarding allegations of involvement in a liquid
crystal display price-fixing cartel. It is difficult at this time to predict the outcome of these investigations and
when they may be settled.
14. Epson is at risk of material legal actions being brought against it.
Epson conducts businesses internationally. We are engaged primarily in the development, manufacture and sale
of printing solutions, visual communications equipment, and wearable and industrial products, as well as the
provision of services related thereto. Given the nature of these businesses, there is a possibility that an action
could be brought or legal proceedings could be started against Epson regarding, for example, intellectual
property rights, product liability, antitrust laws or environmental regulations.
19
As of the date we submitted our Annual Securities Report, Epson was contending with the following material
actions.
In Germany, the organization for collecting copyright fees on behalf of copyright holders,
Verwertungsgesellschaft Wort (“VG Wort”), has brought a series of legal actions seeking payment of copyright
fees against importers and vendors of PCs, printers and other digital equipment that is capable of reproducing
copyrighted works.
In January 2004, VG Wort brought a civil action against Epson Deutschland GmbH (“EDG”), a consolidated
subsidiary of Seiko Epson, to seek payment of copyright fees on single-function printers. The court initially
ruled that single-function printers are subject to a copyright fee and decreed that EDG pay the fee at a rate of
between 10 to 256.70 euros per printer depending on the printer’s printable pages per minute. However, the
claim was dismissed by the appeals court and the Supreme Court. The plaintiff, however, unsatisfied with this
ruling, appealed to the Federal Constitutional Court of Germany. In December 2010, the Federal Constitutional
Court ruled that the August 2008 ruling of the Supreme Court violates rights set forth in Article 14 of the
constitutional law of Germany. It thus dismissed the ruling of the Supreme Court and referred the case back to
the Supreme Court for review. Then, in July 2011, the Supreme Court referred the case to the Court of Justice of
the European Union, and an inquiry was begun in October 2012, but in June 2013 the Court of Justice of the
European Union issued a ruling that would allow EU member states to impose copyright fees on printer and PC
manufacturers. In response to this ruling, the Supreme Court, in July 2014, also ruled that printers and PCs are
subject to copyright fees, and the high court began an appellate review of specific copyright fees.
Companies in general, including Epson, and industry organizations are showing a willingness to take a stance
against the expansion of the scope of such copyright fees.
In June 2010, Epson Europe B.V. (“EEB”), a consolidated subsidiary of Seiko Epson, brought a civil suit
against La SCRL Reprobel (“Reprobel”), a Belgium-based group that collects copyright royalties, seeking
restitution for copyright royalties for multifunction printers. With Reprobel subsequently filing a suit against
EEB, the two lawsuits were adjoined. EEB’s claims were rejected at the first trial, but EEB, dissatisfied with the
decision, intends to appeal.
Apart from this, civil actions have been brought against Epson and certain of our consolidated subsidiaries by
customers in the United States, regarding allegations of involvement in a liquid crystal display price-fixing
cartel.
It is difficult at this time to predict the outcome of these civil actions and when they may be settled, but our
operating results and future business could be affected, depending on the outcomes of suits and legal
proceedings.
15. Epson is vulnerable to certain risks in internal control over financial reporting.
We are building and using internal controls to ensure the reliability of financial reporting. With the
establishment and operation of internal controls for financial reporting high on our list of important
management issues, we have been pursuing a Groupwide effort to audit and improve corporate oversight of our
Group companies. However, since there is no assurance that we will be able to establish and operate an effective
internal control system on a continuous basis, and since there are inherent limitations to internal control systems,
if the internal controls that Epson implements fail to function effectively, or if there are deficiencies in internal
control over financial reporting or material weaknesses in the internal controls, it might adversely affect the
reliability of our financial reporting.
16. Epson is vulnerable to risks inherent in its tie-ups with other companies.
One of our business strategy options is to enter into business tie-ups with other companies. However, the parties
may review the arrangements of tie-ups, and there is a possibility that tie-ups could be dissolved or be subject to
changes. There is also no assurance that the business strategy of tie-ups will succeed or contribute to our
operating results exactly as expected.
17. Epson could be severely affected in the event of a natural or other disaster.
We have research and development, procurement, manufacturing, logistics, sales and service sites around the
globe, and our operating results could be adversely affected by any number of unpredictable events, including
but not limited to natural disasters, pandemics involving new strains of the influenza virus, infection by
computer viruses, leaks or theft of customer data, failures of mission-critical internal IT systems, supply chain
disruptions, and acts of terrorism or war.
20
The central region of Nagano Prefecture, home to some of our key plants and offices, has numerous cities and
towns designated as “Areas Requiring Enhanced Measures to Respond to Disasters” due to the high risk of a
large-scale disaster in the event of an earthquake in the Tokai region. Moreover, an active fault line traces the
Itoigawa–Shizuoka geotectonic line through the middle of the Nagano Prefecture region.
We revised our earthquake-response policy after the new designation of Areas Requiring Enhanced Measures to
Respond to Disasters in April 2002, and we planned disaster drills, prepared earthquake disaster management
and response plans, and established business continuity plans to mitigate the effects of disasters to the extent
possible.
However, if a major earthquake occurs in the central Nagano Prefecture region, it is possible that, despite these
countermeasures, the effect on Epson could be extreme.
Although Epson is insured against losses arising from earthquakes, the scope of indemnification is limited.
18. Laws, regulations, or licenses and the like pose risks for Epson.
Epson is a multinational corporation with a variety of business operations around the globe. We ensure
compliance with the laws and regulations of the countries in which we operate by building a robust compliance
framework in each country and each business and by communicating the nature and importance of compliance
requirements internally. To expand our businesses in the future, we must strengthen our sales and marketing
activities that target new customers, including public institutions, and we must develop new areas, such as the
health and medical markets, where legal, regulatory, and compliance requirements are extremely strict.
Compliance remains high on our list of important management issues, and we are developing measures to
prevent and control potential issues as appropriate. However, if we were to violate or potentially violate laws
and regulations relating to, among others, corruption, advertising and labeling, personal data and privacy
protection, or if the authorities were to introduce stricter laws and regulations or impose more stringent laws,
we could see our credibility damaged, could become subject to the imposition of a large civil fine, could see
constraints placed on our business activities, or could see the costs of complying with such laws and
regulations increase. Any of the foregoing could adversely affect our financial performance and future business
development.
21
Business Conditions
1. Overview of business results
(1) Operating results
On the whole, the global economy continued its gradual recovery during the year under review. Regionally, the
U.S. economy continued to expand, with strong consumer spending and solid job growth. The European
economy as a whole continues to pick up, but elements of uncertainty, such as a recession in Russia and the
rekindling of fiscal problems, remain. China’s growth rate slowed. However, the Indian economy picked up, and
the economies of ASEAN countries also continued to gradually recover. Although a temporary dip was seen
following a hike in the consumption tax, the Japanese economy continued to gradually recover on the whole,
largely due to an improved export environment owing to the weaker yen, the effects of government economic
measures, and lower crude oil prices.
The main markets for the products of the Epson Group (“Epson”) fared as follows.
Demand for inkjet printers remained firm in Europe but contracted in Japan compared to last year due to
delayed recovery in consumer spending following the consumption tax hike. Demand also decreased slightly in
North America. Demand for large-format printers decreased somewhat in Japan but moved sideways in Europe
and remained firm in the United States. Demand for serial-impact dot-matrix (SIDM) printers is slipping in the
Americas and Europe, and is now on a downward trend in China, where demand for SIDM printers used in tax
collection systems has temporarily run its course. Demand for point-of-sale (POS) system products was similar
to that in the same period last year in both the Americas and Europe. Demand for projectors was firm thanks
largely to growth in the Americas and Asia, where the FIFA World Cup helped drive unit sales higher in the first
half of the year.
In the main markets for Epson's electronic devices demand was mixed. While demand for feature phones
continued to decelerate, there was firm demand for smartphones. Digital camera market demand was sluggish.
In the precision products market, Japanese demand for watches temporarily contracted, particularly for
premium models, following a run-up in sales prior to the increase in the consumption tax, but demand has
gradually recovered in the latter part of the period. Markets were solid in the Americas and Europe. Industrial
robot demand increased in the smartphone and automotive sectors, while demand for IC handlers was also firm.
Given the foregoing market conditions, Epson established the SE15 Updated Mid-Range Business Plan
(FY2013–FY2015), in March 2013. Under the updated three-year plan, we have maintained the basic strategic
course charted by the SE15 Long-Range Corporate Vision. The basic strategy has been to manage our
businesses so that they create steady profit while avoiding the single-minded pursuit of revenue growth. Our top
priority has been steady profit and cash flow. To achieve this in the existing segments, we have been readjusting
our product mixes and adopting new business models. Meanwhile, we have been aggressively developing
markets in new segments.
The average exchange rates of the yen against the U.S. dollar and of the yen against the euro during the year
under review were ¥109.93 and ¥138.77, respectively. This represents 10% depreciation in the value of the yen
against the dollar and 3% depreciation in the value of the yen against the euro, year over year.
The foregoing factors are reflected in our consolidated financial results for the 2014 fiscal year, the second year
of our updated business plan. Revenue was ¥1,086.3 billion ($9,040,034 thousand), up 7.7% year over year.
Business profit was ¥101.2 billion ($842,773 thousand), up 12.4% year over year. Profit from operating
activities was ¥131.3 billion ($1,093,284 thousand), up 65.2% year over year. Profit before tax was ¥132.5
billion ($1,102,904 thousand), up 70% year over year. Profit for the period was ¥112.7 billion ($938,545
thousand), up 33.6% year over year.
(Note) Business profit is calculated by subtracting Cost of sales and Selling, general and administrative
expenses from Revenue.
A breakdown of the financial results in each reporting segment is as follows.
22
Information-Related Equipment Business Segment
Printing systems revenue increased, helped in part by foreign exchange effects.
We succeeded in sharply expanding inkjet printer revenue despite a decline in ink cartridge printer shipments
because a reinforced lineup of printers with high-capacity ink tanks had strong sales especially in emerging
markets. We also reinforced our business inkjet printer lineup for a resolute entry into the business market. At
the same time, we launched a managed print services business in Japan. Under this new business model,
customers pay a flat fee for a package that includes printer, ink, and maintenance service. In addition, revenue
from consumables also rose due to an improved composition of the install base.
In large-format inkjet printers we saw ongoing firm demand in the large-photo and color calibration (proofing)
markets. In the professional photo market we increased revenue by launching compact, high-performance new
models. In the inkjet textile printing market, the range of applications expanded to encompass everything from
apparel to small personal items and interior goods. Meanwhile, we expanded the territories where we sell
direct-to-garment printers to capture opportunities created by a rise in demand for custom and original T-shirts.
Page printer revenue decreased due to a decline in unit shipments, the result of Epson’s focus on selling
high-added-value models.
SIDM printer revenue was flat year over year because the effects of a temporary lull in demand in China and a
decline in unit shipments in the Americas and Europe were offset by foreign exchange effects and increased
sales of low-priced models in Asia.
POS system product revenue increased because of unit shipment growth in Europe and expanded sales of label
printers for on-demand, in-house printing.
Visual communications revenue increased, owing in part to foreign exchange effects. 3LCD projector revenue
grew sharply in the Americas and Asia. This growth was the result of an expanded and improved lineup of
high-performance products, the special demand generated by the FIFA World Cup, and increased sales in the
education market.
Segment profit in the information-related equipment segment increased due to a combination of revenue growth
from major products and foreign exchange effects.
As a result of the foregoing factors, revenue in the information-related equipment segment was ¥907.2 billion
($7,550,105 thousand), up 7.9% year over year. Segment profit was ¥133.6 billion ($1,112,299 thousand), up
8.0% year over year.
Devices and Precision Products Business Segment
Revenue in the micro-devices business increased, in part due to foreign exchange effects.
Crystal device revenue fell due to ongoing price erosion in the markets for AT-cut crystal and tuning-fork crystal
products. Semiconductor revenue increased due to growth in internal demand and external sales, including
silicon foundry orders.
Precision products revenue increased owing to factors such as increased sales of premium watches, which lifted
average selling prices, and foreign exchange effects.
Segment profit in the devices and precision products segment increased, in part due to revenue gains
resulting from foreign exchange effects.
As a result of the foregoing factors, revenue in the devices and precision products segment was ¥156.2 billion
($1,300,632 thousand), up 5.1% year over year. Segment profit was ¥14.8 billion ($123,508 thousand), up
36.7% year over year.
Sensing and Industrial Solutions Business Segment
Revenue in the sensing and industrial solutions segment increased.
In factory automation systems, industrial robot net sales grew on increased orders from Asia, while IC handler
net sales grew on increased orders from manufacturers of semiconductors for smartphones.
Segment profit in the sensing and industrial solutions segment increased primarily due to increased revenue
from sales of industrial robots.
As a result of the foregoing factors, revenue in the sensing and industrial solutions segment was ¥23.3 billion
($194,690 thousand), up 44.6% year over year. Segment loss was ¥9.0 billion ($75,193 thousand), compared to
a segment loss of ¥9.9 billion in the same period last year.
The loss in this new segment comprises strategic investment and up-front expenses for development of new
products and markets. We will continue to work to strengthen this segment, which we see as a key area in which
we can leverage our strengths to deliver innovative products and services.
23
Other
Other revenue was ¥1.3 billion ($11,566 thousand), up 4.2% year over year. Segment loss was ¥0.3 billion
($2,646 thousand), compared to a ¥0.2 billion segment loss last year.
Adjustments
Adjustments to the total profit of reporting segments amounted to negative ¥37.8 billion ($315,195 thousand).
(Adjustments in the previous fiscal year were negative ¥34.3 billion.) The loss mainly comprises selling,
general and administrative expenses for areas that do not correspond to the reporting segments, such as research
and development expenses for new businesses and basic technology, and general corporate expenses.
(2) Cash flow performance
Net cash provided by operating activities during the year was ¥108.8 billion ($905,617 thousand), compared to
¥114.8 billion in the previous fiscal year. Although depreciation and amortization totaling ¥44.9 billion versus
¥112.7 billion in profit for the period added to net cash, a ¥25.3 billion decrease in net defined benefit liabilities
and a ¥19.2 billion increase in inventories contributed to the decrease in net cash from operating activities.
Net cash used in investing activities was ¥32.7 billion ($272,405 thousand) compared to ¥41.2 billion in the
previous fiscal year, as the ¥42.7 billion spent on the purchase of property, plant, equipment, and intangible
assets was partially offset by things such as the sale of certain noncurrent assets.
Net cash used in financing activities was ¥55.3 billion ($460,946 thousand), compared to ¥56.5 billion last
fiscal year, as the Company had a ¥42.1 billion net decrease in short-term and long-term loans payable and
bonds payable and ¥12.8 billion in dividends paid.
As a result of the foregoing, the fiscal year-end balance of cash and cash equivalents totaled ¥245.3 billion
($2,041,524 thousand) compared to ¥211.5 billion at the end of the previous fiscal year.
(3) Parallel disclosure
Differences between the main items on IFRS consolidated financial statements and those on consolidated
financial statements prepared based on Japanese accounting standards
(Expenses associated with post-employment benefits)
Under Japanese accounting standards, Epson wrote off actuarial gains and losses and past service costs over a
certain period of time. Under IFRS, remeasurements of net defined benefit liabilities and assets are recognized
in full as other comprehensive income in the period in which they are incurred and transferred to retained
earnings immediately. Past service costs are recognized as a net loss either in the period when the plan is
amended or curtailed, or in the period when associated restructuring costs or termination benefits are recognized,
whichever is earlier. Since actuarial assumptions for defined benefit liabilities differ, retirement benefit costs are
additionally recognized.
Due to these effects, the cost of sales and selling, general and administrative expenses in the fiscal year 2013
decreased by ¥6,435 million when calculated based on IFRS rather than on Japanese standards, while other
comprehensive income increased by ¥13,086 million. Cost of sales, selling, general and administrative expenses,
and finance costs in the fiscal year 2014 increased by ¥6,247 million, other operating income increased by
¥30,071 million, and other comprehensive income decreased by ¥1,512 million.
*Please refer to the following for Epson’s financial results for previous years:
http://global.epson.com/IR/
24
2. Manufacturing, orders received and sales
(1) Actual manufacturing
The following table shows actual manufacturing information by segment in the fiscal year under review.
Business segment
Year ended March 31, 2015
(From April 1, 2014, to March 31, 2015)
(Millions of yen)
Change
compared to
previous fiscal
year (%)
Information-related equipment
Devices and precision products
Sensing and industrial solutions
Total for the reporting segments
Other
Total
886,416
152,960
23,973
1,063,350
592
1,063,942
107.9
111.4
159.3
109.2
78.9
109.2
Notes
1. The above figures are based on sales prices. Intersegment transactions are offset and therefore eliminated.
2. The above figures do not include consumption tax.
3. The above figures include outsourced manufacturing.
(2) Orders received
Epson’s policy is to manufacture products based on sales forecasts. Accordingly, this section does not apply.
(3) Actual sales
The following table shows actual sales information by segment in the fiscal year under review.
Business segment
Year ended March 31, 2015
(From April 1, 2014, to March 31, 2015)
(Millions of yen)
Change
compared to
previous fiscal
year (%)
Information-related equipment
Devices and precision products
Sensing and industrial solutions
Total for the reporting segments
Other
Total
Notes
1. Intersegment transactions are offset and therefore eliminated.
2. The above figures do not include consumption tax.
3. No customer accounts for more than 10% of the actual total sales.
906,701
150,292
23,182
1,080,176
808
1,080,984
107.8
104.4
145.2
107.9
90.6
107.9
25
3. Analysis of financial condition and results of operations
(1) Analysis of operating results
Revenue
Consolidated revenue was ¥1,086.3 billion, a year-over-year increase of ¥77.9 billion (7.7%).
Revenue for each reporting segment is discussed below.
The information-related equipment segment recorded revenue of ¥907.2 billion, a year-over-year increase of
¥66.0 billion (7.9%). The segment as a whole benefited from foreign exchange effects as well as from the
factors described below.
Inkjet printer revenue expanded sharply despite a decline in ink cartridge printer shipments because a reinforced
lineup of printers with high-capacity ink tanks had strong sales especially in emerging markets. The Company
also reinforced its business inkjet printer lineup for a resolute entry into the business market. At the same time,
the Company launched a managed print services business in Japan. Under this new business model, customers
pay a flat fee for a package that includes printer, ink, and maintenance service. In addition, revenue from
consumables rose along with an improved composition of the install base. In large-format inkjet printers Epson
saw ongoing firm demand in the large-photo and color calibration (proofing) markets. In the professional photo
market, the Company increased revenue from both printers and ink by launching compact, high-performance
new models. In the inkjet textile printing market, the range of applications expanded to encompass everything
from apparel to small personal items and interior goods. Meanwhile, the Company expanded the territories
where we sell direct-to-garment printers to capture opportunities created by a rise in demand for custom and
original T-shirts. Page printer revenue decreased due to a decline in unit shipments, the result of Epson’s focus
on selling high-added-value models. SIDM printer revenue was flat year over year because the effects of a
temporary lull in demand in China and a decline in unit shipments in the Americas and Europe were offset by
foreign exchange effects and increased sales of low-priced models in Asia. POS system product revenue
increased due to unit shipment growth in Europe and expanded sales of label printers for on-demand, in-house
printing. Visual communications revenue increased, owing in part to foreign exchange effects. 3LCD projector
revenue grew sharply in the Americas and Asia. This growth was the result of an expanded and improved lineup
of high-performance products, the special demand generated by the FIFA World Cup, and increased sales in the
education market.
The devices and precision products segment recorded revenue of ¥156.2 billion, a year-over-year increase of
¥7.5 billion (5.1%). The factors that contributed most significantly to this change are described below.
Crystal device revenue fell due to ongoing price erosion in the markets for AT-cut crystal and tuning-fork crystal
products. Semiconductor revenue increased due to growth in internal demand and external sales, including
silicon foundry orders. Watch revenue increased primarily because of growth in sales of premium watches,
which lifted average selling prices, and foreign exchange effects.
The sensing and industrial solutions segment recorded revenue of ¥23.3 billion, a year-over-year increase of
¥7.2 billion (44.6%). In factory automation systems, industrial robot revenue grew on increased orders from
Asia, while IC handler revenue grew on increased orders from manufacturers of semiconductors for
smartphones.
In the “other” segment, revenue was ¥1.3 billion, a 4.2% increase from the previous year.
Cost of sales and gross profit
Cost of sales was ¥690.4 billion, a year-over-year increase of ¥44.5 billion (6.9%). In addition to foreign
exchange effects, the increase in cost of sales is due largely to higher material and processing costs associated
with an increase in revenue.
As a result, gross profit was ¥3,959 billion, up ¥33.3 billion (9.2%) year over year.
26
Selling, general and administrative expenses and business profit
Selling, general and administrative (SG&A) expenses were ¥294.6 billion, an increase of ¥22.1 billion (8.1%).
In addition to foreign exchange effects, the increase in SG&A expenses is largely a result of higher labor costs,
primarily in the form of bonuses, associated with the Company’s improved financial performance.
As a result, business profit was ¥101.2 billion, up ¥11.1 billion (12.4%) year over year.
Segment profit (business profit) in each reporting segment was as follows.
Segment profit in the information-related equipment segment was ¥133.6 billion, up ¥9.8 billion (8.0%) year
over year. This was due primarily to increased sales of key products, in addition to foreign exchange effects.
Segment profit in the devices and precision products segment was ¥14.8 billion, up ¥3.9 billion (36.7%) year
over year. This increase was due to revenue growth, including foreign exchange effects.
Segment loss in the sensing and industrial solutions segment was ¥9.0 billion, a ¥900 million improvement
compared with the ¥9.9 billion loss in the previous period. This improvement was primarily due to industrial
robot profit growth.
In the “other” segment loss was ¥300 million, compared with a ¥200 million loss in the previous period.
As for adjustments, segment loss was ¥37.8 billion, a ¥3.5 billion increase over the ¥34.3 billion loss incurred in
the previous period. Adjustments consisted primarily of patent royalties, R&D expenses for basic research and
new businesses that do not belong to a reporting segment, and SG&A expenses, comprising Head Office
expenses.
Other operating income, other operating expenses, and profit from operating activities
Other operating income was ¥39.9 billion, a year-over-year increase of ¥39.9 billion (565.3%). The increase in
other operating income resulted from changes in the defined-benefit plan in Japan that reduced past service
costs by ¥30 billion and the sale of assets. Other operating expenses were ¥9.8 billion, a year-over-year decrease
of ¥6.7 billion (40.7%). Other operating expenses decreased because the foreign exchange loss shrank from
¥9.2 billion last fiscal year to ¥2.5 billion this fiscal year. As a result, profit from operating activities was ¥131.3
billion, a year-over-year increase of ¥51.8 billion (65.2%).
Finance income and finance costs
Finance income was ¥3.2 billion, a year-over-year increase of ¥500 million (21.7%). The increase in finance
income was primarily due to an increase in interest income. Finance costs were ¥2.3 billion, a year-over-year
decrease of ¥2.1 billion (47.6%). The decrease in finance costs was primarily due to a decrease in interest paid.
Profit before tax
The foregoing resulted in profit before tax of ¥132.5 billion, a year-over-year increase of ¥54.5 billion (70.0%).
Income taxes
Income taxes were ¥18.6 billion, a ¥27.9 billion increase compared with the previous period. The increase in
income taxes was mainly because the negative ¥27.8 billion corporate tax adjustment recorded in the previous
period fell to negative ¥4.5 billion.
Profit for the year
Profit for the year was ¥112.7 billion, a year-over-year increase of ¥28.3 billion (33.6%).
(2) Liquidity and capital resources
Cash flow
Net cash provided by operating activities was ¥108.8 billion, a decrease of ¥6.0 billion compared with the
previous period. Although profit for the period and income taxes were both higher, by ¥28.3 billion and ¥27.9
billion, respectively, net cash provided by operating activities declined mainly because of a ¥20.5 billion effect
27
from net defined benefit liabilities, a ¥17.6 billion effect from increased inventories, a ¥16.9 billion effect
caused by higher income taxes paid, and a ¥12.1 billion effect from a decrease in trade payables. Net cash used
in investing activities totaled ¥32.7 billion, a year-over-year decrease of ¥8.5 billion. This was primarily due to
a ¥13.7 billion increase in income on the sale of an investment property.
Net cash used in financing activities totaled ¥55.3 billion, a year-over-year decrease of ¥1.1 billion. Although
dividends paid increased by ¥9.3 billion, net cash used in financing activities decreased mainly because the net
change in interest-bearing liabilities decreased by ¥10.4 billion.
As a result of the foregoing factors, cash and cash equivalents at the end of the fiscal year stood at ¥245.3
billion, an increase of ¥33.8 billion compared with the end of the previous fiscal year, giving Epson sufficient
liquidity.
The combined total of short-term loans payable, long-term loans payable, and bonds payable was ¥185.9 billion,
a decrease of ¥34.5 billion compared with the previous period, owing to progress in repaying general
interest-bearing liabilities.
Long-term loans payable (excluding the current portion) at the end of the period totaled ¥50.5 billion, at a
weighted average interest rate of 0.70% due in 2017. These borrowings were obtained as unsecured loans
primarily from banks.
Financial condition
Total assets were ¥1,006.2 billion, an increase of ¥97.3 billion compared with the end of the previous fiscal year.
This increase was primarily due to a ¥38.8 billion increase in inventories, a ¥33.8 billion increase in cash and
cash equivalents, and a ¥13.1 billion increase in trade and other receivables.
Total liabilities were ¥508.9 billion, down ¥35.1 billion compared with the end of the previous fiscal year.
While trade and other payables increased by ¥16.5 billion, total liabilities decreased mainly because of a ¥36.2
billion decrease in other financial liabilities included in current and non-current liabilities accompanying a net
reduction in short-term and long-term loans payable and bonds payable, as well as a ¥25.1 billion decrease in
net defined benefit liabilities accompanying changes to Epson’s defined-benefit plan for employees in Japan.
The equity attributable to owners of the parent company totaled ¥494.3 billion, a ¥131.9 billion increase
compared with the previous fiscal year-end. This was primarily due to a ¥98.6 billion increase in retained
earnings and a ¥33.3 billion increase in other components of equity, including changes in the exchange
differences on translation of foreign operations associated with the depreciation of the yen.
Working capital, defined as current assets less current liabilities, was ¥294.9 billion, an increase of ¥70.3 billion
compared with the end of the previous fiscal year.
The ratio of interest-bearing liabilities to total assets declined to 18.5% from 24.3% at the end of the previous
fiscal year.
28
4. Research and development activities
Epson conducts research and development to create products and services that offer value that exceeds customer
expectations. We seek to create value by driving advances in our unique core technologies in the areas of Micro
Piezo printheads, microdisplays, sensing, and robotics. We also create value by turning these core
technologies—all of which evolved from Epson’s long-established strengths in compact, energy-saving,
high-precision technologies—into platforms that meet the needs of a wide spectrum of customers.
The R&D divisions of our operations follow these basic guidelines to develop core technologies and shared
technology platforms that will strengthen the Company’s market position, in both the near and long term.
Meanwhile, the mission of Corporate R&D is to develop new and existing core technologies as well as shared
technology platforms so as to create new businesses and revolutionize existing ones.
Total R&D spending during the fiscal year was ¥47.8 billion. The information-related equipment segment
accounted for ¥24.4 billion, the devices and precision products segment for ¥4.5 billion, and the sensing and
industrial solutions segment for ¥5.2 billion. The “other” segment and corporate segment accounted for the
remaining ¥13.5 billion.
The main R&D accomplishments in each segment are described below.
Information-related equipment
In the printing systems business, Epson released a compact new inkjet consumer printer that, aside from
printing photos taken with a digital camera or smartphone, allows users to easily create original stickers, labels,
and postcards using a smartphone app. Measuring 249 mm x 176 mm x 85 mm tall (W x D x H), the product is
small enough to rest on the palm of a hand. When not in use, it can be stored vertically on a bookshelf and
easily taken down and transported to wherever it is needed.
Epson also released its first mobile inkjet printers. Equipped with a built-in battery1, these printers are the
smallest and lightest in their class2 thanks primarily to smaller paper-feed and paper-transport rollers, a higher
component layout density, which was achieved by dividing circuits up into multiple smaller circuit boards, and
an aluminum frame that reduced the weight of the products while giving additional strength. Users can
conveniently slip these compact printers into a briefcase along with a tablet PC and take them out on the road.
When not in use, the printers can be stored in a desk drawer.
In addition, the Company released a color inkjet label printer that prints attractive product labels that can be
affixed to bottles and packages. The printer can also be used to print identifying labels that increase the
visibility and recognition of materials, chemicals, and other products in a manufacturing setting.
Last year we developed a new type of PrecisionCore printhead that has an expanded range of applications and is
used to build Epson PrecisionCore lineheads. The color inkjet label printer is the first product in Japan to
employ high-speed PrecisionCore lineheads. The product prints at rates of up to 300 mm/second and, with 600 x
1,200 dpi resolution, provides excellent image quality. It is ideal for customers who want to reduce costs by
printing the labels they need when they need them, on-demand, in quantities of about 1,000 labels.
In the visual communications business, the Company released a new wall-mounted ultra-short throw projector
for educational purposes that has a built-in electronic blackboard function with finger touch-enabled operation.
The operation of this interactive projector is intuitive. Users can use familiar hand gestures to select tool icons
on the electronic blackboard, zoom or shrink images, or scroll through content. Teachers can use arrows,
triangles, circles and other simple graphics to grab and hold students’ attention. With this product, teachers and
students can write on images with a pen and erase things with their fingers, much like on a traditional
blackboard.
The Company also developed a new home theater projector that employs a laser light source, an Epson first.
Featuring 4K Enhancement Technology3, the product supports amazing 4K content. This projector achieves
absolute black4, displaying zero lumens during full-black scenes, such as when the scene changes.
1Can print up to approximately 50 color prints or 100 monochrome prints on a fully charged battery.
Performance may vary depending on usage conditions.
2It is the smallest and lightest A4 inkjet printer in Japan as of June 2014, as per Epson research. The printer is
309 mm wide, 154 mm deep, 61 mm high and weighs approximately 1.6 kg.
34K Enhancement Technology shifts each pixel diagonally by 0.5 pixels to double the resolution to 3840 x
2160 and achieve ultra-high definition.
4A screen brightness of zero lumens in a completely dark room from which all outside sources of light are
29
blocked.
Devices and precision products
In the microdevices business, the Company commercialized a new series of microcontrollers with 16-bit flash
memory built in. These low-power microcontrollers operate on 1.2 V and are designed specifically for small
sensor products, such as electronic locks, motion sensors, and gas alarms used in the industrial and housing
sectors, as well as for wearable products that will be paired with smartphones.
By eliminating the circuitry for a liquid crystal display, Epson was able to reduce the surface area of these
products by up to 87% compared with earlier models.
Sensing and industrial solutions
The Company released Pulsense activity trackers that monitor heart rate, exercise intensity, caloric intake and
consumption, sleep quality, and stress level comfortably at the wrist. In addition to measuring acceleration,
these products are equipped with a unique Epson sensor that accurately measures pulse by using the
light-absorbing property of hemoglobin in blood. The sensor works by shining light from an LED on blood
vessels near the surface of the skin of the wrist and measuring blood flow based on the amount of reflected light.
All of the data taken with Pulsense products can be uploaded to a PC or smartphone for review and analysis
using a special website or mobile app. These activity monitors can continuously track the wearer’s heart rate for
up to about 36 hours at a time and can thus record the wearer’s activity, whether exercise or sleep patterns,
around the clock.
The Company also released a new IC test handler that is perfectly suited for use in testing smartphone ICs,
demand for which remains robust. This handler has the same basic features of its predecessor, but we increased
the standard contact pressure it exerts when plugging ICs into test sockets, to allow the handler to accommodate
chips with high pin counts. The handler gives users flexibility in designing their test environments, because the
hands that transport ICs inside the system can be configured for either inline 4-site test mode5 or square 4-site
test mode6, and the handler can also be upgraded to an 8-site test mode7.
5A mode in which four ICs are simultaneously tested in a series
6A mode in which four ICs are arranged in a 2 x 2 configuration for simultaneous testing
7A mode in which eight ICs are simultaneously tested
30
5. Issues for Fiscal 2015
At the start of the 2013 fiscal year Epson began working under an updated three-year plan called the Updated
SE15 Second-Half Mid-Range Business Plan (FY2013–FY2015). We have been closely adhering to the
strategic course charted by the SE15 Long-Range Corporate Vision and, in line with the updated plan, are
pursuing a basic strategy of managing our businesses so that they create steady profit while avoiding the
single-minded pursuit of revenue growth. Our top priority will be steady income and cash flow. To achieve this
in existing segments, we will readjust our product mixes and adopt new business models. Meanwhile, we will
aggressively develop markets in new segments. Working under a new mid-range plan from the 2016 fiscal year,
we will move steadily forward to lay the foundation for a metamorphosis during which Epson will change from
being primarily a company that provides consumer imaging products into a company that once again posts
strong growth by creating and providing new information solutions and equipment for businesses and
professionals, as well as consumers.
Although the outlook is not entirely clear, the global economy as a whole is expected to continue growing. The
economies of the U.S. and other developed countries are by and large in recovery mode, but economic growth is
seen slowing in some emerging nations. Society is changing, shifting increasingly toward sustainable industry
and sustainable economic activity. This trend will likely alter the kind of customer value that Epson will need to
provide.
In this type of business environment, we will remake Epson into a company that once again posts strong growth.
We will achieve this by focusing our management resources on the four areas described below, where we can
continue to leverage the strengths of our unique core technologies, by expanding our business segments, and by
building stronger new businesses that will support the Company’s growth in the future. Ultimately, we aim to
consistently achieve a return on sales (business profit*/revenue) of 10% and return on equity (profit for the
period/equity attributable to owners of the parent company) of 10% or more as early as possible by remaining
even more mindful of the cost of capital.
*Business profit is very similar to operating income under Japanese accounting standards (J-GAAP), both conceptually and
numerically. Epson began using business profit as an indicator after adopting International Financial Reporting Standards (IFRS)
in FY2014 to facilitate comparisons with past results.
Strategies in Each Area
Printing
In printing, we will look to use Epson’s unique Micro Piezo inkjet technology to create an innovative printing
environment. In inkjet printers, we will work to sell more high-end consumer models, which tend to generate
higher print volume. We will also continue to upgrade and expand our lineup of products tailored to the needs
of consumers in emerging countries. We will launch powerful new office printers equipped with state-of-the-art
Micro Piezo print-heads and build up our managed print services business, a new business model, to further
increase our competitiveness. Digital inkjet printing systems are increasingly replacing conventional analog
systems in the commercial, industrial, and business printing markets, where they are used to print everything
from billboards to wrapping film for food products to textiles. By creating new customer value in the form of
shorter production processes and lower environmental impact, we will tap more deeply into these markets and
build strong core businesses that will sustain future growth. In business systems, we will achieve steady income
growth by uncovering new demand while maintaining a grip on the top share in existing segments.
Visual Communications
In the visual communications business we will create new forms of visual communication using micro-display
technology. Epson is the leader in liquid-crystal projectors and has a high market share in the home and
business segments. However, to expand the business and increase our earnings power, we also want to further
elevate our position in the high-lumen, short-throw, and ultra-short throw projector niches, and to do so, we will
enhance our ability to propose solutions and will build up our sales network. Epson’s smart glasses have the
31
potential to change the way we live and work. Epson’s smart glasses have the potential to change the way we
live and work. Offering a see-through display and hands-free navigation, they give Epson the opportunity to
create new applications and new value for both consumer and industrial markets.
Quality of Life
We will use high-accuracy sensing technology to create new value that improves the quality of life. Epson has
been building new businesses around innovative sensing products such as wristwatch-like GPS running
monitors and heart rate monitors, and we intend to continue to capitalize on our sensing technologies, which
combine semiconductors and crystal devices, and the technical expertise accumulated in the watch business, to
help enrich the lives of our customers. Going forward, we want to provide life-enriching wearable personal
devices in the health, sports, and medical fields, and toward that end are integrating cloud technology and
building a product development process that will be able to efficiently serve diversified markets. Meanwhile, in
the industrial sector, such as in the monitoring of building, equipment, and infrastructure soundness, we will
drive growth by creating innovative sensing solutions that provide insightful, useful information that would
otherwise be invisible.
Manufacturing
Epson has long contributed to factory automation in a wide range of fields with SCARA robots, compact
six-axis robots, and other precision assembly robots. With labor shortages looming and labor costs soaring in
emerging countries, Epson will use its advanced robotics technologies to help usher in next-generation
manufacturing by providing robots and production equipment that radically boost throughput in production
processes that have traditionally been difficult to automate.
32
6. Dividend policy
The Company is a proponent of paying regular dividends, and in the interests of all stakeholders, we strive to
achieve sustained business growth through the creation of customer value, generate stable cash flow by
improving profitability and using management resources efficiently, invest on the basis of a strategy for growth,
and build a robust financial structure that is capable of withstanding changes in the business environment.
The Company’s dividend policy is to pay cash dividends twice a year. The year-end dividend is determined by
resolution of the general shareholders’ meeting and the interim dividend is determined at a meeting of the board
of directors.
In consequence of successful implementation of the business strategy and favorable exchange rates, business
performance has improved significantly. Since the introduction of International Financial Reporting Standards
(IFRS), the Company defines capital as business profit from the principal business of the Company (very
similar to operating income under Japanese accounting standard [J-GAAP]) minus a sum equivalent to the
statutory effective tax rate. Therefore, based on the long-term target for a consolidated dividend payout ratio of
30%, the Company has paid an annual dividend of 115 yen per share this year.
The Company will work steadily to improve corporate value, and will consider future raises in the consolidated
dividend payout ratio over the medium term in accordance with the policy above.
(Reference) The Company’s approach to annual dividends (forecast)
Annual dividend (forecast): [Business profit (forecast) - Sum equivalent to the statutory effective tax rate] × the
target consolidated dividend payout ratio
The Company’s Articles of Incorporation allow the Company to issue an interim dividend with a record date of
September 30 every year by resolution of the board of directors.
The Company’s distribution of retained earnings for the fiscal year under review is as follows.
Distribution of retained earnings for the fiscal year under review
Date approved
Cash dividends
(Millions of yen)
Cash dividend per share
(Yen)
October 31, 2014, by resolution
of the board of directors
June 25, 2015, by resolution of
the general shareholders’ meeting
6,261
14,311
35
80
33
Corporate Governance
1. Approach to corporate governance
(1) Corporate governance system
Outline
Epson’s basic approach to corporate governance is geared toward
▪ continuously increasing corporate value; and
▪ reinforcing business checks and balances, practicing sound corporate ethics, and ensuring business
transparency and health.
The Company has a board of directors and a board of corporate auditors. The board of directors had 10
members, including two outside directors, as of the date the Annual Securities Report was submitted. It meets
once a month and convenes extraordinary meetings as needed. The board of directors makes decisions on basic
management policies, key business operations, period-end closing, disclosure timeframes, and other important
issues. Various management bodies have been created to advise the board of directors or president, deliberate on
issues to facilitate decision making, and oversee and enhance the execution of business. Epson’s board of
corporate auditors consists of five corporate auditors, including three outside corporate auditors. It strives to
ensure greater independence and transparency of audits.
The names of the outside directors and outside auditors have been reported to the Tokyo Stock Exchange (TSE)
for they are considered to be independent directors/auditors as defined by the TSE.
The main corporate management bodies and their aims are described below:
Corporate Strategy Council and Corporate Management Meetings
The Corporate Strategy Council and corporate management meetings are convened to thoroughly deliberate on
matters before they are referred to the board of directors.
Compliance Committee
The Compliance Committee meets to hear and discuss important matters concerning Epson’s compliance
programs. It reports its findings and offers opinions to the board of directors.
Nomination Committee and Compensation Committee
As advisory bodies to the board of directors, the Nomination Committee screens board of director candidates,
and the Compensation Committee deliberates on director remuneration issues. The Company strives to ensure
the transparency and objectivity of deliberations, with outside directors sitting on both of the committees and
corporate auditors able to attend committee meetings as observers.
Epson’s system of corporate governance is schematically represented below:
34
Reasons for adopting the current system of corporate governance
Epson is looking to initiate fresh growth by developing and executing strategic measures based on the Updated
SE15 Second-Half Mid-Range Business Plan (FY2013–FY2015), which is aimed at achieving the goals set
forth in Epson’s SE15 Long-Range Corporate Vision.
As it moves forward on the updated mid-range business plan, the Company believes that it will be important to
have a governance system that strikes a good balance between business speed and efficiency on the one hand
and effective oversight of management on the other.
For this reason, the Company employs an agile, practical management organization wherein directors who
understand the situation inside the Company simultaneously oversee multiple key business operations, while the
outside directors conduct checks to assure that business decisions make sense.
In addition, Epson employs independent outside directors and independent corporate auditors to ensure a sound
management audit function. The names of the outside directors and outside auditors have been reported to the
Tokyo Stock Exchange (TSE) as they are considered to be independent directors/auditors as defined by the TSE.
Internal control system
The Company passed a resolution at the April 30, 2015, meeting of the board of directors to partially amend
Epson’s basic internal control system policy. The content of the revised basic policy is described below.
Basic internal control system policy
The Company considers its Management Philosophy to be its most important business concept, and to realize it
Epson has established Principles of Corporate Behavior that are shared across the Group, including at
subsidiaries. The Company will establish the following basic policy regarding the internal control system (a
system for ensuring that business is conducted suitably by the corporate group) and provide an improved
internal control system for the Epson Group as a whole.
Compliance
(1) The Company will establish “Principles of Corporate Behavior” as a guide for putting the Management
Philosophy into practice. The Company will also establish regulations that spell out things such as basic
compliance requirements and the organizational framework.
(2) A member of the board will be selected to serve as the Chief Compliance Officer (CCO). The CCO will
head an organization that oversees and monitors the execution of all compliance operations.
(3) The Company also created a Compliance Committee to serve as an advisory body to the board of directors.
The Compliance Committee will be chaired by the CCO and have as members the outside directors,
outside corporate auditors, and a director appointed by the board of directors. The Compliance Committee
35
will meet to hear and discuss important matters concerning the Company’s compliance program. It will
report its findings and offer opinions to the board of directors.
(4) Compliance promotion and enforcement will be supervised by the president of Seiko Epson. Group-wide
compliance programs will be carried out by Head Office supervisory departments with the cooperation of
departments in the various operations divisions and subsidiaries. Compliance programs of the divisions and
their related subsidiaries will be promoted by the respective chief operating officers of the divisions. A
dedicated compliance department will help to ensure the coverage and effectiveness of compliance
programs by monitoring compliance across the Epson Group and by taking corrective action or making
adjustments where needed.
(5) The Corporate Strategy Council, an advisory body to the president comprising members of the board of
directors of the Company, will address important matters with respect to compliance promotion and
enforcement in the Epson Group as a whole, including subsidiaries. The Council will strive to ensure the
effectiveness of compliance by exhaustively discussing and analyzing the implementation of programs for
assuring observance of statutes, internal regulations, business ethics, and initiatives in high-risk and other
key areas.
(6) The Company, including its subsidiaries, will strive to provide an effective whistleblowing system.
Employees will be encouraged and will be able to easily and immediately report compliance violations
using internal and external hotlines and e-mail addresses. Controls will be in place to protect
whistleblowers from reprisal, and allegations will be reported to the Company’s corporate auditors, the
Compliance Committee, and the Corporate Strategy Council in a way that whistleblowers cannot be
identified.
(7) The Company will strive to enhance legal awareness by providing Epson Group employees with
web-based training and other educational opportunities.
(8) The president of Seiko Epson will periodically report important compliance-related matters to the board of
directors and will take measures as needed to respond to issues.
(9) Epson’s “Principles of Corporate Behavior” states that the Company will have no association whatsoever
with antisocial forces. The Company takes a firm stance in rejecting any and all contact with antisocial
forces that threaten social order and security.
Business execution system
(1) The Company will formulate long-term vision statements and mid-range business plans, and it will set
clear medium- and long-range goals for the Epson Group as a whole.
(2) The Company will institute a system that will ensure the appropriate and efficient execution of business.
To that end, the Company will establish regulations governing organizational management, levels of
authority , the division of responsibilities, and the management of affiliated companies, thus distributing
power and authority across the entire Group.
(3) Personnel responsible for business operations will report the matters below to the board of directors at least
once every three months.
• Current business performance and performance outlook
• Risk management responses
• Status of key business operations
Risk management
(1) The Company will establish a basic risk management regulation that stipulates the risk management
system of the Company, including its subsidiaries, and that defines the organization, risk management
methods and procedures, and other basic elements of this system.
(2) Overall responsibility for risk management in the Epson Group, including subsidiaries, will belong to the
president of Seiko Epson. Group-wide risk management will be carried out by Head Office supervisory
departments with the cooperation of the operations divisions and subsidiaries. Risks unique to an
individual business will be managed by the chief operating officer of that business, including subsidiaries
consolidated under it. The Company will also set up a department that will supervise risk management,
monitor overall risk management Group-wide, make corrections and adjustments thereto, and ensure the
effectiveness of risk management programs.
(3) The Corporate Strategy Council strives to ensure effective management of serious risks that could have an
egregious affect on society by dynamically and exhaustively discussing and analyzing ways to identify and
36
control risks. Also, when major risks become apparent, the president will lead the entire company in
mounting a swift initial response in line with the Company’s prescribed crisis management program.
(4) The president of Seiko Epson will periodically report to the board of directors on critical risk management
issues and formulate appropriate measures to respond to these issues.
Ensuring the appropriateness of operations in the corporate group
(1) The Group’s management structure will help to ensure that operations in the corporate group, including
subsidiaries, are conducted appropriately. Essentially, the Company will be organized into product-based
divisions. Each division will be headed by a chief operating officer who owns global consolidated
responsibility for that business. Meanwhile, supervisory functions within the Head Office will own global
responsibility. Responsibility for providing the framework for business operations at subsidiaries will be
owned by the head of each business. Group-wide corporate functions will be the responsibility of the heads
of Head Office supervisory departments.
(2) The Company will have business processes that enable business to be controlled on a Group level. This
will be accomplished by internal regulations that require subsidiaries to report or acquire pre-approval for
certain business operations from the parent company, Seiko Epson, and by requiring issues that meet
certain criteria to be submitted to Epson’s board of directors for resolution. In certain regions, moreover,
the Company will seek to ensure the suitability and efficiency of Group-wide business operations by
establishing a company that acts as a regional head office that supervises subsidiaries.
(3) An internal auditing department will conduct audits Group-wide, including subsidiaries, based on a basic
internal audit regulation, thereby strengthening and enhancing internal audits Group-wide, including at
subsidiaries.
Safeguarding and management of work-related information
(1) Information on business operations will be safeguarded and managed under regulations governing, among
other things, document control, management approval, and contracts, with directors and corporate auditors
reviewing these and other relevant documents on an ongoing basis.
(2) The Company strives to prevent the leak and loss of Epson Group internal information by managing
confidential information according to the level of sensitivity, in accordance with internal information
security regulations.
Audit system
(1) Corporate auditors will have the authority to conduct interviews with directors and other personnel
whenever they deem such interviews necessary based on corporate regulations governing auditors and
audit procedures.
(2) Corporate auditors will also be authorized to attend Corporate Strategy Council sessions, corporate
management meetings, and other important business meetings that will enable them to conduct audits
based on the same information as that available to directors. Corporate auditors will also routinely review
important documents related to management decision making.
(3) The Company will establish a Corporate Auditors’ Office that will be staffed with full-time employees.
Evaluations and transfers of Corporate Auditors’ Office employees will require the approval of corporate
auditors. If the number of full-time employees required for audit operations is insufficient, or if they lack
the requisite expertise, etc., and if corporate auditors acknowledge that special circumstances hinder the
effectiveness of audits, corporate auditors will be able to make the necessary requests to the representative
director or the board of directors.
(4) Per a corporate auditor audit regulation, corporate auditors will be able to ask directors and persons from
the internal audit department and elsewhere to report or explain the state of management within the Epson
Group, including subsidiaries, and will be able to view supporting materials. Corporate auditors will,
where necessary, be able to ask subsidiary company directors, auditors, internal audit groups, and other
personnel to report the state of management within their respective companies.
(5) Corporate auditors shall strive to enhance the effectiveness of audits by holding regular discussions with
the internal audit department and with independent public accountants.
(6) Corporate auditors will directly assess business operations by holding regular meetings with representative
directors.
(7) The expenses required to execute the duties of corporate auditors will be properly budgeted for in advance.
37
In addition, expenses required to execute the duties of corporate auditors when emergency or extraordinary
audits are needed will be promptly paid in advance or refunded on each occasion.
(2) Internal audits
Epson’s internal compliance system guards against potential legal and internal regulatory violations in
departmental operations, and the internal audit organization, with a staff of 20, directly reports to the president
the results of routine internal audits, including those conducted at Epson subsidiaries. The audit organization
evaluates the effectiveness of the governance process and requests improvements where needed.
(3) Outside directors and outside corporate auditors
View on independence
The Epson board of directors has established criteria concerning the independence of outside directors. In
compliance with these criteria, it selects candidates for outside directors and outside corporate auditors who do
not have potential conflicts of interest with general shareholders. The outside directors and the outside auditors
that are currently engaged all meet the independence criteria.
The criteria concerning the independence of outside directors are listed below.
Outside director independence criteria
Epson does not select as candidates for outside director persons to whom any of the following apply:
(1) A person who receives significant business1 from Epson or a person who has within the last five years been
employed as an executive officer2 of a company that receives significant business from Epson
(2) A person who is a major business partner3 of Epson or a person who has within the last five years been
employed as an executive officer of a company that is a major business partner of Epson
(3) A consultant, an accounting professional such as a certified public accountant, or a legal professional such
as an attorney who, in the last three years, has received from Epson a large sum of money4 or other
property for reasons other than director remuneration (including any person who has belonged to or been
employed as an executive officer or the like with a company, union or other group that has received such
property in the last three years)
(4) A person who is a major Epson shareholder5 or a person who, within the last five years, has been an
executive officer or corporate auditor of a company that is a major Epson shareholder
(5) A person who is employed as an executive officer or corporate auditor of a company or other group in
which Epson is a major shareholder
(6) A person who has belonged within the last 10 years to an auditing company that has conducted a statutory
audit of Epson
(7) A person who has belonged to Epson’s managing underwriter within the last 10 years
(8) A person who has received a large donation6 from Epson (a person who belongs to a legal entity, union or
other group that has received a large donation from Epson and has been employed therein as an executive
officer or the equivalent)
(9) A person from a company that employs a former Epson employee as an outside director
(10) The spouse or other immediate family member of a person to whom any of items (1) through (9) apply
Notes
1A “person who receives significant business from Epson” is a person or supplier who has received payments
amounting to 2% or more of the person’s or supplier’s annual consolidated sales for any fiscal year in the
last three years.
2An “executive officer” is an employee in a senior executive management position, including executive,
managing director, operating officer, or general manager or higher position.
3A “person who is a major business partner of Epson” is a person or customer who has furnished Epson with
payments amounting to 2% or more of Epson’s annual consolidated sales for any fiscal year in the last
three years.
4A “large sum of money” is, in the case of an individual, an amount which, on average in any of the last three
years, is equal to ¥10,000,000 or more, or, in the case of a group, equivalent to 2% or more of the group’s
total revenue.
5 “Major shareholder” means a person who owns, either directly or indirectly, 10% or more of the outstanding
voting rights.
38
6A “large donation” is a donation in an amount which, on average in any of the last three years, exceeds the
greater of ¥10,000,000 or 30% of the group’s total annual expenses.
Outside directors
Epson’s board has two outside directors. No special interests exist between the Company and the outside
directors.
Outside Director Toshiharu Aoki was an executive at Nippon Telegraph and Telephone Corporation and at NTT
Data Corporation. Epson has not had business transactions with either Nippon Telegraph and Telephone
Corporation or NTT Data Corporation for the past three years, and neither company is considered a major
supplier under Epson’s outside director independence criteria.
Outside Director Hideaki Omiya is Chairman of Mitsubishi Heavy Industries, Ltd. Although Epson and
Mitsubishi Heavy Industries have bought and sold semiconductor fabrication equipment and had other business
transactions within the past three years, Mitsubishi Heavy Industries is not considered a major supplier under
Epson’s outside director independence criteria, as the value of transactions is less than 0.1% of the consolidated
revenue of either company.
Outside corporate auditors
Each of Epson’s three outside corporate auditors draws on a wealth of experience and keen insight when
conducting audits, and offers frank opinions to the board of directors. No special interests exist between the
Company and any of the outside corporate auditors.
Outside corporate auditor Yoshiro Yamamoto is a former Fuji Bank, Ltd. (presently Mizuho Corporate Bank,
Ltd.) executive who has been retired from the bank for more than 10 years. He was invited to become an auditor
because he fits the needs of the Company and for no other reason, such as a recommendation by Fuji Bank, Ltd.
Net interest-bearing liabilities account for only a small percentage of the Company’s total assets, and the
Company’s dependence on bank loans is low. Furthermore, the Company deals with multiple financial
institutions and does not depend on Mizuho Corporate Bank, Ltd. for a high proportion of its borrowing. There
is therefore no special relationship between the Company and Mizuho Corporate Bank, Ltd., and Mizuho
Corporate Bank, Ltd. does not influence Epson’s decision making.
Outside corporate auditor Kenji Miyahara was an executive at Sumitomo Corporation. Epson has not had
business transactions with Sumitomo Corporation over the last three years.
Outside corporate auditor Michihiro Nara is an attorney, but the Company has never engaged him or the law
office to which he belongs to perform duties under an advisory agreement or under any other separate
agreement, nor does it plan to do so in the future.
There is no particular system of coordination between outside corporate auditors and audit functions in the
Group; however, corporate auditors take the initiative to consult with the internal audit organization and
independent public accountants. Each time an issue is identified by an audit, details are passed on to the outside
corporate auditors to keep them informed as appropriate. Moreover, corporate auditors participate in the
Compliance Committee, which supervises compliance programs, and they conduct inquiries at departments
where a significant incident involving internal control has occurred. Corporate auditors are thus kept abreast of
operational issues and the status of measures to address those issues.
(4) Director remuneration
Basic policy
Directors serve to enhance corporate value, both in the immediate and long terms, and Epson has designed its
system of director remuneration to provide them with incentives to improve business performance.
The monthly salaries of directors are decided by the board of directors after deliberation by the Compensation
Committee and in consideration of Epson’s business performance. Director bonuses are paid only if the
Company has achieved a level of profit that increases corporate value. The desired level of profit is predefined
by the board of directors after deliberation by the Compensation Committee, and the board of directors submits
to the general shareholders for approval a proposal for the total amount of director bonuses to be paid in a given
period, the amount to be commensurate with the level of performance with respect to profit.
Furthermore, a portion of the monthly salaries of directors is paid as Epson stock so that remuneration is linked
to share price, and to serve as an incentive for improving business performance in the long term.
39
Remuneration paid
Category
Directors
(including total for outside
directors)
Corporate auditors
(including total for outside
corporate auditors)
Total
Total remuneration
(millions of yen)
Remuneration breakdown
(millions of yen)
Basic salary
Bonuses
Number of
individuals
456
(26)
106
(44)
563
356
(26)
106
(44)
463
99
(－)
－
(－)
99
13
(2)
7
(3)
20
Notes
1. The number of individuals above includes three directors and two corporate auditors who retired at the
closing of the general shareholders’ meeting on June 24, 2014.
2. Epson introduced a stock performance (stock-based) component to the remuneration system to link
remuneration more closely to share price, so Epson stock accounts for a portion of the basic salary.
3. A resolution passed at the general shareholders’ meeting of June 26, 2001, established the maximum base
remuneration at ¥70 million per month for directors and at ¥12 million per month for corporate auditors.
4. The remuneration paid includes ¥99 million in director bonuses (bonuses to be paid to the eight directors,
excluding outside directors), which were approved at the June 25, 2015 regular general shareholders’
meeting. There is no bonus system for corporate auditors.
5. The directors who retired at the closing of the general shareholders’ meeting held on June 24, 2014 were
paid a retirement benefit of ¥41 million based on the resolution of the general shareholders’ meeting held on
June 23, 2006, on the payment of director retirement benefits.
6. Stock options are not granted.
(5) Stock holdings
Balance sheet total of stocks held for reasons other than pure investment
22 companies
¥15,925 million
Issuing company, number, and balance sheet total of stocks held for reasons other than pure investment
Previous fiscal year
Company
Shares (stock)
Balance sheet total
(millions of yen)
Reason held
NGK Insulators, Ltd.
3,757,000
Mizuho Financial Group, Inc.
15,008,880
Seiko Holdings Corporation
1,644,080
The Hachijuni Bank, Ltd.
489,500
Iwasaki Electric Co., Ltd.
1,000,000
Hakuto Co., Ltd.
190,000
40
8,077 Maintain and
strengthen
business ties
3,061 Maintain and
strengthen
business ties
675 Maintain and
strengthen
business ties
287 Maintain and
strengthen
business ties
253 Maintain and
strengthen
business ties
183 Maintain and
strengthen
business ties
Company
Shares (stock)
Balance sheet total
(millions of yen)
Reason held
Marubun Corporation.
King Jim Co., Ltd.
Otsuka Corporation
Joshin Denki Co., Ltd.
Pixelworks, Inc.
Nippon BS Broadcasting
Corporation
Current Fiscal year
332,640
221,980
10,000
70,000
100,000
16,600
178 Maintain and
strengthen
business ties
158 Maintain and
strengthen
business ties
134 Maintain and
strengthen
business ties
57 Maintain and
strengthen
business ties
57 Maintain and
strengthen
business ties
30 Maintain and
strengthen
business ties
Company
Shares (stock)
Balance sheet total
(millions of yen)
Reason held
NGK Insulators, Ltd.
3,757,000
Mizuho Financial Group, Inc.
15,008,880
Seiko Holdings Corporation
1,644,080
The Hachijuni Bank, Ltd.
489,500
Hakuto Co., Ltd.
Marubun Corporation
King Jim Co., Ltd.
Otsuka Corporation
Joshin Denki Co., Ltd.
Pixelworks, Inc.
190,000
332,640
221,980
30,000
70,000
100,000
41
9,636 Maintain and
strengthen
business ties
3,168 Maintain and
strengthen
business ties
996 Maintain and
strengthen
business ties
415 Maintain and
strengthen
business ties
272 Maintain and
strengthen
business ties
263 Maintain and
strengthen
business ties
180 Maintain and
strengthen
business ties
153 Maintain and
strengthen
business ties
66 Maintain and
strengthen
business ties
60 Maintain and
strengthen
business ties
Company
Shares (stock)
Balance sheet total
(millions of yen)
Reason held
Nippon BS Broadcasting
Corporation
33,200
41 Maintain and
strengthen
business ties
Stocks held for pure investment
None
(6) Accounting audits
(a) Names and other details of corporate public accountants performing audits
Name of CPA
Audit company
No. of successive years
performing audits
Designated and
Engagement Partner,
Certified Public
Accountant
Designated and
Engagement Partner,
Certified Public
Accountant
Designated and
Engagement Partner,
Certified Public
Accountant
Hidetoshi
Watanabe
Ernst & Young
ShinNihon LLC
Seiji
Yamamoto
Ernst & Young
ShinNihon LLC
Takahiro
Yamazaki
Ernst & Young
ShinNihon LLC
2
2
4
(b) Composition of auditing team
The auditing team comprises 43 staff including 15 certified public accountants, eight junior accountants, and 20
other accounting staff.
(7) Outline of contract limiting liability
The Company’s contract with the outside directors and outside corporate auditors is based on Article 427,
Paragraph 1, of the Japanese Companies Act, and the contract stipulations determining the liability for damages
on Article 423, Paragraph 1, of the same law. Said contract also stipulates that the limit of liability for damages
shall be the legal maximum.
Limited liability is recognized only in cases where the outside directors and the outside corporate auditors
performed their duties in good faith and were not grossly negligent.
(8) Number of directors
Epson’s Articles of Incorporation determine the maximum number of directors to be ten.
(9) Election and retirement of directors
According to its Articles of Incorporation, directors of the Company can be elected by a majority vote by at
least one third of shareholders with voting rights, and not through cumulative voting.
Provisions regarding the retirement of directors do not vary from the provisions of the Japanese Companies Act.
(10) Items for approval at the General Shareholders’ Meeting that can be determined by the board of
directors
Treasury stock acquisition
The Company’s Articles of Incorporation allow the Company to acquire treasury stock through stock market
trade and other means by resolution of the board of directors. This enables a more flexible capital policy in
response to a changing business environment.
42
Director and auditor exemption from liability
When liability falls under the requirements stipulated in Article 426, Paragraph 1, of the Japanese Companies
Act, the Company’s Articles of Incorporation allow the Company to exempt the directors and auditors from
liability for damages in Article 423, Paragraph 1, of the Japanese Companies Act up to the amount remaining
after the legal minimum liability is deducted from the total liability amount by resolution of the board of
directors. This allows the directors to fully apply themselves to their expected task of building an organization
capable of aggressive business expansion, and allows the corporate auditors to fulfill their functions
accordingly.
Interim dividend
The Company’s Articles of Incorporation allow the Company to declare an interim dividend with a date of
record of September 30 every year by resolution of the board of directors. This provides the Company with
flexibility in paying dividends to shareholders.
(11) Special resolution requirements of the General Shareholders’ Meeting
The Company’s Articles of Incorporation set forth the requirements for a special resolution of the general
shareholders’ meeting stipulated in Article 309, Paragraph 2, of the Japanese Companies Act as a two-thirds
majority vote by at least one third of shareholders with voting rights. This policy is intended to ensure the
smooth operation of the general shareholders’ meeting by relaxing the quorum requirements for special
resolutions at the general shareholders’ meeting.
43
2. Details of audit remuneration
(1) Remuneration for audits by certified public accountants
(Millions of yen)
Category
Previous fiscal year
Fiscal year under review
Remuneration for
audit certification
work
Remuneration for
non-audit work
Remuneration for
audit certification
work
Remuneration for
non-audit work
Filing company
Consolidated
subsidiaries
Total
197
67
264
13
4
17
158
66
225
2
2
5
(2) Other important remuneration
Previous fiscal year
Total payments for audits carried out on behalf of 64 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2014, amounted to
¥549 million.
Fiscal year under review
Total payments for audits carried out on behalf of 63 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2015, amounted to
¥562 million.
(3) Non-audit work performed by auditing certified public accountant at filing company
Previous fiscal year
Remuneration paid for non-audit work performed by the certified public accountant was for consultancy
services in IFRS.
Fiscal year under review
Remuneration paid for non-audit work performed by the certified public accountant was for various consultancy
services.
(4) Governing policy for auditor remuneration
This does not apply because remuneration for auditing services is determined according to the nature of the
audit work.
44
3. Basic policy regarding company control
At its meeting on April 30, 2008, Epson’s board of directors agreed on a basic policy governing persons who
control our financial and business policy decisions (hereinafter the “basic policy”).
(1) Overview
Epson believes that its shareholders should be determined through free trade on the market. Therefore, the
decision as to whether to accept a takeover offer that would allow another party to acquire a controlling share of
Epson and thus gain power over the Company’s financial and business decisions should ultimately be put before
the shareholders.
To ensure and enhance the corporate value and common interests of shareholders, Epson believes it is essential
for Epson’s directors, managers, and employees to work as a team to create value, to pursue the Epson tradition
of creativity and challenge, and to earn and keep the trust of its customers.
Not all large-scale acquisitions of shares enhance the value of the company whose shares are being acquired,
nor do they always serve the common interests of shareholders. Epson recognizes the need to use all necessary
and appropriate means to protect the Company’s corporate value and the common interests of its shareholders
against persons seeking to improperly acquire large numbers of shares in an attempt to gain control over
decisions concerning the Company’s financial and business policies.
(2) Summary of measures in support of the basic policy
1) Specific actions in support of the basic policy
Under the Updated SE15 Second-Half Mid-Range Business Plan (FY2013–FY2015), the Company remains
firmly committed to the strategies outlined in the SE15 Long-Range Corporate Vision but has adopted new
tactics and a different emphasis. Under the updated basic policy, Epson will pursue a basic strategy of
managing its businesses so that they create steady profit while avoiding any over-emphasis on revenue
growth. The top priority will be steady income and cash flow.
Going forward, Epson will transform itself into a company that once again posts strong growth by focusing
its management resources in areas where it can capitalize on its unique strengths, by expanding its business
segments, and by building stronger new businesses that will support Company growth in the future.
2) Efforts to deter parties who are deemed inappropriate based on Epson’s basic policy in gaining control over
the Company’s financial and business policy decision making
Aiming to ensure and enhance corporate value and the common interests of its shareholders, Epson
introduced a series of measures to prevent large-scale acquisition of Epson shares. The measures were
approved at the June 2008 general meeting of shareholders and updated at the June 2011 general meeting of
shareholders. The old measures were formally reworded and shareholders approved their updating at the
June 24, 2014 general meeting of shareholders. (The updated measures are called “the Plan,” below.)
The purpose of the Plan is to prevent large-scale acquisitions of Epson stock certificates that do not enhance
corporate value or that are not in the common interests of shareholders by having shareholders decide
whether to allow such acquisitions and by giving the Epson board of directors the time and information they
need to present shareholders with an alternative proposal and enable the board to discuss and negotiate with
the acquirer on behalf of shareholders. Specifically, a party that intends to acquire 20% or more of stock
certificates outstanding or to stage a takeover bid shall be required to submit in advance to the Epson board
of directors a statement of intent as well as sufficient and necessary information for decision making on the
part of shareholders and for evaluation and consideration by a special committee. The party shall also be
required to comply with the procedures defined in the Plan. Furthermore, the Plan allows for the activation
of provisions to halt the acquisition in question if, for example, it is not conducted in line with the Plan or it
is deemed contrary to Epson’s value as a company or the common interest of its shareholders.
To prevent the Epson board of directors from making arbitrary decisions about using anti-takeover measures,
the decision to invoke preventive measures is subject to the assessment of a special committee made up of
highly independent external parties. Actions of the special committee shall include examination of stock
acquisition details, requesting information from the Epson board of directors regarding alternative proposals,
disclosing information to shareholders, and negotiating with parties intending to make acquisitions. The
special committee shall advise the Epson board of directors regarding the necessity of anti-takeover
measures, and the Epson board of directors shall promptly accept or reject a resolution to invoke preventive
measures, paying the utmost consideration to that advice.
45
(3) Decisions made by the Epson board of directors regarding specific actions and the justification for
those decisions
The actions described in (2) 1) above were specifically formulated to enhance both Epson’s corporate value and
the common interests of its shareholders in a continuous and sustained manner. These actions support the basic
policy.
As well as having been introduced and updated in order to ensure and enhance corporate value and the common
interests of shareholders, the Plan is in accordance with the basic policy outlined in (1) above. Specifically, the
Plan guarantees fairness and objectivity, is reasonable, and supports Epson’s corporate value and the common
interests of its shareholders because, among other things, a) it was introduced (and updated) after being
approved by shareholders at the general shareholders’ meeting; b) it contains provisions for reasonable and
objective implementation; c) a special committee comprising members with a high degree of independence
from Epson management was established and activation of the Plan is subject to the assessment of that special
committee; d) the special committee may solicit expert opinions from third parties at Epson’s expense; and e)
the Plan was determined to be valid for approximately three years and may be abolished by the board of
directors at any time. The Plan is not for keeping Epson executive officers in their posts.
46
Management
Directors, statutory auditors and executive officers of the Company as of the date when the annual securities
report (yukashoken-houkokusho) was submitted and their functions are listed below.
Name
Position
Current function
Minoru Usui
Noriyuki Hama
President
(Representative
Director)
Senior Managing
Director
(Representative
Director)
Shigeki Inoue
Managing Director
General Administrative
Manager, Management
Control Division, and
General Administrative
Manager, Compliance
Office
General Administrative
Manager, Business
Infrastructure Development
Division
Yoneharu Fukushima
Managing Director
Chief Operating Officer,
Robotics Solutions
Operations Division, and
General Administrative
Manager, Corporate
Research & Development
Division
Chief Operating Officer,
Printer Operations
Division
General Administrative
Manager, Imaging
Products Key Component
Research & Engineering
Division
Chief Operating Officer,
Visual Products Operations
Division, and Deputy
General Administrative
Manager, Business
Infrastructure
Development Division
General Administrative
Manager, Human
Resources Division, and
President, Orient Watch
Co., Ltd.
Koichi Kubota
Managing Director
Motonori Okumura
Director
Junichi Watanabe
Director
Masayuki Kawana
Director
Toshiharu Aoki
Hideaki Omiya
Kenji Kubota
Outside Director
Outside Director
Standing Statutory
Auditor
47
Seiichi Hirano
Yoshiro Yamamoto
Kenji Miyahara
Michihiro Nara
John Lang
Tadaaki Hagata
Kiyofumi Koike
Standing Statutory
Auditor
Outside Statutory
Auditor
Outside Statutory
Auditor
Outside Statutory
Auditor
Managing
Executive Officer
Managing
Executive Officer
Executive Officer
Yasukazu Kitamatsu
Executive Officer
Hideki Shimada
Executive Officer
Masayuki Kitamura
Executive Officer
Akihiro Fukaishi
Executive Officer
Sunao Murata
Executive Officer
Yoshiyuki Moriyama
Executive Officer
Toshiya Takahata
Executive Officer
Tsuyoshi Kitahara
Executive Officer
Naoyuki Saeki
Executive Officer
Nobuyuki Shimotome
Executive Officer
Kazuyoshi Yamamoto
Executive Officer
48
President and Chief
Executive Officer, Epson
America, Inc.
President, Epson Precision
(Philippines), Inc.
Chairman, Epson (China)
Co., Ltd.
Deputy General
Administrative Manager,
Corporate Research &
Development Division
Deputy Chief Operating
Officer, Printer Operations
Division
Chief Operating Officer,
Microdevices Operations
Division
Deputy Chief Operating
Officer, Professional
Printing Operations
Division
Chief Operating Officer,
Professional Printing
Operations Division
Chief Operating Officer,
Wearable Products
Operations Division
General Administrative
Manager, Intellectual
Property Division
Deputy General
Administrative Manager,
Corporate Research &
Development Division
President, Epson Sales
Japan Corporation
Deputy General
Administrative Manager,
Corporate Research &
Development Division
President, Epson Europe
B.V.
Index to Consolidated Financial Statements
Seiko Epson Corporation and Subsidiaries
Consolidated Statement of Financial Position .............................................................................. 50
Consolidated Statement of Comprehensive Income ...................................................................... 52
Consolidated Statement of Changes in Equity.............................................................................. 54
Consolidated Statement of Cash Flows ........................................................................................ 56
Notes to Consolidated Financial Statements ................................................................................. 57
Report of Independent Auditors ................................................................................................. 116
49
Consolidated Statement of Financial Position
Years ended March 31, 2014 and 2015:
Millions of yen
Notes
March 31,
2014
March 31,
2015
Thousands of
U.S. dollars
March 31,
2015
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivables
Other financial assets
Other current assets
Subtotal
Non-current assets held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment property
Investments accounted for using the equity
method
Net defined benefit assets
Other financial assets
Other non-current assets
Deferred tax assets
Total non-current assets
Total assets
8,35
9,35
10
11,35
12
13,15
14
17
23
11,35
12
18
211,510
154,309
181,581
2,284
505
10,452
560,645
-
560,645
222,556
18,947
10,273
3,858
10
21,881
2,931
67,786
348,245
908,890
245,330
167,482
220,426
1,963
3,544
11,539
650,287
96
650,383
227,257
19,170
4,758
3,232
7
25,345
5,958
70,168
2,041,524
1,393,708
1,834,284
16,335
29,491
96,050
5,411,392
799
5,412,191
1,891,129
159,524
39,593
26,895
58
210,909
49,615
583,906
355,898
1,006,282
2,961,629
8,373,820
50
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables
Income tax payables
Other financial liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Other financial liabilities
Net defined benefit liabilities
Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Equity
Share capital
Capital surplus
Treasury shares
Other components of equity
Retained earnings
Equity attributable to owners of the parent
company
Non-controlling interests
Total equity
Total liabilities and equity
Millions of yen
Notes
March 31,
2014
March 31,
2015
Thousands of
U.S. dollars
March 31,
2015
123,463
13,689
82,471
22,397
94,064
336,087
141,942
56,362
5,401
3,698
640
208,045
544,132
53,204
84,321
(20,457)
49,716
195,587
362,371
2,385
364,757
908,890
140,047
8,384
75,745
24,322
106,942
355,442
112,466
31,234
6,141
2,977
711
153,531
508,973
53,204
84,321
(20,464)
83,073
294,191
1,165,407
69,767
630,315
202,396
889,941
2,957,826
935,890
259,915
51,102
24,801
5,916
1,277,624
4,235,450
442,739
701,680
(170,292)
691,297
2,448,123
494,325
4,113,547
2,982
497,308
1,006,282
24,823
4,138,370
8,373,820
19,35
20,35
21
22
20,35
23
21
22
18
24
24
24
24
51
Consolidated Statement of Comprehensive Income
Years ended March 31, 2014 and 2015:
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income
Other operating expense
Profit from operating activities
Finance income
Finance costs
Share of profit of investments accounted for using the
equity method
Profit before tax
Income taxes
Profit from continuing operations
Loss from discontinued operations
Profit for the period
Other comprehensive income
Items that will not be reclassified subsequently to profit
or loss, net of tax
Remeasurement of net defined benefit liabilities (assets)
Net gain (loss) on revaluation of financial assets
measured at FVTOCI (Note)
Subtotal
Items that may be reclassified subsequently to profit
or loss, net of tax
Exchange differences on translation of foreign
operations
Net changes in fair value of cash flow hedges
Share of other comprehensive income of investments
accounted for using the equity method
Subtotal
Total other comprehensive income, net of tax
Total comprehensive income for the period
Notes
7,26
10,13,
14
13,14,
27
29
13,30
31
31
18
32
33
33
33
33
33
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
Millions of yen
Year ended
March 31,
2014
2015
Thousands of U.S.
dollars
Year ended
March 31,
2015
1,008,407
(645,818)
362,589
(272,501)
5,998
(16,537)
79,549
2,685
(4,428)
170
77,977
9,345
87,322
(2,880)
84,442
13,086
2,785
15,871
19,378
632
154
20,166
36,038
120,480
1,086,341
(690,416)
395,924
(294,648)
39,907
(9,802)
131,380
3,268
(2,320)
207
132,536
(18,631)
113,904
(1,118)
112,785
(1,512)
2,121
608
30,113
1,718
257
32,089
32,698
145,483
9,040,034
(5,745,335)
3,294,699
(2,451,926)
332,087
(81,576)
1,093,284
27,194
(19,296)
1,722
1,102,904
(155,047)
947,857
(9,312)
938,545
(12,582)
17,641
5,059
250,605
14,296
2,138
267,039
272,098
1,210,643
52
Profit for the period attributable to:
Owners of the parent company
Non-controlling interests
Profit for the period
Total comprehensive income for the period
attributable to:
Owners of the parent company
Non-controlling interests
Total comprehensive income for the period
Millions of yen
Year ended
March 31,
Notes
2014
2015
Thousands of U.S.
dollars
Year ended
March 31,
2015
84,203
239
84,442
120,047
432
120,480
Yen
Year ended
March 31,
Notes
2014
2015
112,560
225
112,785
144,841
642
145,483
936,673
1,872
938,545
1,205,301
5,342
1,210,643
U.S. dollars
Year ended
March 31,
2015
Earnings (loss) per share for the period:
Basic earnings (loss) per share for the period
Earnings (loss) per share from continuing operations for
the period:
Basic earnings (loss) per share for the period
Earnings (loss) per share from discontinued operations for
the period:
Basic earnings (loss) per share for the period
34
34
34
235.35
314.61
243.40
317.74
2.62
2.65
(8.05)
(3.13)
(0.03)
53
Consolidated Statement of Changes in Equity
Years ended March 31, 2014 and 2015:
Equity attributable to owners of the parent company
Millions of yen
Other components of equity
Share capital
Capital surplus
Treasury shares
Notes
Remeasurement of net
defined benefit
liabilities (assets)
Net gain (loss) on
revaluation of financial
assets measured at
FVTOCI (Note)
Exchange differences
on translation of
foreign operations
Net changes in fair
value of cash flow
hedges
Total other
components of equity
Retained
earnings
Total equity
attributable to owners
of the parent
company
Non-controlling
interests
Total equity
As of April 1, 2013
Profit (loss) for the period
Other comprehensive income (loss)
Total comprehensive income (loss) for the
period
Acquisition of treasury shares
Dividends
Acquisition of subsidiary
Transfer from other components of equity
to retained earnings
Total transactions with the owners
As of March 31, 2014
53,204
-
-
84,321
-
-
(20,453)
-
-
-
-
13,086
2,467
-
2,864
25,785
-
19,260
(1,295)
-
632
26,958
-
35,844
101,876
84,203
-
-
-
-
13,086
2,864
19,260
632
35,844
84,203
245,905
84,203
35,844
120,047
2,063
239
193
432
247,969
84,442
36,038
120,480
24
25
-
-
-
-
-
-
(4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,577)
-
(4)
(3,577)
-
-
(110)
-
(4)
(3,688)
-
-
-
-
(13,086)
-
-
-
-
53,204
-
84,321
(4)
(20,457)
(13,086)
-
-
5,332
-
45,046
-
(662)
(13,086)
(13,086)
49,716
13,086
-
-
-
9,508
195,587
(3,581)
362,371
(110)
2,385
(3,692)
364,757
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
54
Equity attributable to owners of the parent company
Millions of yen
Other components of equity
Share capital
Capital surplus
Treasury shares
Notes
Remeasurement of net
defined benefit
liabilities (assets)
Net gain (loss) on
revaluation of financial
assets measured at
FVTOCI (Note)
Exchange differences
on translation of
foreign operations
Net changes in fair
value of cash flow
hedges
Total other
components of equity
Retained
earnings
Total equity
attributable to owners
of the parent
company
Non-controlling
interests
Total equity
As of April 1, 2014
Profit (loss) for the period
Other comprehensive income (loss)
Total comprehensive income (loss) for the
period
Acquisition of treasury shares
Dividends
Acquisition of subsidiary
Transfer from other components of equity
to retained earnings
Total transactions with the owners
As of March 31, 2015
53,204
-
-
84,321
-
-
(20,457)
-
-
-
-
(1,512)
5,332
-
2,253
45,046
-
29,821
(662)
-
1,718
49,716
-
32,281
195,587
112,560
-
-
-
-
(1,512)
2,253
29,821
1,718
32,281
112,560
362,371
112,560
32,281
144,841
2,385
225
416
642
24
25
-
-
-
-
-
-
(6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,880)
-
(6)
(12,880)
-
-
(95)
50
364,757
112,785
32,698
145,483
(6)
(12,975)
50
-
-
-
-
53,204
-
84,321
(6)
(20,464)
1,512
1,512
-
(436)
-
-
(436)
7,149
-
74,868
-
1,055
1,075
1,075
83,073
(1,075)
-
-
-
(13,955)
294,191
(12,887)
494,325
(45)
2,982
(12,932)
497,308
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
Thousands of U.S. dollars
Equity attributable to owners of the parent company
Other components of equity
Share capital
Capital surplus
Treasury shares
Notes
Remeasurement of net
defined benefit
liabilities (assets)
Net gain (loss) on
revaluation of financial
assets measured at
FVTOCI (Note)
Exchange differences
on translation of
foreign operations
Net changes in fair
value of cash flow
hedges
Total other
components of equity
Retained
earnings
Total equity
attributable to owners
of the parent
company
Non-controlling
interests
Total equity
As of April 1, 2014
Profit (loss) for the period
Other comprehensive income (loss)
Total comprehensive income (loss) for the
period
Acquisition of treasury shares
Dividends
Acquisition of subsidiary
Transfer from other components of equity
to retained earnings
Total transactions with the owners
As of March 31, 2015
442,739
-
-
701,680
-
-
(170,243)
-
-
-
-
-
-
-
(12,582)
(12,582)
44,379
-
18,748
18,748
374,862
-
248,166
248,166
(5,517)
-
14,296
14,296
413,724
-
268,628
268,628
1,627,576
936,673
-
936,673
3,015,476
936,673
268,628
1,205,301
19,865
1,872
3,470
5,342
24
25
-
-
-
-
-
-
(49)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(107,181)
-
(49)
(107,181)
-
-
(800)
416
3,035,341
938,545
272,098
1,210,643
(49)
(107,981)
416
-
-
-
-
442,739
-
701,680
(49)
(170,292)
12,582
12,582
-
(3,637)
-
-
(3,637)
59,490
-
623,028
-
8,779
8,945
8,945
691,297
(8,945)
-
-
-
(116,126)
2,448,123
(107,230)
4,113,547
(384)
24,823
(107,614)
4,138,370
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
55
Consolidated Statement of Cash Flows
Years ended March 31, 2014 and 2015:
Millions of yen
Year ended March 31,
2014
2015
Thousands of U.S. dollars
Year ended March 31,
2015
Notes
Cash flows from operating activities
Profit for the period
Depreciation and amortisation
Impairment loss
Finance (income) costs, net
Share of (profit) loss of investments accounted for using the equity
method
Loss (gain) on sales and disposal of property, plant and equipment,
intangible assets and investment property, net
Income taxes
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in net defined benefit liabilities
Other, net
Subtotal
Interest and dividend income received
Interest expenses paid
Payments for loss on litigation
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Proceeds from sales of investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of intangible assets
Proceeds from sales of investment property
Purchase of investments in subsidiaries
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in current borrowings
Repayments of non-current borrowings
Proceeds from issuance of bonds issued
Redemption of bonds issued
Payments of lease obligations
Dividends paid
Dividends paid to non-controlling interests
Purchase of treasury shares
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
25
8
8
84,442
41,375
4,429
1,742
(170)
650
(9,345)
(7,225)
(1,650)
12,148
(4,830)
8,685
130,251
2,099
(2,693)
(4,068)
(10,729)
114,859
14
(33,725)
564
(8,261)
36
251
-
(124)
(41,244)
2,503
(75,000)
20,000
-
(379)
(3,577)
(110)
(4)
(56,567)
9,808
26,856
184,654
211,510
112,785
44,907
3,563
(948)
(207)
(4,288)
18,631
(2,279)
(19,252)
21
(25,355)
8,842
136,419
2,481
(1,552)
(859)
(27,660)
108,828
249
(37,045)
272
(5,738)
29
14,012
(1,097)
(3,417)
(32,735)
(30,167)
(2,000)
10,000
(20,000)
(241)
(12,880)
(95)
(6)
(55,392)
13,118
33,819
211,510
245,330
938,545
373,695
29,649
(7,898)
(1,722)
(35,682)
155,047
(18,964)
(160,206)
174
(210,992)
73,570
1,135,216
20,645
(12,915)
(7,148)
(230,181)
905,617
2,072
(308,271)
2,263
(47,749)
241
116,601
(9,128)
(28,434)
(272,405)
(251,036)
(16,670)
83,215
(166,430)
(2,005)
(107,181)
(790)
(49)
(460,946)
109,169
281,435
1,760,089
2,041,524
56
Notes to Consolidated Financial Statements
1. Reporting Entity
Seiko Epson Corporation (the “Company”) is a stock corporation domiciled in Japan. The addresses of the
Company’s registered head office and principal business offices are available on the Company’s website
(http://www.epson.jp). The details of businesses and principal business activities of the Company and its affiliates
(“Epson”) are stated in “7. Segment Information.”
2. Basis of Preparation
(1) Compliance with IFRS
Epson’s consolidated financial statements are prepared in accordance with International Financial Reporting
Standards (hereinafter referred to as “IFRS”) as issued by the International Accounting Standards Board which are
applied based on the provision of Article 93 of the Ordinance on Terminology, Forms and Preparation Methods of
Consolidated Financial Statements, as Epson meets the criteria of a “Specified company” defined under Article 1-2,
Paragraph 1, Item 2 of the Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial
Statements.
(2) Basis of Measurement
Except for the financial instruments stated in “3. Significant Accounting Policies,” Epson’s consolidated financial
statements are prepared on the cost basis.
(3) Functional Currency and Presentation Currency
Epson’s consolidated financial statements are presented in Japanese yen (hereinafter referred to as “yen” or “¥”),
which is the functional currency of the Company. The units are in millions of yen unless otherwise noted, and
figures less than one million yen are rounded down.
The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of
readers outside Japan and have been made at the rate of ¥120.17 to U.S. $1 as of March 31, 2015.
(4) Reporting Period of Subsidiaries
The fiscal year end date of certain overseas subsidiaries is December 31, and Epson consolidates financial results
of those subsidiaries in conformity with the provisional settlement of accounts as of the consolidated fiscal year
end.
3. Significant Accounting Policies
(1) Basis of Consolidation
The consolidated financial statements include financial statements of Epson, and interests in investments in
associates and joint ventures.
(A) Subsidiaries
A subsidiary is an entity that is controlled by Epson. Epson has control over the entity if it is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee. The acquisition date of a subsidiary is the date on which Epson obtains control of the
subsidiary, and the subsidiary is included in the consolidation from the date of acquisition until the date on which
Epson loses control.
All intergroup balances, transactions, unrealised profit or loss arising from intercompany transaction are eliminated
on consolidation. Comprehensive income for subsidiaries is attributed to owners of the parent company and
non-controlling interests even if this results in the non-controlling interests having a deficit balance.
(B) Associates
An associate is an entity over which Epson has significant influence, including the power to participate in the
financial and operating policy decisions of the investee. Investments in associates are accounted for using the
equity method from the date on which Epson has the significant influence until the date on which it ceases to have
the significant influence.
57
(C) Joint Ventures
Joint venture is a joint arrangement whereby Epson and the other parties that have joint control of the arrangement
which is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
activities that significantly affect the investee’s returns require the unanimous consent of the parties sharing control,
have rights to the net assets of the arrangement. Epson accounts for that investment using the equity method.
(2) Business Combinations
Business combinations are accounted for using the acquisition method. Consideration transferred in a business
combination is measured as the sum of the acquisition-date fair value of the assets transferred, the liabilities
assumed, all non-controlling interests and equity instruments issued by the Company in exchange for control over
an acquiree. Any excess of the consideration of acquisition over the fair value of identifiable assets and liabilities is
recognised as goodwill in the consolidated statement of financial position. If the consideration of acquisition is
lower than the fair value of the identifiable assets and liabilities, the difference is immediately recognised as profit
in the consolidated statement of comprehensive income. Acquisition related costs incurred are recognised as
expenses. The additional acquisition of non-controlling interests after obtaining control is accounted for as a capital
transaction and no goodwill is recognised with respect to such transaction.
(3) Foreign Currency Translation
Consolidated financial statements of Epson are presented in Japanese yen, which is the functional currency of the
Company. Each company in Epson specifies its own functional currency and measures transactions based on it.
Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing at the
dates of transactions or an approximation of the rate. Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the rates of exchange prevailing at the fiscal year end date.
Differences arising from the translation and settlement are recognised as profit or loss. However, exchange
differences arising from the translation of financial instruments designated as hedging instruments for net
investments in foreign operations (foreign subsidiaries), financial assets measured at fair value through other
comprehensive income, and cash flow hedges are recognised as other comprehensive income.
The assets and liabilities of foreign operations are translated into Japanese yen at the rates of exchange prevailing at
the fiscal year end date, while income and expenses of foreign operations are translated into Japanese yen at the
rates of exchange prevailing at the dates of transactions or an approximation to the rate. The resulting translation
differences are recognised as other comprehensive income. In cases where foreign operations are disposed of, the
cumulative amount of translation differences related to the foreign operations is recognised as profit or loss in the
period of disposition.
(4) Financial Instruments
Epson accounts for financial instruments in accordance with IFRS 9 “Financial Instruments” (announced in
November 2009, revised in October 2010), which Epson has early adopted.
(A) Financial Assets
(i) Initial Recognition and Measurement
Financial assets are classified into financial assets measured at fair value and amortised cost at initial recognition.
Financial assets are classified as financial assets measured at amortised cost if both of the following conditions
are met. Otherwise, they are classified as financial assets measured at fair value.
(a) The asset is held within a business model whose objective is to hold assets in order to collect contractual
cash flows.
(b) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For financial assets measured at fair value, each equity instrument is designated as measured at fair value through
profit or loss or as measured at fair value through other comprehensive income, except for equity instruments
held for trading purposes that must be measured at fair value through profit or loss. Such designations are applied
continuously.
All financial assets are initially measured at fair value plus transaction costs that are directly attributable to the
financial assets, except when classified in the category of financial assets measured at fair value through profit or
loss.
Epson recognises trade and other receivables on the date they are originated. All other financial assets are
recognised on the trade date when Epson becomes a party to the contractual provisions of the instrument.
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(ii) Subsequent Measurement
After initial recognition, financial assets are measured based on the classification as follows:
(a) Financial Assets Measured at Amortised Cost
Financial assets measured at amortised cost are measured at amortised cost using the effective interest method.
(b) Other Financial Assets
Financial assets other than those measured at amortised cost are measured at fair value.
Changes in fair value of financial assets measured at fair value are recognised as profit or loss. However,
changes in fair value of equity instruments designated as measured at fair value through other comprehensive
income are recognised as other comprehensive income and the amount in other comprehensive income is
transferred to retained earnings when equity instruments are derecognised or the decline in its fair value is
significant. Dividends on the financial assets are recognised in profit or loss for each fiscal year.
(iii) Derecognition
Financial assets are derecognised when the contractual rights to the cash flows from them expire or when they are
transferred in transactions in which substantially all the risks and rewards of ownership are transferred.
(B) Impairment of Financial Assets
At the end of each fiscal year, Epson assesses whether there is any objective evidence that financial assets
measured at amortised cost are impaired. Evidence of impairment includes significant financial difficulty of the
borrower or a group of borrowers, a default or delinquency in interest or principal payments, and bankruptcy of the
borrower. Epson assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant and collectively for financial assets that are not individually significant.
If there is any objective evidence that impairment losses on financial assets measured at amortised cost have been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows.
When impairment is recognised, the carrying amount of the financial asset is reduced by an allowance account for
credit losses and impairment losses are recognised in profit or loss. The carrying amount of financial assets
measured at amortised cost is directly reduced for the impairment when they are expected to become uncollectible
in the future and all collaterals are implemented or transferred to Epson.
If the amount of the impairment losses provided decreases due to an event occurring after the impairment was
recognised, the previously recognised impairment losses are reversed into profit through the allowance account for
credit losses.
(C) Financial Liabilities
(i) Initial Recognition and Measurement
Financial liabilities are classified into financial liabilities measured at fair value through profit or loss and
financial liabilities measured at amortised cost. Epson determines the classification at initial recognition.
All financial liabilities are measured at fair value at initial recognition. However, financial liabilities measured at
amortised cost are measured at cost after deducting transaction costs that are directly attributable to the financial
liabilities.
(ii) Subsequent Measurement
After initial recognition, financial liabilities are measured based on the classification as follows:
(a) Financial Liabilities Measured at Fair Value through Profit or Loss
Financial liabilities measured at fair value through profit or loss include financial liabilities designated as
measured at fair value through profit or loss at initial recognition.
(b) Financial Liabilities Measured at Amortised Cost
After initial recognition, financial liabilities measured at amortised cost are measured at amortised cost using
the effective interest method. Amortisation under the effective interest method and gains or losses on
derecognition are recognised as profit or loss in the consolidated statement of comprehensive income.
(iii) Derecognition
Financial liabilities are derecognised when the obligation is discharged, canceled or expired.
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(D) Offsetting of Financial Assets and Financial Liabilities
Financial assets and financial liabilities are offset and presented as a net amount in the consolidated statement of
financial position only when there is a legally enforceable right to set off the recognised amounts and Epson
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
(E) Derivatives Accounting
Epson utilizes derivatives, including forward foreign exchange contracts and non-deliverable forwards, to hedge
foreign exchange and interest rate risks. These derivatives are initially measured at fair value when the contract is
entered into, and are subsequently remeasured at fair value.
Changes in fair value of derivatives are recognised as profit or loss in the consolidated statement of comprehensive
income. However, the gains or losses on hedging instruments relating to the effective portion of cash flow hedges
and hedges of net investments in foreign operations are recognised as other comprehensive income in the
consolidated statement of comprehensive income.
(F) Hedge Accounting
At the inception of a hedge, Epson formally designates and documents the hedging relationship to which hedge
accounting is applied and the objectives and strategies of risk management for undertaking the hedge. The
documentation includes identification of hedging instruments, the hedged items or transactions, the nature of the
risks being hedged and how the hedging instrument’s effectiveness is assessed in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to the hedged risks. Even though these hedges are
expected to be highly effective in offsetting changes in fair value or cash flows, they are assessed on an ongoing
basis and determined actually to have been highly effective throughout the financial reporting periods for which the
hedges were designated. Hedges that meet the requirements for hedge accounting are classified in the following
categories.
(i) Fair Value Hedge
Changes in fair value of derivatives are recognised as profit or loss in the consolidated statement of
comprehensive income. Regarding changes in fair value of hedged items attributable to the hedged risks, the
carrying amount of the hedged item is adjusted and the change is recognised as profit or loss in the consolidated
statement of comprehensive income.
(ii) Cash Flow Hedge
The effective portion of gains or losses on hedging instruments is recognised as other comprehensive income in
the consolidated statement of comprehensive income, while the ineffective portion is recognised immediately as
profit or loss in the consolidated statement of comprehensive income.
The amounts of hedging instruments recognised in other comprehensive income are reclassified to profit or loss
when the transactions of the hedged items affect profit or loss. In cases where hedged items result in the
recognition of non-financial assets or liabilities, the amounts recognised as other comprehensive income are
accounted for as adjustments to the initial carrying amount of non-financial assets or liabilities.
When forecast transactions or firm commitments are no longer expected to occur, any related cumulative gains or
losses that have been recognised in other components of equity as other comprehensive income are reclassified to
profit or loss. When hedging instruments expire, are sold, terminated or exercised without the replacement or
rollover of other hedging instruments, or when the hedge designation is revoked, amounts that have been
recognised in other components of equity through other comprehensive income continue to be recognised in
other component of equity until the forecast transactions or firm commitments occur.
(iii) Hedge of Net Investment in Foreign Operations
The hedge of net investment in foreign operations is accounted for similarly to a cash flow hedge. The effective
portion of gains or losses on hedging instruments is recognised as other comprehensive income in the
consolidated statement of comprehensive income, while the ineffective portion is recognised as profit or loss in
the consolidated statement of comprehensive income. At the time of the disposal of the foreign operations, any
related cumulative gains or losses that have been recognised in other components of equity as other
comprehensive income are reclassified to profit or loss.
(G) Fair Value of Financial Instruments
Fair value of financial instruments that are traded in active financial markets at the fiscal year end refers to quoted
market prices or dealer quotations.
If there is no active market, fair value of financial instruments is determined using appropriate valuation models.
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(5) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments that are readily
convertible to known amounts of cash and subject to insignificant risk of change in value and due within three
months from the date of acquisition.
(6) Inventories
The cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition. Inventories are measured at the lower of cost or net realizable
value, and the costs are determined by using the weighted-average method. Net realizable value is determined as
the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated
costs necessary to make the sale.
(7) Property, Plant and Equipment
Property, plant, and equipment is measured by using the cost model and is stated at cost less accumulated
depreciation and accumulated impairment losses.
The cost includes any costs directly attributable to the acquisition of the asset and dismantlement, removal and
restoration costs, as well as borrowing costs eligible for capitalisation.
Except for assets that are not subject to depreciation such as land, assets are depreciated using the straight-line
method over their estimated useful lives. The estimated useful lives of major asset items were as follows:
• Buildings and structures: 10 to 35 years
• Machinery and vehicles: 2 to 12 years
The estimated useful lives, depreciation method and residual value are reviewed at each fiscal year end and if there
are any changes made to the estimated useful lives, depreciation method and residual value, such changes are
accounted for on a prospective basis as changes in estimate.
(8) Intangible Assets
(A) Goodwill
Goodwill is measured at cost less accumulated impairment losses.
Goodwill is not amortised. It is allocated to cash-generating units that are identified according to locations and
types of businesses and tested for impairment annually or whenever there is any indication of impairment.
Impairment losses on goodwill are recognised as profit or loss in the consolidated statement of comprehensive
income and not reversed in subsequent periods.
(B) Intangible Assets other than Goodwill
Intangible assets are measured by using the cost model and are stated at cost less accumulated amortisation and
accumulated impairment losses.
Intangible assets acquired separately are measured at cost at the initial recognition, and the costs of intangible
assets acquired through business combinations are recognised at fair value at the acquisition date. Expenditures on
internally generated intangible assets are recognised as expenses in the period incurred, except for development
expense that satisfy the capitalisation criteria.
Intangible assets with finite useful lives are amortised using the straight-line method over their estimated useful
lives and are tested for impairment whenever there is any indication of impairment. The estimated useful lives and
amortisation method of intangible assets with finite useful lives are reviewed at fiscal year end, and the effect of
any changes in estimate would be accounted for on a prospective basis.
The estimated useful life of major intangible assets with finite useful lives was as follows:
• Software: 3 to 5 years
Intangible assets with indefinite useful lives and intangible assets that are not ready to use are not amortised, but
they are tested for impairment individually or by cash-generating unit annually or whenever there is any indication
of impairment.
(9) Leases
Leases are classified as finance leases whenever substantially all the risks and rewards incidental to ownership are
transferred to Epson. All other leases are classified as operating leases.
In finance lease transactions, leased assets and lease obligations are recognised in the consolidated statement of
financial position at the lower of the fair value of the leased property or the present value of the minimum lease
payments, each determined at the inception of the lease. Lease payments are apportioned between the finance cost
and the reduction of the lease obligations based on the effective interest method. Leased assets are depreciated
using the straight-line method over the shorter of their estimated useful lives or lease terms.
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In operating lease transactions, lease payments are recognised as an expense using the straight-line method over the
lease terms in the consolidated statement of comprehensive income. Contingent rents are recognised as an expense
in the period in which they are incurred.
Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement in
accordance with the terms of that, whether fulfilment of the arrangement is dependent on the use of a specific asset
or assets (the asset) and the arrangement conveys a right to use the asset, even if the arrangement does not take the
legal form of a lease.
(10) Investment Property
Investment property is property held to earn rentals or for capital appreciation or both.
Investment property is measured by using the cost model and is stated at cost less accumulated depreciation and
accumulated impairment losses.
The estimated useful life of major investment property is 35 years.
(11) Impairment of Non-financial Assets
Epson assesses for each fiscal year whether there is any indication that an asset may be impaired. If any such
indication exists, or in cases where the impairment test is required each fiscal year, the recoverable amount of the
asset is estimated. If the recoverable amount cannot be estimated for each asset, it is estimated by the
cash-generating unit to which the asset belongs. The recoverable amount of an asset or a cash-generating unit is
determined at the higher of its fair value less sales costs or its value in use. If the carrying amount of the asset or
cash-generating unit exceeds the recoverable amount, impairment losses are recognised and the carrying amount is
reduced to the recoverable amount. In determining the value in use, estimated future cash flows are discounted to
the present value, using pretax discount rates that reflect current market assessments of the time value of money
and the risks specific to the asset.
Epson assesses whether there is any indication that impairment losses recognised in prior years for an asset other
than goodwill may no longer exist or may have decreased, such as any changes in assumptions used for the
determination of the recoverable amount. If any such indication exists, the recoverable amount of the asset or cash-
generating unit is estimated. If the recoverable amount exceeds the carrying amount of the asset or cash-generating
unit, impairment losses are reversed up to the lower of the estimated recoverable amount or the carrying amount
(net of depreciation) that would have been determined if no impairment losses had been recognised in prior years.
(12) Non-current Assets Held-for-Sale and Discontinued Operations
An asset or asset group whose value is expected to be recovered through a sales transaction rather than through
continuing use is classified into a non-current asset and disposal group held-for-sale when the following conditions
are met: it is highly probable that the asset or asset group will be sold within one year, the asset or asset group is
available for immediate sale in its present condition, and Epson management commits to the sale plan. In such
cases, the non-current asset is not depreciated or amortised and is measured at the lower of its carrying amount or
its fair value less sales costs.
Assets and asset groups that have already been disposed of or that are classified as held-for-sale are recognised as
discontinued operations when they meet any of the following:
• Separate major line of business or geographical area of operations
• Part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of
operations
• Subsidiary acquired exclusively with a view to resale
(13) Post-employment Benefits
Epson sponsors defined benefit plans and defined contribution plans as post-employment benefits plans. For each
defined benefit plan, Epson calculates the present value of defined benefit obligations, related current service cost
and past service cost using the projected unit credit method. For a discount rate, a discount period is determined
based on the period until the expected date of benefit payment in each fiscal year, and the discount rate is
determined by reference to market yields for the period corresponding to the discount period at the fiscal year end
date on high quality corporate bonds. Net of liabilities or assets for defined benefit plans are calculated by the
present value of the defined benefit obligation, deducting the fair value of any plan assets (including adjustments
for the asset ceiling for defined benefit plans and minimum funding requirements, if necessary). Net interest costs
derived from net of liabilities or assets for defined benefit plans are recognised as finance costs.
Remeasurements of net of liabilities or assets for defined benefit plans are recognised in full as other
comprehensive income in the period when they are incurred and transferred to retained earnings immediately. Past
service costs are recognised as profit or loss at the earlier of when a plan amendment or scale down occurs and
when any related restructuring costs or termination benefits are recognised. The expenses for post-employment
benefits for defined contribution plans are recognised as expenses at the time of contribution.
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(14) Provisions
Epson recognises provisions when it has legal obligations or constructive obligations resulting from prior events
and when it is probable that the obligations are required to be settled and the amount of the obligations can be
estimated reliably.
Where the effect of the time value of money is material, the amount of provisions is measured at the present value
of the expenditures expected to be required to settle the obligations.
(15) Revenue
(A) Sale of Goods
Epson sells information-related equipment, devices and precision products, and sensing and industrial solutions.
Revenue from the sale of these goods is recognised when the significant risks and rewards of ownership of the
goods transfer to the buyers, Epson retains neither continuing managerial involvement nor effective control over
the goods sold, it is probable that the future economic benefits will flow to Epson, and the amount of revenue and
the corresponding costs can be measured reliably. Therefore, revenue is usually recognised at the time of delivery
of goods to customers. In addition, revenue is recognised at fair value of the consideration received or receivable
less discounts and rebates.
(B) Interest Income
Interest income is recognised using the effective interest rate method.
(C) Dividend Income
Dividend income is recognised when the shareholder’s right to receive payment is established.
(D) Royalties
Royalties are recognised on an accrual basis in accordance with the substance of the relevant agreement.
(E) Rendering of Services
Revenues arising from rendering of services are recognised by reference to the stage of completion of the
transaction as of the fiscal year end date when the service is provided.
(16) Government Grants
A government grant is recognised at fair value when there is a reasonable assurance that the entity will comply
with the conditions attaching to it, and that the grant will be received.
Government grants that are related to expense items are recognised in profit on a systematic basis over the periods
in which the entity recognises as expenses the related costs for which the grants are intended to compensate, and
unexpired grants are recognised in liabilities as deferred income. With regard to government grants related to assets,
the amount of the grants is deducted from the cost of the assets.
(17) Borrowing Costs
With respect to assets that require a substantial period of time to get ready for their intended use or sale, the
borrowing costs that are directly attributable to the acquisition, construction or production of the assets are
capitalized as part of the cost of the assets. Other borrowing costs are recognised as an expense in the period when
they are incurred.
(18) Income Taxes
Income taxes in the consolidated statement of comprehensive income are presented as the total of current tax
expense and deferred tax expense.
Current tax expense is measured at the amount that is expected to be paid to or refunded from the taxation
authorities. For the calculation of the tax amount, Epson uses the tax rates and tax laws that have been enacted or
substantively enacted by the fiscal year end date. The current tax expense is recognised in profit or loss, except for
taxes arising from items that are recognised in other comprehensive income or directly in equity and taxes arising
from business combinations.
Deferred tax expense is calculated based on the temporary differences between the tax base and accounting bases
for assets and liabilities at the fiscal year end date. Deferred tax assets are recognised for deductible temporary
differences, carryforward of unused tax credits and unused tax losses to the extent that it is probable that future
taxable profit will be available against which they can be utilized. Deferred tax liabilities are recognised for all
taxable temporary differences.
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The deferred tax assets or liabilities are not recognised for the following temporary differences:
• The initial recognition of goodwill
• The initial recognition of assets or liabilities in transactions that are not business combinations and affect neither
accounting profit nor taxable profit or tax loss at the time of transaction
• Deductible temporary differences arising from investments in subsidiaries and associates, and interests in joint
ventures to the extent that it is probable that the temporary differences will not reverse in the foreseeable future and
it is not probable that future taxable profits will be available against which they can be utilized
• Taxable temporary differences arising from investments in subsidiaries and associates, and interests in joint
ventures to the extent that the timing of the reversal of the temporary difference is controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the fiscal year when the
asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the
fiscal year end date.
(19) Treasury Shares
Treasury shares are recognised at cost and deducted from equity. No profit or loss is recognised on the purchase,
sale or cancellation of the treasury shares. Any difference between the carrying amount and the consideration paid
is recognised in capital surplus.
(20) Earnings per Share
Basic earnings per share are calculated by dividing profit or loss attributable to ordinary shareholders of the parent
company by the weighted-average number of ordinary shares outstanding during the year, adjusted by the number
of treasury shares.
(21) Dividends
Year-end dividend distributions to the shareholders of the Company are recognised as liabilities in the period in
which the distribution is approved by the Annual Shareholders’ Meeting. Interim dividend distributions are
recognised as liabilities in the period in which the distribution is approved by Epson’s Board of Directors.
(22) Contingencies
(A) Contingent Liabilities
Epson discloses contingent liabilities in the notes to consolidated financial statements if it has possible obligations
at the fiscal year end date but their existence cannot be confirmed at that date, or if it has present obligations as a
result of past events but which those obligations do not meet the recognition criteria of a provision.
(B) Contingent Assets
Epson discloses contingent assets in the notes to consolidated financial statements if an inflow of future economic
benefits to Epson is probable, but not virtually certain at the fiscal year end date.
(23) Reclassification
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.
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4. Significant Accounting Estimates and Judgments
The preparation of Epson’s consolidated financial statements includes management estimates and assumptions in
order to measure income, expenses, assets and liabilities, and disclosed contingencies as of the fiscal year end date.
These estimates and assumptions are based on the best judgment of management in light of historical experience
and various factors deemed to be reasonable as of the fiscal year end date. Given their nature, actual results may
differ from those estimates and assumptions.
The estimates and assumptions are continuously reviewed by management. The effects of a change in estimates and
assumptions are recognised in the period of the change and subsequent periods.
Among the above estimates and assumptions, the following were items that may have a material effect on the
amounts recognised in Epson’s consolidated financial statements:
(1) Impairment of Property, Plant and Equipment, Goodwill, Intangible Assets and Investment
Property
Epson performs an impairment test for property, plant and equipment, goodwill, intangible assets and investment
property when there is any indication that the recoverable amount has fallen below the carrying amount of the
assets.
The impairment test is performed by comparing the carrying amount and the recoverable amount of assets. If the
recoverable amount falls below the carrying amount, impairment losses are recognised. The recoverable amount is
mainly calculated based on the discounted cash flow model. Certain assumptions are made for the useful lives and
the future cash flows of the assets, discount rates and long-term growth rates. These assumptions are based on the
best estimates and judgments of management, but they could be affected by variable and uncertain future economic
conditions. Any changes in these assumptions could have a material impact on Epson’s consolidated financial
statements in future periods.
The method for calculating the recoverable amount is stated in “13. Property, Plant and Equipment.”
(2) Post-employment Benefits
Epson has several types of post-employment benefit plans, including defined benefit plans.
The present value of defined benefit obligations on each of these plans and the related service costs and others are
calculated based on actuarial assumptions. These actuarial assumptions require estimates and judgments on
variables, such as discount rates.
The actuarial assumptions are determined based on the best estimates and judgments of management, but they
could be affected by variable and uncertain future economic conditions. Any changes in these assumptions could
have a material impact on Epson’s consolidated financial statements in future periods.
These actuarial assumptions and related sensitivity analysis are stated in “23. Post-employment Benefits.”
(3) Provisions
Epson recognises various provisions, including provisions for product warranties and provisions for loss on
litigation, in the consolidated statement of financial position.
These provisions are recognised based on the best estimates of the expenditures required to settle the obligations,
taking into account risks and uncertainty related to the obligations as of the fiscal year end date.
Expenditures necessary for settling the obligations are calculated by taking all possible future results into account;
however, they may be affected by unexpected events or changes in conditions which may have a material impact
on Epson’s consolidated financial statements in future periods.
The nature and amount of recognised provisions are stated in “21. Provisions.”
(4) Income Taxes
Epson, which conducts business around the world, makes reasonable estimates of income tax to be paid to local tax
authorities in accordance with local laws and regulations, and recognises income taxes payable and current tax
expense based on these estimates.
Calculating income taxes payable and current tax expense requires estimates and judgments on various factors,
including, for example, the interpretation of tax regulations by taxable entities and the tax authority in the
jurisdiction or experience of prior tax investigation.
Therefore, there may be differences between the amount recognised as income taxes payable and current tax
expense and the amount of actual income taxes payable and current tax expense. These differences may have a
material impact on Epson’s consolidated financial statements in future periods.
In addition, deferred tax assets are recognised to the extent that it is probable that taxable income will be available
against which deductible temporary differences can be utilised. In recognizing the deferred tax assets, Epson judges
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the possibility of future taxable income and reasonably estimate the timing and amount of future taxable income
based on the business plan. The timing and amount of taxable income may be affected by variable and uncertain
future economic conditions, and changes could have a material impact on Epson’s consolidated financial
statements in future periods.
The content and amounts related to income taxes are stated in “18. Income Taxes.”
(5) Contingencies
With regard to contingencies, any items that may have a material impact on business in the future are disclosed in
light of all the available evidence as of the fiscal year end date and by taking into account the probability of these
contingencies and their impact on financial reporting.
The content of contingencies is stated in “39. Contingencies.”
5. Changes in Accounting Policies
The following are the accounting standards and interpretations applied by Epson from fiscal year 2014 ended
March 31, 2015. These standards and interpretations did not have a material impact on the consolidated financial
statements of Epson.
IFRS
Summaries of new or amended IFRS
standards or interpretations
IFRS 10
IFRS 12
IAS 32
IAS 36
IAS 39
Consolidated Financial Statements Accounting for investments held by investment entities
Disclosure of Interests in Other
Entities
Financial Instruments:
Presentation
Impairment of Assets
Additional disclosure for investments held by investment
entities
Clarification of criteria for offsetting financial assets and
liabilities and addition of application guidance
Disclosure of recoverable amounts for non-financial
assets
Exception to the requirement for the discontinuation of
hedge accounting
Recognition of liabilities related to levies
Financial Instruments:
Recognition and Measurement
IFRIC 21 Levies
6. New Accounting Standards Not Yet Adopted
Basis of preparation by the date of approval of the consolidated financial statements, new accounting standards,
amended standards and new interpretations that have been issued, but have not been early adopted by Epson are as
follows.
The implications from adoption of these standards and interpretations are assessed by Epson; however, based on
the Company’s evaluation, none of them will have a material impact on its operating results and financial
condition.
IFRS
IFRS 9
Financial
Instruments
Mandatory adoption
(from the year
beginning)
January 1, 2018
Timing of
adoption by
Epson
Description of new and revised standards
To be determined Amendments to hedge accounting
Limited changes to classification and
measurement of financial assets, and
introduction of an expected credit loss
impairment model
IFRS 15 Revenue from
Contracts with
Customers
January 1, 2017
To be determined Amendments to accounting treatment for
recognising revenue
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7. Segment Information
(1) Outline of Reportable Segments
The reportable segments of Epson are determined based on the operating segments that are components of Epson
about which separate financial information is available and are evaluated regularly by the Board of Directors in
deciding how to allocate resources and in assessing performance.
Epson is mainly engaged in the manufacture and sale of “Information-related equipment”, “Devices & precision
products” and “Sensing & industrial solutions”. The reportable segments of Epson are composed of three segments.
They are determined by types of products, nature of products, and markets.
Epson conducts development, manufacturing and sales within its reportable segments as follows:
Reportable segments
Information-related
equipment
Devices & precision
products
Sensing & industrial
solutions
Main products
Inkjet printers, page printers, color image scanners, commercial inkjet printers, serial
impact dot matrix printers, printers for use in POS systems, inkjet label printers and
related consumables, 3LCD projectors, HTPS-TFT panels for 3LCD projectors, label
printers, smart glasses, personal computers and others.
Crystal units, crystal oscillators, quartz sensors, CMOS LSIs, watches, watch
movements, metal powders, surface finishing and others.
Industrial robots, IC handlers, industrial inkjet printing systems, sensing systems and
others.
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(2) Revenues and Performances for Reportable Segments
Revenues and performances for reportable segments were as follows. Transactions between the segments were
mainly based on prevailing market prices.
FY2013: Year ended March 31, 2014
Information-
related
equipment
Reportable segments
Sensing &
industrial
solutions
Devices &
precision
products
Millions of yen
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenue
Inter-segment revenue
Total revenue
Segment profit (loss)
(Business profit (loss))
(Note 1)
840,783
444
841,228
143,905
4,873
148,779
15,964
210
16,174
1,000,653
5,529
1,006,182
892
441
1,333
6,862
(5,970)
891
1,008,407
-
1,008,407
123,778
10,857
(9,975)
124,661 (260)
(34,312)
90,087
Other operating income
(expense)
(10,538)
Profit from operating activities
79,549
Finance income (costs), net
Share of profit of
investments accounted for
using the equity method
Profit before tax
(1,742)
170
77,977
Other items
Depreciation and
amortisation expense
Impairment losses on
other than financial
assets
Segment assets
Capital expenditures
Information
-related
equipment
Reportable segments
Sensing &
industrial
solutions
Devices &
precision
products
Subtotal
Other
(Note 2)
Adjustments
Consolidated
(27,365)
(7,638)
(728)
(35,732)
(21)
(4,957)
(40,711)
(200)
(106)
(359)
(665)
-
(3,763)
(4,429)
434,296
26,452
123,742
7,984
11,876
696
569,915
35,132
845
10
338,129
3,846
908,890
38,989
(Note 1) Segment profit (loss) (Business profit (loss)) is calculated by subtracting cost of sales and selling, general
and administrative expenses from revenue.
(Note 2) “Other” consists of the intra-group services.
(Note 3) Adjustments to business profit of (¥34,312) million comprised “Eliminations” of ¥145 million and
“Corporate expenses” of (¥34,458) million. The corporate expenses included expenses relating to research and
development for new businesses and basic technology, and general corporate expenses which are not attributed to
reportable segments.
68
FY2014: Year ended March 31, 2015
Millions of yen
Reportable segments
Information-
related
equipment
Devices &
precision
products
Sensing &
industrial
solutions
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenue
906,701
150,292
23,182
1,080,176
Inter-segment revenue
594
6,004
213
6,813
808
581
5,356
1,086,341
(7,395)
-
Total revenue
907,296
156,297
23,396
1,086,989
1,390
(2,038) 1,086,341
Segment profit (loss)
(Business profit (loss))
(Note 1)
133,665
14,842
(9,036)
139,471 (318)
(37,877)
101,275
(expense)
Other operating income
Profit from operating activities
Finance income (costs), net
Share of profit of
investments accounted for
using the equity method
Profit before tax
30,104
131,380
948
207
132,536
Other items
Depreciation and
amortisation expense
Impairment losses on
other than financial
assets
Segment assets
Capital expenditures
Information-
related
equipment
(31,424)
Reportable segments
Sensing &
industrial
solutions
Devices &
precision
products
Subtotal
Other
(Note 2)
Adjustments
Consolidated
(7,769)
(668)
(39,862)
(20)
(4,595)
(44,478)
(120)
(346)
(243)
(710)
-
(2,852)
(3,563)
488,289
127,714
14,710
630,714
564
375,003
1,006,282
24,028
7,152
1,737
32,918
11
8,181
41,112
(Note 1) Segment profit (loss) (Business profit (loss)) is calculated by subtracting cost of sales and selling, general
and administrative expenses from revenue.
(Note 2) “Other” consists of the intra-group services.
(Note 3) Adjustments to business profit of (¥37,877) million comprised “Eliminations” of ¥335 million and
“Corporate expenses” of (¥38,213) million. The corporate expenses included expenses relating to research and
development for new businesses and basic technology, and general corporate expenses which are not attributed to
reportable segments.
69
FY2014: Year ended March 31, 2015
Thousands of U.S. dollars
Reportable segments
Information-
related
equipment
Devices &
precision
products
Sensing &
industrial
solutions
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
7,545,145
1,250,670
192,918
8,988,733
6,732
44,569
9,040,034
4,960
49,962
1,772
56,694
4,834
(61,528)
-
Revenue
External revenue
Inter-segment
revenue
Total revenue
7,550,105
1,300,632
194,690
9,045,427
11,566
(16,959) 9,040,034
Segment profit (loss)
(Business profit (loss))
(Note 1)
1,112,299
123,508
(75,193) 1,160,614
(2,64
6)
(315,195)
842,773
Other operating income
(expense)
250,511
Profit from operating activities 1,093,284
Finance income (costs), net
7,898
Share of profit of
investments accounted for
using the equity method
1,722
Profit before tax
1,102,904
Other items
Depreciation and
amortisation expense
Impairment losses on
other than financial
assets
Segment assets
Information-
related
equipment
Reportable segments
Sensing &
industrial
solutions
Devices &
precision
products
Subtotal
Other
(Note 2)
Adjustments
Consolidated
(261,505)
(64,650)
(5,558)
(331,713)
(166)
(38,246)
(370,125)
(1,007)
(2,879)
(2,022)
(5,908)
-
(23,741)
(29,649)
4,063,328
1,062,777
122,409
5,248,514
4,693
3,120,613
8,373,820
Capital expenditures
250,920
64,500
9,669
325,089
99
52,834
378,022
(Note 1) Segment profit (loss) (Business profit (loss)) is calculated by subtracting cost of sales and selling, general
and administrative expenses from revenue.
(Note 2) “Other” consists of the intra-group services.
(Note 3) Adjustments to business profit of ($315,195) thousand comprised “Eliminations” of $2,796 thousand and
“Corporate expenses” of ($317,991) thousand. The corporate expenses included expenses relating to research and
development for new businesses and basic technology, and general corporate expenses which are not attributed to
reportable segments.
70
(3) Geographic Information
The regional breakdowns of non-current assets and external revenues as of each fiscal year end were as follows:
Non-current Assets
Japan
The Americas
China(including Hong Kong)
Other
Total
Millions of yen
March 31,
2014
175,034
4,840
23,498
55,193
258,567
2015
163,689
6,776
26,464
63,447
260,377
Thousands of U.S. dollars
March 31,
2015
1,362,145
56,386
220,221
528,004
2,166,756
(Note) Non-current assets, excluding other financial assets, deferred tax assets and retirement benefits assets, are
segmented by the location of the assets.
External Revenue
Japan
The United States
China(including Hong Kong
and Macao)
Other
Total
Millions of yen
Year ended March 31,
2015
2014
280,936
177,935
276,238
205,215
132,504
417,031
1,008,407
148,176
456,710
1,086,341
Thousands of U.S. dollars
Year ended March 31,
2015
2,298,726
1,707,705
1,233,053
3,800,550
9,040,034
(Note) Revenue is segmented by country based on the location of the customers.
(4) Major Customers Information
Epson had no transactions with a single external customer amounting to 10% or more of total external revenue.
71
8. Cash and Cash Equivalents
The breakdown of “Cash and cash equivalents” was as follows:
Cash and deposits
Short-term investments
Total
Millions of yen
March 31,
2014
118,510
93,000
211,510
2015
111,330
134,000
245,330
Thousands of
U.S. dollars
March 31,
2015
926,437
1,115,087
2,041,524
9. Trade and Other Receivables
The breakdown of “Trade and other receivables” was as follows:
Notes and trade receivables
Other receivables
Allowance account for credit losses
Total
Millions of yen
March 31
2014
145,311
10,495
(1,497)
154,309
2015
156,440
12,563
(1,521)
167,482
Thousands of
U.S. dollars
March 31,
2015
1,301,822
104,543
(12,657)
1,393,708
Trade and other receivables are presented net of the allowance account for credit losses in the consolidated
statement of financial position.
Trade and other receivables are classified as financial assets measured at amortised cost.
10. Inventories
The breakdown of “Inventories” was as follows:
Merchandise and finished goods
Work in process
Raw materials
Supplies
Total
Millions of yen
March 31
2014
109,708
49,994
16,979
4,898
181,581
2015
140,825
54,360
19,250
5,989
220,426
Thousands of
U.S. dollars
March 31,
2015
1,171,881
452,359
160,189
49,855
1,834,284
The amount of inventories included in cost of sales recognised as an expense totaled (¥639,595) million and
(¥676,128) million (($5,626,429) thousand) for the years ended March 31, 2014 and 2015, respectively.
Losses recognised as cost of sales as a result of valuations for the years ended March 31, 2014 and 2015 were
(¥27,542) million and (¥32,138) million (($267,437) thousand), respectively. In addition, Epson has no
inventories pledged as collateral.
72
11. Other Financial Assets
(1) The breakdown of “Other financial assets”
Derivative assets
Equity securities
Bonds receivable
Time deposits
Other
Allowance account for credit losses
Total
Current assets
Non-current assets
Total
Millions of yen
March 31
2014
2015
169
16,784
103
69
5,520
(260)
22,386
505
21,881
22,386
3,181
19,639
108
44
5,980
(64)
28,889
3,544
25,345
28,889
Thousands of
U.S. dollars
March 31,
2015
26,470
163,426
898
366
49,772
(532)
240,400
29,491
210,909
240,400
Derivative assets are classified as financial assets measured at fair value through profit or loss, excluding a case
where hedge accounting is applied. Equity securities held for other than trading purposes are classified as financial
assets measured at fair value through other comprehensive income, and time deposits and bonds receivable are
classified as financial assets measured at amortised cost.
(2) Names of major equity securities measured at fair value through other comprehensive
income, their fair values and dividends received
Millions of yen
Thousands of U.S.
dollars
March 31, 2014
March 31, 2015
March 31, 2015
Fair value
Dividends
received
Fair value
Dividends
received
Fair value
Dividends
received
NGK Insulators, Ltd.
Mizuho Financial Group,
Inc.
8,077
3,061
75
9,636
93 80,186
90
3,168
105 26,362
773
873
Equity securities are held mainly for strengthening relationships with investees. Therefore, they are designated as
financial assets measured at fair value through other comprehensive income.
73
12. Other Assets
The breakdown of “Other current assets” and “Other non-current assets” was as follows:
Prepaid expense
Advances to suppliers
Other
Total
Current assets
Non-current assets
Total
Millions of yen
March 31
2014
8,854
1,582
2,947
13,384
10,452
2,931
13,384
2015
13,620
1,954
1,922
17,497
11,539
5,958
17,497
Thousands of
U.S. dollars
March 31,
2015
113,339
16,260
16,066
145,665
96,050
49,615
145,665
74
13. Property, Plant and Equipment
(1) Schedule of Property, Plant and Equipment
The schedules of the cost, accumulated depreciation and accumulated impairment losses, and carrying amount of
“Property, plant and equipment” were as follows:
Millions of yen
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
Cost
As of April 1, 2013
Individual acquisition
Transfer from(to) investment
property
Sale or disposal
Exchange differences on
translation of foreign operations
Transfer from construction
in progress
Other
As of M arch 31, 2014
Individual acquisition
Acquisition of subsidiary
Transfer to(from) investment
property
Transfer to(from) non-current
assets held for sale
Sale or disposal
Exchange differences on
translation of foreign operations
Transfer from construction
in progress
Other
As of M arch 31, 2015
Cost
As of M arch 31, 2014
Individual acquisition
Acquisition of subsidiary
Transfer to(from) investment
property
Transfer to(from) non-current
assets held for sale
Sale or disposal
Exchange differences on
translation of foreign operations
Transfer from construction
in progress
Other
462,245
1,117
2,924
(2,561)
4,382
3,393
(630)
470,871
810
1,416
(9,462)
(396)
(7,057)
6,968
5,332
(13)
468,469
6,740
11,792
(78,738)
(3,295)
(58,725)
57,984
44,370
(116)
As of M arch 31, 2015
3,898,385
440,929
2,883
-
164,656
7,194
-
(19,599)
(15,651)
7,807
6,431
30
170,468
7,613
145
-
-
(12,145)
14,004
7,741
10,770
(2,048)
440,677
6,682
44
-
-
(14,268)
14,422
14,134
(1,641)
460,050
4,447
21,774
-
(67)
260
(20,595)
(636)
5,184
24,001
-
-
-
(45)
334
2,407
219
-
(127)
17
-
43
2,561
580
-
-
-
(12)
4
24
(19)
3,137
1,074,686
33,189
2,924
(38,006)
20,209
-
(3,241)
1,089,762
39,687
1,606
(9,462)
(396)
(33,529)
35,734
-
(2,989)
1,120,412
5,714
(25,206)
(1,190)
184,611
(125)
4,143
Thousands of U.S. dollars
43,138
199,725
21,312
4,837
-
-
-
(374)
2,779
(209,752)
(1,040)
34,476
-
-
-
(118)
52
217
(177)
26,123
9,068,493
330,257
13,364
(78,738)
(3,295)
(279,013)
297,362
-
(24,872)
9,323,558
55,604
366
- －
- －
63,351
1,206
-
-
(118,731)
(101,065)
120,013
116,534
117,616
(13,655)
3,828,326
47,549
(9,884)
1,536,248
75
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
3,918,373
3,667,113
1,418,557
Accumulated Depreciation and
Accumulated Impairment Losses
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
Millions of yen
As of April 1, 2013
Depreciation expense (Note)
Impairment losses
Transfer to(from) investment
property
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2014
Depreciation expense (Note)
Impairment losses
Acquisition of subsidiary
Transfer from(to) investment
property
Transfer from(to) non-current
assets held for sale
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2015
(322,777)
(9,922)
(2,939)
(2,924)
2,348
(2,257)
709
(337,763)
(9,398)
(2,960)
(765)
6,175
300
6,830
(3,185)
(35)
(340,803)
(384,099)
(13,266)
(306)
-
19,377
(5,645)
2,103
(381,837)
(14,186)
(249)
(43)
-
-
13,725
(10,445)
1,595
(391,441)
(142,914)
(12,259)
(256)
-
15,255
(6,447)
141
(146,481)
(14,129)
(135)
(128)
-
-
11,910
(11,674)
1,010
(159,629)
-
-
(5)
-
4
-
-
(1,009)
(7)
-
-
9
(16)
(98)
(0)
(1,122)
-
-
-
-
-
0
-
-
-
(9)
-
-
-
-
5
(2)
(152)
(1,280)
(850,800)
(35,456)
(3,508)
(2,924)
36,994
(14,365)
2,855
(867,205)
(37,724)
(3,345)
(937)
6,175
300
32,472
(25,307)
2,417
(893,155)
Accumulated Depreciation and
Accumulated Impairment Losses
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
Thousands of U.S. dollars
As of M arch 31, 2014
Depreciation expense (Note)
Impairment losses
Acquisition of subsidiary
Transfer from(to) investment
property
Transfer from(to) non-current
assets held for sale
Sale or disposal
Exchange differences on
translation of foreign operations
Other
(2,810,709)
(78,205)
(24,640)
(6,375)
51,385
2,496
56,836
(26,504)
(291)
(3,177,473)
(118,049)
(2,072)
(357)
-
-
114,213
(86,918)
13,263
(1,218,948)
(117,575)
(1,123)
(1,065)
-
-
99,109
(97,145)
8,388
As of M arch 31, 2015
(2,836,007)
(3,257,393)
(1,328,359)
0
-
-
-
-
-
0
-
-
-
(9,354)
(92)
(7,216,484)
(313,921)
-
-
-
-
59
(26)
(1,257)
(10,670)
(27,835)
(7,797)
51,385
2,496
270,217
(210,593)
20,103
(7,432,429)
(Note)Depreciation expense for property, plant and equipment was included in cost of sales and selling, general
and administrative expenses in the consolidated statement of comprehensive income.
76
Millions of yen
Carrying Amount
As of April 1, 2013
As of March 31, 2014
As of March 31, 2015
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
139,468
133,107
127,665
56,829
58,839
68,609
21,741
23,986
24,982
4,447
5,183
4,143
1,397
1,438
1,856
223,885
222,556
227,257
Thousands of U.S. dollars
Carrying Amount
As of March 31, 2014
As of March 31, 2015
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Construction
in progress
Other
Total
1,107,664
1,062,378
489,640
570,933
199,609
207,889
43,138
34,476
11,958
15,453
1,852,009
1,891,129
The carrying amount of property, plant and equipment includes the carrying amount of the following leased assets:
Millions of yen
Leased Assets
As of April 1, 2013
As of March 31, 2014
As of March 31, 2015
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Total
684
223
109
75
62
98
183
116
76
943
402
284
Thousands of U.S. dollars
Leased Assets
As of March 31, 2014
As of March 31, 2015
Land, buildings
and structures
Machinery,
equipment and
vehicles
Tools, furniture
and fixtures
Total
1,865
916
515
815
965
632
3,345
2,363
(2) Impairment Losses
Epson’s business assets are generally grouped by business segment under the Company’s management accounting
system, and their cash flows are continuously monitored. Assets planned to be sold and idle assets are separately
assessed for impairment on the individual asset level.
Impairment losses recognised in the years ended March 31, 2014 and 2015, represent the losses related to idle
assets that Epson has no plan to use in the future, and the carrying amount was reduced to the recoverable amounts.
They were recognised as other operating expense in the consolidated statement of comprehensive income.
The recoverable amounts of these assets are determined using their fair values less disposal cost, which were
assessed on the basis of reasonable estimates such as a valuation by an external real estate appraiser.
77
14. Intangible Assets
The schedules of the cost, accumulated amortisation and accumulated impairment losses, and carrying amount of
“Intangible assets” were as follows:
Cost
Software
Patent rights
Millions of yen
Product
development
assets
Goodwill
Other
Total
As of April 1, 2013
Individual acquisition
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2014
Individual acquisition
Acquisition of subsidiary
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2015
35,870
4,912
(4,356)
676
519
37,622
4,149
125
(2,385)
892
1,181
41,586
14,080
1,455
-
-
-
15,536
770
-
-
-
-
16,306
4,559
1,710
(14)
-
-
6,255
1,338
161
-
1
(336)
7,421
1,841
-
-
6
-
1,848
-
402
-
75
-
2,326
4,059
215
(111)
258
(18)
4,403
124
0
(32)
(57)
(333)
4,104
60,411
8,294
(4,481)
941
500
65,666
6,383
689
(2,417)
912
511
71,744
Cost
Software
Patent rights
As of M arch 31, 2014
Individual acquisition
Acquisition of subsidiary
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2015
313,073
34,526
1,040
(19,846)
7,422
9,844
346,059
129,283
6,408
-
-
-
-
135,691
Thousands of U.S. dollars
Product
development
assets
52,051
11,134
1,340
-
8
(2,779)
61,754
Goodwill
Other
Total
15,378
-
3,353
-
624
-
19,355
36,657
1,048
0
(267)
(465)
(2,812)
34,161
546,442
53,116
5,733
(20,113)
7,589
4,253
597,020
78
Accumulated Amortisation and
Accumulated Impairment Losses
Software
Patent rights
Millions of yen
Product
development
assets
Goodwill
Other
Total
As of April 1, 2013
Amortisation expense (Note)
Impairment losses
Sale or disposal
Exchange differences on
translation of foreign operations
Other
As of M arch 31, 2014
Amortisation expense (Note)
Impairment losses
Acquisition of subsidiary
Sale or disposal
Exchange differences on
translation of foreign operations
Other
(28,497)
(2,903)
(14)
4,221
(557)
(252)
(28,005)
(3,839)
(3)
(114)
2,343
(582)
(476)
(11,281)
(937)
-
-
-
-
(12,219)
(1,036)
-
-
-
-
-
(2,397)
(1,071)
(72)
0
-
-
(3,541)
(1,380)
(77)
(112)
-
(18)
-
As of M arch 31, 2015
(30,678)
(13,255)
(5,130)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,207)
(577)
(107)
92
(163)
8
(2,953)
(556)
(5)
-
5
(0)
-
(44,383)
(5,490)
(194)
4,313
(721)
(243)
(46,719)
(6,813)
(86)
(227)
2,349
(600)
(476)
(3,509)
(52,574)
Thousands of U.S. dollars
Accumulated Amortisation and
Accumulated Impairment Losses
Software
Patent rights
Product
development
assets
Goodwill
Other
Total
As of M arch 31, 2014
Amortisation expense (Note)
Impairment losses
Acquisition of subsidiary
Sale or disposal
Exchange differences on
translation of foreign operations
Other
(233,044)
(31,938)
(24)
(956)
19,497
(4,843)
(3,980)
(101,680)
(8,622)
(29,466)
(11,502)
-
-
-
-
-
(640)
(932)
-
(149)
-
As of M arch 31, 2015
(255,288)
(110,302)
(42,689)
-
-
-
-
-
-
-
-
(24,584)
(4,632)
(51)
-
50
(0)
-
(388,774)
(56,694)
(715)
(1,888)
19,547
(4,992)
(3,980)
(29,217)
(437,496)
(Note) Amortisation expense for intangible assets was included in cost of sales and selling, general and
administrative expenses in the consolidated statement of comprehensive income.
Carrying Amount
Software
Patent rights
Millions of yen
Product
development
assets
Goodwill
Other
Total
As of April 1, 2013
As of M arch 31, 2014
As of M arch 31, 2015
7,372
9,617
10,907
2,798
3,316
3,050
2,162
2,714
2,291
1,841
1,848
2,326
1,852
1,450
594
16,027
18,947
19,170
Carrying Amount
Software
Patent rights
Thousands of U.S. dollars
Product
development
assets
Goodwill
Other
Total
As of M arch 31, 2014
As of M arch 31, 2015
80,029
90,771
27,603
25,389
22,585
19,065
15,378
19,355
12,073
4,944
157,668
159,524
79
15. Finance Lease Transactions
Epson leases industrial uninterruptible power supply, host computers and computer terminals as a lessee.
The total of future minimum lease payments, future finance costs and their present value for leased assets
recognised based on the finance lease contracts by maturity were as follows:
Not later than 1 year
Total of future minimum lease payments
Future finance costs
Present value
Later than 1 year and not later than 5 years
Total of future minimum lease payments
Future finance costs
Present value
Later than 5 years
Total of future minimum lease payments
Future finance costs
Present value
Total
Total of future minimum lease payments
Future finance costs
Present value
Millions of yen
March 31,
2014
2015
Thousands of
U.S. dollars
March 31,
2015
237
(5)
232
110
(2)
108
-
-
-
348
(7)
340
72
(2)
70
111
(2)
108
0
(0)
0
185
(4)
180
598
(16)
582
932
(17)
915
0
(0)
0
1,530
(33)
1,497
80
16. Operating Lease Transactions
(1) Future Minimum Lease Payments under Non-cancellable Operating Leases
The total of future minimum lease payments under non-cancellable operating leases was as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total
Millions of yen
March 31,
2014
3,083
6,861
1,487
11,432
2015
4,497
8,663
1,529
14,690
Thousands of
U.S. dollars
March 31,
2015
37,421
72,099
12,723
122,243
(2) Total of Minimum Lease Payments and Contingent Rents
The total of minimum lease payments and contingent rents of operating lease contracts recognised as an expense
was as follows:
Total of minimum lease payments
Contingent rents
Millions of yen
Year ended
March 31,
2014
7,136
269
2015
7,399
114
Thousands of
U.S. dollars
Year ended
March 31,
2015
61,571
948
81
17. Investment Property
(1) Schedule of Investment Property
The schedule of the carrying amount of “Investment property” was as follows:
Balance at the beginning of the year
Expenditure after acquisition
Transfer from(to) property, plant and equipment
Depreciation expense
Impairment losses
Sale or disposal
Exchange differences on translation of foreign operations
Balance at the end of the year
Breakdown of “Balance at the beginning of the year”
Cost
Accumulated depreciation and accumulated impairment
losses
Total
Breakdown of “Balance at the end of the year”
Cost
Accumulated depreciation and accumulated impairment
losses
Total
Millions of yen
Year ended
March 31,
2014
11,583
41
(0)
(336)
(726)
(288)
-
10,273
2015
10,273
459
3,286
(170)
(126)
(8,972)
6
4,758
Thousands of
U.S. dollars
Year ended
March 31,
2015
85,487
3,819
27,353
(1,414)
(1,048)
(74,653)
49
39,593
18,065
11,491
95,614
(6,481)
(1,217)
(10,127)
11,583
10,273
85,487
11,491
11,595
96,487
(1,217)
(6,837)
(56,894)
10,273
4,758
39,593
(2) Fair Value
The carrying amount and the fair value of “Investment property” were as follows:
Millions of yen
March 31, 2014
March 31, 2015
Thousands of
U.S. dollars
March 31, 2015
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Investment property
10,273
11,236
4,758
4,380
39,593
36,448
The fair value of investment property is determined on the basis of a valuation conducted by an external real estate
appraiser. The valuation is made in accordance with the income approach using Level 3 inputs which include the
future cash flow.
82
18. Income Taxes
(1) Deferred Tax Assets and Deferred Tax Liabilities
The breakdown of “Deferred tax assets” and “Deferred tax liabilities” by major causes of their occurrence were as
follows:
Carryforward of unused tax losses
Inter-company profits and write downs on
inventories
Fixed assets (Note 1)
Net defined benefit liabilities
Other
Total deferred tax assets
Undistributed profit
Fixed assets (Note 1)
Other
Total deferred tax liabilities
Net deferred tax assets(Note2)
Millions of yen
March 31
2014
2015
Thousands of
U.S. dollars
March 31,
2015
30,752
21,305
5,561
14,155
20,068
91,843
(12,789)
(6,760)
(5,148)
(24,697)
67,145
29,168
22,654
7,425
5,280
27,948
92,477
(14,186)
(3,813)
(5,019)
(23,020)
69,457
242,722
188,516
61,787
43,937
232,589
769,551
(31,730)
(118,049)
(41,782)
(191,561)
577,990
(Note 1) “Fixed assets” include impairment losses and excess of depreciation of property, plant and equipment,
intangible assets and investment property.
(Note 2) The difference between the net amount of deferred tax assets recognised in the years ended March 31,
2014 and 2015, less the respective net amounts of deferred tax assets recognised directly in equity and in other
comprehensive income, is mainly attributable to the impact of foreign exchange movements.
Epson assesses its ability to utilize carryforward of unused tax losses in future periods based on the Mid-Range
Business Plan and financial forecasts approved by the Board of Directors annually. This takes account of Epson’s
medium and long-term strategy and financial plans and the expected future economic outlook. The ability to utilize
carryforward of unused tax losses in future periods for recognising deferred tax assets also takes account of
material tax adjusting items, the expected future taxable income and the period (if any) in which carryforward of
unused tax losses might expire. Epson believes that the recognised deferred tax assets are probable and the tax
benefits can be realized based on the prior taxable income and the expected future taxable income when the
deferred tax assets can be recognised.
Epson does not recognise deferred tax assets for some carryforward of unused tax losses and some deductible
temporary differences. Epson reduces the amount of the deferred tax assets to the extent that it is no longer
probable that the tax benefits can be realized with based on an individual analysis of each company’s condition as a
result of assessing the recoverability of the deferred tax assets.
The amounts of carryforward of unused tax losses, for which deferred tax assets have not been recognised, as of
March 31, 2014 and 2015, were ¥45,409 million and ¥8,247 million ($68,627 thousand), respectively. The amounts
of deductible temporary differences, for which deferred tax assets have not been recognised, as of March 31, 2014
and 2015, were ¥278,308 million and ¥240,737 million ($2,003,303 thousand), respectively. The deductible
temporary differences are not expired under present tax laws. The expiration schedule of carryforward of unused
tax losses was as follows.
83
1st year
2nd year
3rd year
4th year
5th year and thereafter
Total
Millions of yen
March 31
2014
2015
Thousands of
U.S. dollars
March 31,
2015
646
10
97
792
43,861
45,409
-
-
-
-
8,247
8,247
-
-
-
-
68,627
68,627
Epson has no taxable temporary differences associated with investments in subsidiaries for which deferred tax
liabilities have not been recognised as of March 31, 2014 and 2015.
(2) Tax Expense
“Tax expense” recognised as an expense was as follows:
Current tax expense
Deferred tax expense
Total
Millions of yen
Year ended
March 31
2014
(18,464)
27,810
9,345
2015
(23,216)
4,584
(18,631)
Thousands of
U.S. dollars
Year ended
March 31,
2015
(193,192)
38,145
(155,047)
Deferred tax expense increased by ¥2,199 million and ¥3,424 million ($28,492 thousand) due to the effect of
changes in Japanese applicable tax rates for the years ended March 31, 2014 and 2015, respectively.
Deferred tax expense includes the benefit arising from a previously unrecognised tax loss, tax credit or temporary
difference of a prior period. These benefits that reduce deferred tax expense was ¥32,191 million and ¥13,253
million ($110,285 thousand) for the years ended March 31, 2014 and 2015, respectively.
In addition, deferred tax expense includes benefits arising from the reversal of previous write-downs of deferred
tax assets. These effects that increased deferred tax expense was ¥9,656 million for the year ended March 31, 2014.
(3) Reconciliation of the Effective Tax Rate
The breakdown of major items that caused differences between the effective statutory tax rate and the actual tax
rate was as follows.
Epson is subject mainly to corporate tax, inhabitant tax, and enterprise tax, and the effective statutory tax rates
calculated based on these taxes were 37.8% and 35.4% for the years ended March 31, 2014 and 2015, respectively.
The Special Corporation Tax for Reconstruction has been abolished in this fiscal year. Foreign subsidiaries are
subject to income tax at their locations.
Effective statutory tax rate
Different tax rates applied to foreign subsidiaries
Expenses not deductible for tax purposes
Reassessment of recoverability of deferred tax assets
Other
Actual tax rate
%
Year ended
March 31, 2014
Year ended
March 31, 2015
37.8
(4.7)
(1.4)
(54.6)
10.9
(12.0)
35.4
(5.4)
(0.8)
(18.8)
3.7
14.1
84
19. Trade and Other Payables
The breakdown of “Trade and other payables” was as follows:
Notes and trade payables
Other payables
Total
Millions of yen
March 31,
2014
72,821
50,642
123,463
2015
80,359
59,688
140,047
Thousands of
U.S. dollars
March 31,
2015
668,710
496,697
1,165,407
Trade and other payables are classified as financial liabilities measured at amortised cost.
85
20. Other Financial Liabilities
The breakdown of “Other financial liabilities” was as follows:
Derivative financial liabilities
of
portion
non-current
Current borrowings
Current
borrowings
Current portion of bonds issued
(Note 2)
Non-current borrowings
Bonds issued (Note 2)
Other
Total
Current liabilities
Non-current liabilities
Total
Millions of yen
March 31,
2014
2015
Thousands of
U.S. dollars
March 31,
2015
%
Average interest
rate (Note 1)
Due
2,296
57,945
1,999
19,993
50,501
89,772
1,904
224,413
82,471
141,942
224,413
259
35,380
53
39,978
50,533
59,853
2,153
2,155
294,416
441
332,678
420,512
498,069
17,934
188,211
1,566,205
75,745
112,466
188,211
630,315
935,890
1,566,205
-
1.19
0.86
-
0.70
-
-
-
-
-
-
2017
-
-
(Note 1) The average interest rate is calculated using the interest rate and outstanding balance as of March 31, 2015.
(Note 2) The summary of issuing conditions of the bonds issued was as follows:
Company
Name of bonds issued
Issue date
%
interest
rate
Collateral
Maturity date
Millions of yen
March 31
2014
2015
Thousands of
U.S. dollars
March 31,
2015
The Company
T he 5th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
The Company
The Company
The Company
The Company
The Company
The Company
The Company
T he 6th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 7th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 8th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 9th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 10th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 11th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
T he 12th Series unsecured
straight bonds issued (with
inter-bond pari passu clause)
Sep 3, 2010
0.58
Non
Sep 3, 2015
20,000
Jun 14, 2011
0.49
Non
Jun 13, 2014
20,000
(20,000)
20,000
166,430
(20,000)
(166,430)
-
-
Jun 14, 2011
0.72
Non
Jun 14, 2016
20,000
20,000
166,430
Sep 12, 2012
0.55
Non
Sep 11, 2015
20,000
20,000
166,430
(20,000)
(166,430)
Sep 12, 2012
0.67
Non
Sep 12, 2017
10,000
10,000
83,215
Sep 11, 2013
0.33
Non
Sep 9, 2016
10,000
10,000
83,215
Sep 11, 2013
0.57
Non
Sep 11, 2018
10,000
10,000
83,215
Jun 13, 2014
0.35
Non
Jun 13, 2019
-
10,000
83,215
110,000
100,000
(20,000)
(40,000)
832,150
(332,860)
*The figures in parentheses represent the current portion of bonds issued.
Derivative financial liabilities were classified as financial liabilities measured at fair value through profit or loss
excluding those which hedge accounting was applied to, and bonds issued and borrowings were classified as
financial liabilities measured at amortised cost. There were no financial covenants on bonds issued and borrowings
that had a significant impact on Epson's financing activities.
86
21. Provisions
The breakdown and the schedule of “Provisions” were as follows:
FY2013: Year ended March 31, 2014
Provision for product
warranties
Provision for
rebates
Asset retirement
obligations
Provision for
loss on
litigation
Other
provisions
Total
Millions of yen
As of April 1, 2013
Arising during the year
Utilised
Unused amounts reversed
Exchange differences on
translation of foreign
operations
As of March 31, 2014
Current liabilities
Non-current liabilities
Total
FY2014: Year ended March 31, 2015
8,276
9,458
(8,054)
(164)
583
10,100
9,597
502
10,100
6,543
6,359
(6,543)
-
1,083
7,443
7,443
-
7,443
1,166
322
(91)
-
33
1,431
36
1,394
1,431
2,676
592
(298)
(1)
483
4,325
4,128
(3,570)
(55)
543
3,452
5,371
917
2,534
3,452
4,401
969
5,371
22,988
20,861
(18,558)
(220)
2,727
27,799
22,397
5,401
27,799
Provision for product
warranties
Provision for
rebates
Asset retirement
obligations
Provision for
loss on
litigation
Other
provisions
Total
Millions of yen
As of April 1, 2014
Arising during the year
Utilised
Unused amounts reversed
Exchange differences on
translation of foreign
operations
As of March 31, 2015
Current liabilities
Non-current liabilities
Total
10,100
10,699
(9,788)
(324)
690
11,376
10,043
1,333
11,376
7,443
7,973
(7,443)
-
(149)
7,823
7,823
-
7,823
1,431
102
(76)
-
17
1,474
30
1,443
1,474
3,452
1,076
(916)
-
(285)
3,326
866
2,460
3,326
5,371
6,429
(4,482)
(691)
(164)
6,461
5,558
902
6,461
27,799
26,280
(22,707)
(1,016)
108
30,463
24,322
6,141
30,463
FY2014: Year ended March 31, 2015
Thousands of U.S. dollars
Provision for product
warranties
Provision for
rebates
Asset retirement
obligations
As of April 1, 2014
Arising during the year
Utilised
Unused amounts reversed
Exchange differences on
translation of foreign
operations
As of March 31, 2015
Current liabilities
Non-current liabilities
Total
84,047
89,024
(81,451)
(2,696)
5,741
94,665
83,573
11,092
94,665
61,937
66,338
(61,937)
-
(1,239)
65,099
65,099
-
65,099
87
Provision for
loss on
litigation
Other
provisions
28,725
8,945
(7,622)
-
44,713
53,535
(37,315)
(5,758)
Total
231,330
218,690
(188,957)
(8,454)
(2,371)
(1,383)
889
11,908
848
(632)
-
141
12,265
27,677
53,792
253,498
249
12,016
12,265
7,206
20,471
27,677
46,269
7,523
53,792
202,396
51,102
253,498
(1) Provision for product warranties
Epson recognises an accrual for estimated future warranty costs based on the rate of historical service contract
expenses to sales. Other specific warranty provisions are made for those products where future warranty expenses
can be specifically estimated. Most of these expenses are expected to be incurred in the next fiscal year.
(2) Provision for rebates
Epson recognises provisions for rebates, related to sales made on or prior to the fiscal year end, that are paid to
distributors or customers based on direct outcomes such as the sales performance or early payment. These expenses
are expected to be paid in the next fiscal year.
(3) Asset retirement obligations
Epson recognises a provision for retirement costs of property, plant and equipment for which Epson is required to
bear, and which derive from the acquisition, construction, development or normal use of such assets to the amount
that it is probable that Epson will pay in light of historical experience. These expenses are expected to be paid
mainly after one year or more. However, they may be affected by future business plans.
(4) Provision for loss on litigation
Epson recognises a provision for loss on litigation based on the estimated future compensation payment and
litigation expenses which need to be provided at each fiscal year end. These expenses are expected to be paid
mainly after one year or more.
22. Other Liabilities
The breakdown of “Other current liabilities” and “Other non-current liabilities” was as follows:
Accrued expense
Accrued bonus to employees
Accrued employee’s unused paid vacations
Other
Total
Current liabilities
Non-current liabilities
Total
Millions of yen
March 31,
2014
26,859
25,984
24,496
20,421
97,763
94,064
3,698
97,763
2015
26,916
34,124
25,069
23,809
109,920
106,942
2,977
109,920
Thousands of
U.S. dollars
March 31,
2015
223,982
283,964
208,612
198,184
914,742
889,941
24,801
914,742
88
23. Post-employment Benefits
The Company and some Japanese subsidiaries have the following defined benefit plans: defined benefit corporate
pension plans and lump-sum severance plans. In addition, they also have defined contribution plans.
Some overseas subsidiaries have defined benefit plans and defined contribution plans.
Epson’s major defined benefit plans are administrated by the Corporate Pension Fund (the “Fund”) in accordance
with the Defined-Benefit Corporate Pension Act (Act No. 50 of 2001).
The benefits of defined benefit plans are determined based on conditions, such as years of service, the salary
proportional method based on average employee salaries for services or final base salaries for retirement benefits
and a funded method based on the points employees have earned for each year of service.
The Fund has a Board of Representatives consisting of representatives of the Company and its Japanese
subsidiaries and representatives of the plan participants in accordance with the rules of the Fund. The Board of
Representatives is responsible for changes in the rules of the Fund, dismissal of the board members including
members who execute operations related to the administration and investment of pension reserves for the Fund, and
resolutions of the business report and the closing of account.
(1) Schedule of Defined Benefit Obligations
The schedule of the defined benefit obligations was as follows:
Balance at the beginning of the year
Service cost
Interest cost
Remeasurement
Actuarial gains and losses arising from
changes in demographic assumptions
Actuarial gains and losses arising from
changes in financial assumptions
Past service cost and losses (gains) arising
from settlements
Exchange differences on translation of foreign
operations
Benefits paid
Balance at the end of the year
Millions of yen
Year ended
March 31,
2014
290,201
11,169
4,605
2015
293,895
10,687
4,337
Thousands of
U.S. dollars
Year ended
March 31,
2015
2,445,660
88,932
36,090
(1,863)
2,749
22,875
(2,682)
19,492
162,203
(58)
(30,071)
(250,237)
5,252
(12,730)
293,895
1,175
(9,229)
293,035
9,779
(76,799)
2,438,503
89
(2) Schedule of Plan Assets
The schedule of the plan assets was as follows.
Epson’s major defined benefit plans are regulated by maintaining a balance between the pension obligations and
plan assets through reviewing the financial condition of the fund that affects future benefits.
Epson plans to pay contributions of ¥7,784 million ($64,774 thousand) for the year ending March 31, 2016.
Balance at the beginning of the year
Interest income
Remeasurement
Return on plan assets
Exchange differences on translation of foreign
operations
Contributions by the employer
Contributions by plan participants
Benefits paid
Balance at the end of the year
Millions of yen
Year ended
March 31,
2014
218,116
3,362
11,472
2,339
11,948
1,647
(11,343)
237,543
2015
237,543
3,807
20,257
396
7,345
1,223
(8,764)
261,808
Thousands of
U.S. dollars
Year ended
March 31,
2015
1,976,724
31,672
168,569
3,313
61,121
10,177
(72,930)
2,178,646
(3) Schedule of Right to Reimbursement
As Epson’s major defined benefit plans are corporate defined benefit pension plans, there are no contributions from
third parties.
(4) Effect of Asset Ceiling
There was no effect from the asset ceiling.
(5) Reconciliation of Defined Benefit Obligations and Plan Assets
The reconciliation of the defined benefit obligations and plan assets to the net defined benefit liabilities or assets
recognised in the consolidated statement of financial position were as follows:
Funded defined benefit obligations
Plan assets
Subtotal
Unfunded defined benefit obligations
Net defined benefit liabilities or assets
recognised in the consolidated statement of
financial position
Net defined benefit liabilities
Net defined benefit assets
Net defined benefit liabilities and assets
recognised in the consolidated statement of
financial position
Millions of yen
March 31,
2014
288,220
(237,543)
50,676
5,675
2015
286,837
(261,808)
25,029
6,198
Thousands of
U.S. dollars
March 31,
2015
2,386,925
(2,178,646)
208,279
51,578
56,351
31,227
259,857
56,362
(10)
31,234
(7)
259,915
(58)
56,351
31,227
259,857
90
(6) Breakdown of Plan Assets
The breakdown of plan assets by major category was as follows:
Investments quoted in active markets
Equity securities
Bonds receivable
Alternative investments
Cash and deposits
Other
Total
Investments unquoted in active markets
Pooled funds (Equity securities)
Pooled funds (Bonds receivable)
General accounts of life insurance companies
(Note 1)
Alternative investments
Total
Millions of yen
March 31,
2014
2015
Thousands of
U.S. dollars
March 31,
2015
18,495
134
19,909
3,185
2,374
44,100
32,587
66,274
82,716
11,865
193,443
24,580
117
20,934
4,433
3,666
53,732
40,690
69,875
84,780
12,729
208,075
204,543
973
174,203
36,889
30,533
447,141
338,603
581,467
705,511
105,924
1,731,505
(Note 1) A certain interest rate and principal for the general accounts of life insurance companies are guaranteed by
life insurance companies.
(Note 2)In plan assets, there are no transferable financial instruments, real estate held by Epson or other assets used
by Epson.
The investment strategy for Epson’s plan assets was as follows:
Epson’s plan assets under defined benefit plans are managed in accordance with the rules of the Fund for securing
stable returns in the middle- and long-term in order to ensure the redemption of the defined benefit obligations.
Epson sets a best qualified asset mix policy through performing pension ALM, which is combined management of
assets and liabilities” by an external agency to secure stable returns.Epson invests plan assets consistently with the
asset mix policy which includes setting of the risk, target rate of return and composition ratio of plan assets by asset
category
91
(7) Matters Related to Actuarial Assumptions
The major item of actuarial assumptions was as follows:
Discount rate
1.7
1.3
March 31, 2014
March 31, 2015
%
The valuation of defined benefit obligations reflects judgments on uncertain future events. The sensitivities of
defined benefit obligations due to changes of 1% in the discount rate as of March 31, 2015 were as follows. Each
of these sensitivities assumes that other variables remain fixed. Negative figures show a decrease in the defined
benefit obligations, while positive figures show an increase.
Discount rate (1% increase)
Discount rate (1% decrease)
Millions of yen
March 31,
2015
(47,049)
54,928
Thousands of
U.S. dollars
March 31,
2015
(391,520)
457,085
The weighted-average duration of the defined benefit obligations at March 31, 2015 was 15.5 years.
(8) Defined Contribution Plans
Expenses for the defined contribution plans were ¥14,388 million and ¥17,875 million ($148,747 thousand) for the
years ended March 31, 2014 and 2015, respectively.
92
24. Equity and Other Equity Items
(1) Share Capital and Capital Surplus
(A) Authorised Shares
The number of authorized shares as of March 31, 2014 and 2015 was 607,458,368 ordinary shares.
The Company completed the Company’s common shares split into two shares with an effective date of
April 1, 2015. As a result, the number of authorized shares increased 607,458,368 shares to 1,214,916,736 shares.
(B) Fully Paid Issued Shares
The schedule of the number of issued shares, the amount of “Share capital” and “Capital surplus” was as follows:
a share
Millions of yen
Thousands of U.S. dollars
Number of ordinary
issued shares
(Note1) (Note2)
Share capital
Capital surplus
Share capital
Capital surplus
As of April 1, 2013
Increase (decrease)
As of March 31, 2014
Increase (decrease)
As of March 31, 2015
199,817,389
-
199,817,389
-
199,817,389
53,204
-
53,204
-
53,204
84,321
-
84,321
-
84,321
442,739
-
442,739
701,680
-
701,680
(Note1) The shares issued by the Company are non-par value ordinary shares that have no restriction on any
content of rights.
(Note2) The Company completed the Company’s common shares split into two shares with an effective date of
April 1, 2015. As a result, the number of ordinary shares increased 199,817,389 shares to 399,634,778 shares.
(2) Treasury Shares
The schedule of the number of treasury shares and the corresponding amount was as follows:
a share
Millions of yen
Number of
shares(Note2)
Amount
Thousands of
U.S. dollars
Amount
As of April 1, 2013
Increase (decrease) (Note1)
As of March 31, 2014
Increase (decrease) (Note1)
As of March 31, 2015
20,925,261
1,822
20,927,083
1,574
20,928,657
20,453
4
20,457
6
20,464
170,243
49
170,292
(Note1) The reason for the increase was due to the purchase of odd shares.
(Note2) The Company completed the Company’s common shares split into two shares with an effective date of
April 1, 2015. As a result, the number of treasury shares increased 20,928,657 shares to 41,857,314 shares.
(3) Other Components of Equity
(A) Remeasurement of net defined benefit liabilities (assets)
Remeasurement of net defined benefit liabilities (assets) comprise actuarial gain and loss on the present value of
defined benefit obligations and the return on plan assets excluding amounts included in net interest. The amount is
recognised as other comprehensive income when occurred and is transferred immediately from other components
of equity to retained earnings.
93
(B) Net gain (loss) on revaluation of financial assets measured at fair value through other comprehensive income
This is the valuation difference in fair value of financial assets measured at fair value through other comprehensive
income.
(C) Exchange differences on translation of foreign operations
This is a foreign currency translation difference that occurs when consolidating financial statements of foreign
operations are prepared in foreign currencies.
(D) Net changes in fair value of cash flow hedges
Epson uses derivatives for hedging to avoid the risk of fluctuation in future cash flows. This is the effective portion
of changes in fair value of derivative transactions designated as cash flow hedges.
94
25. Dividends
Dividends paid were as follows:
FY2013: Year ended March 31, 2014
(Resolution)
Annual Shareholders Meeting
(June 24, 2013)
Board of Directors
(October 31, 2013)
Class of shares
Ordinary shares
Ordinary shares
Millions of yen
Yen
Total dividends
Dividends
per share
Basis date
Effective date
1,252
2,325
7
March 31, 2013
June 25, 2013
13
September 30, 2013
December 6, 2013
FY2014: Year ended March 31, 2015
(Resolution)
Annual Shareholders Meeting
(June 24, 2014)
Board of Directors
(October 31, 2014)
Class of shares
Ordinary shares
Ordinary shares
FY2014: Year ended March 31, 2015
Millions of yen
Yen
Total dividends
Dividends
per share
Basis date
Effective date
6,618
6,261
37
March 31, 2014
June 25, 2014
35
September 30, 2014
December 5, 2014
(Resolution)
Annual Shareholders Meeting
(June 24, 2014)
Board of Directors
(October 31, 2014)
Class of shares
Thousands of U.S.
dollars
Total dividends
U.S. dollars
Dividends
per share
Basis date
Effective date
Ordinary shares
55,071
0.30
March 31, 2014
June 25, 2014
Ordinary shares
52,110
0.29
September 30, 2014
December 5, 2014
Dividends whose basis dates were during the years ended March 31, 2014 and 2015, but whose effective dates
were subsequent to March 31, 2014 and 2015 were as follows:
FY2013: Year ended March 31, 2014
(Resolution)
Annual Shareholders Meeting
(June 24, 2014)
Class of shares
Millions of yen
Yen
Total dividends
Dividends
per share
Basis date
Effective date
Ordinary shares
6,618
37
March 31, 2014
June 25, 2014
FY2014: Year ended March 31, 2015
(Resolution)
Annual Shareholders Meeting
(June 25, 2015)
Class of shares
Millions of yen
Yen
Total dividends
Dividends
per share
Basis date
Effective date
Ordinary shares
14,311
80
March 31, 2015
June 26, 2015
FY2014: Year ended March 31, 2015
(Resolution)
Annual Shareholders Meeting
(June 25, 2015)
Class of shares
Thousands of U.S.
dollars
Total dividends
U.S. dollars
Dividends
per share
Basis date
Effective date
Ordinary shares
119,089
0.66
March 31, 2015
June 26, 2015
95
26. Revenue
The breakdown of “Revenue” was as follows:
Sale of goods
Royalty income
Other
Total
Millions of yen
Year ended
March 31,
2014
992,826
10,331
5,250
1,008,407
2015
1,071,687
8,201
6,452
1,086,341
Thousands of
U.S. dollars
Year ended
March 31,
2015
8,918,091
68,244
53,699
9,040,034
27. Selling, General and Administrative Expenses
The breakdown of “Selling, general and administrative expenses” was as follows:
Millions of yen
Year ended
March 31,
2014
(88,925)
(48,535)
(24,106)
(19,006)
(16,215)
(14,786)
(60,926)
(272,501)
2015
(94,749)
(47,837)
(28,722)
(20,109)
(19,823)
(18,162)
(65,245)
(294,648)
Thousands of
U.S. dollars
Year ended
March 31,
2015
(788,458)
(398,077)
(239,011)
(167,337)
(164,957)
(151,135)
(542,951)
(2,451,926)
Employee benefit expense
Research and development expense
Promotion expense
Service contract expense
Advertising expense
Transportation expense
Other
Total
28. Employee Benefit Expenses
The employee benefit expenses included in the consolidated statement of comprehensive income were as follows:
Salaries and wages
Legal welfare expense
Welfare expense
Expenses of post-employment benefits
Expense for defined contribution plans
Expense for defined benefit plans
Total
Thousands of
U.S. dollars
Year ended
March 31,
2015
(1,720,862)
(163,601)
(88,649)
(148,747)
(102,398)
(2,224,257)
Millions of yen
Year ended
March 31,
2015
(206,796)
(19,660)
(10,653)
(17,875)
(12,303)
(267,289)
2014
(191,346)
(20,130)
(9,328)
(14,388)
(1,277)
(236,471)
96
29. Other Operating Income
The breakdown of “Other operating income” was as follows:
Income from a revision of the defined benefit
plan (Note)
Gains on sales of property, plant and equipment,
intangible assets and investment property
Other
Total
Millions of yen
Year ended
March 31
2014
2015
Thousands of
U.S. dollars
Year ended
March 31,
2015
-
30,071
250,237
359
5,638
5,998
5,270
4,564
39,907
43,854
37,996
332,087
(Note)As a result of a revision to the defined benefit plan, Epson recognised a ¥30,071 million ($250,237thousand)
decline in expenses associated with past service costs at the Company and certain domestic subsidiaries. This
resulted in a ¥30,071 million ($250,237 thousand) increase in other operating income for the year ended March 31,
2015.
30. Other Operating Expense
The breakdown of “Other operating expense” was as follows:
Impairment losses
Foreign exchange losses
Other
Total
Millions of yen
Year ended
March 31
2014
(4,429)
(9,230)
(2,877)
(16,537)
2015
(3,563)
(2,595)
(3,643)
(9,802)
Thousands of
U.S. dollars
Year ended
March 31,
2015
(29,649)
(21,594)
(30,333)
(81,576)
97
31. Finance Income and Finance Costs
The breakdowns of “Finance income” and “Finance costs” were as follows:
Finance Income
Interest income
Dividend income
Foreign exchange gains (Note)
Other
Total
Finance Costs
Interest expense
Foreign exchange losses (Note)
Employee benefit expense
Other
Total
Millions of yen
Year ended
March 31
2014
1,394
225
-
1,065
2,685
2015
2,159
278
567
263
3,268
Millions of yen
Year ended
March 31
2014
(2,955)
(179)
(1,241)
(51)
(4,428)
2015
(1,559)
-
(531)
(229)
(2,320)
Thousands of
U.S. dollars
Year ended
March 31,
2015
17,966
2,313
4,718
2,197
27,194
Thousands of
U.S. dollars
Year ended
March 31,
2015
(12,973)
-
(4,418)
(1,905)
(19,296)
(Note) The increase or decrease in the fair value of currency derivatives is included in the foreign exchange gains
(losses).
98
32. Discontinued Operations
As of April 1, 2010, Epson transferred a part of its business and some assets in the field of small- and
medium-sized liquid crystal displays to Sony Corporation and Sony Mobile Display Corporation and terminated
the production operation at the end of December, 2010. The profit and loss related to allegations concerning a LCD
price-fixing cartel that occurred during the years ended March 31, 2014 and 2015 was classified into “Discontinued
operations”.
As of November 16, 2012, Epson concluded an agreement with Hoya Corporation (“Hoya”) about the transfer of
the optical products business of the Company and related subsidiaries to Hoya group.
After the Company and related subsidiaries transferred their optical products business to Hoya Group on February
1, 2013, the profit and loss related to the optical products business was classified into “Discontinued operations”.
(1) Reportable Segments
Small- and medium-sized liquid crystal displays business: Other
Optical products business: Devices & precision products
(2) The analysis of profit and loss of discontinued operations
Selling, general and administrative expenses
Other operating income
Other operating expense
Loss from operating activities
Loss before tax
Loss from discontinued operations
Millions of yen
Year ended
March 31,
2014
2015
(653)
-
(2,227)
(2,880)
(2,880)
(2,880)
(459)
1,000
(1,659)
(1,118)
(1,118)
(1,118)
(3) The analysis of cash flow of discontinued operations
Net cash provided by (used in) operating
activities
Total
Millions of yen
Year ended
March 31,
2014
2015
(4,721)
(4,721)
(411)
(411)
Thousands of
U.S. dollars
Year ended
March 31,
2015
(3,819)
8,321
(13,814)
(9,312)
(9,312)
(9,312)
Thousands of
U.S. dollars
Year ended
March 31,
2015
(3,420)
(3,420)
99
33. Other Comprehensive Income
The amount arising during the year, reclassification adjustments to profit or loss and tax effects for each component
of “Other comprehensive income” were as follows:
FY2013: Year ended March 31, 2014
Millions of yen
Amount arising
Reclassification
adjustments
Before tax
effects
Tax effects
Net of
tax effects
Remeasurement of net defined benefit liabilities (assets)
Net gain (loss) on revaluation of financial assets
measured at FVTOCI (Note)
Exchange differences on translation of foreign operations
Net changes in fair value of cash flow hedges
Share of other comprehensive income of investments
accounted for using the equity method
Total
13,228
4,606
19,513
946
154
38,449
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
FY2014: Year ended March 31, 2015
-
-
(134)
106
-
(27)
13,228
4,606
19,378
1,052
154
38,421
(142)
(1,821)
-
(420)
-
13,086
2,785
19,378
632
154
(2,383)
36,038
Millions of yen
Amount arising
Reclassification
adjustments
Before tax
effects
Tax effects
Net of
tax effects
Remeasurement of net defined benefit liabilities (assets)
Net gain (loss) on revaluation of financial assets
measured at FVTOCI (Note)
Exchange differences on translation of foreign operations
Net changes in fair value of cash flow hedges
Share of other comprehensive income of investments
accounted for using the equity method
Total
(1,016)
2,244
31,219
2,418
257
35,124
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
FY2014: Year ended March 31, 2015
-
-
(1,106)
149
-
(956)
(1,016)
2,244
30,113
2,568
257
34,167
(496)
(123)
-
(850)
-
(1,512)
2,121
30,113
1,718
257
(1,469)
32,698
Thousands of U.S. dollars
Amount arising
Reclassification
adjustments
Before tax
effects
Tax effects
Net of
tax effects
Remeasurement of net defined benefit liabilities (assets)
Net gain (loss) on revaluation of financial assets
measured at FVTOCI (Note)
Exchange differences on translation of foreign operations
Net changes in fair value of cash flow hedges
Share of other comprehensive income of investments
accounted for using the equity method
Total
(8,454)
18,673
259,808
20,120
2,138
292,285
(Note) FVTOCI: Fair Value Through Other Comprehensive Income
-
-
(9,203)
1,240
-
(8,454)
18,673
250,605
21,360
2,138
(4,128)
(1,032)
-
(7,064)
(12,582)
17,641
250,605
14,296
-
2,138
(7,963)
284,322
(12,224)
272,098
100
34. Earnings per Share
Basis of calculating basic earnings per share
(1) Profit attributable to ordinary shareholders of the parent company
Profit from continuing operations attributable to owners
of the parent company
Loss from discontinued operations attributable to
owners of the parent company
Profit used for calculation of basic earnings per share
Millions of yen
Year ended
March 31
2014
2015
Thousands of
U.S. dollars
Year ended
March 31,
2015
87,083
113,678
945,985
(2,880)
(1,118)
(9,312)
84,203
112,560
936,673
(2) Weighted-average number of ordinary shares outstanding during the year
Thousands of shares
Year ended March 31,
2014
Year ended March 31,
2015
Weighted-average number of
ordinary shares
357,783
357,779
(Note) The Company completed the Company’s ordinary shares split into two shares with an effective date of
April 1, 2015 based on the resolution by the Company’s Board of Directors on January 30, 2015. Basic earnings
per share was calculated under the assumption that the share splits took effect at the beginning of the previous
fiscal year.
101
35. Financial Instruments
(1) Capital Management
Epson selects the most effective fund management method focusing on the preservation of funds in view of
safeness and flexibility. In addition, Epson obtains financing from bank loans and bonds issued. Epson has a policy
not to transact derivatives for speculation purposes, but for avoiding the risks stated below.
Epson manages net interest-bearing debt, where cash and cash equivalents are deducted from interest-bearing debt,
and capital (equity attributable to owners of the parent company). The amounts were as follows:
Interest-bearing debt
Cash and cash equivalents
Net interest-bearing debt
Capital (equity attributable to
owners of the parent company)
Millions of yen
March 31,
2014
2015
220,553
(211,510)
9,042
362,371
185,978
(245,330)
(59,351)
494,325
Thousands of
U.S. dollars
March 31,
2015
1,547,613
(2,041,524)
(493,911)
4,113,547
Epson monitors financial indicators in order to maintain a well-balanced capital structure that ensures an
appropriate return on equity and a sound and flexible financial condition for future investment. Epson monitor
credit ratings for financial soundness and flexibility, and ROE (return on equity) for profitability, while focusing on
changes in the domestic and overseas environment.
(2) Financial Risk Management
Epson is exposed to financial risks (credit risks, liquidity risks, foreign exchange risks, interest rate risks, and
market price fluctuation risks) in the process of its business activities; and it manages risks based on a specific
policy in order to avoid or reduce said risks. The results of risk management are quarterly reported by the financial
and general accounting department to the Executive Committee of the Company.
Epson’s policy limits derivatives to transactions for the purpose of mitigating risks from transactions based on
actual demand. Therefore, Epson do not transact derivatives for speculation purposes or trading purposes.
102
(3) Credit Risk
Receivables, such as notes and trade receivables, resulting from the operating activities of Epson are exposed to
customer credit risks.
Epson holds mainly bonds receivable as investments of surplus funds and equity securities of customers and
suppliers to strengthen relationships with them; those securities are exposed to the issuers’ credit risks.
In addition, through derivative transactions that Epson conducts in order to hedge foreign exchange fluctuation
risks and interest rate fluctuation risks, Epson is exposed to the credit risks of the financial institutions which are
counterparties to these transactions.
In principle, Epson sets credit lines or transaction conditions with respect to trade receivables for counterparties
based on Epson’s Credit Control Regulation in order to prevent credit risks relating to counterparties. In addition,
the receivable balances of counterparties are monitored in order to mitigate the credit risks. The financial and
general accounting department of the Company regularly monitors the status of the occurrence and collection of
bad debts, and reports them to the Executive Committee of the Company. There is no over-concentrated credit risk
for a single customer.
With regard to the investment of cash surpluses and derivatives, Epson invests in bonds receivable and other
financial instruments with a certain credit rating and transacts with financial institutions with a high credit rating in
principle in order to prevent credit risks based on Epson’s Capital Management Regulation. In addition, the
financial and general accounting department of the Company regularly monitors the performances of these
transactions and reports the results to the Executive Committee of the Company.
The analysis of the aging of “Trade and other receivables” that are past due but not impaired as of March 31, 2015
was as follows. It includes amounts considered recoverable by credit insurance and collateral.
Within 30 days
Over 30 days, within 60 days
Over 60 days, within 90 days
Over 90 days
Total
Millions of yen
March 31,
2015
Thousands of
U.S. dollars
March 31,
2015
9,174
713
229
752
10,871
76,368
5,933
1,905
6,257
90,463
Epson uses an allowance account for credit losses to record impairment losses on the uncollectible amounts of
individually significant trade receivables at the end of the reporting period and to record impairment losses on trade
receivables that are not individually significant at an amount based on the historical loan loss ratio at the end of the
reporting period. The allowance account for credit losses against the financial assets is included in “Trade and other
receivables” in the consolidated statement of financial position.
The schedule of the allowance account for credit losses of “Trade and other receivables” was as follows:
Balance at the beginning of the year
Addition (Note)
Decrease (utilised)
Decrease (reversal)
Other
Balance at the end of the year
Millions of yen
March 31
2014
2015
1,454
455
(160)
(158)
167
1,758
1,758
478
(483)
(311)
145
1,586
Thousands of
U.S. dollars
March 31,
2015
14,629
3,961
(4,019)
(2,588)
1,206
13,189
(Note) Trade and other receivables for which impairment was recognised individually at March 31, 2014 and 2015
were ¥250 million and ¥52 million ($432 thousand), respectively; and their corresponding allowance account for
credit losses were ¥250 million and ¥52 million ($432 thousand), respectively.
103
(4) Liquidity Risk
Epson raises funds by borrowings and bonds issued; however, these liabilities are exposed to the liquidity risk that
it would not be able to repay liabilities on the due date due to the deterioration of the financing environment.
Epson establishes a financing plan based on the annual business plan and the financial and general accounting
department of the Company regularly monitors and collects information on the balance of liquidity-in-hand and
interest-bearing debt and reports it to the Executive Committee of the Company. In addition, Epson manages
liquidity risks with the balance of liquidity-in-hand maintained at a proper level by working out the financing plan
on a timely basis, and by taking into consideration the financial environment.
The financial liability balance (including derivative financial instruments) by maturity was as follows:
FY2013: As of March 31, 2014
Carrying
amount
Contractual
cash flow
Due within
1 year
Due after 1
year through
2 years
Due after 2
years through
3 years
Due after 3
years through
4 years
Due after 4
years through
5 years
Due after
5 years
Millions of yen
Non-derivative financial liabilities
Trade and other payables
Borrowings
Bonds issued
Lease obligations
Other
Total
Derivative financial liabilities
Foreign exchange forward contract
Total
FY2014: As of March 31, 2015
123,463
110,446
109,765
340
1,563
345,580
2,296
2,296
123,463
110,445
110,000
343
1,563
345,816
123,463
59,945
20,000
235
3
203,648
2,296
2,296
2,296
2,296
-
-
40,000
56
182
40,239
-
-
-
500
30,000
33
60
30,593
-
-
-
50,000
10,000
14
22
60,036
-
-
-
-
10,000
4
37
10,042
-
-
Carrying
amount
Contractual
cash flow
Due within
1 year
Due after 1
year through
2 years
Due after 2
years through
3 years
Due after 3
years through
4 years
Due after 4
years through
5 years
Due after
5 years
Millions of yen
Non-derivative financial liabilities
Trade and other payables
Borrowings
Bonds issued
Lease obligations
Other
Total
Derivative financial liabilities
Foreign exchange forward contract
Total
FY2014: As of March 31, 2015
140,047
85,966
99,831
180
1,973
327,999
259
259
140,047
85,966
100,000
185
1,973
328,172
140,047
35,433
40,000
72
3
215,557
259
259
259
259
-
533
30,000
51
98
30,682
-
-
-
50,000
10,000
31
108
60,140
-
-
-
-
10,000
18
419
10,438
-
-
-
-
10,000
9
185
10,194
-
-
Carrying
amount
Contractual
cash flow
Due within
1 year
Due after 1
year through
2 years
Due after 2
years through
3 years
Due after 3
years through
4 years
Due after 4
years through
5 years
Due after
5 years
Thousands of U.S. dollars
Non-derivative financial liabilities
Trade and other payables
Borrowings
Bonds issued
Lease obligations
Other
Total
1,165,407
715,369
830,747
1,497
16,437
2,729,457
1,165,407
715,369
832,145
1,539
16,437
2,730,897
1,165,407
294,857
332,861
635
26
1,793,786
Derivative financial liabilities
Foreign exchange forward contract
Total
2,155
2,155
2,155
2,155
2,155
2,155
-
4,435
249,646
424
816
255,321
-
-
-
416,077
83,215
257
908
500,457
-
-
-
-
83,215
149
3,496
86,860
-
-
-
-
83,208
74
1,547
84,829
-
-
-
-
-
-
1,256
1,256
-
-
-
-
-
0
1,158
1,159
-
-
-
-
-
0
9,644
9,644
-
-
104
(5) Foreign Exchange Risk
Epson operates businesses globally and, therefore, is exposed to the following risks due to foreign exchange
fluctuation:
(A) The risk that the profit or loss and cash flow in each functional currency of Epson is influenced by foreign
exchange fluctuation as a result of external transactions and intergroup transactions, including the payment and
receipt of dividends, in currencies that are different from each functional currency of Epson.
(B) The risk that the equity of Epson is influenced by foreign exchange fluctuation when equity denominated in
each functional currency of Epson is translated into Japanese yen and consolidated.
(C) The risk that the profit or loss of Epson is influenced by foreign exchange fluctuation when profit or loss
denominated in each functional currency of Epson is translated into Japanese yen and consolidated.
Epson hedges against risk (A) using derivatives or foreign currency-denominated interest-bearing debt when future
cash flow is projected or when receivables and payables are fixed. As a rule, the net of foreign
currency-denominated operating receivables and payables is hedged mainly using forward foreign exchange
contracts.
Epson does not hedge against risk (B) and (C), in principle.
In order to mitigate risks mentioned above resulting from the foreign exchange fluctuation, in accordance with
Epson’s Foreign Exchange Management Regulation, Epson establishes a foreign currency hedge policy based on
the current conditions and forecast of the foreign exchange market, implements the aforementioned hedges under
the supervision of the Foreign Exchange Management Committee of the Company. The financial and general
accounting department of the Company regularly reports the performances to the Executive Committee of the
Company.
The breakdown of currency derivatives was follows:
Derivative transactions to which hedge accounting is not applied
Millions of yen
March 31,
Contract
amount
2014
Over one
year
Fair value
Contract
amount
2015
Over one
year
Fair value
Contract
amount
Thousands of U.S. dollars
March 31,
2015
Over one
year
Fair value
Foreign exchange forward contract
Buying
Selling
Non-Deliverable Forward
Selling
Total
2,571
37,357
3,297
43,226
Derivative transactions to which hedge accounting is applied
Contract
amount
2014
Over one
year
Foreign exchange forward contract
Selling
Non-Deliverable Forward
Selling
Total
40,101
6,615
46,716
-
-
-
-
-
-
-
72
(1,080)
(48)
(1,055)
3,238
34,957
2,940
41,136
Millions of yen
March 31,
Fair value
Contract
amount
2015
Over one
year
(898)
37,030
(105)
(1,004)
8,172
45,203
-
-
-
-
-
-
-
(52)
1,383
26,945
290,905
36
1,367
24,465
342,315
-
-
-
-
(432)
11,508
299
11,375
Thousands of U.S. dollars
Fair value
Contract
amount
March 31,
2015
Over one
year
Fair value
(Note)
1,557
308,155
(44)
1,512
68,003
376,158
-
-
-
12,948
(366)
12,582
(Note) Cash flow hedge is applied, and derivative transactions are measured at fair value in the consolidated
statement of financial position.
105
Foreign Exchange Sensitivity Analysis
In cases where each currency other than the functional currency that denominates the financial instruments held by
Epson as of March 31, 2015 increases by 10% in value against the functional currency, the impact on profit before
tax in the consolidated statement of comprehensive income was as follows.
The impact from the translation of functional currency-denominated financial instruments, and assets, liabilities,
income and expenses of foreign operations into Japanese yen is not included. Also, it is based on the assumption
that currencies other than the currencies used for the calculation do not fluctuate.
Millions of yen
March 31,
2015
Thousands of
U.S. dollars
March 31,
2015
Profit before tax
1,389
11,558
(6) Interest Rate Risk
Epson’s interest rate risk arises from cash equivalents and interest-bearing debt. Borrowings and bonds issued with
floating rates are subject to the effects of changes in future cash flows caused by the fluctuation of market interest
rates; while, borrowings and bonds issued with fixed rates are subject to the effects of changes in the fair value
caused by the fluctuation of market interest rates.
In response to the fluctuation of market interest rates, Epson reduces the interest rate risk by implementing an
interest rate swap and adjusting appropriate proportion of financing between floating rates and fixed rates.
In accordance with Epson’s Capital Management Regulation, the interest rate swap is approved by the finance
officer of the Company.
Interest Rate Sensitivity Analysis
In cases where the interest rate of financial instruments held by Epson as of March 31, 2015 increases by 100bp,
the impact on profit before tax in the consolidated statement of comprehensive income was as follows:
The analysis included financial instruments affected by interest rate fluctuation and based on the assumption that
other factors, including the impacts of foreign exchange fluctuation, were constant.
Millions of yen
March 31,
2015
Thousands of
U.S. dollars
March 31,
2015
Profit before tax
700
5,825
(7) Market Price Fluctuation Risk
With respect to equity securities, Epson regularly assesses the fair value and financial conditions of the issuers, and
reviews the portfolio held by taking into account the relationship with counterparty entities in accordance with
Epson’s Securities Operation Regulation.
Epson intends to hold equity instruments not for short-term trading but for long-term investment. Therefore, Epson
does not sell the instruments actively. The equity price fluctuation risks are calculated based on the price of equity
instruments at the fiscal year end. In cases where the equity price changes by 5% in value, the impact on other
comprehensive income before tax effects as of March 31, 2015 was ¥986 million ($8,205 thousand) due to the
changes in the fair value.
106
(8) Fair Value of Financial Instruments
(A) Fair value measurement
The fair values of financial assets and liabilities are determined as follows:
(Derivatives)
The fair values are calculated based on prices obtained from financial institutions.
(Equity securities and bonds receivable)
When market values for equity securities and bonds receivable are available, such values are used as the fair values.
The fair values of the equity securities and bonds receivable whose market values are unavailable are measured by
using the discounted cash flow method, price comparison method based on the prices of similar types of securities
and bonds and other valuation methods.
(Borrowings)
As current borrowings are settled on a short-term basis, the fair values approximate their carrying amounts. For
non-current borrowings with floating rates, it is assumed that the fair value is equal to the carrying amounts,
because the rates are affected in the short term by fluctuations in market interest rates, and because Epson’s credit
status has not greatly changed since they were implemented. The fair values of non-current borrowings with fixed
rates are calculated by the total sum of the principal and interest discounted using the interest rates that would be
applied if similar new borrowings were conducted.
(Bonds issued)
The fair values of bonds issued are determined based on market prices.
(Lease obligations)
The fair values are calculated based on the present value of the total amount discounted by the interest rate
corresponding to the period to maturity and the credit risk per each lease obligation classified per certain period.
(Other)
Other financial instruments are settled mainly on a short-term basis, and the fair values approximate the carrying
amounts.
107
(B) Fair values of financial instruments
The carrying amounts and the fair values of the financial instruments were as follows:
Millions of yen
March 31,
2014
2015
Thousands of U.S. dollars
March 31,
2015
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
169
16,784
169
16,784
3,181
19,639
3,181
19,639
26,470
163,426
26,470
163,426
211,510
154,309
103
5,329
211,510
154,309
103
5,329
245,330
167,482
108
5,960
245,330
167,482
108
5,960
2,041,524
1,393,708
898
49,606
2,041,524
1,393,708
898
49,606
2,296
2,296
259
259
2,155
2,155
123,463
123,463
140,047
140,047
1,165,407
1,165,407
110,446
109,765
340
1,563
110,631
110,588
340
1,563
85,966
99,831
180
1,973
86,118
100,466
180
1,973
715,369
830,747
1,497
16,437
716,634
836,032
1,497
16,437
Financial assets measured at
fair value
Derivative financial assets
Equity securities
Financial assets measured at
amortised cost
Cash and cash equivalents
Trade and other receivables
Bonds receivable
Other receivables
Financial liabilities measured at
fair value
Derivative financial liabilities
Financial liabilities measured at
amortised cost
Trade and other payables
Interest-bearing debt
Borrowings
Bonds issued
Lease obligations
Other payables
108
(C) Fair value hierarchy
The fair value hierarchy of financial instruments is categorized from Level 1 to Level 3 as follows:
Level 1: Fair value measured at quoted prices in active markets for identical assets or liabilities
Level 2: Fair value calculated using inputs other than quoted prices included within Level 1 that are observable,
either directly or indirectly
Level 3: Fair value calculated using valuation techniques including inputs unobservable input for the assets and
liabilities
Epson does not have any financial instruments for which there is significant measurement uncertainty and
subjectivity which needs to subdivide each level stated above for disclosure.
The transfers between levels in the fair value hierarchy are deemed to have occurred at the end of the reporting
period.
Classification by hierarchy regarding financial assets and liabilities measured at fair value
FY2013: As of March 31, 2014
Financial assets
Derivative financial assets
Equity securities
Total
Financial liabilities
Derivative financial liabilities
Total
FY2014: As of March 31, 2015
Financial assets
Derivative financial assets
Equity securities
Total
Financial liabilities
Derivative financial liabilities
Total
FY2014: As of March 31, 2015
Financial assets
Derivative financial assets
Equity securities
Total
Financial liabilities
Derivative financial liabilities
Total
Millions of yen
Level 1
Level 2
Level 3
Total
-
14,178
14,178
-
-
169
-
169
2,296
2,296
-
2,606
2,606
-
-
169
16,784
16,953
2,296
2,296
Millions of yen
Level 1
Level 2
Level 3
Total
-
17,232
17,232
-
-
3,181
-
3,181
259
259
-
2,406
2,406
-
-
3,181
19,639
22,821
259
259
Thousands of U.S. dollars
Level 1
Level 2
Level 3
Total
-
143,405
143,405
-
-
26,470
-
26,470
2,155
2,155
-
20,021
20,021
-
-
26,470
163,426
189,896
2,155
2,155
There were no transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy during the
years ended March 31, 2014 and 2015.
109
Classification by hierarchy regarding financial assets and liabilities not measured at fair value
FY2013: As of March 31, 2014
Financial assets
Bonds receivable
Total
Financial liabilities
Borrowings
Bonds issued
Lease obligations
Total
FY2014: As of March 31, 2015
Financial assets
Bonds receivable
Total
Financial liabilities
Borrowings
Bonds issued
Lease obligations
Total
FY2014: As of March 31, 2015
Financial assets
Bonds receivable
Total
Financial liabilities
Borrowings
Bonds issued
Lease obligations
Total
Millions of yen
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
103
103
110,631
110,588
-
221,219
-
-
-
-
340
340
103
103
110,631
110,588
340
221,560
Millions of yen
Level 2
Level 3
Total
108
108
86,118
100,466
-
186,584
-
-
-
-
180
180
108
108
86,118
100,466
180
186,765
Thousands of U.S. dollars
Level 2
Level 3
Total
898
898
716,634
836,032
-
1,552,666
-
-
-
-
1,497
1,497
898
898
716,634
836,032
1,497
1,554,163
Level 1
Level 1
The movement of financial instruments categorized within Level 3 of the fair value hierarchy was as follows:
Balance at the beginning of the year
Gains and losses
Other comprehensive income
Sales
Other
Balance at the end of the year
Millions of yen
Year ended
March 31,
2014
2,731
2015
2,606
Thousands of
U.S. dollars
Year ended
March 31,
2015
21,685
(125)
-
-
2,606
(174)
(25)
0
2,406
(1,456)
(208)
0
20,021
110
36. Principal Subsidiaries
Principal subsidiaries as of March 31, 2015 were as follows:
Company name
Location
Main business
Ownership percentage of
voting rights (%)
(Note)
Epson Sales Japan
Corporation
Shinjuku-ku, Tokyo
Epson Direct Corporation
Matsumoto-shi, Nagano
Orient Watch Co., Ltd.
Chiyoda-ku, Tokyo
Miyazaki Epson Corporation Miyazaki-shi, Miyazaki
Tohoku Epson Corporation
Sakata-shi, Yamagata
Akita Epson Corporation
Yuzawa-shi, Akita
Epson Atmix Corporation
Hachinohe-shi, Aomori
Sales of information-related
equipment and sensing and
industrial solutions
Sales of information-related
equipment
Sales of devices and precision
products
Manufacture of devices and
precision products
Manufacture of
information-related
equipment, devices and
precision products
Manufacture of
information-related
equipment, devices and
precision products, and
sensing and industrial
solutions
Manufacture and sales of
devices and precision products
U.S. Epson, Inc.
Long Beach, U.S.A.
Holding company
Epson America, Inc.
Long Beach, U.S.A.
Epson Electronics
America, Inc.
San Jose, U.S.A.
Epson Portland Inc.
Portland, U.S.A.
Epson El Paso, Inc.
El Paso, U.S.A.
Epson Europe B.V.
Amsterdam, the Netherlands
Epson (U.K.) Ltd.
Hemel Hempstead, UK
Epson Deutschland
GmbH
Epson Europe
Electronics GmbH
Dusseldorf, Germany
Munich, Germany
Epson France S.A.
Levallois-Perret, France
Regional headquarters, Sales
of information-related
equipment and sensing and
industrial solutions
Sales of devices and precision
products
Manufacture of
information-related equipment
Distribution of
information-related equipment
Regional headquarters,
Sales of information-related
equipment
Sales of information-related
equipment
Sales of information-related
equipment and sensing and
industrial solutions
Sales of devices and precision
products
Sales of information-related
equipment
111
100.0
100.0
(100.0)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
Company name
Location
Main business
Ownership percentage of
voting rights (%)
(Note)
Epson Italia s.p.a.
Milan, Italy
Epson Iberica, S.A.
Cerdanyola, Spain
Epson Telford Ltd.
Telford, UK
Epson (China) Co., Ltd.
Beijing, China
Epson Korea Co., Ltd.
Seoul, Korea
Epson Hong Kong Ltd.
Hong Kong, China
Epson Taiwan
Technology & Trading Ltd.
Taipei, Taiwan
Epson Singapore Pte.
Ltd.
Singapore
Epson Australia
Pty. Ltd.
Epson India
Pvt. Ltd.
North Ryde, Australia
Bangalore, India
Tianjin Epson Co., Ltd.
Tianjin, China
Epson Precision
(Hong Kong), Ltd.
Epson Engineering
(Shenzhen) Ltd.
Epson Precision
(Shenzhen) Ltd.
Orient Watch
(Shenzhen) Ltd.
Hong Kong, China
Shenzhen, China
Shenzhen, China
Shenzhen, China
Singapore Epson Industrial
Pte. Ltd.
Singapore
P.T. Epson Batam
Batam, Indonesia
P.T. Indonesia Epson
Industry
Bekasi, Indonesia
Sales of information-related
equipment
Sales of information-related
equipment
Manufacture of
information-related equipment
Regional headquarters, Sales
of information-related
equipment and sensing and
industrial solutions
Sales of information-related
equipment
Sales of information-related
equipment, devices and
precision products and sensing
and industrial solutions
Sales of information-related
equipment, devices and
precision products
Regional headquarters, Sales
of information-related
equipment, devices and
precision products
Sales of information-related
equipment
Sales of information-related
equipment
Manufacture of
information-related equipment
Procurement of
information-related equipment
components
Manufacture of
information-related equipment
and sensing and industrial
solutions
Manufacture of devices and
precision products
Manufacture of devices and
precision products
Manufacture of devices and
precision products
Manufacture of
information-related equipment
Manufacture of
information-related equipment
112
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
(100.0)
80.0
(80.0)
100.0
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
100.0
(100.0)
100.0
Company name
Location
Main business
Epson Precision
(Philippines), Inc.
Epson Precision
Malaysia Sdn. Bhd.
Epson Precision
(Johor) Sdn. Bhd.
Lipa, Philippines
Kuala Lumpur, Malaysia
Johor, Malaysia
Manufacture of
information-related equipment
Manufacture of devices and
precision products
Manufacture of devices and
precision products
Ownership percentage of
voting rights (%)
(Note)
100.0
100.0
100.0
(100.0)
(Note) Ownership percentage of voting rights indicated inside parentheses refers to indirect ownership percentage.
37. Related Parties
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated in
consolidation and are not disclosed in this note. There were no significant transactions between the Company, its subsidiaries and
other related parties.
The remuneration of directors and other members of key management personnel was as follows:
Short-term remuneration
Millions of yen
Year ended
March 31
2014
564
2015
563
Thousands of
U.S. dollars
Year ended
March 31,
2015
4,685
(Note 1) Epson introduced a stock performance (stock-based) remuneration system to link remuneration more closely to share
price, so a certain portion of short-term remuneration is allotted for the purchase of Epson Stock.
(Note 2) A director who retired at the closing of the general shareholders’ meeting held on June 24, 2014 receipted a retirement
benefit of ¥41 million based on the resolution of the general shareholders’ meeting held on June 23, 2006, on the payment of
director retirement benefits.
113
38. Commitments
Commitments for the acquisition of assets were as follows:
Millions of yen
March 31
2014
2015
Thousands of
U.S. dollars
March 31,
2015
Acquisition of property, plant and equipment
Acquisition of intangible assets
Total
6,167
927
7,094
4,706
1,519
6,226
39,169
12,640
51,809
39. Contingencies
Material litigation
In general, litigation has uncertainties and it is difficult to make reliable judgments for the possibility of an outflow
of resources embodying economic benefits and to estimate the financial effect.
Provisions are not recognised either if an outflow of resources embodying economic benefits is not probable or to
estimate the financial effect is not practicable. Epson was contending the following material actions.
(1) The liquid crystal display price-fixing cartel
The civil actions have been brought against the Company and certain of its consolidated subsidiaries by multiple
customers in the U.S, regarding allegations of involvement in a liquid crystal display price-fixing cartel.
Moreover, the Company and certain of its consolidated subsidiaries are currently under investigation by the
European Commission and other anti-monopoly-related authorities.
(2) The civil action on copyright fee of ink-jet printers
Verwertungsgesellschaf Wort (“VG Wort”), the organization for collecting copyright fees on behalf of copyright
holders, has brought a civil action against Epson Deutschland GmbH(“EDG”), a consolidated subsidiary of the
Company, to seek payment of copyright fees on single-function printers.
The claim was dismissed by the supreme court. The plaintiff, however, unsatisfied with this ruling, appealed to the
Federal Constitutional Court of Germany. In December 2010, the Federal Constitutional Court ruled that the ruling
of the supreme court violates rights set forth in Article 14 of the constitutional law of Germany. It thus dismissed
the ruling of the supreme court and referred the case back to the supreme court for review. In July 2011, the
supreme court referred the case to the Court of Justice of the European Union, and an inquiry was begun in October
2012. In June 2013, the Court of Justice of the European Union ruled that EU member states can impose levies on
printer and PC manufacturers in order to compensate copyrights holders for unauthorized reproduction of their
work. In response to this, the supreme court judged that printer and PC are liable to copyright levies, in July 2014.
The specific copyright rates are under consideration again by the high court of the Germany.
In June 2010, Epson Europe B.V. (“EEB”), a consolidated subsidiary of the Company, brought a civil suit against
La SCRL Reprobel (“Reprobel”), a Belgium-based group that collects copyright royalties, seeking restitution for
copyright royalties for multifunction printers. After that, Reprobel also brought a civil suit against EEB. As a result,
these two lawsuits were adjoined. EEB’s claims were rejected at the first trial, but EEB, dissatisfied with the
decision, intends to appeal.
114
40. Subsequent Events
Share splits
The Company completed the Company’s ordinary shares split as below with an effective date of April 1, 2015
based on the resolution by the Company’s Board of Directors on January 30, 2015.
(1) Purpose of share splits
The Company, in the light of recent share price trends, aims to make it easier for investors to invest in the
Company and expand its investor base by reducing the investment unit amount of the Company’s shares and
enhancing the liquidity of its ordinary shares.
(2) Method of share splits
Each share of the Company’s ordinary shares held by registered shareholders as of the basis date of March 31,
2015, was split into two shares on the effective date of April 1, 2015.
(3) Increase in number of ordinary shares due to share split
Ordinary shares: 199,817,389 shares
Earnings per share was calculated under the assumption that the share splits took effect at the beginning of the
previous fiscal year.
41. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by Minoru Usui (President and Representative Director) and
Noriyuki Hama (Senior Managing Director and General Administrative Manager, Management Control Division)
on June 25, 2015.
115
Report of Independent Auditors
116
Additional Information
1. Principal subsidiaries and affiliates
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
Consolidated subsidiaries
Epson Sales Japan
Corporation
*
Shinjuku-ku,
Tokyo
4,000
(million JPY)
Epson Direct
Corporation
Matsumoto-shi,
Nagano
150
(million JPY)
Sales of
information-related
equipment and sensing
and industrial solutions
Sales of
information-related
equipment
Orient Watch Co., Ltd.
Chiyoda-ku,
Tokyo
100
(million JPY)
Sales of devices and
precision products
Miyazaki Epson
Corporation
Miyazaki-shi,
Miyazaki
100
(million JPY)
Tohoku Epson
Corporation
Sakata-shi,
Yamagata
100
(million JPY)
Akita Epson
Corporation
Yuzawa-shi,
Akita
80
(million JPY)
Epson Atmix
Corporation
Hachinohe-shi,
Aomori
450
(million JPY)
Manufacture of
devices and precision
products
Manufacture of
information-related
equipment, devices
and precision products
Manufacture of
information-related
equipment, devices
and precision products,
and sensing and
industrial solutions
Manufacture and sales
of devices and
precision products
U.S. Epson, Inc.
*
Long Beach,
U.S.A.
111,941
(thousand USD)
Holding company
100.0
Epson America, Inc.
*
Long Beach,
U.S.A.
40,000
(thousand USD)
Regional headquarters,
Sales of
information-related
equipment and sensing
and industrial solutions
Epson Electronics
America, Inc.
Epson Portland Inc.
Epson El Paso, Inc.
San Jose,
U.S.A.
Portland,
U.S.A.
El Paso,
U.S.A.
10,000
(thousand USD)
Sales of devices and
precision products
31,150
(thousand USD)
51,000
(thousand USD)
Manufacture of
information-related
equipment
Distribution of
information-related
equipment
117
100.0
Sales of the Company’s
products,
Interlocking directors,
Financial assistance,
Rental of assets
100.0
(100.0)
Sales of PCs, etc.,
Rental of assets
100.0
Sales of watches,
Financial assistance,
Rental and borrowing of
assets
100.0
Manufacture of crystal
devices
100.0
Manufacture of printer
components and
semiconductors,
Interlocking directors
Manufacture of printer
components, crystal devices,
and sensing systems,
Financial assistance,
Borrowing of assets
Manufacture and sales of
metal powders, etc.,
Financial assistance,
Rental of assets
Holding company in
Americas,
Interlocking directors
Regional headquarters in
Americas,
Sales of printers and other
PC peripherals and sales of
factory automation products,
Interlocking directors
Sales of electronic devices
Manufacture of printer
consumables,
Interlocking directors
100.0
100.0
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
Distribution of printer
consumables,
Interlocking directors
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
Epson Europe B.V.
*
Amsterdam,
the Netherlands
95,000
(thousand EUR)
Regional headquarters,
Sales of
information-related
equipment
Epson (U.K.) Ltd.
Hemel
Hempstead,
UK
1,600
(thousand GBP)
Sales of
information-related
equipment
Epson Deutschland
GmbH
Dusseldorf,
Germany
5,200
(thousand EUR)
Sales of
information-related
equipment and sensing
and industrial solutions
Epson Europe
Electronics GmbH
Munich,
Germany
2,000
(thousand EUR)
Sales of devices and
precision products
Epson France S.A.
Levallois-
Perret, France
4,000
(thousand EUR)
Epson Italia s.p.a.
Milan,
Italy
3,000
(thousand EUR)
Epson Iberica, S.A.
Cerdanyola,
Spain
1,900
(thousand EUR)
Epson Telford Ltd.
Telford, UK
8,000
(thousand GBP)
Epson (China) Co., Ltd.
*
Beijing,
China
1,211
(million CNY)
Sales of
information-related
equipment
Sales of
information-related
equipment
Sales of
information-related
equipment
Manufacture of
information-related
equipment
Regional headquarters,
Sales of
information-related
equipment and sensing
and industrial solutions
Epson Korea Co., Ltd.
Seoul,
Korea
1,466
(million KRW)
Sales of
information-related
equipment
Epson Hong Kong Ltd.
Hong Kong,
China
2,000
(thousand HKD)
Epson Taiwan
Technology
& Trading Ltd.
Taipei,
Taiwan
25,000
(thousand TWD)
Sales of
information-related
equipment, devices
and precision products
and sensing and
industrial solutions
Sales of
information-related
equipment, devices
and precision products
118
Regional headquarters in
Europe,
Sales of printers and other
PC peripherals,
Interlocking directors,
Guaranty of liabilities
Sales of printers and other
PC peripherals,
Interlocking directors,
Guaranty of liabilities
100.0
100.0
(100.0)
100.0
(100.0)
Sales of printers and other
PC peripherals, and sales of
factory automation products,
Guaranty of liabilities
100.0
(100.0)
Sales of electronic devices,
Interlocking directors,
Guaranty of liabilities
100.0
(100.0)
Sales of printers and other
PC peripherals
100.0
(100.0)
Sales of printers and other
PC peripherals,
Guaranty of liabilities
100.0
(100.0)
Sales of printers and other
PC peripherals,
Guaranty of liabilities,
100.0
(100.0)
Manufacture of printer
consumables,
Interlocking directors
100.0
Regional headquarters in
China,
Sales of printers and other
PC peripherals and factory
automation products,
Interlocking directors
100.0
Sales of printers and other
PC peripherals
100.0
Sales of printers and other
PC peripherals, electronic
devices and factory
automation products
100.0
Sales of printers and other
PC peripherals, and sales of
electronic devices,
Guaranty of liabilities
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
Epson Singapore Pte.
Ltd.
Singapore
200
(thousand SGD)
Epson Australia
Pty. Ltd.
North Ryde,
Australia
1,000
(thousand AUD)
Epson India
Pvt. Ltd.
Bangalore,
India
108,628
(thousand INR)
Tianjin Epson Co., Ltd.
Tianjin,
China
172,083
(thousand CNY)
Regional headquarters,
Sales of
information-related
equipment, devices
and precision products
Sales of
information-related
equipment
Sales of
information-related
equipment
Manufacture of
information-related
equipment
Epson Precision
(Hong Kong), Ltd.
*
Hong Kong,
China
81,602
(thousand USD)
Procurement of
information-related
equipment components
Epson Engineering
(Shenzhen) Ltd.
*
Shenzhen,
China
56,641
(thousand USD)
Epson Precision
(Shenzhen) Ltd.
Shenzhen,
China
25,000
(thousand USD)
Orient Watch
(Shenzhen) Ltd.
Shenzhen,
China
37,748
(thousand CNY)
Manufacture of
information-related
equipment and sensing
and industrial solutions
Manufacture of
devices and precision
products
Manufacture of
devices and precision
products
Singapore Epson
Industrial
Pte. Ltd.
Singapore
71,700
(thousand SGD)
Manufacture of
devices and precision
products
P.T. Epson Batam
Batam,
Indonesia
7,000
(thousand USD)
P.T. Indonesia Epson
Industry
*
Bekasi,
Indonesia
23,000
(thousand USD
Epson Precision
(Philippines), Inc.
*
Lipa,
Philippines
157,533
(thousand USD)
Manufacture of
information-related
equipment
Manufacture of
information-related
equipment
Manufacture of
information-related
equipment
119
100.0
Regional headquarters in
Asia-Pacific,
Sales of printers and other
PC peripherals, and
sales of electronic devices,
Interlocking directors,
Guaranty of liabilities
100.0
100.0
(100.0)
Sales of printers and other
PC peripherals,
Guaranty of liabilities
Sales of printers and other
PC peripherals,
Interlocking directors,
Guaranty of liabilities
80.0
(80.0)
Manufacture of printer
consumables, etc.,
Interlocking directors
Procurement of printer and
3LCD projector
components,
100.0
100.0
(100.0)
Manufacture of printers,
3LCD projectors, liquid
crystal panels and factory
automation products, etc.,
Interlocking directors
100.0
(100.0)
Manufacture of watches,
etc.,
Interlocking directors
100.0
(100.0)
Manufacture of watches,
etc.,
100.0
Manufacture of
semiconductors, and surface
finishing,
Interlocking directors,
Guaranty of liabilities
100.0
(100.0)
Manufacture of printer
consumables,
Interlocking directors
Guaranty of liabilities
100.0
Manufacture of printers,
Interlocking directors,
Guaranty of liabilities
100.0
Manufacture of printers and
3LCD projectors,
Interlocking directors,
Guaranty of liabilities
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
Epson Precision
Malaysia Sdn. Bhd.
Kuala Lumpur,
Malaysia
16,000
(thousand MYR)
Manufacture of
devices and precision
products
Epson Precision
(Johor) Sdn. Bhd.
Johor,
Malaysia
22,800
(thousand MYR)
Manufacture of
devices and precision
products
50 other companies
–
–
–
Equity method affiliates
Time Module
(Hong Kong) Ltd.
Hong Kong,
China
5,001
(thousand HKD)
Sales of devices and
precision products
Four other companies
–
–
–
100.0
Manufacture of crystal
devices,
Interlocking directors,
Guaranty of liabilities
100.0
(100.0)
Manufacture of watches,
etc.,
Guaranty of liabilities
–
33.3 Sales of watch movements
–
–
–
Notes
1. Ownership percentage of voting rights indicated inside parentheses refers to indirect ownership percentage.
2. *indicates a specified subsidiary (tokutei-kogaisha).
3. The revenue (excluding eliminations of sales among consolidated subsidiaries) of Epson Sales Japan Corporation
and Epson America, Inc. each amounts to more than 10% of the consolidated revenue. Key information on the
operations of these subsidiaries is as follows.
Company name
Revenue
Profit before
tax
Profit for the
period
(Millions of yen)
Total equity
Total assets
Epson Sales Japan Corporation
202,453
Epson America, Inc.
298,334
4,801
5,626
2,641
4,018
13,915
66,681
34,332
149,989
The amounts for Epson America, Inc. are included in consolidated business results.
120
2. Distribution of ownership among shareholders
Category
Government and
Japanese
Japanese
regional public
financial
securities
bodies
institutions
companies
Other Japanese
corporations
Foreign institutions and
Japanese
others
individuals
Total
Institutions
Individuals
and others
Shares less
than one
unit (Shares)
Share ownership (100 shares per unit)
As of March 31, 2014
Number of
shareholders
(Persons)
Number of
shares owned
(Units)
Percentage of
shares owned
(%)
–
89
37
420
521
26
47,131
48,224
－
–
492,560
72,570
282,010
511,321
125
638,561 1,997,147
102,689
–
24.66
3.63
14.12
25.60
0.01
31.98
100.00
－
Notes
1. 20,928,657 shares of treasury stock are included as 209,286 units under “Japanese individuals and others” and 57
shares under “Shares less than one unit.”
2. Three units in the name of Japan Securities Depository Center, Inc. are included under “Other Japanese
corporations.”
121
3. Major shareholders
Name
Address
Number of shares held
As of March 31, 2015
Shareholding
ratio (%)
Sanko Kigyo Kabushiki
Kaisha
Japan Trustee Services
Bank, Ltd. (Trustee
Account)
The Master Trust Bank
of Japan, Ltd. (Trust
account)
Seiko Holdings
Corporation
6-1 Ginza 5-chome, Chuo-ku,
Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
11-3 Hamamatsu-cho 2-chome,
Minato-ku, Tokyo
5-11 Ginza 4-chome, Chuo-ku,
Tokyo
Yasuo Hattori
Minato-ku, Tokyo
Noboru Hattori
Minato-ku, Tokyo
The Dai-ichi Life
Insurance Company,
Limited
(Standing proxy: Trust &
Custody Services Bank,
Ltd.)
Mizuho Trust & Banking
Co., Ltd., Retirement
benefit trust, Mizuho
Bank, Ltd. account,
Beneficiary of the
re-trust, Trust & Custody
Services Bank, Ltd.
Seiko Epson Corporation
Employees’
Shareholding
Association
NGK INSULATORS,
LTD.
Total
13-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
(8-12, Harumi 1-chome,
Chuo-ku, Tokyo)
Harumi Island Triton Square
Office Tower Z, 8-12, Harumi
1-chome, Chuo-ku, Tokyo
3-5, Owa 3-chome, Suwa-shi,
Nagano
2-56, Suda-cho, Mizuho-ku,
Nagoya-shi, Aichi
－
10,000,000
7,851,000
7,793,200
6,000,000
5,966,306
5,599,968
5.00
3.92
3.90
3.00
2.98
2.80
4,368,000
2.18
4,076,900
2.04
3,886,158
1.94
3,450,000
58,991,532
1.72
29.52
Notes:
1. Although the Company holds 20,928,657 shares of treasury stock, the Company is excluded from the above list
of major shareholders. (The ratio of the treasury shares held by the Company to the total number of shares issued is
10.47%.)
2. The shares held by Mizuho Trust & Banking Co., Ltd., Retirement benefit trust, Mizuho Bank, Ltd. account,
Beneficiary of the re-trust, Trust & Custody Services Bank, Ltd., were contributed by Mizuho Bank, Ltd. to the
trust assets of the Retirement benefit trust.
3. Mizuho Bank, Ltd. and its joint holders submitted a Report of Change to the Director of the Kanto Local Finance
Bureau as of May 22, 2014, claiming that they hold the Company’s shares as follows as of May 15, 2014. However,
we have not been able to confirm the number of shares they held at the end of the fiscal year under review.
Therefore, they are not included in the above major shareholders.
122
Name
Address
Mizuho Bank, Ltd.
Mizuho Trust & Banking
Co., Ltd.
Mizuho Asset
Management Co., Ltd.
Total
5-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
2-1, Yaesu 1-chome, Chuo-ku,
Tokyo
5-27, Mita 3-chome, Minato-ku,
Tokyo
－
Number of shares
held
Shareholding ratio (%)
6,947,000
2,696,800
459,500
10,103,300
3.48
1.35
0.23
5.06
123
4. Epson stock price
(1) High and low stock prices for the previous five years
Year
Fiscal year
69th year
March 2011
70th year
March 2012
71st year
March 2013
72nd year
March 2014
73rd year
Mar 2015
High (¥)
Low (¥)
1,700
1,032
1,499
881
1,183
431
3,390
795
5,970
□2,333
2,752
□2,120
Notes
1. High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data.
2. The □ mark indicates the highest and lowest ex-rights prices after a stock split (the 2-for-1 stock split
implemented on April 1, 2015).
(2) High and low stock prices for the previous six months
Month
October 2014
November
December
January 2015
February
March
High (¥)
Low (¥)
5,280
5,790
5,970
5,090
4,505
4,495
5,030
4,940
4,775
4,055
4,885
□2,333
4,405
□2,120
Notes
1. High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data.
2. The □ mark indicates the highest and lowest ex-rights prices after a stock split (the 2-for-1 stock split
implemented on April 1, 2015).
124
5. Corporate data and investor information
(1) Company name
Seiko Epson Corporation
(2) Founded
(3) Head office
May 1942
3-5 Owa 3-chome, Suwa, Nagano 392-8502, Japan
Tel: +81-266-52-3131(main)
(4) Tokyo office
Shinjuku NS Building, 4-1 Nishi-shinjuku 2-chome,
Shinjuku-ku, Tokyo 163-0811, Japan
Tel: +81-3-3348-8531(main)
(5) Investor information
Closing of accounts
Regular general shareholders’ meeting
Date for confirmation to shareholders of
March 31
June
the cash dividend payment date
March 31
Date for confirmation to shareholders of
the interim cash dividend payment date
September 30
Transfer agent
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo
Agent’s business address
Stock Transfer Agency Department
Mitsubishi UFJ Trust and Banking Corporation
10-11, Higashisuna 7-chome, Koto-ku, Tokyo
Tel: +81-3-6701-5000
http://www.tr.mufg.jp/english/
Intermediary offices
Head Office and Branches of Mitsubishi UFJ Trust and
Banking Corporation
Posting of public notices
Public notices will be posted electronically. In the event of
accidents or other circumstances preventing the electronic
posting of information, such information will be made
available through the Nihon Keizai Shimbun newspaper
(Japanese)
Web address
http://www.pronexus.co.jp/koukoku/6724/6724.html
(Japanese)
125
3-3-5 Owa, Suwa, Nagano 392-8502, Japan
tel: +81-266-52-3131
http://global.epson.com