ANNUAL REPORT 2018
SEIKO EPSON CORPORATION
April 2017 - March 2018
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 .......................................................................................................... 11
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
Management Analysis of Financial Position, Operating Results and Cash Flows ................................ 22
1. Operating results overview ................................................................................................................. 22
2. Manufacturing, orders received and sales ........................................................................................ 25
3. Management analysis and discussion on operating results, etc. ...................................................... 26
4. Research and development activities ................................................................................................. 28
5. Management policy, business environment and issues to be addressed, etc. ................................. 31
6. Dividend policy .................................................................................................................................... 36
Corporate Governance ................................................................................................................................ 37
1. Approach to corporate governance .................................................................................................... 37
2. Details of audit remuneration ............................................................................................................. 52
Management ................................................................................................................................................ 53
Index to Consolidated Financial Statements ............................................................................................. 56
Consolidated Statement of Financial Position ...................................................................................... 57
Consolidated Statement of Comprehensive Income ............................................................................. 59
Consolidated Statement of Changes in Equity ...................................................................................... 61
Consolidated Statement of Cash Flows .................................................................................................. 63
Notes to Consolidated Financial Statements ......................................................................................... 64
Report of Independent Auditors .......................................................................................................... 118
Additional Information ............................................................................................................................. 119
1. Principal subsidiaries and affiliates ................................................................................................. 119
2. Distribution of ownership among shareholders .............................................................................. 123
3. Major shareholders ........................................................................................................................... 124
4. Officer and employee stock ownership plans .................................................................................. 127
5. Epson stock price ............................................................................................................................... 129
6. Corporate data and investor information ....................................................................................... 130
2
Consolidated Financial Highlights
Seiko Epson Corporation and Subsidiaries
For the years ended March 31
Statement of Comprehensive
Income
Revenue
Information-related equipment
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Adjustments
Printing Solutions business
segment
Visual Communications business
segment
Wearable & Industrial Products
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 from (used in)
operating activities
Net cash from (used in)
investing activities
Free cash flows
Net cash from (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
IFRS
Millions of yen
2015
2016
2017
2018
Thousands of
U.S. dollars
2018
1,086,341
1,092,481
1,024,856
1,102,116
10,367,002
907,296
156,297
23,396
1,390
(2,038)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
730,867
736,369
686,619
736,688
6,929,631
177,186
184,033
179,682
198,891
1,870,858
173,478
170,415
158,548
167,336
1,574,038
1,390
3,418
1,404
257
1,509
(1,502)
936
(1,737)
8,804
(16,329)
395,924
397,660
365,974
400,848
3,770,557
(294,648)
(312,708)
(300,167)
(326,062)
(3,067,086)
131,380
132,536
112,560
94,026
91,530
45,772
67,892
67,470
48,320
65,003
62,663
611,447
589,436
41,836
393,528
145,483
(1,469)
55,982
41,581
391,129
108,828
113,054
96,873
84,279
792,766
(32,735)
(51,558)
(75,759)
(74,661)
(702,295)
76,093
61,495
21,114
9,617
90,471
(55,392)
(67,171)
(26,691)
37
348
650,383
355,898
1,006,282
355,442
153,531
601,451
339,888
941,340
325,019
145,644
602,446
371,940
974,387
351,389
128,275
639,172
394,178
1,033,350
322,387
195,856
6,012,341
3,707,817
9,720,158
3,032,518
1,842,320
494,325
467,818
492,196
512,727
4,822,942
3
IFRS
Millions of yen
2015
2016
2017
2018
Thousands of
U.S. dollars
2018
314.61
314.61
115.00
127.94
127.94
60.00
136.82
136.82
60.00
118.78
118.75
62.00
1.12
1.12
0.58
1,381.66
1,307.58
1,397.40
1,455.67
13.69
49.1
49.7
50.5
49.6
26.3
9.5
10.1
8.3
13.7
12.1
52,010
12,787
9.7
8.6
-
-
7.1
6.6
-
-
6.5
5.9
-
-
Per Share Data (yen and U.S. dollars)
Basic earnings per share (Note 2)
Diluted earnings per share (Note 2)
Cash dividends per share (Note 3)
Equity attributable to owners of the
parent company, per share (Note 2)
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
-
-
-
-
1,246
41,051
Sensing and industrial solutions
business segment
Printing Solutions
business segment
Visual Communications
business segment
Wearable & Industrial Products
business segment
Other
Corporate
Total
Notes
1. The Consolidated Financial Statements have been prepared on the basis of International Financial Reporting
48,331
11,474
10,041
12,785
13,312
10,973
44,789
13,092
76,391
67,605
69,878
72,420
3,229
2,861
3,453
3,529
348
337
306
340
-
-
Standards (IFRS) from the year ended March 31, 2014.
2. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split with an effective
date of April 1, 2015. As a result, each share of the Company’s ordinary shares was split into two shares. Basic
earnings per share, diluted earnings per share and equity attributable to owners of the parent company, per share
were calculated under the assumption that the shares split took effect at the beginning of the year ended March
31, 2014.
3. In this table, cash dividends per share refers to the amount paid for each share in each fiscal year.
4. U.S. dollar amounts have been translated from yen, for convenience only. The exchange rate of ¥106.31 = U.S.
$1 at the end of the reporting period has been used for the purpose of presentation.
4
For the years ended March 31
Statements of Income
Net sales
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 (Note 1)
Income (loss) before income taxes
and minority interests
Profit (loss) attributable to owners
of parent
Research and development costs
Capital expenditures
Depreciation and amortization
Net cash from (used in)
operating activities
Net cash from (used in)
investing activities
Free cash flows
Net cash from (used in)
financing activities
JGAAP
Millions of yen
2014
1,003,606
836,436
148,956
16,181
1,334
699
322,976
238,007
84,968
78,121
71,916
83,698
50,531
37,825
38,725
111,253
(39,519)
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
business segment
Devices and precision products
business segment
Sensing and industrial solutions
business segment
Other
Corporate
Total
Per Share Data (Yen)
Earnings per share (Note 2)
Cash dividends per share (Note 3)
Net assets per share (Note 2)
JGAAP
Millions of yen
2014
602,452
216,170
865,872
313,636
200,505
351,730
55,104
13,723
1,197
252
2,895
73,171
233.94
50.00
976.41
40.3
Financial Ratios (%)
Shareholders’ equity ratio (Note 4)
ROE (net income (loss) / average
shareholders’ equity at beginning
and end of year) (Note 4)
ROA (ordinary income / average
total assets at beginning and end of
year)
ROS (operating income / net sales)
Notes
1. Ordinary income is a common item on financial statements in Japan, which is calculated by adding to or
27.6
9.5
8.5
subtracting from operating income items such as interest income, rent income, interest expenses and foreign
exchange gains or losses.
2. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split with an effective
date of April 1, 2015. As a result, each share of the Company’s ordinary shares was split into two shares.
Earnings per share and net assets per share were calculated under the assumption that the shares split took effect
at the beginning of the year ended March 31, 2014.
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 the
printing solutions, visual communications, wearable and industrial products, and the other business.
Epson is organized into operations divisions that come under global 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 various businesses is provided below along with a list of the main Epson Group
companies involved in each segment.
Printing Solutions Business Segment
This segment comprises the printer business, professional printing business, and others. The businesses in this
segment leverage Epson’s original Micro Piezo and other technologies to develop, manufacture, and sell products.
The main activities of these businesses are described below.
Printer business
This business is primarily responsible for home and office inkjet printers, serial impact dot matrix (SIDM) printers,
page printers, color image scanners, and related consumables, as well as dry process office papermaking systems.
Professional printing business
This business is primarily responsible for large-format inkjet printers, industrial inkjet printing systems, printers for
use in POS systems, label printers, and related consumables.
Others
This business sells PCs in the Japanese market through a domestic subsidiary.
7
The major Epson Group companies involved in this segment are listed in the table below.
Business area
Main products
Main Epson Group companies
Manufacturing companies
Sales companies
Printers
Professional printing
Inkjet printers, serial impact
dot matrix printers, page
printers, color image
scanners, and related
consumables, dry process
office papermaking systems,
and others
Large-format inkjet printers,
industrial inkjet printing
systems, printers for use in
POS systems, label printers,
and related consumables, and
others
Tohoku Epson Corporation
Akita Epson Corporation
Epson Portland Inc.
Epson Telford Ltd.
Fratelli Robustelli S.r.l.
Tianjin Epson Co., Ltd.
Epson Engineering (Shenzhen) Ltd.
P.T. Epson Batam
P.T. Indonesia Epson Industry
Epson Precision (Philippines), Inc.
Others
PCs and other equipment
—
Epson Sales Japan Corporation
Epson America, Inc.
Epson Europe B.V.
Epson (U.K.) Ltd.
Epson Deutschland GmbH
Epson France S.A.S.
Epson Italia S.p.A.
For.Tex S.r.l.
Epson Iberica, S.A.U.
Epson (China) Co., Ltd.
Epson Korea Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
P.T. Epson Indonesia
Epson (Thailand) Co., Ltd.
Epson Philippines Corporation
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.
Epson Sales Japan Corporation
Epson Direct Corporation
Visual Communications Business Segment
The businesses in this segment leverage Epson’s original microdisplay and projection technologies to develop,
manufacture, and sell 3LCD projectors for business, education, and the home; high-temperature polysilicon TFT
LCD panels for 3LCD projectors; and smart glasses.
The major Epson Group companies involved in this segment are listed in the table below.
Business area
Main products
Main Epson Group companies
Manufacturing companies
Sales companies
Visual
communications
3LCD projectors,
high-temperature polysilicon
TFT LCD panels for 3LCD
projectors, smart glasses, and
others
Epson Engineering (Shenzhen) Ltd.
Epson Precision (Philippines), Inc.
Epson Sales Japan Corporation
Epson America, Inc.
Epson Europe B.V.
Epson (U.K.) Ltd.
Epson Deutschland GmbH
Epson France S.A.S.
Epson Italia S.p.A.
Epson Iberica, S.A.U.
Epson (China) Co., Ltd.
Epson Korea Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
P.T. Epson Indonesia
Epson (Thailand) Co., Ltd.
Epson Philippines Corporation
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.
8
Wearable & Industrial Products Business Segment
This segment comprises the wearable products business, robotics solutions business, and the microdevices
business.
The main activities of these businesses are described below.
Wearable products business
This business leverages its ultrafine and ultraprecision machining and processing technologies and its high-density
mounting and assembly technologies to develop, manufacture and sell watches, as well as to develop, manufacture
and sell useful products that use high-accuracy sensors to connect people and information.
Watch business
This business primarily develops, manufactures, and sells wristwatches and watch movements.
Sensing equipment business
This business is primarily engaged in developing, manufacturing, and selling sensing equipment that have
extremely accurate built-in sensors and that are used in the personal health and sports fields etc.
Robotics solutions business
This business uses advanced precision mechatronics and other technologies to develop, manufacture, and sell
industrial robots, IC handlers and other production systems that dramatically increase productivity.
Microdevices and others business
This business designs, manufactures, and sells small, accurate, energy-efficient electronic devices for external
customers as well as for other businesses in the Epson Group. It also provides metal powders and surface finishing
services.
Quartz device business
This business 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.
Others
This business develops, manufacturers, and sells a variety of high-performance metal powders for use as raw
materials in the production of electronic components, etc. This business also provides high-value-added surface
finishing in a wide variety of industrial fields.
9
The major Epson Group companies involved in this segment are listed in the table below.
Business area
Main products
Wearable products
Watches
Wristwatches, watch
movements, and others
Main Epson Group companies
Manufacturing companies
Sales companies
Akita Epson Corporation
Epson Precision (Shenzhen) Ltd.
Orient Watch (Shenzhen) Ltd.
Epson Precision (Johor) Sdn. Bhd.
Epson Sales Japan Corporation
Epson (China) Co., Ltd.
Epson Hong Kong Ltd.
Sensing equipment
Akita Epson Corporation
Epson Sales Japan Corporation
Robotics solutions
Industrial robots, IC handlers,
and others
Epson Engineering (Shenzhen) Ltd.
Microdevices and
others
Quartz devices
Crystal units, crystal
oscillators, quartz sensors,
and others
Miyazaki Epson Corporation
Epson Precision Malaysia Sdn. Bhd.
Epson Precision (Thailand) Ltd.
Semiconductors
CMOS LSIs, and others
Tohoku Epson Corporation
Singapore Epson Industrial Pte. Ltd.
Others
Metal powders,
surface finishing
Epson Atmix Corporation
Singapore Epson Industrial Pte. Ltd.
Epson Sales Japan Corporation
Epson America, Inc.
Epson Deutschland GmbH
Epson (China) Co., Ltd.
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Electronics America, Inc.
Epson Europe Electronics GmbH
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
Note Epson Electronics America, Inc. merged operations with Epson America, Inc., effective April 1, 2018.
Other Business Segment
This segment comprises the businesses of Epson Group companies that offer services for and within the Epson
Group.
10
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, 2018
Book value (Millions of yen)
Buildings and
structures
Machinery,
equipment
and
vehicles
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
1,201
(42,383)
[2,136]
–
(–)
6,127
(200,943)
[31,120]
3,764
(179,759)
[1,758]
749
(75,912)
[32,092]
1,443
(113,082)
[28,909]
1,375
(160,528)
129
(39,943)
[1,502]
1,996
(247,143)
2,177
(538,828)
7,627
(36,245)
1,068
(43,060)
[6,066]
84
2,845
496
116
781
101
3,129 43,764
5,641
176
5,268
602
1,484
6,742
1,468
575 24,075
1,169
102
6,581
217
229
4,013
471
672 12,143
735
605 14,962
71 10,437
313
5,708
23
249
855
Head Office
(Suwa-shi, Nagano)
Tokyo Office
(Shinjuku-ku,
Tokyo)
Hirooka Office
(Shiojiri-shi,
Nagano)
Matsumoto Minami
Plant
(Matsumoto-shi,
Nagano)
Toyoshina Plant
(Azumino-shi,
Nagano)
Suwa Minami Plant
(Fujimi-machi,
Suwa-gun, Nagano)
Chitose Plant
(Chitose-shi,
Hokkaido)
Ina Plant
(Minowa-machi,
Kamiina-gun,
Nagano)
Overall
administration and
other
Overall
administration and
other
Printing solutions
Other
Other facilities
1,374
185
Other facilities
664
–
Printer development and
design and component
manufacturing facilities
Research and development
facilities
16,022
18,485
Other
Other facilities
1,295
31
Visual
communications
Wearable &
Industrial products
Printing solutions
Visual
communications
Other
3LCD projector, smart
glasses and factory
automation product
development and design
facilities
Printer component and liquid
crystal panel manufacturing
facilities
Research and development
facilities
3,117
1,391
6,040
16,016
Visual
communications
Liquid crystal panel
manufacturing facilities
2,205
2,897
Wearable &
Industrial products
Crystal device development
and design facilities
1,987
1,666
Fujimi Plant
(Fujimi-machi,
Suwa-gun, Nagano)
Wearable &
Industrial products
Other
Wearable &
Industrial products
Wearable &
Industrial products
Sakata Plant
(Sakata-shi,
Yamagata)
Hino Office
(Hino-shi, Tokyo)
Shiojiri Plant
(Shiojiri-shi,
Nagano)
Sensing equipment and
semiconductor development
and design facilities
Research and development
facilities
Semiconductor
manufacturing facilities
Other
7,058
2,416
7,229
4,949
Other facilities
2,736
2
Wearable &
Industrial products
Watch development, design
and manufacturing facilities
1,692
2,634
11
(2) Domestic subsidiaries
Company name
(location)
Business segment
Type of facilities
As of March 31, 2018
Book value (Millions of yen)
Buildings and
structures
Machinery,
equipment
and
vehicles
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
Tohoku Epson
Corporation
(Sakata-shi,
Yamagata)
Printing solutions
Wearable &
Industrial products
Printer component and
semiconductor
manufacturing facilities
Akita Epson
Corporation
(Yuzawa-shi, Akita)
Printing solutions
Wearable &
Industrial products
Printer component, watch
movements and sensing
equipment manufacturing
facilities
3
13
4,447
118
Epson Atmix
Corporation
(Hachinohe-shi,
Aomori)
Wearable &
Industrial products
Manufacturing facilities for
metal powders, etc.
3,664
2,752
–
(–)
650
(65,436)
360
(30,653)
[34,208]
552
569
2,036
593
5,809
1,239
199
6,976
276
(3) Overseas subsidiaries
Company name
(location)
Business segment
Type of facilities
As of March 31, 2018
Book value (Millions of yen)
Buildings and
structures
Machinery,
equipment
and
vehicles
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
–
(–)
[8,644]
–
(–)
[254,871]
Epson Engineering
(Shenzhen) Ltd.
(Shenzhen, China)
Singapore Epson
Industrial Pte. Ltd.
(Singapore)
Printing solutions
Visual
communications
Wearable & Industrial
products
Wearable & Industrial
products
Printer, 3LCD projector and
factory automation product
manufacturing facilities
Watch component and
semiconductor manufacturing
facilities and surface finishing
facilities
3,113
3,486
2,455
943
–
(–)
[64,104]
–
(–)
[41,567]
P.T. Epson Batam
(Batam, Indonesia)
Printing solutions
Printer consumables
manufacturing facilities
651
5,052
2,760
9,360
8,615
391
3,790
764
356
6,060
3,011
5,141
5,938
7,291 18,371
Printing solutions
Printer manufacturing facilities
Wearable & Industrial
products
Crystal device manufacturing
facilities
P.T. Indonesia Epson
Industry
(Bekasi, Indonesia)
Epson Precision
(Thailand) Ltd.
(Chachoengsao,
Thailand)
Epson Precision
(Philippines), Inc.
(Lipa, Philippines)
Epson Precision
Malaysia Sdn. Bhd.
(Kuala Lumpur,
Malaysia)
Notes
1. The above amounts do not include consumption tax.
2. “Other” under the book value column includes tools, furniture and fixtures and other property, plant and
Crystal device manufacturing
facilities
Printing solutions
Visual
communications
Printer and 3LCD projector
manufacturing facilities
Wearable & Industrial
products
466
(100,000)
[130,000]
602
(97,435)
322
(32,437)
4,661 35,807
23,062
2,719
2,518
5,969
7,617
2,847
3,603
129
411
22
11,124
1,324
15,521
1,373
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 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 fiscal year under review were concentrated in key strategic areas, primarily for
commercializing new products, increasing production capacity, 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 ¥79.4 billion.
No equipment with significant impact on production capacity was sold or removed.
Capital expenditures in each business segment are discussed below.
Printing solutions segment
Investment used for commercializing new products such as printers, and for increasing production capacity,
rationalizing, upgrading and maintaining equipment and facilities amounted to ¥46.3 billion in the fiscal year under
review.
Visual communications segment
Investment used for commercializing new products such as 3LCD projectors, and for increasing production
capacity, rationalizing, upgrading and maintaining equipment and facilities amounted to ¥14.3 billion in the fiscal
year under review.
Wearable & Industrial products segment
Investment used for commercializing new products such as watches, sensing equipment, factory automation
products, crystal devices and semiconductors, and for increasing production capacity, rationalizing, upgrading and
maintaining equipment and facilities amounted to ¥11.0 billion in the fiscal year under review.
Other and overall
Investment used for strengthening R&D structure, etc. amounted to ¥7.6 billion in the fiscal year under review.
13
4. Plans for new additions or disposals
Epson plans to allocate ¥83.0 billion to capital expenditures for the fiscal year ending March 31, 2019.
Business segment
Planned amount of
capital expenditures
(100 million yen)
Main type and purpose of equipment and facilities
Printing solutions
Visual
communications
Wearable &
Industrial products
490
130
130
Commercializing new products, increasing production capacity,
rationalizing, upgrading and maintaining equipment and facilities,
etc.
Commercializing new products, increasing production capacity,
rationalizing, upgrading and maintaining equipment and facilities,
etc.
Commercializing new products, increasing production capacity,
rationalizing, upgrading and maintaining equipment and facilities,
etc.
Other and overall
80 Strengthening R&D and manufacturing structures, etc.
Total
830
–
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
Name of other party
Country
Type of contract
Contract period
License to use patents relating
to information-related
equipment
License to use patents relating
to information-related
equipment
License to use patents relating
to information-related
equipment and software used
by such equipment
License to use patents relating
to information-related
equipment
License to use patents relating
to electrophotography and
inkjet printers
License to use patents relating
to semiconductors and
information-related equipment
License to use patents relating
to information-related
equipment
March 28, 2018 until
the expiry of the
patents
April 1, 2006 until
the expiry of the
patents
September 29, 2006
until the expiry of the
patents
October 1, 2006 until
the expiry of the
patents
March 31, 2008 until
the expiry of the
patents
April 1, 2008 until
March 31, 2018
August 22, 2008 until
the expiry of the
patents
5. Major management contracts
Reciprocal technical assistance agreements
Name of contracting
company
Seiko Epson
Corporation
HP Inc.
U.S.A.
Seiko Epson
Corporation
International Business
Machines Corporation
U.S.A.
Seiko Epson
Corporation
Seiko Epson
Corporation
Seiko Epson
Corporation
Microsoft Corporation
U.S.A.
Eastman Kodak Company U.S.A.
Xerox Corporation
U.S.A.
Seiko Epson
Corporation
Texas Instruments
Incorporated
U.S.A.
Seiko Epson
Corporation
Canon Incorporated
Japan
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.
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 we submitted our
Annual Securities Report.
1. Our operating results could be adversely affected by fluctuations in printer sales.
The ¥736.6 billion in revenue in the printing solutions segment in the year ended March 2018 accounted for about
two-thirds of Epson’s ¥1,102.1 billion in consolidated revenue. Inkjet printers (including printer consumables) for
the home, office, and for 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 declines in prices, a shift of demand toward lower-priced
products, 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 to effectively 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, and
Epson’s projectors also compete against flat panel displays (FPDs)5 of other companies.
We believe that the technologies we use in these products have competitive advantage over 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 in technology and our operating results could be adversely affected.
1 Micro Piezo technology is an inkjet technology created by Epson that manipulates piezoelectric elements to fire small droplets
of ink from nozzles.
2 Thermal 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.
3 3LCD 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, green and blue) 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.
4 DLP 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.
5 FPD encompasses a variety of thin electronic display technologies.
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
16
possibility that other companies could use their brand power, technological strength, 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, etc. in the business environment could affect Epson.
Epson seeks to drive inkjet innovation, visual innovation, wearables innovation, and robotics innovation. We are
looking to achieve our vision for each business by providing value to customers in the form of smart technologies,
environmental benefits, and functional performance. Epson is executing plans and strategies based on a long-range
corporate vision and a mid-range business plan that we believe will enable us to establish a competitive advantage
in technology, which we believe will be crucial for increasing our competitiveness. We are driving further
advances in our original core technologies, including Micro Piezo inkjet technology, microdisplays, sensing, and
robotics, all of which arose from Epson’s rich legacy of efficient, compact, and precision technologies. By
combining these technologies to create platforms, we are developing, manufacturing, and selling products and
providing services that match customer needs.
However, in the product markets and businesses where Epson is concentrating its management resources the pace
of technological innovation is typically rapid, and product life cycles are short. In addition, demand and investment
trends in Epson’s major markets could change along with global economic conditions and progress of digitalization,
and could affect sales of Epson products. Moreover, there is no guarantee that Epson’s current mid-range business
plan, business strategies, and actions specified therein will succeed or be realized.
Under these business circumstances, Epson will also continue to strive to make rapid and smooth transition from
existing products to new products by understanding market and customer needs, investing and conducting research
and development from a medium- and long-range view based on product market forecasts, and creating
development and design platforms.
However, if Epson cannot suitably respond to technological innovations in its main markets, or if competition with
other companies intensifies, or if economic downturns or other factors prevent a recovery in demand, or if Epson is
unable to adequately meet sudden fluctuations in demand in a major market, its 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 etc., 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 and profit
declines because unit shipments of Epson brand ink cartridges shrink as sales of third-party 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 approximately 75% of our
consolidated revenue for the business year ended March 2018. 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
2018, our overseas employees accounted for approximately 75% 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. There are, however, unavoidable risks associated with overseas manufacturing and sales
operations. These include but are not limited to changes in national laws, ordinances, or regulations related to
manufacturing and sales; social, political or economic changes; transport delays; damage to infrastructure such as
17
electrical power and communications; currency exchange restrictions; insufficient skilled labor; changes in regional
labor environments; changes in tax systems overseas and uncertainty with regard to tax administration by tax
authorities; protectionist trade regulations; geopolitical risks; and laws, ordinances, regulations or the like that
could affect 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 have multi-source relating to 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’s parts shortages or supplier’s 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 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 both in Japan and overseas. We also license the intellectual
property rights for products and technologies by entering into agreements with other companies. We must
strengthen our intellectual property portfolio by placing personnel in key positions to manage our intellectual
property.
If any of the situations envisioned below 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 environmental risks.
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. In addition, with heightened concern about
18
the response to global climate change accompanying the Paris Agreement, which was adopted at the 21st
Conference of the Parties to the United Nations Framework Convention on Climate Change, companies
increasingly need to set more ambitious goals for emissions reductions and strive to accomplish these goals.
Given this situation, Epson is proactively engage in environmental conservation efforts on multiple fronts in line
with a mid-range action plan and “Environmental Vision 2050,” a document that states our long-term goals for
reducing our CO2 emissions and other environmental impacts. 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.
As a result of these efforts, Epson has reduced its CO2 emissions for the 2017 fiscal year to 590,000 tons. This
represents an approximately 40% reduction since the 2006 fiscal year, which is the baseline year in “Environmental
Vision 2050.”
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, so our dollar-denominated expenses currently exceed our
dollar-denominated revenue. On the other hand, our euro-denominated revenue is still significantly greater than our
euro-denominated expenses. On the whole, our revenues in other foreign currencies also significantly exceed our
expenses in those currencies. 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, euro, or other foreign currencies against the yen could adversely affect our financial situation and
operating 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. Concerning regulatory investigations and investigations conducted by relevant authorities, etc.
Epson develops its business globally, and it could become the subject of various regulatory investigations or
investigations conducted by relevant authorities, etc. in any of its businesses in any country or region. For example,
in addition to Epson currently being subject in Japan and overseas to proceedings relating to antitrust laws and
regulations, such as those prohibiting private monopolies and those protecting fair trade, Epson will in the future
be required even more to respond to various laws and regulations and compliance relating to activities pertaining
to its efforts to strengthen its sales activities directed at new customers, which will include public organizations,
etc.
Under these circumstances, in Epson, we consider compliance to be one of the most important management
policies, and for a long time, we have been conducting appropriate, preventive and controlled activities. Going
forward, overseas agencies related to competition law have been conducting investigations or information
gathering that have been targeting specific industries, etc., and as part of such investigation, Epson also is being
19
investigated in relation to the market situation and marketing methods in general. Furthermore, sometimes
inconsistencies or potential inconsistencies arise in relation to not only anti-bribery regulations, advertising and
labeling regulations, personal information protection and privacy regulations but also security trade control, and
stricter laws and regulations may get introduced or a strengthening of the operation of laws and regulations may be
carried out by the relevant authorities.
Should violations occur in regard to these related laws and regulations, or should investigations or proceedings be
carried out by the relevant authorities, such events could interfere with Epson’s sales activities. They could also
potentially damage Epson’s credibility, result in a large civil fine, or result in constraints being placed on Epson’s
sales activities. Any of these, as well as the added costs to comply with the relevant regulations could adversely
affect Epson’s operating results and its future business expansion.
As of the date we submitted our Annual Securities Report, investigations into laws and regulations, etc. targeting
Epson are provided below.
Regarding allegations of involvement in a liquid crystal display price-fixing cartel, the Company is currently under
investigation by certain anti-monopoly-related authorities.
Furthermore, regarding the inkjet printer products sold in France, authorities have initiated investigations following
an allegation made by a consumer organization in the country, pursuant to consumer protection law. The consumer
organization alleges that Epson shortens the life of its products, which was never Epson’s intention. Giving the
highest priority to quality and environment, Epson will continue to offer designs that meet customer needs.
Progress, result and resolution timing of the investigations, and their impact on Epson’s operating results and its
future business development are not predictable at this time.
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 sales 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.
As of the date we submitted our Annual Securities Report, Epson was contending with the following material
actions.
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. 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.
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 Group-wide 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,
20
leaks or theft of customer data, reputational damage on social networking services (SNS), failures of
mission-critical internal IT systems, cyber-attacks, supply chain disruptions, and acts of terrorism or war.
The central region of Nagano Prefecture, home to some of our key plants and offices, is an area that is at
comparatively high risk of earthquakes due to the presence of an active fault zone along the Itoigawa-Shizuoka
geotectonic line. Accordingly, in addition to earthquake-proofing its equipment and facilities, Epson conducts
disaster drills, has prepared earthquake disaster management and response plans, and has established business
continuity plans to mitigate the effects of disasters to the extent possible.
However, if a major earthquake occurs in the central region of Nagano Prefecture, 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.
21
Management Analysis of Financial Position, Operating Results and Cash Flows
1. Operating results overview
(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 steadily recover, fueled by an increase in consumer spending and improvement in
the employment situation. The Latin American and European economies gradually recovered, and the Chinese
economy showed signs of picking up. The Japanese economy continued to register signs of a gradual economic
recovery, as consumer spending remained stable in response to a firm employment and income situation.
The situation in the main markets of Epson was as follows.
Inkjet printer demand continued to contract in Japan and Europe but was firm in the Americas. Demand for
high-capacity ink tank printers expanded steadily. Large-format inkjet printer demand stayed firm. Serial-impact
dot-matrix (SIDM) printer demand contracted in China after spiking last year with the enactment of B2V tax
reforms. Demand also shrank in the Americas and Europe.
Projector demand shrank. In addition to the absence of major sporting events in Europe, demand from the
education sector in some of the major countries in Europe contracted while North American retail market sales
remained sluggish.
Demand for smart phones, one of the main markets for Epson’s crystal devices for electronic products,
contracted due to market maturation in China. Watch demand gradually recovered in Japan. Demand for watch
movements was firm. Demand for industrial robots expanded, particularly in China.
The average exchange rates of the yen against the U.S. dollar and of the yen against the euro during the year
were ¥110.85 and ¥129.66, respectively. This represents a 2% devaluation of the yen against the dollar and a 9%
devaluation of the yen against the euro compared to the same period last year.
In this business environment, operating results in the fiscal year under review are as follows.
Year ended
March 31,
2017
Year ended
March 31,
2018
Change
Percentage of
change
Main reason(s) for change
(Billions of yen)
Revenue
1,024.8
1,102.1
77.2
7.5%
Boosted revenue in Printing
Solutions Segment and increases
caused by the impact of foreign
exchange rates
Cost of sales
(658.8)
(701.2)
(42.3)
–
Changes in revenue and increases
caused by the impact of foreign
exchange rates
Gross profit
Selling, general
and administrative
expenses
Business profit *
Other operating
income and Other
operating expense
Profit from
operating activities
Finance income
and Finance costs
Profit before tax
365.9
400.8
34.8
9.5%
(300.1)
(326.0)
(25.8)
Increases caused by the impact of
foreign exchange rates
–
65.8
74.7
8.9
13.6%
2.0
(9.7)
(11.8)
–
67.8
(0.4)
67.4
65.0
(2.4)
62.6
(2.8)
(4.3%)
(1.9)
(4.8)
–
(7.1%)
Increases caused by the impact of
foreign exchange rates
Increases in foreign exchange losses
and expenses caused by restructuring
of overseas plants
Increases in foreign exchange losses
22
Year ended
March 31,
2017
Year ended
March 31,
2018
Change
Percentage of
change
Main reason(s) for change
(Billions of yen)
Income taxes
(18.4)
(20.8)
(2.4)
–
Increases mainly caused by a reversal
of deferred tax assets accompanying
U.S. tax reform
Profit for the
period
* Business profit is calculated after deducting cost of sales and selling, general and administrative expenses
from revenue.
(13.8%)
(6.6)
48.4
41.7
A breakdown of operating results in each segment is provided below.
Printing Solutions Segment
Printer business revenue increased.
Inkjet printer revenue continued to expand, as high-capacity ink tank printer unit shipments jumped in emerging
economies and as increased market recognition sparked unit shipment growth in developed countries, as well.
Foreign exchange effects also boosted inkjet revenue. Consumables revenue moved sideways year on year, as
increased sales of ink bottles for high-capacity ink tank printers and foreign exchange effects offset a decline in
consumer printer ink cartridges revenue.
Page printer sales decreased due to a slump in consumables sales in addition to a decline in unit shipments, the
result of a sharper focus on selling high added value models.
SIDM printer revenue declined compared to last year, when there was special demand in the Chinese tax
collection system market.
Revenue in the professional printing business increased.
Total revenue from large-format inkjet printers increased on solid demand in the growing signage, textile, and
label printer markets. Foreign exchange effects also had a positive effect on revenue. Consumables revenue also
increased owing to an increase in unit shipments and to foreign exchange effects.
POS system product revenue increased owing primarily to unit shipment growth from contract wins in North
America and beneficial effects of foreign exchange.
Segment profit in the printing solutions segment was squeezed by a decline in sales of SIDM printers and
soaring raw materials costs yet still rose due to sales growth in high-capacity ink tank inkjet printers and
large-format inkjet printers in combination with foreign exchange effects.
As a result of the foregoing factors, revenue in the printing solutions segment was ¥736.6 billion, up 7.3% year
on year. Segment profit was ¥94.8 billion, up 12.8% year on year.
Visual Communications Segment
Visual communications revenue increased.
Total 3LCD projector revenue increased chiefly because firm demand for Epson’s laser projectors in the
high-brightness segment caused an upsurge in unit shipments of high added value products. Foreign exchange
effects also positively affected revenue.
Segment profit in the visual communications segment increased chiefly as a result of growth in unit shipments of
high-lumen and other projectors, as well as foreign exchange effects.
As a result of the foregoing factors, revenue in the visual communications segment was ¥198.8 billion, up
10.7 % year on year. Segment profit was ¥24.4 billion, up 51.3 % year on year.
Wearable & Industrial Products Segment
Revenue in the wearable products business decreased slightly from last year. Although positively affected by
foreign exchange, it was not enough to compensate for a drop in retail demand in North America and other
factors.
23
Revenue in the robotics solutions business increased owing to industrial robot order growth in China and foreign
exchange effects.
Revenue in the microdevices business increased. Although positively affected by foreign exchange, crystal
device revenue decreased due to a decline in unit shipments to manufacturers of cell phones and other personal
electronics. Semiconductor revenue increased owing to increased market demand and unit shipment growth, as
well as foreign exchange effects.
Segment profit in the wearable & industrial products segment decreased, as declines in sales of wearable
products and quartz devices more than offset increased sales in the robotic solutions and semiconductor
businesses and foreign exchange effects.
As a result of the foregoing factors, revenue in the wearable & industrial products segment was ¥167.3 billion,
up 5.5% year on year. Segment profit was ¥7.1 billion, down 8.4% year on year.
Other
Other revenue amounted to ¥0.9 billion, down 37.9 % year on year. Segment loss was ¥0.5 billion, compared to
a segment loss of ¥0.4 billion year on year.
Adjustments
Adjustments to the total profit of segments amounted to negative ¥51.1 billion. (Adjustments in the previous
fiscal year were negative ¥41.7 billion.) The main components of the adjustment were basic technology research
and development expenses that do not correspond to the segments and expenses associated with things such as
new businesses and corporate functions.
(2) Cash flow performance
Net cash from operating activities during the year totaled ¥84.2 billion (compared to ¥96.8 billion in the
previous fiscal year). This was due to factors including an increase in depreciation and amortisation totaled
¥49.9 billion, in addition to profit for the year of ¥ 41.7 billion.
Net cash used in investing activities totaled ¥74.6 billion (compared to ¥75.7 billion in the previous fiscal year),
mainly because Epson used ¥73.6 billion in the purchase of property, plant and equipment and purchase of
intangible assets.
Net cash from financing activities totaled ¥0.0 billion (compared to ¥26.6 billion used in the previous fiscal
year). This was due to factors including proceeds from issuance of bonds issued totaling ¥19.8 billion and net
increase in current borrowings totaling ¥11.5 billion, despite there being redemption of bonds issued totaling
¥10.0 billion and dividends paid totaling ¥21.1 billion.
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥229.6 billion (compared to ¥221.7
billion at the end of the previous fiscal year).
*Please refer to the following for Epson’s financial results for previous fiscal years:
https://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, 2018
(From April 1, 2017, to March 31, 2018)
(Millions of yen)
Change
compared to
previous fiscal
year (%)
Printing solutions
Visual communications
Wearable & Industrial products
Total for the segments
Other
Total
741,665
208,598
160,060
1,110,324
176
1,110,500
109.1
118.9
108.5
110.7
29.6
110.7
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, 2018
(From April 1, 2017, to March 31, 2018)
(Millions of yen)
Change
compared to
previous fiscal
year (%)
Printing solutions
Visual communications
Wearable & Industrial products
Total for the 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.
736,239
198,889
158,535
1,093,663
187
1,093,851
107.3
110.7
105.2
107.6
23.8
107.5
25
3. Management analysis and discussion on operating results, etc.
Recognition and details of analysis/discussions on Epson’s operating results, etc. from the management’s
perspective are as follows:
All forward-looking statements hereunder were made at Epson’s discretion based on the forecasts and certain
assumptions at the end of the fiscal year. These statements may differ from actual results and are not guarantees
of the achievement.
(1) Operating results, etc.
Financial position
Total assets at the end of the fiscal year were ¥1,033.3 billion, an increase of ¥58.9 billion from the previous
fiscal year end. This increase was mainly due to a ¥22.7 billion increase in property, plant and equipment, a
¥14.7 billion increase in inventories, a ¥9.5 billion increase in trade and other receivables, a ¥7.8 billion
increase in cash and cash equivalents, and a ¥3.3 billion increase in other current assets. Segment assets of the
printing solutions segment at the end of the fiscal year under review were ¥410.4 billion, an increase of ¥33.7
billion compared to the end of the last fiscal year, because of an increase in property, plant and equipment in
conjunction with capital expenditures principally for the purpose of new products and enhancement of
production capacity, and other factors. Likewise, segment assets of the visual communications segment
amounted to ¥127.3 billion, up ¥12.3 billion compared to the previous fiscal year end, and those of the wearable
& industrial products segment totaled ¥142.3 billion, up ¥8.3 billion compared to the previous fiscal year end.
Total liabilities were ¥518.2 billion, up ¥38.5 billion compared to the end of the last fiscal year. Although other
current liabilities decreased by ¥5.3 billion and net defined benefit liabilities decreased by ¥2.9 billion, total
liabilities increased primarily because of a ¥19.9 billion increase in bonds issued, borrowings and lease
liabilities under current liabilities and non-current liabilities, an ¥13.1 billion increase in trade and other
payables, a ¥7.9 billion increase in other non-current liabilities, and a ¥7.1 billion increase in provisions for
current liabilities and non-current liabilities.
The equity attributable to owners of the parent company totaled ¥512.7 billion, a ¥20.5 billion increase
compared to the previous fiscal year end. Although dividends paid totaled ¥21.1 billion and there was a ¥5.2
billion decrease in other components of equity, primarily consisting of exchange differences on translation of
foreign operations associated with a rise in the value of the yen, equity attributable to owners of the parent
company increased mainly because retained earnings increased due to the recording of a ¥41.8 billion profit for
the period and because of a ¥4.9 billion remeasurement of net defined benefit liabilities (assets)
Working capital, defined as current assets less current liabilities, was ¥316.7 billion, an increase of ¥65.7 billion
compared to the end of the previous fiscal year.
Operating results
The operating results are provided in “Management Analysis of Financial Position, Operating Results and Cash
Flows 1. Operating results overview (1) Operating results.”
Cash flow performance
The cash flow performance is provided in “Management Analysis of Financial Position, Operating Results and
Cash Flows 1. Operating results overview (2) Cash flow performance.”
(2) Capital resources and liquidity
Epson plans to allocate ¥83.0 billion to capital expenditures for the fiscal year ending March 31, 2019, and
required funds will be covered by current funds in hand. The amount of planned capital expenditures for each
segment is as described in “Information on the Company 4. Plans for new additions or disposals.”
In order to stably secure funds necessary for business activities such as capital expenditures, Epson raises funds
through utilization of internal funds as well as borrowings from financial institutions and issuance of bonds.
The balance of interest-bearing debt at the end of the fiscal year under review was ¥166.5 billion, up ¥19.9
billion compared to the previous fiscal year end, due to an increase in issuance of bonds and borrowings, despite
redemption of bonds. The balance of cash and cash equivalents at the end of the fiscal year under review totaled
¥229.6 billion, up ¥7.8 billion compared to the end of the last fiscal year, giving Epson sufficient liquidity.
Epson has earned a credit rating from Rating and Investment Information, Inc. The rating was A (single A) as at
the end of the fiscal year under review.
26
(3) Management policy, corporate strategy, objective indices to assess the status of achievement of
management goals, etc.
As stated in “Management Analysis of Financial Position, Operating Results and Cash Flows 5. Management
policy, business environment and issues to be addressed, etc.,” Epson will aim to achieve, for the 2025 fiscal
year, ¥1,700 billion in revenue, ¥200 billion in business profit, a 12% return on sales (business profit/revenue),
and a 15% return on equity (profit for the period/equity attributable to owners of the parent company), assuming
exchange rates of 115 yen to the U.S. dollar and 125 yen to the euro, by striving to promote a growth strategy
based on the Epson 25 Corporate Vision and the mid-range business plan for achieving the vision and
strengthen its business infrastructure and financial structure.
In each area of innovation where its unique strength can be demonstrated, Epson will look to achieve operating
performance targets by accomplishing strategies for future growth of each business set forth in “Management
policy, business environment and issues to be addressed, etc.” above as well as promoting sustainable growth
and increase of its corporate value
Information on differences in main items relating to overview of the status of operation results, etc.
Matters concerning differences between the main items on IFRS consolidated financial statements and
equivalent items on consolidated financial statements prepared based on the Ordinance on Terminology, Forms
and Preparation Methods of Consolidated Financial Statements (excluding Article 7 and Article 8, hereinafter
referred to as “Japanese accounting standards”) are as follows:
(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, remeasurement of net defined benefit liabilities (assets) is recognized in full
as other comprehensive income in the period in which this item is transferred to retained earnings immediately.
Past service costs are recognized in profit and 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.
Due to these effects, the cost of sales and selling, general and administrative expenses, and finance costs in the
previous fiscal year increased by ¥0.4 billion when calculated based on IFRS rather than Japanese standards.
The cost of sales and selling, general and administrative expenses, and finance costs in the fiscal year increased
by ¥2.3 billion.
27
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 Micro Piezo printheads, microdisplays, sensors,
and robotics, all of which are unique core technologies that evolved from Epson’s rich legacy of efficient,
compact, and precision technologies. Further value is added by developing technology platforms that meet the
needs of a wide spectrum of customers.
The corporate R&D division and the R&D units of the operations divisions are teaming up to develop core
technologies and devices for the future and to strengthen manufacturing infrastructure. Together, they are laying
a technological foundation to create new businesses, strengthen existing ones, and increase the competitiveness
of all Epson products.
Total R&D spending during the fiscal year was ¥50.3 billion. The printing solutions segment accounted for
¥18.0 billion, the visual communications segment for ¥10.0 billion, and the wearable and industrial products
segment for ¥7.1 billion. The “other” segment and corporate segment accounted for the remaining ¥15.0 billion.
The main R&D accomplishments in each segment are described below.
Printing solutions segment
In the printer business, Epson launched an A4 compatible business inkjet multifunction printer that is both
space-saving and has high ink capacity. This product is equipped with an ink pack system that allows for higher
ink capacity than ink cartridges and by installing the ink packs in the lower section of the printer, it’s possible to
simultaneously save space and increase ink capacity. Also, Epson achieved the fastest first-page printing speed
among Epson business inkjet printers1 with the first page taking 5.3 seconds when printing in color2 and 4.8
seconds when printing in black and white2. Furthermore, it has an increased range of compatible paper types, is
equipped with the ability to handle paper types suitable for various tasks, and has a simple printing process and
architecture that is only possible with inkjet. Because the printing process does not rely on heat, using a
non-contact printing process that sprays ink onto the paper, the printer offers outstanding environmental
performance.
In addition, Epson launched new inkjet printer products in the Japanese domestic market equipped with
high-capacity ink tanks (eco tank). These included a compact A4 compatible multifunction unit, the first A3
compatible3 multifunction unit model equipped with a high-capacity ink tank, and an A3 extra compatible4
multifunction unit for business. These new product models reduce the inconvenience of changing ink cartridges
for customers that do a lot of printing and are equipped with large-capacity ink tanks that allow customers to
print documents and photos at low cost and without hesitation. They are able to print clear and clean characters
because all models are loaded with clear black pigment ink. Also, models equipped with PrecisionCore
printheads can achieve high-resolution printing on plain paper at 600dpi enabling printing tasks with fine lines,
such as detailed characters and blueprints, to be reproduced with stunning clarity.
In the professional printing business, Epson launched a new product, a large format inkjet printer appropriate
for design and proof processes and the production of high-resolution posters. With this product, color
reproduction is possible throughout the process, from design to printing, which enables process simplification
by reducing the time spent checking colors. In this way, said product contributes to improving the work flow
efficiency of printing operations, from design to proofing.
Also, Epson launched a new sublimation transfer printer product, a high-end model equipped with two
PrecisionCoreTFP printheads. The basic performance and convenience of this product were further improved by
combining Epson Precision Dot, an original technology developed based on Epson’s many years of experience
with photographic image technology related to inkjet printers, and Epson’s genuine software RIP, Epson Edge
Print.
Epson also launched a new garment printer product with improved productivity and ease of maintenance
reflecting customer requests. New to this product is a function that keeps T-shirts flat and reduces setting time
with a setting method that uses a cloth sheet and baren5. This product is also capable of printing that is both
high-concentration and high-speed using the Double Strike printing function in which color ink and white ink
are used in combination. Furthermore, Epson improved ease of maintenance by, for example, newly installing a
filter to the automatic ink circulation system and by automating absorption cap cleaning by adding a cleaning
cartridge. As a result, Epson reduced downtime and achieved stable operation of the aforementioned product.
1 Among Epson’s lineup for business inkjet printers as of January 16, 2018.
28
2 Please refer to Epson’s website for details regarding the calculation criteria for printing time of the first
sheet.
3 The scanner is A4 compatible.
4 The scanner is A3 compatible.
5 Reduces unevenness by keeping T-shirts flat when set on a cloth sheet.
Visual communications segment
In regard to the 3LCD projectors for business, as part of efforts to strengthen the lineup for models equipped
with a laser light source, Epson launched a bright model intended for permanent installation appropriate for use
in wide open spaces such as large meeting rooms and concert halls, and launched a wall-mounted ultra-short
throw projector model that can be used not just in meeting rooms and classrooms but can also be used for digital
signage and ambiance enhancement at retail and entertainment facilities. In regard to the high-lumen (15,000lm
(lumen)) model intended for permanent installation, Epson achieved decreased size and increased efficiency and
succeeded in making it compact and lightweight with brightness increased by approximately 50% when
compared to the lamp light source6 in Epson’s previous models, and volume reduced by approximately 30%. As
for the wall-mounted ultra-short throw projector model, among all 4,000lm devices, this model is Epson’s first
model equipped with a laser light source. This product can project clear and vivid images even in a well-lit
room and due to being high resolution, WUXGA (1920×1200), it can enlarge projected images, including
high-definition diagrams and charts with many items, and maintain clarity. Furthermore, when projecting a 70
inch image, it’s possible to set the projector almost directly above the surface being projected onto, as the
product has a projection distance of about 41cm. As such, it’s less likely for a nearby person to cast a shadow on
the projection and there’s no risk of looking into a bright light.
Also, Epson announced a new projector product equipped with a laser light source, a lighting model for the
ambiance enhancement market. This product is the first projector Epson provides that can not only project
images but also be used as a spotlight. Using a cylindrical shape that feels natural in most spaces, this projector
can project onto things other than a screen such as tables, display cases and products. Also, it’s easy to
customize the projected image to be, for example, a circle or a window shape and due to its exceptional ease of
installation, it’s possible to use it for new ambiance enhancement using imagery in various locations such as
offices, stores, retail facilities, and restaurants.
6 When comparing with the EB-Z10005U and the EB-Z10000U.
Wearable and industrial products segment
In the wearable products business, Epson newly created TRUME, a brand that aims to create the ultimate analog
watch using leading-edge technology, and launched an original analog watch that displays each sensor data
using analog needles. This watch has various sensors, such as a GPS sensor, an air pressure/elevation sensor,
and a magnetic north sensor, installed and functioning in it. It can continue to function, even while receiving
additional data from the expanded sensor device, as it is provided power by a built-in solar panel.
In the robotic solutions business, Epson commercialized an autonomous dual-arm robot with the product
concept of “seeing, sensing, thinking, and working.” Unlike most industrial robots, which are conventionally
installed in a fixed location on a line to perform a given task, this product can be moved to wherever it’s needed
to take the place of a single human worker and carry out jobs such as assembly and transferring. In this way, it
enables the automation of manufacturing that previously would have been difficult to automate. Epson also
developed a 6-axis industrial robot (vertical articulated robot) and a SCARA (Selective Compliance Assembly
Robot Arm) robot (horizontal articulated robot) that meet many of the needs of a manufacturing facility. As a
result of efforts such as independently developing a folding arm and internalizing the controller within the robot
itself, these products are able to contribute to reducing space used in factories and improving productivity.
In the micro-devices business, Epson developed a real time clock module8 that has an internal digital
temperature compensated crystal oscillator (DTCXO7) for automotive and industrial applications. In general,
there is a tradeoff between lower energy consumption and higher precision when making real time clock
modules. However, with this product Epson succeeded in reducing electricity consumption and expanding
operating temperature range by using manufacturing technology of tiny, accurate tuning fork crystal units and
new IC design technology that enables the crystal unit to be driven at low power.
7 A digital temperature compensated crystal oscillator is an oscillator (crystal unit and oscillation circuit)
with a function that applies corrections to frequencies, which change in response to the ambient
temperature of the crystal unit.
29
8 Epson’s real-time clock modules are single-package products that have a real-time clock IC with clock,
calendar, and other functions and an integrated 32.768-kHz crystal unit.
30
5. Management policy, business environment and issues to be addressed, etc.
All forward-looking statements hereunder were made at Epson’s discretion based on the forecasts and certain
assumptions at the end of the fiscal year. These statements may differ from actual results and are not guarantees
of the achievement.
(1) Fundamental management policy
Endowed with a rich legacy of efficient, compact, and precision technologies, Epson seeks to continuously
create game-changing customer value and play a central role in creating a better world as an indispensable
company by forging innovations through challenges that are bold, imaginative, and exceed our own vision.
Using the Epson Management Philosophy and the global tagline below as guides, we will strive to achieve our
vision with employees who embrace a common set of values, demonstrate teamwork, and exercise initiative to
create value that exceeds customer expectations.
Epson Management Philosophy
Epson aspires to be an indispensable company,
trusted throughout the world for our commitment to openness,
customer satisfaction and sustainability.
We respect individuality while promoting teamwork,
and are committed to delivering unique value
through innovative and creative solutions.
EXCEED YOUR VISION
As Epson employees,
we always strive to exceed our own vision,
and to produce results that bring surprise and delight
to our customers.
(2) Medium- and long-term corporate strategy and issues to be addressed
Epson began the 2016 fiscal year under a new 10-year corporate vision and a new mid-range business plan. The
Epson 25 Corporate Vision describes what Epson would like to achieve by the start of the 2025 fiscal year.
Meanwhile, the Epson 25 Mid-Range Business Plan (FY2016-2018) is a three-year plan for the first phase of
work toward achieving the vision.
The business environment in which Epson operates needs to be closely watched. Although the global economy
is generally registering signs of gradual recovery, political uncertainty and the economic situation are fueling
concerns over things such as foreign exchange volatility and geopolitical risks that could well impact national
economies and product demand.
Epson will look to sustain growth and increase corporate value over the medium- to long term by steadily
executing the strategies described below.
① Epson 25 Corporate Vision
The Epson 25 Corporate Vision (hereafter called “Epson 25”), which was created based on an understanding of
the mega trends, changes, and other forces that will shape Epson’s business in the future, contains the following
vision statement: “Creating a new connected age of people, things and information with efficient, compact and
precision technologies.”
“Efficient, compact and precision technologies” are original technologies that will create the value that Epson
will provide to its customers in three areas: smart technologies, the environment, and performance.
Smart technologies. Use advanced products and software so customers can easily, conveniently, and
securely use our products anywhere and anytime.
31
Environment. Contribute to the development of a sustainable society by leveraging efficient, compact and
precision technologies to reduce the environmental impact of products and services across their life cycles.
Performance. Create new and higher value by providing outstanding products that contribute to customer
productivity, accuracy and creativity.
Advances in information and communication technology will interconnect vast amounts of information on the
Internet, causing cyber space to expand indefinitely. As a manufacturing company that specializes in generating
value in the real world, Epson will play an important role in “creating a new connected age of people, things
and information” by using attractive, advanced products as leverage to collaborate with IT companies and
increase the value of the technologies it provides to customers.
In this “new connected age” Epson aims to free people from repetitive manual labor and from unnecessary
wastes of time and energy. Epson’s goal is to heighten people’s creativity, and to create a sustainable and
affluent society in which people enjoy safe and healthy lifestyles.
In line with this vision, Epson will provide value in the form of smart technologies, the environment, and
performance in four areas of innovation: inkjet innovation, visual innovation, wearables innovation and robotics
innovation. Epson will drive innovations in these areas by achieving the vision in each of its businesses. To
support the realization of Epson 25, Epson will further strengthen its business infrastructure and company-wide
information systems in the areas of human resources, technology, manufacturing, sales, and the environment.
Epson set out financial performance targets in Epson 25. Assuming exchange rates of 115 yen to the U.S. dollar
and 125 yen to the euro, Epson will aim to achieve, by the 2025 fiscal year, ¥1,700 billion in revenue, ¥200
billion in business profit, a 12% return on sales (business profit*/revenue), and a 15% return on equity (profit
for the period/equity attributable to owners of the parent company).
* 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.
Vision in Each Business
Printing: inkjet innovation
Refine original Micro Piezo technology, and expand into high-productivity segments. Improve environmental
performance and create a sustainable printing ecosystem.
Visual communications: visual innovation
Refine original microdisplay and projection technologies, and create outstanding visual experiences and a
natural visual communications environment for every aspect of business and lifestyles.
Wearables: wearables innovation
Leverage our watchmaking heritage, refine timekeeping and sensing accuracy, and offer a sense of status and
fashion.
Robotics: robotics innovation
Combine our core technologies with sensing and smart technologies in manufacturing, expand applications, and
create a future in which robots support people in a wide variety of situations.
Microdevices: support the four innovations
Contribute to Epson’s finished products and to the development of smart communications, power,
transportation and manufacturing systems with advanced Epson quartz timing and sensing solutions and
low-power semiconductor solutions.
② Epson 25 Mid-Range Business Plan (FY2016-2018)
The Epson 25 Mid-Range Business Plan (FY2016-2018) is a roadmap for the first phase of work toward
achieving the Epson 25 vision. During this phase Epson will sustain the momentum it gained by strategically
32
adopting new business models and developing new market segments under the previous corporate vision. At the
same time, it will move forward on product development while aggressively investing as needed to provide a
solid business foundation.
The basic strategy for achieving this will be to continue to grow by further increasing its competitive edge in
businesses where SE15 strategic initiatives were successful, and to quickly address issues and establish a path to
growth in businesses where Epson was unable to fully advance. Epson will look to ensure growth by creating
products and services that generate customer value in smart technologies, the environment, and performance, as
the Epson 25 aims to achieve. While taking care to grow profit over the short term, Epson will also invest
management resources as appropriate, quickly establish new business models, and strengthen its sales
organizations to achieve the Epson 25 vision. Epson will also position itself for future growth by pursing the
business strategies below and by building up its business infrastructure.
Strategies in Each Business
In the printer business, Epson will aim to establish a competitive advantage in the home printer market by
boosting the attractiveness of its products and to get office market development on track with linehead
models.
In professional printing, Epson will establish a competitive advantage with hardware, improve support and
other organizational infrastructure, and achieve solid growth in new domains.
In visual communications, Epson will further strengthen its presence in the projection market and use laser
light sources to pave the way to rapid growth in new markets.
In wearable products, Epson will lay the foundation for building wearables into a core business by refining
watch resources and combining them with sensors to create families of differentiated products.
In robotics solutions, Epson will create a framework for growth on top of its technology base.
In microdevices, Epson will create a stable business platform in the quartz business by building
competitive strength. The semiconductor business, meanwhile, will create new core technologies and
devices.
Strengthening Business Infrastructure
Technology. Refine our efficient, compact and precision technologies, advance our actuator, optical
control, and sensor technologies, and bring in information and communication technology to continue to
create new customer value.
Manufacturing. Provide timely products that others cannot easily imitate. Offer them at highly
competitive costs and quality.
Sales and support. Strengthen the office and industrial domains, establish optimum area sales
organization, improve products quality with a market-driven (market-in) approach, and transform the brand
image.
Environment. Expand initiatives to reduce environmental impacts across product and service life cycles
and supply chains.
Under the foregoing basic policies, we executed policies during the fiscal year to drive growth in our businesses
through the development and sales of strategic products.
On the other hand, certain issues that need to be addressed became clear. Not only do we now recognize that it
is going to take more time for these products to penetrate the market but we also clearly see that the world is
changing at dizzying speed and that we need to respond by strategically realigning and restructuring some of
our businesses.
In the realm of inkjet innovation, therefore, we will seek to strengthen the profit structure. On the one hand, we
will capitalize on inkjet advantages such as superior environmental performance and lower printing costs to
expand sales of high-capacity ink tank printers beyond emerging nations and into developed countries. On the
other hand, we will revolutionize office printing by penetrating the office market with the line inkjet printers
that we launched to market earlier in the fiscal year.
33
In the realm of visual innovation, we will seek further growth by developing and recommending lighting,
signage, and other new applications that take advantage of the unique features of projection technology.
In our other businesses, we will execute strategies to achieve the corporate vision. For example, we began
setting the stage for business growth in wearables by launching own-brand products. And in robotic systems, we
are preparing to enter the collaborative robot market.
To respond to future changes in the market environment, we will strengthen the new technology and new
business model research function for growth areas across the company.
(3) Basic policy regarding company control
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
In March 2016 the Company established the Epson 25 Corporate Vision, a document that describes Epson’s
goals over the decade between the 2016 and 2025 fiscal years. At the same time, the Company established
the Epson 25 Mid-Range Business Plan (FY2016-2018), a three-year plan for the first phase of work toward
achieving the Epson 25 vision.
Under the Phase 1 Mid-Range Business Plan, Epson will build a robust foundation for business by
sustaining the results of successful strategic initiatives pursued to date, developing products for the future,
and aggressively investing as needed.
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
To ensure and enhance corporate value and the common interests of its shareholders, Epson updated its
measures to prevent large-scale acquisitions of Epson shares and received approval for them at the June
2014 Ordinary General Meeting of Shareholders. Epson revised these old measures to further enhance
appropriateness and transparency. Shareholders approved the new measures at the June 28, 2017 Ordinary
General Meeting of Shareholders. (The new measures are called “the Plan” below.)
The purpose of the Plan is to prevent large-scale acquisitions of Epson stock certificates 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
negotiate with the acquirer on behalf of shareholders. Specifically, a party that intends to acquire or make a
takeover bid for 20% or more of stock certificates outstanding 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 defensive measures if, for example, the proposed acquisition is not conducted in line with
the Plan or it is deemed contrary to Epson’s corporate value or the common interest of its shareholders.
34
To prevent the Epson board of directors from making arbitrary decisions about whether to activate takeover
defense measures, a special committee composed entirely of highly independent outside directors shall
assess the need for a defense. The special committee shall examine the nature of a proposed stock
acquisition, request information from the Epson board of directors regarding alternative proposals, provide
information to shareholders, and negotiate with a potential acquirer. The special committee shall
recommend whether to active a defense to the Epson board of directors. The Epson board of directors shall
accept the committee’s recommendation and promptly accept or reject a resolution to invoke preventive
measures, by following that advice (unless the board concludes that doing so would violate the directors’
duty of care).
③ Decisions made by the Epson board of directors regarding specific actions and the justification for
those decisions
Specifically, the Plan guarantees appropriateness and objectivity, is reasonable, and supports Epson’s corporate
value and the common interests of its shareholders because among other things, a) it was updated after being
approved by shareholders at the general shareholders’ meeting; b) it contains provisions for reasonable and
objective implementation; c) the special committee comprising Outside Directors 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 Board of Directors is required to follow the recommendations of the special
committee regarding the necessity of anti-takeover measures (except in cases where following such advice
could be considered a violation of directors’ obligation to exercise the duty of due care of a prudent manager);
e) the special committee may solicit expert opinions from third parties at Epson’s expense; f) the period
necessary for each process after an acquirer expressed the intention to purchase is specified; g) in case of
acquiring stock acquisition rights from non-qualified parties, it is clarified that any economic profit such as cash
will not be delivered; and h) 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.
35
6. Dividend policy
The Company strives to sustain business growth through the creation of customer value and to generate stable
cash flow by improving profitability and using management resources efficiently. While the top priority is on
strategic investment in growth, the Company also actively returns profits in parallel with its efforts to build a
robust financial structure that is capable of withstanding changes in the business environment.
In line with this policy, the Company has set a consolidated dividend payout ratio in the range of 40% as a
medium-term target, the ratio based on profit after an amount equivalent to the statutory effective tax rate is
deducted from business profit, a profit category that shows profit from the Company’s main operations (and
which is very similar to operating income under Japanese accounting standards, both conceptually and
numerically). The Company intends to be more active in giving back to shareholders by agilely purchasing
treasury shares as warranted by share price, the capital situation, and other factors.
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.
Revenue and business profit, the latter of which indicates the true strength of a business, grew year on year
primarily owing to strategic progress and foreign exchange effects. The Company therefore has paid an annual
dividend of ¥62 per share, an increase of ¥2 per share compared to last year.
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
October 26, 2017, by resolution
of the board of directors
June 27, 2018, by resolution of
the general shareholders’ meeting
Cash dividends
(Millions of yen)
Cash dividend per share
(Yen)
10,572
11,276
30
32
Notes
1. The total amount of dividends to be paid based on the resolution of the board of directors on October 26,
2017 includes ¥5 million of cash dividends for the Company’s shares held through the BIP (Board Incentive
Plan) trust (hereinafter referred to as the “BIP trust”).
2. The total amount of dividends to be paid based on the resolution of the general shareholders’ meeting on
June 27, 2018 includes ¥5 million of cash dividends for the Company’s shares held through the BIP trust.
36
Corporate Governance
1. Approach to corporate governance
(1) Basic corporate governance principles
The general principles of corporate governance at Epson are as follows:
▪ Respect the rights of shareholders, and ensure equality.
▪ Bear in mind the interests of, and cooperate with, stakeholders, including shareholders, customers, local
communities, business partners, and Epson personnel.
▪ Appropriately disclose company information and maintain transparency.
▪ Directors, Executive Officers, and Special Audit & Supervisory Officers shall be aware of their fiduciary
duties and shall fulfill the roles and responsibilities expected of them.
▪ Engage in constructive dialogue with shareholders.
To achieve the goals declared in the Management Philosophy, promote sustainable growth, and increase
corporate value over the medium and long terms, Epson strives to continuously enhance and strengthen
corporate governance so as to realize transparent, fair, fast, and decisive decision-making.
Under a company with an Audit & Supervisory Committee, to further increase the effectiveness of corporate
governance, Epson further improves the supervisory function of the Board of Directors, further enhances
deliberation and speeds up management decision-making.
(2) Corporate governance system
Overview of and reasons for adopting the current system of corporate governance
Epson is structured as a company with an Audit & Supervisory Committee. It has a Board of Directors, an Audit
& Supervisory Committee, and a financial auditor. It has also voluntarily established an advisory committee for
matters such as the Director nomination and compensation.
This governance system was adopted to further increase the effectiveness of corporate governance by
strengthening supervision over management and by enabling the Board of Directors to devote more time to
discussions while speeding up decision-making by management.
The main corporate management bodies and their aims are described below:
Board of Directors
The Board of Directors, with a mandate from shareholders, is responsible for realizing efficient and effective
corporate governance, through which Epson will accomplish its social mission, sustain growth, and maximize
corporate value over the medium and long terms. To fulfill these responsibilities, the Board of Directors will
exercise a supervisory function over general management affairs, maintain management fairness and
transparency, and make important business decisions, including decisions on things such as management plans,
business plans, and investments exceeding a certain amount.
The Board of Directors is composed of 12 Directors, including five Outside Directors. Meetings of the Board of
Directors are, as a rule, held once per month and as needed. The Board of Directors makes decisions on basic
business policies, important business affairs, and other matters that the Board of Directors is responsible for
deciding as provided for in internal regulations. Business affairs that the Board of Directors is not responsible
for deciding are delegated to executive management, and the Board monitors these. To speed up business
decisions and increase business agility as a company with an Audit & Supervisory Committee, Epson expanded
the scope of affairs delegated to executive management from the Board of Directors and limits board
deliberations to only the most important issues. Corporate Governance Policy states that at least one-third of the
board members should be outside directors.
Audit & Supervisory Committee
The Audit & Supervisory Committee, with a mandate from shareholders, is responsible for independently and
objectively auditing and monitoring the execution of director duties and for ensuring the sound and sustained
growth of Epson. The Audit & Supervisory Committee verifies the effectiveness of the internal control system
and conducts audits primarily in cooperation with internal audit departments and the financial auditor. The
Audit & Supervisory Committee has established basic guidelines for selecting outside financial auditors and
criteria for evaluating their independence and expertise. Resolutions concerning financial auditors selected by
the Committee per the guidelines are submitted for approval at a general meeting of shareholders. The Audit &
Supervisory Committee also discusses the selection, dismissal, resignation, and compensation of Directors who
37
are not Audit & Supervisory Committee members and decides on the opinions to be presented at a general
meeting of shareholders.
The Audit & Supervisory Committee is composed of four Audit & Supervisory Committee members, three of
whom are Outside Directors. It is chaired by a full-time member of the Audit & Supervisory Committee.
Meetings are held once per month and as needed.
Corporate Strategy Council
The Corporate Strategy Council is an advisory body to the president whose purpose is to help ensure that the
right decisions are made based on a range of opinions on the executive management side. Meetings of the
Corporate Strategy Council are where Directors, Executive Officers, and Special Audit & Supervisory Officers
exhaustively examine important business topics that affect the Epson Group as a whole and matters on the
agenda for meetings of the Board of Directors.
Compliance Committee
The Compliance Committee’s function is to discuss the content of reports that it receives concerning important
compliance activities, and report its findings and communicate its opinions to the Board of Directors in order to
see that compliance activities are appropriately executed by line management.
As an advisory body to the Board of Directors, the Compliance Committee is composed of Outside Directors
and Directors who are Audit & Supervisory Committee members. The Compliance Committee is chaired by a
full-time member of the Audit & Supervisory Committee. Meetings are held every half year and as needed.
A Chief Compliance Officer (CCO) is elected by the Board of Directors and supervises and monitors
compliance-related affairs on the whole. The CCO periodically reports the state of compliance affairs to the
Compliance Committee.
Nomination Committee and Compensation Committee
Epson has created a Nomination Committee and a Compensation Committee as advisory bodies to the Board of
Directors. These Committees, which are composed primarily of Outside Directors, are designed to ensure
transparency and objectivity in the screening and nomination of candidates for Director, Executive Officer, and
Special Audit & Supervisory Officer and in matters of Director compensation. Both Committees include
Outside Directors, who comprise the majority of members, the Representative Director/President, and the
Director in charge of human resources. Directors who are full-time members of the Audit & Supervisory
Committee can attend meetings of either Committee as observers.
Epson’s system of corporate governance is schematically represented below.
38
(3) Internal control system
Epson’s Board of Directors approved a basic policy on the internal control system (a system for ensuring that
business is conducted suitably by the corporate group), and Epson has implemented the approved internal
control system. The Company passed a resolution on October 26, 2017, at the meeting of the Board of Directors
to partially amend Epson’s basic policy regarding the internal control system. The content of the revised
basic policy regarding the internal control system is described below.
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) The Company has created a Compliance Committee to serve as an advisory body to the Board of Directors.
The Compliance Committee is chaired by a full-time member of the Audit & Supervisory Committee and
is composed of Outside Directors and members of the Audit & Supervisory Committee. The Compliance
Committee meets regularly and as needed to hear and discuss important matters concerning the Company’s
compliance program. It reports its findings and offers opinions to the Board of Directors. Financial auditors
can attend meetings of the Compliance Committee as observers.
(3) A Chief Compliance Officer (CCO) is elected and supervises and monitors the execution of all compliance
operations. The CCO periodically reports the state of compliance affairs to the Compliance Committee.
(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. The
compliance management department helps to ensure the completeness 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 comprised of members of the Board of
Directors, etc. 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 are encouraged and are able to easily and immediately report compliance violations using
internal and external hotlines and e-mail addresses. Controls are in place to protect whistleblowers from
reprisal, and allegations are reported to the Company’s Audit & Supervisory Committee, the Compliance
Committee, and the Corporate Strategy Council in a way that whistleblowers cannot be identified.
(7) The Company strives to enhance legal awareness by providing Epson Group employees with web-based
training and other educational opportunities.
(8) The president of Seiko Epson periodically reports important compliance-related matters to the Board of
Directors and take measures as needed to respond to issues.
(9) The Company’s “Principles of Corporate Behavior” states that the Company will have no association
whatsoever with antisocial forces (i.e., organized crime groups). The Company takes a firm stance in
rejecting any and all contact with antisocial forces that threaten social order and security.
System for ensuring proper financial reporting
(1) The creation of proper financial reports is recognized as a critical issue. The Company shall build, on the
orders of the president, a system that enables internal control over financial reporting to be properly
arranged, implemented, and evaluated. The financial reports will not be limited in scope to evaluations and
39
reporting required by the Financial Instruments and Exchange Act but will also include reporting over the
scope deemed necessary by management.
(2) A basic regulation and other regulations and standards pertaining to internal control over financial
reporting shall be created, and their observance shall be obligatory across the entire Epson Group.
(3) Continuously evaluate whether the internal controls that have been put in place for financial reporting are
effectively and properly functioning, and take corrective action where needed.
Business execution system
(1) The Company formulates long-term corporate visions and mid-range business plans, and it sets clear
medium-and long-range goals for the Epson Group as a whole.
(2) The Company has instituted a system to ensure the appropriate and efficient execution of business. To that
end, the Company has established 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 report the matters below to the Board of Directors at least
once every three months.
a. Current business performance and performance outlook
b. Risk management responses
c. Status of key business operations
Risk management
(1) The Company has established 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, belongs to the
president of Seiko Epson. Group-wide risk management is carried out by Head Office supervisory
departments with the cooperation of the operations divisions and subsidiaries. Risks unique to an
individual business are managed by the chief operating officer of that business, including at subsidiaries
consolidated under them. The Company has also set up the risk management department, monitors overall
risk management Group-wide, makes corrections and adjustments thereto, and ensures the effectiveness of
risk management programs.
(3) The Corporate Strategy Council strives to ensure effective management of serious risks that could have an
egregious effect on society by dynamically and exhaustively discussing and analyzing ways to identify and
control risks. Also, when major risks become apparent, the president leads 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 periodically reports critical risk management issues to the Board of Directors
and formulates appropriate measures to respond to these issues, as needed.
Ensuring the appropriateness of operations in the corporate group
(1) The Group’s management structure helps to ensure that operations in the corporate group, including
subsidiaries, are conducted appropriately. Essentially, the Company is organized into product-based
divisions. Each division is headed by a chief operating officer who owns global consolidated responsibility
for that business. Meanwhile, supervisory functions within the Head Office own global responsibility.
Responsibility for providing the framework for business operations at subsidiaries is owned by the head of
each business. Group-wide corporate functions are the responsibility of the heads of Head Office
supervisory departments.
(2) The Company has business processes that enable business to be controlled on a Group level. This is
accomplished by regulations governing the management of affiliated companies that require subsidiaries to
report or acquire pre-approval for certain business affairs 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. The
Company has established regional head offices in certain regions to supervise local subsidiaries in order to
ensure the suitability and efficiency of operations Group-wide.
(3) Per the Basic Regulation for Internal Audits, internal audit departments serve as monitoring organizations
that are independent from the management and supervisory functions of the operations divisions and the
Head Office. Internal audit departments audit internal controls and the state of their implementation in all
40
Epson Group companies, including subsidiaries. The findings of the internal audit departments are
presented to the head of the audited organization along with requests for corrective action, where needed.
This information is also regularly reported to the president of Seiko Epson and to the Audit & Supervisory
Committee. In this way, Epson strives to optimize operations across the entire Group.
Safeguarding and management of work-related information
(1) Information on the performance of duties is safeguarded and managed in accordance with regulations
governing, among other things, document control, management approval, and contracts. All directors are
able to access this information at all times.
(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) The Audit & Supervisory Committee can interview Directors who are not members of the Audit &
Supervisory Committee, executive officers, and other personnel whenever they deem necessary in the
performance of duties based on the Audit & Supervisory Committee Audit Regulation.
(2) Audit & Supervisory Committee members can 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 who are not members of the Audit &
Supervisory Committee. Members of the Audit & Supervisory Committee also routinely review important
documents related to management decision-making.
(3) An Audit & Supervisory Committee Office was set up to assist the duties of the Audit & Supervisory
Committee. The head of the Audit & Supervisory Committee Office serves as the Special Audit &
Supervisory Officer and assigns full-time personnel to the Audit & Supervisory Committee Office. The
head and personnel of the Audit & Supervisory Committee Office discharge their duties to assist the Audit
& Supervisory Committee, obeying the orders of the Audit & Supervisory Committee alone and not orders
from Directors who are not members of the Audit & Supervisory Committee. Matters relating to the
personnel of the office must be approved in advance by the Audit & Supervisory Committee.
(4) To ensure that audits by the Audit & Supervisory Committee are systematic and effective, a framework has
been created to secure close cooperation between the internal audit departments and the Audit &
Supervisory Committee.
(5) If a situation involving the Audit & Supervisory Committee or cooperation with the internal audit
departments or other organizations is observed to interfere with the effectiveness of audits by the Audit &
Supervisory Committee, the Audit & Supervisory Committee can ask the representative director or Board
of Directors to take corrective action.
(6) The Audit & Supervisory Committee receives audit reports from internal audit departments and can issue
specific instructions to internal audit departments as needed. If the instructions issued to internal audit
departments by the Audit & Supervisory Committee and the president are in conflict, the president will
have the internal audit departments honor the instructions of the Audit & Supervisory Committee.
(7) Per the Audit & Supervisory Committee Audit Regulation, the Audit & Supervisory Committee can ask
Directors who are not members of the Audit & Supervisory Committee, the compliance management
department, and the risk management department, as well as others to report or explain the state of
management within the Epson Group, including subsidiaries. It can also view supporting materials. The
Audit & Supervisory Committee can also ask, as needed, subsidiary company directors, corporate auditors,
internal audit departments, and other organizations to report the state of management of the subsidiary. A
system shall be put in place to protect reporters from reprisal for having made a report, and the identity of
the reporter shall be protected even if the President or a Board Member, for example, is asked to make
corrections and so forth based on the report.
(8) The Audit & Supervisory Committee shall strive to enhance the effectiveness of audits by holding regular
discussions with financial auditors.
(9) The Audit & Supervisory Committee and representative director regularly meet to enable the Committee to
directly assess business operations.
41
(10) Funds required by the Audit & Supervisory Committee to perform its duties are properly budgeted for in
advance. However, funds required to perform the duties of the Audit & Supervisory Committee in
emergency or extraordinary situations will be promptly paid in advance or refunded on each occasion.
(4) Internal audits
Audit & Supervisory Committee audits
Epson’s Audit & Supervisory Committee is composed of four Directors, three of whom are Outside Directors.
Taro Shigemoto was selected to serve as a Full-Time Audit & Supervisory Committee member to help ensure
that the Audit & Supervisory Committee works effectively, as it was concluded that it would be necessary for
someone to prepare an environment to facilitate audits, attend important internal meetings to smoothly collect
internal information, work closely with groups such as the internal audit department, and monitor the internal
control system.
Audit & Supervisory Committee members can attend meetings of the Corporate Strategy Council and other
important meetings as part of their efforts to properly monitor business affairs. They examine the legality and
suitability of actions taken by the directors by checking and confirming compliance and by supervising and
verifying things such as the state of the internal control system, including internal control over financial
reporting. When they deem it necessary, Audit & Supervisory Committee members can ask internal audit
departments to investigate affairs or can provide specific instructions regarding the performance of their duties.
In addition, the Audit & Supervisory Committee ordinarily conducts audits using internal audit departments but
can exercise its investigation authority to conduct its own audits if the effectiveness of audits conducted by the
internal audit departments is not being maintained.
Audit & Supervisory Committee member Chikami Tsubaki is a certified public accountant and has an
appreciable degree of knowledge and insight into finance and accounting.
Internal audits
Epson’s internal compliance system guards against potential legal and internal regulatory violations in
departmental operations. Internal audit departments serve as monitoring organizations that are independent from
the management and supervisory functions of the operations divisions and the Head Office. They audit internal
controls and the implementation of controls in all Epson Group companies, including subsidiaries.
Internal audit departments conduct internal audits based on an annual audit plan. After conducting internal
audits, they report their observations, including recommendations for improvements based on the facts, to the
president and to the Audit & Supervisory Committee in a timely manner. Internal audit departments also
regularly report the internal audit situation to the president and Audit & Supervisory Committee.
Interconnections among Audit & Supervisory Committee audits, internal audits, and accounting audits,
and the relationship of these audits to the internal control department
In order to make Audit & Supervisory Committee audits systematic and efficient, Epson ensures close
collaboration between internal audit departments and the Audit & Supervisory Committee. In relation to the
structure of the Audit & Supervisory Committee Office and the coordination system with internal audit
departments, if circumstances hindering the effectiveness of the audit by the Audit & Supervisory Committee
are found, the Audit & Supervisory Committee requests the representative directors or the Board of Directors to
rectify them.
Epson’s internal audit departments regularly present their audit plans and audit results to the Audit &
Supervisory Committee. In response, the Audit & Supervisory Committee can, when it deems necessary, ask
internal audit departments to investigate affairs or can provide specific instructions regarding the performance
of their duties. The Audit & Supervisory Committee ordinarily conducts audits using internal audit departments
but can conduct its own audits if the effectiveness of audits conducted by the internal audit departments is not
being maintained.
Internal audit departments are seen as a keystone for internal control functions built by the president and
operations departments. On the other hand, to ensure the effectiveness and independence of audits by the Audit
& Supervisory Committee and internal audit departments, if the instructions issued to internal audit departments
by the Audit & Supervisory Committee and the president are in conflict, the president must have internal audit
departments honor the instructions of the Audit & Supervisory Committee.
The Audit & Supervisory Committee and the internal audit departments will thus proactively cooperate going
forward, but Epson set up an Audit & Supervisory Committee Office headed by the Special Audit &
42
Supervisory Officer as an organization dedicated to supporting the Audit & Supervisory Committee. The Audit
& Supervisory Committee Office is independent from executive management and supports the Audit &
Supervisory Committee, with a direct reporting line to it.
The Audit & Supervisory Committee and financial auditors enhance the effectiveness of audits by periodically
discussing issues with one another. Financial auditors have the right to observe meetings of the Compliance
Committee, which is made up of Outside Directors and a Director who is a member of the Audit & Supervisory
Committee.
(5) Outside Directors
The role of Outside Directors
To ensure that Outside Directors are independent from the Company’s management team, have a broad view,
and are able to objectively supervise the making of important decisions, the Company has set forth the role of
Outside Directors in the Corporate Governance Policy as below. In principle, Outside Directors should comprise
at least one-third of the members of the Board of Directors.
a. Monitoring of the management
- Monitoring of corporate executives through involvement in the officer election process and the
compensation determination process based on an evaluation of the business as a whole
- Monitoring of the business as a whole through the exercise of voting rights on important business
decisions made by the Board of Directors
b. Advisory function for improving business efficiency
c. Monitoring of conflicts of interest
- Monitoring of conflicts of interest between Epson and its Directors and Executive Officers
- Monitoring of conflicts of interest between Epson and related parties
Principle of independence
The Company’s Board of Directors has established a “Criteria for Independence of Outside Directors” and, in
compliance with this standard, elects director candidates who are unlikely to have conflicts of interest with
general shareholders. All current Outside Directors satisfy the independence requirements of the criteria.
The content of the amended standard is described below.
Criteria for Independence of Outside Directors
The Company has established the criteria below to objectively determine whether potential Outside Directors
are independent.
1. A person is not independent if:
(1) The person considers the Company to be a major business partner1, or has served as an executive2 within
the past five years in an entity for which the Company is a major business partner;
(2) The person is a major business partner3 of the Company or has served as an executive within the past five
years in an entity that is a major business partner of the Company.
(3) The person is a business consultant, certified public accountant, or lawyer who has received a large sum of
money or other forms of compensation4 (other than compensation as an officer) from the Company or has,
within the past three years, performed duties equivalent to those of an executive as an employee of a
corporation or group, such as a union, that has received a large sum of money or other forms of
compensation from the Company;
(4) The person is a major shareholder5 of the Company or has, within the past five years, been an executive or
Audit & Supervisory Board Member of an entity that is a major shareholder of the Company;
(5) The person is an executive or Audit & Supervisory Board Member of an entity in which the Company is
currently a major shareholder;
(6) The person is a major lender 6 to the Company or has been an executive of a major lender to the Company
within the past five years;
(7) The person has been employed by an auditing firm that has conducted a legal accounting audit of the
Company within the past five years;
(8) The person has been employed by a leading managing underwriter of the Company within the past five
years;
43
(9) The person has received a large donation7 from the Company or, within the past three years, has performed
duties equivalent to those of an executive as an employee of a corporation or a group, such as a union, that
has received a large donation from the Company;
(10) The person came from an entity that employs someone from the Company as an Outside Director; or
(11) The spouse or other immediate family member of a person to whom any of items (1) through (9) apply.
2. Even if any of the foregoing criteria apply to a potential Outside Director, the Company can elect that
person as an Outside Director if that person satisfies the requirements for Outside Directors set forth in the
Companies Act, and the Company deems the person suitable as an Outside Director of the Company in light
of his or her personality, knowledge, experience, or other qualifications upon explaining and announcing
the reasons thereof.
Notes
1 A person (usually a supplier) considers the Company to be a major business partner if 2% or more of its
consolidated net sales (consolidated revenue) has come from the Company in any fiscal year within the
past three years.
“Executive” means an executive officer, executive director, operating officer, or an employee occupying a
senior management position of department manager or higher.
2
3 A person (usually a buyer) is a major business partner if 2% or more of the Company’s consolidated
4
5
6
7
revenue has come from that partner in any fiscal year within the past three years.
“A large sum of money or other forms of compensation” means an average annual amount for the past
three years that is:
i) no less than 10 million yen for an individual; or
ii) no less than 2% of the annual revenues in any fiscal year for a group.
“Major shareholder” means a shareholder who directly or indirectly holds 10% or more of the voting
rights.
“A major lender” means a financial institution or other major creditor that is indispensable for the
Company’s financing and on which the Company depends to the extent that it is irreplaceable in any fiscal
year within the past three years.
“Large donation” means a donation whose annual average amount for the past three years exceeds either;
i) 10 million yen or
ii) 30% of the annual expense of the group, whichever is higher.
Number of outside directors, selection criteria, and human, capital, business or other interests between
outside directors and the Company
Epson had five outside directors (of whom three are Audit & Supervisory Committee members) as of the
submission date of its the security report.
a. Hideaki Omiya
Mr. Omiya has served as a Chairman of the Board of Mitsubishi Heavy Industries, Ltd. and has a wealth of
experience and insight as a corporate manager and engineer.
He has monitored corporate management appropriately by expressing opinions actively including findings
and proposals regarding overall managerial issues from a perspective of a corporate manager well-versed
in the global corporate management in the heavy industry, a different business field.
Epson believes that he will appropriately monitor management to achieve sustained growth and increase
medium-to long-term corporate value.
Mr. Omiya was an executive of Mitsubishi Heavy Industries, Ltd. The Company has had no transactions
with Mitsubishi Heavy Industries, Ltd. in the past three years. Epson has registered him as an Independent
Director with the Tokyo Stock Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.
b. Mari Matsunaga
Ms. Matsunaga has created new business models and has a considerable insight and experiences through
her involvement in the management of multiple companies as an Outside Officer. As an Outside Director
of the Company, she has appropriately monitored management, actively pointing out business issues and
offering recommendations particularly from the viewpoints of collaboration with external parties and
human resources strategy, etc. Epson believes that she will monitor management appropriately to achieve
44
sustained growth and increase medium-to long-term corporate value.
The Company has had no transactions with Ms. Matsunaga in the past three years. Epson has registered her
as an Independent Director with the Tokyo Stock Exchange.
She owns a small number of Epson shares, but there are no human, capital, business or other interests
between her and the Company.
c. Michihiro Nara (Outside Director who is an Audit & Supervisory Committee member)
Mr. Nara has a high level of expertise as an attorney. He has considerable insight and experiences through
his involvement in the management of multiple companies as an independent outside officer and
achievements as an Outside Director who is Audit & Supervisory Committee Member of the Company.
Epson believes that he will monitor management appropriately to achieve sustained growth and increase
medium-to long-term corporate value. He has never been involved in corporate management except as an
outside officer. However, given the reasons above, Epson believes that he can appropriately perform his
duties as an Outside Director who is an Audit & Supervisory Committee member.
As an Outside Director of the Company, Mr. Nara has actively pointed out business issues and offered
recommendations from the perspective of a legal professional.
The Company has not entered into a consulting agreement nor has it consigned any business under any
individual agreement with Mr. Nara as an attorney-at-law or with the law office to which he belongs.
Epson has registered him as an Independent Director with the Tokyo Stock Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.
d. Chikami Tsubaki (Outside Director who is an Audit & Supervisory Committee member)
Ms. Tsubaki has a high level of expertise as a certified public accountant. She has a considerable insight
and experiences through her involvement in the management of multiple companies as an independent
outside officer, and achievements as an Outside Director who is Audit & Supervisory Committee Member
of the Company. Epson believes that she will monitor management appropriately to achieve sustained
growth and increase medium to long-term corporate value. She has never been involved in corporate
management except as an outside officer. However, given the reasons above, Epson believes that she can
appropriately perform her duties as an Outside Director who is an Audit & Supervisory Committee
member.
As an Outside Director of the Company, Ms. Tsubaki has actively pointed out business issues and offered
recommendations from the perspective of a finance and accounting professional.
Epson does not have a business relationship with Ms. Tsubaki, a certified public accountant, and has never
engaged her based on an advisory agreement or other separate agreement. Epson has registered her as an
Independent Director with the Tokyo Stock Exchange.
She owns a small number of Epson shares, but there are no human, capital, business or other interests
between her and the Company.
e. Yoshio Shirai (Outside Director who is an Audit & Supervisory Committee member)
Mr. Shirai has served as Directors at Toyota Motor Corporation, Hino Motors, Ltd. and Toyota Tsusho
Corporation, and has considerable insight and a wealth of experience as a corporate manager, and
achievements as an Outside Director who is Audit & Supervisory Committee Member of the Company.
Epson believes that he will monitor management appropriately to achieve sustained growth and increase
medium-to long-term corporate value.
As an Outside Director of the Company, Mr. Shirai has drawn on his global perspective as well as his
management experience in a different business field including automotive industry and trading company to
actively point out business issues and offer recommendations.
Mr. Shirai has served as an executive at Hino Motors, Ltd. and Toyota Tsusho Corporation within the past
five years. The Company has had no transactions with Hino Motors, Ltd. and Toyota Tsusho Corporation
in the past three years. Epson has registered him as an Independent Director with the Tokyo Stock
Exchange.
He owns a small number of Epson shares, but there are no human, capital, business or other interests
between him and the Company.
(6) Overview of limited liability agreements
The Company has executed agreements with non-executive directors Hideaki Omiya, Mari Matsunaga, Taro
Shigemoto, Michihiro Nara, Chikami Tsubaki, and Yoshio Shirai that limit their liability for damages under
45
Article 423 (1), pursuant to the provisions of Article 427 (1) of the Companies Act. The maximum amount of
liability for damages under these agreements is limited to the amount provided for by laws and regulations. The
liability of the non-executive directors shall be limited only if they have acted in good faith and without gross
negligence in performing their duties.
(7) Officer compensation, etc.
With an aim to ensure transparency and objectivity, compensation of officers is determined by the General
Meeting of Shareholders, the Board of Directors or Audit & Supervisory Committee after going through a
fair, transparent, and rigorous reporting by the Director Compensation Committee in which Outside
Directors make significant contributions.
a. Policies
Compensation for executive officers
(a) Compensation shall provide incentive to improve business performance in order to increase
corporate value in the near, medium, and long terms.
(b) Compensation shall be sufficient to attract qualified persons both from within the Company and
from outside.
(c) Compensation shall be commensurate with period performance so that directors and executive
officers can demonstrate their management capabilities to the fullest during their tenure.
Compensation for non-executive officers
(a) The composition of compensation shall guarantee independence so that these officers can suitably
exert their general management supervisory function, etc.
(b) Compensation shall be sufficient to attract qualified persons both from within the Company and
from outside.
b. Compensation system
- Director and executive officer compensation of the Company consists of base compensation, bonuses,
and stock compensation. Non-executive officers receive base compensation only, a fixed amount, from
the standpoint independent from business execution, because their role is to supervise general
management. They do not receive bonuses and stock compensation, which are forms of compensation
that are linked to performance and share price.
Base compensation
Base compensation is a monetary amount that is determined by taking into account all factors such as
an individual’s position and responsibilities. It is paid as a monthly compensation that reflects the
results of annual performance evaluations based on criteria set according to the individuals’ roles.
Bonus
An annual bonus is monetary compensation in an amount that is determined by taking into account
factors such as the financial performance for the year. The bonus reflects the results of annual
performance evaluations based on criteria set according to the individuals’ roles.
Stock compensation
Under Epson’s stock-based compensation plan, a trust scheme is used to deliver Company shares to
officers, the number of shares being based on points system, where in officers are awarded points
depending on the level of achievement with respect to medium- and long-term operating performance
targets, such as business profit, ROS and ROE.
c. Procedure for determining compensation
- Compensation is determined by an appropriate body, such as the general meeting of shareholders, the
Board of Directors, or Audit & Supervisory Committee, after a fair, transparent, and rigorous review by
the Director Compensation Committee, which is composed mainly of Outside Directors and which
issues an opinion, to ensure transparency and objectivity.
46
d. Compensation paid
Category
Total
compensation
(millions of yen)
Total compensation by type (millions of yen)
Fixed
compensation
Variable
compensation
Base compensation
Bonus
Stock
compensation
Number of
individuals
Directors who are not
Audit & Supervisory
Committee members
(amount accounted for
by Outside Directors)
Directors who are
Audit & Supervisory
Committee members
(amount accounted for
by Outside Directors)
Total
373
(28)
81
(48)
454
239
(28)
81
(48)
9
(–)
–
(–)
89
(–)
–
(–)
321
9
89
35
(–)
–
(–)
35
8
(2)
4
(3)
12
Notes:
1. The base compensation for Directors who are not Audit & Supervisory Committee members (excluding
Outside Directors) consists of fixed compensation and variable compensation. Variable compensation
refers to monetary compensation that reflects the results of annual performance evaluations based on
criteria set according to their respective roles.
2. The Company has introduced an officer stock ownership plan to link compensation more closely to
shareholders’ value. A portion of the base compensation is discretionally allotted for the acquisition of the
Company’s shares.
3. Upon the resolution at the annual general meeting of shareholders of June 28, 2016, the maximum base
compensation was set to at 62 million yen per month for Directors who are not Audit & Supervisory
Committee members (Outside Directors account for 10 million yen of this amount) and at 20 million yen
for Directors who are Audit & Supervisory Committee members.
4. The amount above includes 89 million yen in bonuses to be paid to five Directors (excludes Outside
Directors and Directors who are Audit & Supervisory Committee members), as approved by shareholders
at the annual general meeting of shareholders on June 27, 2018.
5. The Company introduced a performance-linked stock compensation plan (stock compensation) by
employing a framework referred to as the officer compensation BIP trust, for the purpose of showing its
commitment to promoting sustainable growth and increasing its medium to long-term corporate value, in
addition to strengthening the sense of sharing common interests with its shareholders. The stock
compensation stated above represents the amount recorded for the current fiscal year based on Japanese
Generally Accepted Accounting Principles (JGAAP).
6. The number of individuals above includes one Director who is not Audit & Supervisory Committee
Member who retired at the conclusion of the Ordinary General Meeting of Shareholders held on June 28,
2017.
7. Stock options are not granted.
47
e. Total compensation paid to officers whose total consolidated compensation is 100 million yen or
more
Name
Total
consolidated
compensation
(millions of yen)
Total consolidated compensation by type
(millions of yen)
Category
Fixed
compensation
Variable
compensation
Base compensation
Bonus
Stock
compensation
Minoru Usui
115
Director
60
6
31
16
Note: The stock compensation stated above represents the amount recorded for the current fiscal year based on
Japanese Generally Accepted Accounting Principles (JGAAP).
48
(8) Securities held by the Company
a. Balance sheet total of stocks held for reasons other than pure investment:
19 companies
¥11,176 million
b.
Issuing company, number, and balance sheet total of stocks held for reasons other than pure
investment
Previous fiscal year
Special investment securities
Company
NGK Insulators, Ltd.
Shares
(stock)
2,507,000
Balance sheet total
(millions of yen)
Reason held
6,317 To maintain and strengthen the
Mizuho Financial Group, Inc.
15,008,880
3,061 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products
business relationship with a
source of steady funding and a
provider of financial services
746 To maintain and strengthen the
business relationship with a
major buyer of Epson products
362 To maintain and strengthen the
business relationship with a
major buyer of Epson products
307 To maintain and strengthen the
business relationship with a
source of steady funding and a
provider of financial services
237 To maintain and strengthen the
business relationship with a
major buyer of Epson products
195 To maintain and strengthen the
business relationship with a
major buyer of Epson products
193 To maintain and strengthen the
business relationship with a
major buyer of Epson products
147 To maintain and strengthen the
business relationship with a
major buyer of Epson products
52 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products
35 To maintain and strengthen the
business relationship with a
company whose parent company
is major buyer of Epson products
Seiko Holdings Corporation
1,644,080
Otsuka Corporation
60,000
The Hachijuni Bank, Ltd.
489,500
Marubun Corporation
332,640
Hakuto Co., Ltd.
190,000
King Jim Co., Ltd.
221,980
Joshin Denki Co., Ltd.
130,000
Pixelworks, Inc.
100,000
Nippon BS Broadcasting
Corporation
33,200
49
Current fiscal year
Special investment securities
Company
NGK Insulators, Ltd.
Shares
(stock)
2,507,000
Balance sheet total
(millions of yen)
Reason held
4,597 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products
Mizuho Financial Group, Inc.
15,008,880
2,872 To maintain and strengthen the
Seiko Holdings Corporation
328,816
Otsuka Corporation
60,000
Marubun Corporation
332,640
Hakuto Co., Ltd.
190,000
The Hachijuni Bank, Ltd.
489,500
Joshin Denki Co., Ltd.
65,000
King Jim Co., Ltd.
221,980
Nippon BS Broadcasting
Corporation
33,200
Pixelworks, Inc.
100,000
business relationship with a
source of steady funding and a
provider of financial services
846 To maintain and strengthen the
business relationship with a
major buyer of Epson products
643 To maintain and strengthen the
business relationship with a
major buyer of Epson products
327 To maintain and strengthen the
business relationship with a
major buyer of Epson products
296 To maintain and strengthen the
business relationship with a
major buyer of Epson products
279 To maintain and strengthen the
business relationship with a
source of steady funding and a
provider of financial services
252 To maintain and strengthen the
business relationship with a
major buyer of Epson products
227 To maintain and strengthen the
business relationship with a
major buyer of Epson products
41 To maintain and strengthen the
business relationship with a
company whose parent company
is major buyer of Epson products
41 To maintain and strengthen the
business relationship with a
supplier of key parts used in
Epson products
Note: Otsuka Corporation completed its ordinary shares split into two shares with an effective date of April
1, 2018.
c. Stocks held purely for investment purposes
None
50
(9) Accounting audits
1) Names and other details of certified 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
Seiji
Yamamoto
Yoshiyuki
Sakuma
Yoshitomo
Matsuura
Ernst & Young
ShinNihon LLC
Ernst & Young
ShinNihon LLC
Ernst & Young
ShinNihon LLC
5
2
5
2) Composition of auditing team
The auditing team comprises 53 staff including 25 certified public accountants, 4 accountant
examination passers, and 24 other accounting staff.
(10) Number of directors
Epson’s Articles of Incorporation provide for a maximum of nine directors who are not members of the Audit &
Supervisory Committee and a maximum of five directors who are members of the Audit & Supervisory
Committee.
(11) 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 Companies Act.
(12) Matters requiring resolutions of general meetings of shareholders that can be implemented by
resolutions of 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.
Director exemption from liability
When liability falls under the requirements stipulated in Article 426, Paragraph 1 of the Companies Act, the
Company’s Articles of Incorporation allow the Company to exempt the Directors from liability for damages in
Article 423, Paragraph 1 of the 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 so that the Directors (excluding
Executive Director) to fully apply themselves to their expected roles.
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.
(13) Special resolution requirements of the general meeting of shareholders
The Company’s Articles of Incorporation set forth the requirements for a special resolution of the general
meeting of shareholders stipulated in Article 309, Paragraph 2, of the Companies Act as a two-thirds majority
vote by at least one-third of shareholders with voting rights. This policy is intended to ensure smooth operation
of the general meeting of shareholders by relaxing the quorum requirements for special resolutions at the
general meeting of shareholders.
51
2. Details of audit remuneration
(1) Remuneration for audits by certified public accountants
(Millions of yen)
Category
Filing company
Consolidated
subsidiaries
Total
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
152
61
214
2
–
2
167
46
214
2
–
2
(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, 2017, amounted to
¥576 million.
Fiscal year under review
Total payments for audits carried out on behalf of 62 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2018, amounted to
¥599 million.
(3) Non-audit work performed by certified public accountant at filing company
Previous fiscal year
Remuneration paid for non-audit work performed by the certified public accountant was for various consultancy
services.
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 audit remuneration
This does not apply because remuneration for auditing services is determined according to the nature of the
audit work.
52
Management
Directors, audit & supervisory committee members 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.
Current function
Chief Operating Officer,
Wearable Products &
Industrial Solutions
Operations Segment,
Chief Operating Officer,
Wearable Products
Operations Division, and
General Administrative
Manager, Corporate
Planning Division
Chief Operating Officer,
Printing Solutions
Operations Division
General Administrative
Manager, Human
Resources Division,
General Administrative
Manager, CSR
Management Office, and
Chairman, Epson Sales
Japan Corporation
General Administrative
Manager, Management
Control Division
Chief Operating Officer,
Visual Products Operations
Division
Name
Minoru Usui
Shigeki Inoue
Position
President and
Representative
Director
Representative
Director,
Senior Managing
Executive Officer
Koichi Kubota
Masayuki Kawana
Director,
Senior Managing
Executive Officer
Director,
Executive Officer
Tatsuaki Seki
Yasunori Ogawa
Hideaki Omiya
Mari Matsunaga
Taro Shigemoto
Michihiro Nara
Director,
Executive Officer
Director,
Executive Officer
Outside Director
Outside Director
Director,
Full-Time Audit &
Supervisory
Committee
Member
Outside Director,
Audit &
Supervisory
Committee
Member
53
Name
Position
Current function
Chikami Tsubaki
Outside Director,
Audit &
Supervisory
Committee
Member
Yoshio Shirai
Outside Director,
Audit &
Supervisory
Committee
Member
Motonori Okumura
Managing
Executive Officer
Junichi Watanabe
Managing
Executive Officer
Hideki Shimada
Managing
Executive Officer
General Administrative
Manager, Technology
Development Division;
Deputy Chief Operating
Officer, Wearable Products
& Industrial Solutions
Operations Segment
General Administrative
Manager, Production
Planning Division;
Deputy Chief Operating
Officer, Wearable Products
& Industrial Solutions
Operations Segment;
Deputy Chief Operating
Officer, Wearable Products
Operations Division
Deputy Chief Operating
Officer, Printing Solutions
Operations Division
Yasumasa Kitamatsu
Executive Officer
Technology Development
Division
Akihiro Fukaishi
Executive Officer
President, Epson (China)
Sunao Murata
Executive Officer
Deputy General
Co., Ltd.
Administrative Manager,
Corporate Planning
Division
Yoshiyuki Moriyama
Executive Officer
Chairman and President,
Toshiya Takahata
Executive Officer
Epson Engineering
(Shenzhen) Ltd.
General Administrative
Manager, Intellectual
Property Division
Tsuyoshi Kitahara
Executive Officer
Technology Development
Naoyuki Saeki
Executive Officer
Division
President, Epson Sales
Japan Corporation
54
Name
Position
Current function
Nobuyuki Shimotome
Executive Officer
Chief Operating Officer,
Microdevices Operations
Division
Kazuyoshi Yamamoto
Executive Officer
President, Epson Europe
B.V.
Munenori Ando
Executive Officer
General Administrative
Hitoshi Igarashi
Executive Officer
Keith Kratzberg
Executive Officer
Manager, Sales &
Marketing Division
Deputy Chief Operating
Officer, Printing Solutions
Operations Division
President and Chief
Executive Officer, Epson
America, Inc.
Isamu Otsuka
Executive Officer
President, Epson Atmix
Corporation
Eiichi Abe
Executive Officer
President, P.T. Indonesia
Kazuhiro Ichikawa
Executive Officer
Keijiro Naito
Executive Officer
Kazunori Kumakura
Executive Officer
Yoshifumi Yoshida
Executive Officer
Epson Industry
Deputy General
Administrative Manager,
Technology Development
Division
Deputy Chief Operating
Officer, Visual Products
Operations Division
General Administrative
Manager, IT Division
Chief Operating Officer,
Robotics Solutions
Operations Division
Akihiko Toeda
Special Audit &
Supervisory
Officer
General Administrative
Manager, Audit &
Supervisory Committee
Office
55
Index to Consolidated Financial Statements
Seiko Epson Corporation and Subsidiaries
Consolidated Statement of Financial Position................................................................................................ 57
Consolidated Statement of Comprehensive Income ...................................................................................... 59
Consolidated Statement of Changes in Equity ............................................................................................... 61
Consolidated Statement of Cash Flows ........................................................................................................... 63
Notes to Consolidated Financial Statements .................................................................................................. 64
Report of Independent Auditors ....................................................................................................................118
56
Consolidated Statement of Financial Position
Years ended March 31, 2017 and 2018:
57
Thousands ofU.S. dollarsNotesMarch 31,2017March 31,2018March 31,2018Assets Current assets Cash and cash equivalents8,36221,782229,6782,160,455 Trade and other receivables9,36155,704165,2821,554,717 Inventories10208,512223,2272,099,774 Income tax receivables2,4762,94227,673 Other financial assets11,367541,51314,231 Other current assets1213,17616,485155,086 Subtotal602,406639,1296,011,936 Non-current assets held for sale3943405 Total current assets602,446639,1726,012,341 Non-current assets Property, plant and equipment13,15275,195297,9272,802,436 Intangible assets1421,55322,037207,290 Investment property171,2881,21911,466 Investments accounted for using the equity method1,4381,54614,542 Net defined benefit assets23011103 Other financial assets11,3620,54420,433192,202 Other non-current assets125,4865,29949,894 Deferred tax assets1846,43345,701429,884 Total non-current assets371,940394,1783,707,817 Total assets974,3871,033,3509,720,158Millions of yen
58
Thousands ofU.S. dollarsNotesMarch 31,2017March 31,2018March 31,2018Liabilities and equity Liabilities Current liabilities Trade and other payables19,36141,633154,7591,455,733 Income tax payables7,2637,29668,629 Bonds issued, borrowings and lease liabilities20,3676,20036,082339,403 Other financial liabilities361,3182011,890 Provisions2121,98126,403248,358 Other current liabilities22102,99297,643918,505 Total current liabilities351,389322,3873,032,518 Non-current liabilities Bonds issued, borrowings and lease liabilities20,3670,371130,4831,227,382 Other financial liabilities361,5861,61315,172 Net defined benefit liabilities2345,28142,321398,090 Provisions216,2098,95484,225 Other non-current liabilities223,52111,434107,584 Deferred tax liabilities181,3041,0499,867 Total non-current liabilities128,275195,8561,842,320 Total liabilities479,664518,2444,874,838 Equity Share capital2453,20453,204500,460 Capital surplus2484,32184,364793,565 Treasury shares24(30,812)(30,803)(289,746) Other components of equity2453,17647,960451,144 Retained earnings332,306358,0013,367,519 Equity attributable to owners of the parent company492,196512,7274,822,942 Non-controlling interests2,5262,37822,378 Total equity494,722515,1064,845,320 Total liabilities and equity974,3871,033,3509,720,158Millions of yen
Consolidated Statement of Comprehensive Income
Years ended March 31, 2017 and 2018:
59
Thousands of U.S. dollarsNotes20172018Revenue7,261,024,8561,102,11610,367,002Cost of sales10,13,14(658,882)(701,268)(6,596,445)Gross profit365,974400,8483,770,557Selling, general and administrative expenses13,14,27(300,167)(326,062)(3,067,086)Other operating income295,4214,86045,715Other operating expense13,30(3,335)(14,643)(137,739)Profit from operating activities67,89265,003611,447Finance income311,3831,27712,012Finance costs31(1,858)(3,691)(34,719)Share of profit of investments accounted for using theequity method5374696Profit before tax67,47062,663589,436Income taxes18(18,461)(20,899)(196,585)Profit from continuing operations49,00941,764392,851Loss from discontinued operations32(582)--Profit for the period48,42641,764392,851Profit for the period attributable to:Owners of the parent company48,32041,836393,528Non-controlling interests106(72)(677)Profit for the period48,42641,764392,851Millions of yenYear endedMarch 31,Year endedMarch 31,2018
60
Thousands of U.S.dollarsNotes20172018Other comprehensive incomeItems that will not be reclassified subsequently to profitor loss, net of taxRemeasurement of net defined benefit liabilities (assets)3310,7854,99847,013Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)332,219(371)(3,499)Subtotal13,0054,62643,514Items that may be reclassified subsequently to profitor loss, net of taxExchange differences on translation of foreignoperations33(5,477)(5,266)(49,534)Net changes in fair value of cash flow hedges33474444,176Share of other comprehensive income of investmentsaccounted for using the equity method33(20)13122Subtotal(5,450)(4,809)(45,236)Total other comprehensive income, net of tax7,555(182)(1,722)Total comprehensive income for the period55,98241,581391,129Total comprehensive income for the periodattributable to:Owners of the parent company56,02841,612391,411Non-controlling interests(46)(30)(282)Total comprehensive income for the period55,98241,581391,129 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeU.S. dollarsNotes20172018Earnings per share for the period:Basic earnings per share for the period34136.82118.781.12Diluted earnings per share for the period34136.82118.751.12Earnings per share from continuing operationsfor the period:Basic earnings per share for the period34138.47118.781.12Diluted earnings per share for the period34138.46118.751.12Earnings per share from discontinued operationsfor the period:Basic loss per share for the period34(1.65)--Diluted loss per share for the period34(1.65)--Millions of yenYear endedMarch 31,Year endedMarch 31,2018YenYear endedMarch 31,Year endedMarch 31,2018
Consolidated Statement of Changes in Equity
Years ended March 31, 2017 and 2018:
61
NotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchange differenceson translation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents of equityAs of April 1, 201653,20484,321(20,471)-4,53353,616(160)57,989292,775467,8182,858470,676Profit for the period----- ---48,32048,32010648,426Other comprehensive income---10,7902,221(5,351)477,707-7,707(152)7,555Total comprehensive income for the period---10,7902,221(5,351)477,70748,32056,028(46)55,982Acquisition of treasury shares24--(10,340)------(10,340)-(10,340)Dividends25--------(21,299)(21,299)(237)(21,537)Share-based payment transactions35-12-------12-12Acquisition of subsidiaries----------2626Changes in interests in subsidiaries-(12)--(10)0-(9)-(21)(75)(97)Transfer from other components of equityto retained earnings---(10,790)(1,720)--(12,510)12,510---Total transactions with the owners-0(10,340)(10,790)(1,730)0-(12,520)(8,789)(31,650)(285)(31,936)As of March 31, 201753,20484,321(30,812)-5,02448,265(112)53,176332,306492,1962,526494,722 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeMillions of yenEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable to ownersof the parentcompany
62
NotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchange differenceson translation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents of equityAs of April 1, 201753,20484,321(30,812)-5,02448,265(112)53,176332,306492,1962,526494,722Profit for the period--------41,83641,836(72)41,764Other comprehensive income---4,998(371)(5,294)444(223)-(223)41(182)Total comprehensive income for the period---4,998(371)(5,294)444(223)41,83641,612(30)41,581Acquisition of treasury shares24--(2)------(2)-(2)Dividends25--------(21,133)(21,133)(116)(21,250)Share-based payment transactions35-4311------54-54Acquisition of subsidiaries------------Changes in interests in subsidiaries------------Transfer from other components of equityto retained earnings---(4,998)5--(4,992)4,992---Total transactions with the owners-438(4,998)5--(4,992)(16,141)(21,081)(116)(21,197)As of March 31, 201853,20484,364(30,803)-4,65842,97033147,960358,001512,7272,378515,106 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeNotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchange differenceson translation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents of equityAs of April 1, 2017500,460793,161(289,831)-47,269454,012(1,063)500,2183,125,8204,629,82823,7514,653,579Profit for the period--------393,528393,528(677)392,851Other comprehensive income---47,013(3,489)(49,817)4,176(2,117)-(2,117)395(1,722)Total comprehensive income for the period---47,013(3,489)(49,817)4,176(2,117)393,528391,411(282)391,129Acquisition of treasury shares24--(18)------(18)-(18)Dividends25--------(198,786)(198,786)(1,091)(199,877)Share-based payment transactions35-404103------507-507Acquisition of subsidiaries------------Changes in interests in subsidiaries------------Transfer from other components of equityto retained earnings---(47,013)56--(46,957)46,957---Total transactions with the owners-40485(47,013)56--(46,957)(151,829)(198,297)(1,091)(199,388)As of March 31, 2018500,460793,565(289,746)-43,836404,1953,113451,1443,367,5194,822,94222,3784,845,320 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeThousands of U.S. dollarsEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable to ownersof the parentcompanyMillions of yenEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable to ownersof the parentcompany
Consolidated Statement of Cash Flows
Years ended March 31, 2017 and 2018:
63
Thousands of U.S. dollarsYear ended March 31,Notes201720182018Cash flows from operating activitiesProfit for the period48,42641,764392,851Depreciation and amortisation43,67949,993470,256Impairment loss (reversal of impairment loss)2392,09119,668Finance (income) costs4752,41422,707Share of (profit) loss of investments accounted for using the equitymethod(53)(74)(696)Loss (gain) on sale and disposal of property, plant and equipment,intangible assets and investment property967977,496Income taxes18,46120,899196,585Decrease (increase) in trade receivables(3,691)(9,528)(89,624)Decrease (increase) in inventories(10,729)(17,199)(161,781)Increase (decrease) in trade payables10,8923,08729,037Increase (decrease) in net defined benefit liabilities1561,61215,163Other8,3999,88793,023Subtotal116,352105,745994,685Interest and dividends income received1,4141,27912,030Interest expenses paid(981)(1,038)(9,763)Payment for loss on litigation-(564)(5,305)Income taxes paid(19,910)(21,142)(198,881)Net cash from (used in) operating activities96,87384,279792,766Cash flows from investing activitiesProceeds from sale of investment securities3,10316150Purchase of property, plant and equipment(70,637)(69,237)(651,274)Proceeds from sale of property, plant and equipment7468588,070Purchase of intangible assets(6,899)(4,368)(41,087)Proceeds from sale of intangible assets2419Proceeds from sale of investment property1,088984Purchase of investments in subsidiaries(2,743)--Other(441)(1,942)(18,247)Net cash from (used in) investing activities(75,759)(74,661)(702,295)Cash flows from financing activitiesNet increase (decrease) in current borrowings20(14,374)11,590109,019Proceeds from non-current borrowings2050049,908469,457Repayment of non-current borrowings20(500)(50,000)(470,322)Proceeds from issuance of bonds issued2049,75919,896187,150Redemption of bonds issued20(30,000)(10,000)(94,064)Payment of lease obligations20(101)(106)(997)Dividends paid25(21,299)(21,133)(198,786)Dividends paid to non-controlling interests(236)(116)(1,091)Payment for purchase of subsidiaries’ equity from non-controllinginterests(97)--Purchase of treasury shares(10,340)(2)(18)Net cash from (used in) financing activities(26,691)37348Effect of exchange rate changes on cash and cash equivalents(3,139)(1,759)(16,545)Net increase (decrease) in cash and cash equivalents(8,716)7,89574,274Cash and cash equivalents at beginning of period8230,498221,7822,086,181Cash and cash equivalents at end of period8221,782229,6782,160,455Millions of yenYear ended March 31,
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
(global.epson.com/). 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 (“IFRS”) as issued by the International Accounting Standards Board which are applied based on the
provision of Article 93 of Ordinance on Terminology, Forms and Preparation Methods of Consolidated Financial
Statements, as Epson meets the criteria of a “Specified Companies applying Designated IFRS” defined under
Article 1-2 of 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 (“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 ¥106.31 to U.S. $1 at the end of the reporting period.
(4) Reporting Period of Subsidiaries
The fiscal year end date of certain overseas subsidiaries is December 31, and the subsidiaries prepare, for
consolidation purposes, additional financial information as of the date of the consolidated financial statements.
3. Significant Accounting Policies
(1) Basis of Consolidation
Consolidated financial statements of Epson include financial statements of the Company and subsidiaries, and
interests in investments in associates and joint ventures.
(A) Subsidiaries
A subsidiary is an entity that is controlled by Epson. Epson controls the entity when it is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. 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 intergroup transaction are eliminated on
consolidation. Comprehensive income for subsidiaries is attributed to the owners of the parent company and to the
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 that is the power to participate in the financial
and operating policy decisions of the entity. 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.
64
(C) Joint Ventures
A joint venture is a joint arrangement whereby Epson and the other parties that have joint control of the
arrangement have rights to the net assets of the arrangement. The joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant activities, that significantly affect
the returns of the arrangement, require the unanimous consent of the parties sharing control. Epson accounts for
that investment using the equity method.
(2) Business Combinations
Each business combination is accounted for by applying the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of
the assets transferred by Epson, the liabilities incurred by Epson to former owners of the acquiree and the equity
interests issued by Epson. Goodwill is recognised in the consolidated statement of financial position, as the excess
of the transferred consideration over the net of the acquisition-date amounts of the identifiable assets acquired and
the liabilities assumed. If the difference is a negative monetary value, the resulting gain is immediately recognised
as profit. Acquisition-related costs incurred are recognised as expenses except for the costs to issue debt or equity
securities.
(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 determines its functional currency and measures its results and financial
position in that currency.
A foreign currency transaction is translated into the functional currency at a spot exchange rate at the date of the
transaction or a rate that approximates the actual rate at the date of the transaction. Foreign currency monetary
items are translated using the closing rate. Exchange differences arising on the settlement of monetary items or on
translating monetary items are recognised in profit or loss. However, exchange differences arising on financial
instruments designated as hedging instruments for net investments in foreign operations, financial assets measured
at fair value through other comprehensive income, and cash flow hedges are recognised in other comprehensive
income.
Assets and liabilities of foreign operations are translated into Japanese yen at the closing date, while income and
expenses of foreign operations are translated into Japanese yen at exchange rates at the dates of the transactions or
a rate that approximates the exchange rates at the dates of the transactions. All resulting exchange differences are
recognised in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the
exchange differences relating to that foreign operation is recognised in 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 measured at their fair values and classified into financial assets measured subsequently 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 financial 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.
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.
65
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.
(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) Financial Assets Measured at Fair Value
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 in profit or loss. However, changes
in fair value of equity instruments designated as measured at fair value through other comprehensive income are
recognised in other comprehensive income and the cumulative change in fair value in other comprehensive
income is transferred to retained earnings when equity instruments are derecognised or the decline in their fair
values are 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 and
impairment loss is recognised in profit or loss. If the amount of the impairment loss provided decreases due to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed in
profit or loss through the allowance account.
(C) Financial Liabilities
(i) Initial Recognition and Measurement
Financial liabilities are measured at fair value at initial recognition. However, financial liabilities measured
subsequently at amortised cost are measured at their fair value less transaction costs that are directly attributable
to the issuance of the financial liabilities.
Financial liabilities are classified into financial liabilities measured subsequently at fair value through profit or
loss and financial liabilities measured at amortised cost. Epson determines the classification at initial recognition.
(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 are measured at fair value and include financial
liabilities designated as measured at fair value through profit or loss at initial recognition.
(b) Financial Liabilities Measured at Amortised Cost
Financial liabilities measured at amortised cost are measured at amortised cost using the effective interest
method.
(iii) Derecognition
Financial liabilities are derecognised when the obligation is discharged, canceled or expired.
66
(D) Offsetting a Financial Asset and a Financial Liability
A financial asset and a financial liability are offset and the net amount presented in the consolidated statement of
financial position 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 realise the asset and settle the liability simultaneously.
(E) Derivatives Accounting
Epson utilises 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.
A gain or loss on a derivative is recognised in profit or loss. However, the portion of the gain or loss on the hedging
instruments that is determined to be an effective hedge of cash flow hedges and hedges of net investments in
foreign operations are recognised in other 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. Epson classifies hedging relationships that meet the qualifying criteria for hedge
accounting in the following categories and applies hedge accounting to the hedging relationships.
(i) Fair Value Hedge
A gain or loss on a derivative is recognised in profit or loss. The hedging gain or loss on the hedged items
attributable to the hedged risks adjust the carrying amount of the hedged item and is recognised in profit or loss.
(ii) Cash Flow Hedge
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised
in other comprehensive income, while the ineffective portion is recognised immediately in profit or loss.
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 in 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 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
comprehensive income continue to be recognised in equity until the forecast transactions or firm commitments
occur.
(iii) Hedges of a Net Investment in a Foreign Operation
Hedges of a net investment in a foreign operation are accounted for similarly to cash flow hedges. The portion of
the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other
comprehensive income, while the ineffective portion is recognised in profit or loss. On the disposal of the foreign
operation, the cumulative gain or loss on the hedging instrument relating to the effective portion of the hedge that
has been recognised in other comprehensive income is reclassified from equity to profit or loss.
(G) Fair Value of Financial Instruments
Fair value of financial instruments that are traded in an active market as of the end of fiscal year 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.
(5) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term, highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value
as such that has a short maturity of three months or less from the date of acquisition.
67
(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 realisable value, and the cost of inventories is assigned by
using the weighted-average cost formula. Net realisable value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the estimated costs necessary to make the sale.
(7) Property, Plant and Equipment
The cost of property, plant and equipment 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.
After recognition as an asset, property, plant, and equipment is measured by using the cost model and is carried at
its cost less any accumulated depreciation and any accumulated impairment losses.
Except for asset that is not subject to depreciation such as land, asset is depreciated using the straight-line method
over its estimated useful life. The estimated useful life of major asset is as follows:
• Buildings and structures: 10 to 35 years
• Machinery and vehicles: 2 to 12 years
The estimated useful life, depreciation method and residual value are reviewed at each fiscal year end and, if
expectations differ from previous estimates, the effect of changes in accounting estimates is recognised
prospectively.
(8) Intangible Assets
(A) Goodwill
Goodwill acquired in a business combination is measured at the amount recognised at the acquisition date less any
accumulated impairment losses.
Goodwill is not amortised and allocated to a cash-generating unit that is identified according to business. The
cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is
an indication that the unit may be impaired. An impairment loss is recognised in profit or loss and not reversed in a
subsequent period.
(B) Intangible Assets
The cost of a separately acquired intangible asset is measured initially at cost, and the cost of intangible asset
acquired in a business combination is its fair value at the acquisition date. The cost of internally generated
intangible asset is the sum of expenditure incurred from the date when the intangible asset first meets the
recognition criteria.
After initial recognition, an intangible asset is measured by using the cost model and is carried at its cost less any
accumulated amortisation and any accumulated impairment losses.
An intangible asset with a finite useful life is amortised using the straight-line method over its estimated useful life.
The estimated useful life of major intangible asset with a finite useful life is as follows:
• Software: 3 to 10 years
The estimated useful life and amortisation method of an asset are reviewed at each fiscal year end and, if
expectations differ from previous estimates, the effect of changes in accounting estimates is recognised
prospectively.
An intangible asset with an indefinite useful life or an intangible asset not yet available for use is not amortised and
tested for impairment annually, and whenever there is an indication that the intangible asset may be impaired.
(9) Leases
Epson classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to
ownership of an asset and a lease as an operating lease if it does not transfer substantially all the risks and rewards
incidental to ownership of an asset.
At the commencement of the lease term, finance leases are recognised as assets and liabilities at amounts equal to
the fair value of the leased property or, if lower, the present value of the minimum lease payments, each determined
at the inception of the lease. Minimum lease payments are apportioned between the finance charge and the
reduction of the outstanding liability. The asset is depreciated using the straight-line method over the shorter of the
lease term and its estimated useful life which is consistent with that for depreciable assets that are owned. Lease
payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.
Contingent rents are recognised as expenses in the periods in which they are incurred.
Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and
requires an assessment of 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.
68
(10) Investment Property
Investment property is property held to earn rentals or for capital appreciation or both.
After recognition as an asset, investment property is measured by using the cost model and is carried at its cost less
any accumulated depreciation and any accumulated impairment losses.
Except for asset that is not subject to depreciation such as land, investment property is depreciated using the
straight-line method over its estimated useful life. The estimated useful life of major investment properties that is
subject to depreciation is 35 years.
(11) Impairment of Non-financial Assets
Epson assesses whether there is any indication that an asset may be impaired. If any such indication exists, or
irrespective of whether there is any indication of impairment, where impairment testing is required, the recoverable
amount of the asset is estimated. If it is not possible to estimate the recoverable amount for each asset, the
recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount
is measured at the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use.
If carrying amount of an asset or cash-generating unit exceeds its recoverable amount, an impairment loss is
recognised and the carrying amount of the asset is reduced to its recoverable amount. The impairment loss is
recognised in profit or loss. In determining an asset’s value in use, an estimate of the future cash flows expected to
derive from the asset 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.
An impairment loss for goodwill is recognised in profit or loss and not reversed in a subsequent period. Epson
assesses whether there is any indication that an impairment loss recognised in prior periods for an asset other than
goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amount of that
asset is estimated. If the recoverable amount exceeds the carrying amount of the asset, an impairment loss is
reversed to the carrying amount that would have been determined (net of amortisation or depreciation) if no
impairment loss had been recognised for the asset in prior years.
(12) Non-current Assets Held for Sale and Discontinued Operations
Epson classifies a non-current asset or disposal group as held for sale if its carrying amount will be recovered
principally through a sale transaction rather than through continuing use. The non-current asset or disposal group as
held for sale is available for immediate sale in its present condition and its sale is highly probable when Epson
management commits to a plan to sell the asset or disposal group.
Epson measures the non-current asset or disposal group classified as held for sale at the lower of its carrying
amount and fair value less costs to sell. The non-current asset is not depreciated or amortised while it is classified
as held for sale or while it is part of a disposal group classified as held for sale.
A discontinued operation is a component of an entity, that is a cash-generating unit or a group of cash-generating
units, that either has been disposed of, or is classified as held for sale, and (a) represents a separate major line of
business or geographical area of operations, (b) is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations or (c) is a subsidiary acquired exclusively with a view to resale.
(13) Post-employment Benefits
Epson has 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 and the related
current service cost and past service cost, using the projected unit credit method. For a discount rate, a discount
period is set based on the estimated timing of benefit payments in each period, and the discount rate is determined
by reference to market yields as of the end of the fiscal year on high quality corporate bonds for the period
corresponding to the discount period. The net defined benefit liability (asset) is measured by deducting the fair
value of any plan assets (including adjustments of the net defined benefit asset and the asset ceiling, if necessary)
from the present value of the defined benefit obligation. Net interest on the net defined benefit liability (asset) is
recognised in profit or loss. Remeasurements of the net defined benefit liability (asset) are recognised in other
comprehensive income and transferred to retained earnings immediately. Past service cost is recognised as an
expense at the earlier of when a plan amendment or curtailment occurs and when any related restructuring costs or
termination benefits are recognised.
The contribution payable to a defined contribution plan is recognised as an expense.
(14) Share-based Payment
The Company has employed a framework referred to as BIP (Board Incentive Plan) trust as performance-linked
equity-settled share-based payment plan for eligible officers. The shares of the Company held by the trust are
recognised as treasury shares. The Company measures the service received at the fair value of its shares granted at
the grant date and recognises the consideration as expenses over the vesting period while the corresponding amount
is recognised as an increase in equity.
69
(15) Provisions
Epson recognises a provision when it has a present legal or constructive obligation as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a
reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the amount of a provision is measured at the present value
of the expenditures expected to be required to settle the obligation.
(16) Revenue
(A) Sale of Goods
Epson recognises revenue from the sale of goods when the significant risks and rewards of ownership of the goods
have been transferred to the buyers, Epson retains neither continuing managerial involvement nor effective control
over the goods sold, it is probable that the economic benefits associated with the transaction will flow to Epson,
and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured
reliably. The risks and rewards of ownership of the goods are usually transferred at the time of delivery of the
goods to customers. The amount of revenue is measured at the fair value of the consideration received or receivable
taking into account the amount of any trade discounts and volume rebates.
(B) Interest
Interest is recognised using the effective interest method.
(C) Dividends
Dividends are 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 the rendering of services are recognised by reference to the stage of completion of the
transaction as of the end of fiscal year.
(17) Government Grants
A government grant is recognised at fair value when there is reasonable assurance that Epson will comply with the
conditions attaching to it, and that the grant will be received.
Grants related to assets are deducted in calculating the carrying amount of the asset.
Grants related to income are recognised in profit or loss on a systematic basis over the periods in which Epson
recognises as expenses the related costs for which the grants are intended to compensate.
(18) Borrowing Costs
Borrowing costs are interest and other costs incurred in connection with the borrowing of funds.
The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset,
that necessarily takes a substantial period of time to get ready for their intended use or sale, are capitalised as part
of the cost of that asset. Other borrowing costs are recognised as an expense in the period when they are incurred.
(19) Income Taxes
Income taxes are presented as the total of current tax expense and deferred tax expense.
Current tax is the amount of income taxes payable or recoverable and is recognised as an expense or income and
included in profit or loss for the period, except to the extent that the tax arises from a transaction which is
recognised either in other comprehensive income or directly in equity, or a business combination. For the
calculation of the tax amount, Epson uses the tax rates and tax laws that have been enacted or substantively enacted
by the end of fiscal year.
Deferred tax expense is calculated based on a temporary difference that is the difference between the carrying
amount of the assets or liabilities in the consolidated financial statements and their tax bases. A deferred tax asset is
recognised for all deductible temporary differences, the 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 utilised. A
deferred tax liability is recognised for all taxable temporary differences.
A deferred tax liability is not recognised for taxable temporary differences when the deferred tax liability arises
from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction which is not
a business combination and affects neither accounting profit nor taxable profit or loss at the time of the transaction.
70
Also a deferred tax liability is not recognised for taxable temporary differences associated with 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 difference will not reverse in the
foreseeable future.
A deferred tax asset is not recognised for deductible temporary differences arising from investments in subsidiaries
and associates, and interests in joint ventures to the extent that it is not probable that the temporary difference will
reverse in the foreseeable future and that taxable profit will be available against which the temporary difference can
be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted by the end of fiscal year.
(20) Treasury Shares
Treasury shares are measured at their cost and deducted from equity. No gain or loss is recognised in profit or loss
on the purchase, sale or cancellation of the treasury shares. Any difference between the carrying amount and the
consideration paid is recognised in equity.
(21) Earnings per Share
Basic earnings per share are calculated by dividing profit or loss attributable to ordinary shareholders of the
Company by the weighted-average number of ordinary shares outstanding during the period, adjusting by the
number of treasury shares. For the purpose of the calculation, the shares of the Company held by BIP trust are
excluded because the shares are accounted as treasury shares. For the purpose of calculating diluted earnings per
share, the rights for the treasury shares held by the trust to be received by eligible officers are adjusted.
(22) Dividends
Year-end dividend distributions to the shareholders of the Company are recognised as liabilities in the period in
which the distribution is approved at 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.
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 or when it is required annually.
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. Recoverable amount is
determined with certain assumptions of useful life, future cash flow of an asset, discount rate and long-term growth
rate. 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
71
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.
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. 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 recognising the deferred tax assets, Epson judges
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 “40. Contingencies.”
5. Changes in Accounting Policies
There is no accounting standard and interpretation newly applied by Epson for the reporting period.
6. New Standards and Interpretations Not Yet Applied
The new standards, amended standards and new interpretations that have been issued as of the date of approval of
the consolidated financial statements, but have not yet been applied by Epson are as follows.
Epson considers that following standards which will be mandatory for the reporting period ending on March 31,
2019 are expected to have no material effect on the consolidated financial statements.
The potential impacts of IFRS 16-Leases, which will be mandatory for the reporting period ending on March 31,
2020, are currently finalised by Epson.
72
IFRS
IFRS 9
Financial
Instruments
Date of mandatory
application
(from the fiscal year
beginning on or
after)
January 1, 2018
Reporting
periods of
application by
Epson
(The reporting
period ending)
March 31, 2019 Amendments to hedge accounting
Description of new and revised standards
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
IFRS 16 Leases
January 1, 2018
March 31, 2019 Amendments to accounting treatment for
recognising revenue
January 1, 2019
March 31, 2020 Amendments to the principles for the
recognition, measurement, presentation
and disclosure of leases
Recognision of assets and liabilities for
most leases by lessees
Substantially unchanged in lessor
accounting
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
for which discrete financial information is available and whose operating results are regularly reviewed by the
Board of Directors in deciding how to allocate resources and in assessing performance.
The reportable segments of Epson are composed of
three segments: “Printing Solutions,” “Visual
Communications” and “Wearable & Industrial Products.” 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
Printing Solutions
Main products
Inkjet printers, serial impact dot matrix printers, page printers, color image scanners,
large-format inkjet printers, industrial inkjet printing systems, printers for use in POS
systems, label printers and related consumables, dry process office papermaking
systems, personal computers and others.
Visual Communications 3LCD projectors, HTPS-TFT LCD panels for 3LCD projectors, smart glasses and
Wearable & Industrial
Products
others.
Wristwatches, watch movements, sensing equipment, industrial robots, IC handlers,
crystal units, crystal oscillators, quartz sensors, CMOS LSIs, metal powders, surface
finishing and others.
73
(2) Revenues and Performances of Reportable Segments
Revenues and performances of reportable segments were as follows. Transfer prices between the segments were
based on prevailing market prices.
FY2016: Year ended March 31, 2017
Millions of yen
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenues
686,353
179,642
150,674 1,016,671
Intersegment revenues
265
39
7,873
8,179
787
721
7,398 1,024,856
(8,901)
-
Total revenue
686,619
179,682
158,548 1,024,850
1,509
(1,502) 1,024,856
Segment profit (loss)
(Business profit)
(Note 1)
84,127
16,142
7,813
108,084
(482)
(41,794)
65,807
Other operating income
(expense)
2,085
Profit from operating activities
67,892
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
(475)
53
Profit before tax
67,470
Other
(Note 2)
Adjustments
(Note 4)
Consolidated
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
(23,079)
(7,885)
(7,956)
(38,920)
(22)
(4,272)
(43,215)
(45)
(0)
(161)
(206)
-
(32)
(239)
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Segment assets
376,782
115,024
133,982
Capital expenditures
43,930
10,201
9,189
625,790
63,321
299
348,297
974,387
2
11,995
75,319
(Note 1) Segment profit (loss) (Business profit) 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 Segment profit (loss) (Business profit) of (¥41,794) million comprised “Eliminations”
of ¥496 million and “Corporate expenses” of (¥42,291) million. “Corporate expenses” included expenses relating
to research and development for basic technology, new businesses and general corporate expenses which are not
attributed to reportable segments.
(Note 4) “Adjustments” to Segment assets of ¥348,297 million comprised “Eliminations” of (¥3,992) million and
“Corporate assets” of ¥352,290 million.
74
FY2017: Year ended March 31, 2018
Millions of yen
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenues
736,239
198,889
158,535 1,093,663
187
8,265 1,102,116
Intersegment revenues
449
2
8,801
9,253
Total revenue
736,688
198,891
167,336 1,102,916
749
936
(10,002)
-
(1,737) 1,102,116
Segment profit (loss)
(Business profit)
(Note 1)
94,896
24,423
7,154
126,474
(532)
(51,156)
74,785
Other operating income
(expense)
(9,782)
Profit from operating activities
65,003
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
Profit before tax
(2,414)
74
62,663
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Printing
Solutions
Reportable segments
Visual
Communi-c
ations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 4)
Consolidated
(26,688)
(8,783)
(8,815)
(44,287)
(17)
(5,145)
(49,449)
(900)
(23)
(107)
(1,031)
-
(1,060)
(2,091)
Segment assets
410,490
127,325
142,324
680,140
275
352,934 1,033,350
Capital expenditures
46,351
14,338
11,099
71,789
17
7,622
79,430
(Note 1) Segment profit (loss) (Business profit) 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 Segment profit (loss) (Business profit) of (¥51,156) million comprised “Eliminations”
of ¥480 million and “Corporate expenses” of (¥51,637) million. “Corporate expenses” included expenses relating
to research and development for basic technology, new businesses and general corporate expenses which are not
attributed to reportable segments.
(Note 4) “Adjustments” to Segment assets of ¥352,934 million comprised “Eliminations” of (¥5,639) million and
“Corporate assets” of ¥358,573 million.
75
FY2017: Year ended March 31, 2018
Thousands of U.S. dollars
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
6,925,400 1,870,839 1,491,251 10,287,490
1,768
77,744 10,367,002
4,231
19
82,787
87,037
7,036
(94,073)
-
Revenue
External revenues
Intersegment
revenues
Total revenue
6,929,631 1,870,858 1,574,038 10,374,527
8,804
(16,329) 10,367,002
Segment profit (loss)
(Business profit)
(Note 1)
892,645
229,733
67,293 1,189,671
(5,004)
(481,196)
703,471
Other operating income
(expense)
(92,024)
Profit from operating activities
611,447
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
(22,707)
696
Profit before tax
589,436
Other
(Note 2)
Adjustments
(Note 4)
Consolidated
Printing
Solutions
Reportable segments
Visual
Communi-c
ations
Wearable &
Industrial
Products
Subtotal
(251,050)
(82,616)
(82,917)
(416,583)
(159)
(48,397)
(465,139)
(8,476)
(216)
(1,006)
(9,698)
-
(9,970)
(19,668)
3,861,265 1,197,676 1,338,763 6,397,704
2,586 3,319,868 9,720,158
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Segment assets
Capital expenditures
436,008
134,869
104,402
675,279
159
71,716
747,154
(Note 1) Segment profit (loss) (Business profit) 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 Segment profit (loss) (Business profit) of ($481,196) thousand comprised
“Eliminations” of $4,525 thousand and “Corporate expenses” of ($485,721) thousand. “Corporate expenses”
included expenses relating to research and development for basic technology, new businesses and general corporate
expenses which are not attributed to reportable segments.
(Note 4) “Adjustments” to Segment assets of $3,319,868 thousand comprised “Eliminations” of ($53,032)
thousand and “Corporate assets” of $3,372,900 thousand.
76
(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 Philippines
Indonesia
China
Other
Total
Millions of yen
March 31,
2017
2018
Thousands of U.S. dollars
March 31,
2018
188,412
31,436
29,146
25,048
30,918
304,962
199,251
41,197
30,238
23,377
33,964
328,030
1,874,245
387,517
284,432
219,894
319,540
3,085,628
(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
Other
Total
Millions of yen
Year ended March 31,
2018
2017
Thousands of U.S. dollars
Year ended March 31,
2018
251,395
202,416
129,834
441,210
1,024,856
250,119
216,116
144,014
491,866
1,102,116
2,352,732
2,032,884
1,354,660
4,626,726
10,367,002
(Note) Revenues are segmented by country based on the location of the customers.
(4) Information about Major Customers
Epson had no transactions with a single external customer amounting to 10% or more of total external revenues.
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,
2017
105,188
116,593
221,782
2018
109,589
120,088
229,678
Thousands of
U.S. dollars
March 31,
2018
1,030,843
1,129,612
2,160,455
77
9. Trade and Other Receivables
The breakdown of “Trade and other receivables” was as follows:
Millions of yen
March 31,
Notes and trade receivables
Other receivables
Allowance account for credit losses
Total
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.
2017
143,060
14,071
(1,427)
155,704
2018
151,032
15,682
(1,433)
165,282
10. Inventories
The breakdown of “Inventories” was as follows:
Millions of yen
March 31,
Merchandise and finished goods
Work in process
Raw materials
Supplies
Total
The amount of inventories included in cost of sales recognised as an expense totaled (¥644,777) million and
(¥667,638) million (($6,280,105) thousand) for the years ended March 31, 2017 and 2018, respectively.
Losses recognised as cost of sales as a result of valuations for the years ended March 31, 2017 and 2018 were
(¥31,275) million and (¥29,708) million (($279,446) thousand), respectively. In addition, Epson has no
inventories pledged as collateral.
2017
123,050
55,366
22,403
7,692
208,512
2018
131,612
55,651
25,159
10,805
223,227
Thousands of
U.S. dollars
March 31,
2018
1,420,675
147,521
(13,479)
1,554,717
Thousands of
U.S. dollars
March 31,
2018
1,238,002
523,478
236,656
101,638
2,099,774
78
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,
2017
2018
449
15,809
75
37
4,985
(57)
21,298
754
20,544
21,298
1,080
15,242
58
101
5,519
(53)
21,947
1,513
20,433
21,947
Thousands of
U.S. dollars
March 31,
2018
10,158
143,363
545
950
51,915
(498)
206,433
14,231
192,202
206,433
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 bonds receivables and time deposits 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
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.
In order to pursue the efficiency of assets held, sales of financial assets measured at fair value through other
comprehensive income have been carried out (derecognition). The major description is as follows.
79
Fair valueDividendsreceived (Note)Fair valueFair valueDividendsreceived (Note)NGK Insulators, Ltd.6,3171004,59743,241959Mizuho Financial Group, Inc.3,0611122,87227,0151,053(Note) Dividends received from the derecognised financial assets during the reporting periods are not included.Dividendsreceived (Note)102112Millions of yenThousands of U.S. dollarsMarch 31, 2017March 31, 2018March 31, 2018FY2016: Year ended March 31, 2017Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.2,8842,18350(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.Millions of yenAccumulated gainstransferred intoretained earnings(net of tax) (Note)1,591
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,
2017
13,840
1,502
3,319
18,663
13,176
5,486
18,663
2018
13,829
3,939
4,016
21,784
16,485
5,299
21,784
Thousands of
U.S. dollars
March 31,
2018
130,081
37,052
37,847
204,980
155,086
49,894
204,980
80
FY2017: Year ended March 31, 2018Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.---(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.FY2017: Year ended March 31, 2018Fair value at thedate of saleAccumulated gainsDividends receivedNGK Insulators, Ltd.---(Note) Accumulated gain or loss recognised as other comprehensive income is transferred to retained earnings when an equity instrument is sold or the decline in its fair value is significant.-Millions of yenAccumulated gainstransferred intoretained earnings(net of tax) (Note)-Thousands of U.S. dollarsAccumulated gainstransferred intoretained earnings(net of tax) (Note)
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:
81
CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2016458,348461,570182,41815,0842,4921,119,913Individual acquisition3,4777,0198,84250,63851670,494Acquisition of subsidiary31749126-29523Transfer from (to) investmentproperty(100)----(100)Sale or disposal(6,222)(11,908)(12,524)(120)(64)(30,840)Exchange differences ontranslation of foreign operations(1,693)(4,707)(1,244)286(9)(7,368)Transfer from constructionin progress9,75618,11510,832(38,704)--Other620(1,812)(558)(440)(28)(2,219)As of March 31, 2017464,504468,327187,89126,7442,9351,150,402Individual acquisition1,9765,8255,73661,41930975,268Sale or disposal(6,070)(9,489)(11,990)(12)(346)(27,909)Exchange differences ontranslation of foreign operations(1,516)(510)(4,949)(427)16(7,389)Transfer from constructionin progress24,35223,60710,915(58,875)--Other565(1,586)112(303)(2,547)(3,759)As of March 31, 2018483,810486,174187,71628,5443671,186,613CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20174,369,3344,405,2951,767,387251,56627,61910,821,201Individual acquisition18,58754,79253,955577,7342,936708,004Sale or disposal(57,097)(89,257)(112,783)(112)(3,275)(262,524)Exchange differences ontranslation of foreign operations(14,260)(4,797)(46,552)(4,016)121(69,504)Transfer from constructionin progress229,065222,058102,671(553,794)--Other5,306(14,919)1,063(2,881)(23,937)(35,368)As of March 31, 20184,550,9354,573,1721,765,741268,4973,46411,161,809Millions of yenThousands of U.S. dollars
(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.
The carrying amount of property, plant and equipment includes the carrying amount of the following leased assets:
82
Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2016(329,606)(387,615)(157,965)(105)(157)(875,449)Depreciation expense (Note)(8,090)(16,441)(13,154)-(21)(37,708)Impairment losses(78)(33)(74)(20)-(206)Acquisition of subsidiary(42)(42)(62)-(17)(165)Transfer to (from) investmentproperty84----84Sale or disposal5,88311,73512,2661052130,011Exchange differences ontranslation of foreign operations8873,8881,032-95,818Other2171,7584370(5)2,406As of March 31, 2017(330,744)(386,751)(157,520)(20)(170)(875,207)Depreciation expense (Note)(9,177)(19,289)(15,655)-(25)(44,148)Impairment losses(893)(167)(126)--(1,187)Sale or disposal5,4089,20011,701-326,314Exchange differences ontranslation of foreign operations312(153)4,119-(12)4,265Other(195)1,452(13)20151,278As of March 31, 2018(335,290)(395,709)(157,495)-(190)(888,685)Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 2017(3,111,127)(3,637,955)(1,481,704)(188)(1,619)(8,232,593)Depreciation expense (Note)(86,323)(181,441)(147,258)-(254)(415,276)Impairment losses(8,410)(1,570)(1,185)--(11,165)Sale or disposal50,87086,539110,064-48247,521Exchange differences ontranslation of foreign operations2,934(1,439)38,745-(122)40,118Other(1,833)13,648(131)18815012,022As of March 31, 2018(3,153,889)(3,722,218)(1,481,469)-(1,797)(8,359,373)Millions of yenThousands of U.S. dollarsCarrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2016128,74173,95524,45214,9782,335244,463As of March 31, 2017133,75981,57530,37126,7232,764275,195As of March 31, 2018148,52090,46430,22028,544177297,927Carrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20171,258,207767,340285,683251,37826,0002,588,608As of March 31, 20181,397,046850,954284,272268,4971,6672,802,436Millions of yenThousands of U.S. dollars
(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, 2017 and 2018, represent the losses related to idle
assets that Epson has no plan to use in the future, and the carrying amounts were 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. The valuation
is made in accordance with the income approach using Level 3 inputs which include the future cash flow.
83
Leased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of April 1, 20166318846298As of March 31, 20175717830267As of March 31, 201828219944526Leased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of March 31, 20175361,6932822,511As of March 31, 20182,6631,8714134,947Thousands of U.S. dollarsMillions of yen
14. Intangible Assets
The schedules of the cost, accumulated amortisation and accumulated impairment losses, and carrying amount of
“Intangible assets” were as follows:
84
CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 201644,75616,5807,9802,5821,99473,894Individual acquisition4,957111,332-3256,627Acquisition of subsidiary4--2,1055942,704Sale or disposal(1,794)(0)--(7)(1,803)Exchange differences ontranslation of foreign operations(285)-(0)7417(194)Other1145910-11494As of March 31, 201747,65117,0509,3234,7612,93681,723Individual acquisition4,9330696-7056,336Sale or disposal(3,132)(3,240)(593)-(17)(6,983)Exchange differences ontranslation of foreign operations(180)-(9)203(10)3Other(489)-593-523626As of March 31, 201848,78213,80910,0104,9654,13881,706CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2017448,226160,38087,69644,78427,627768,713Individual acquisition46,40206,546-6,65159,599Sale or disposal(29,461)(30,487)(5,578)-(159)(65,685)Exchange differences ontranslation of foreign operations(1,693)-(84)1,919(114)28Other(4,609)-5,578-4,9305,899As of March 31, 2018458,865129,89394,15846,70338,935768,554Millions of yenThousands of U.S. dollars
(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.
85
Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 2016(33,132)(14,293)(6,484)-(1,805)(55,715)Amortisation expense (Note)(3,714)(739)(1,362)-(79)(5,896)Impairment losses(5)(1)(23)-(1)(32)Acquisition of subsidiary(2)----(2)Sale or disposal1,6880---1,689Exchange differences ontranslation of foreign operations209-0-7217Other40(459)--(10)(429)As of March 31, 2017(34,916)(15,493)(7,870)-(1,888)(60,169)Amortisation expense (Note)(4,116)(579)(936)-(202)(5,834)Impairment losses(292)-(603)-(0)(896)Sale or disposal3,1273,240593-166,978Exchange differences ontranslation of foreign operations122-8-62193Other60----60As of March 31, 2018(36,014)(12,832)(8,808)-(2,012)(59,668)Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2017(328,435)(145,734)(74,028)-(17,779)(565,976)Amortisation expense (Note)(38,706)(5,446)(8,795)-(1,930)(54,877)Impairment losses(2,746)-(5,682)-(0)(8,428)Sale or disposal29,41330,4775,578-17065,638Exchange differences ontranslation of foreign operations1,147-75-5931,815Other564----564As of March 31, 2018(338,763)(120,703)(82,852)-(18,946)(561,264)Millions of yenThousands of U.S. dollarsCarrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 201611,6242,2861,4962,58218818,179As of March 31, 201712,7341,5561,4534,7611,04721,553As of March 31, 201812,7679771,2024,9652,12522,037Carrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2017119,79114,64613,66844,7849,848202,737As of March 31, 2018120,1029,19011,30646,70319,989207,290Thousands of U.S. dollarsMillions of yen
15. Finance Lease Transactions
Epson leases host gas supply facilities for factory, 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,
2017
2018
Thousands of
U.S. dollars
March 31,
2018
89
(2)
87
131
(2)
128
0
(0)
0
221
(5)
216
140
(3)
137
293
(4)
289
71
(0)
70
506
(8)
497
1,316
(39)
1,277
2,793
(47)
2,746
652
(0)
652
4,761
(86)
4,675
86
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,
2017
5,581
9,989
903
16,474
2018
6,497
12,576
2,854
21,928
Thousands of
U.S. dollars
March 31,
2018
61,113
118,305
26,846
206,264
(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:
Millions of yen
Year ended
March 31,
2017
8,611
112
2018
9,203
118
Thousands of
U.S. dollars
Year ended
March 31,
2018
86,567
1,109
Total of minimum lease payments
Contingent rents
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
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
87
Millions of yen
Year ended
March 31,
2017
1,967
15
(75)
-
(610)
(8)
1,288
4,173
(2,205)
1,967
2,694
(1,405)
1,288
2018
1,288
-
(10)
(7)
(34)
(17)
1,219
2,694
(1,405)
1,288
2,568
(1,348)
1,219
Thousands of
U.S. dollars
Year ended
March 31,
2018
12,115
-
(94)
(65)
(331)
(159)
11,466
25,331
(13,216)
12,115
24,145
(12,679)
11,466
(2) Fair Value
The carrying amount and the fair value of “Investment property” were as follows:
Millions of yen
March 31, 2017
March 31, 2018
Thousands of
U.S. dollars
March 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Investment property
1,288
990
1,219
907
11,466
8,531
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.
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:
Inter-company profits and write downs on
inventories
Carryforward of unused tax losses
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 (Note 2)
Millions of yen
March 31,
2017
2018
19,533
10,828
5,912
7,237
21,582
65,093
(13,590)
(2,668)
(3,705)
(19,965)
45,128
19,487
10,784
6,413
6,113
20,428
63,226
(12,826)
(3,058)
(2,689)
(18,574)
44,651
Thousands of
U.S. dollars
March 31,
2018
183,303
101,439
60,323
57,501
192,166
594,732
(120,647)
(28,764)
(25,304)
(174,715)
420,017
(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,
2017 and 2018, 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 utilise 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 utilise
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 realised based on the prior taxable income and the expected future taxable income when the
deferred tax assets can be recognised.
88
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 realised 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, 2017 and 2018, were ¥57,903 million and ¥41,434 million ($389,746 thousand), respectively. The
amounts of deductible temporary differences, for which deferred tax assets have not been recognised, as of March
31, 2017 and 2018, were ¥143,599 million and ¥95,935 million ($902,408 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:
1st year
2nd year
3rd year
4th year
5th year and thereafter
Total
Millions of yen
March 31,
2017
-
-
-
-
57,903
57,903
2018
-
-
32,907
7,323
1,203
41,434
Thousands of
U.S. dollars
March 31,
2018
-
-
309,548
68,883
11,315
389,746
Epson has no taxable temporary differences associated with investments in subsidiaries for which deferred tax
liabilities have not been recognised as of March 31, 2017 and 2018.
(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,
2017
(18,433)
(27)
(18,461)
2018
(20,984)
84
(20,899)
Thousands of
U.S. dollars
Year ended
March 31,
2018
(197,375)
790
(196,585)
Deferred tax expense decreased by ¥1,791 million mainly due to the effect of changes in Japanese applicable tax
rate for the year ended March 31, 2017. Deferred tax expense increased by ¥4,867 million ($45,781 thousand)
mainly due to the effect of changes in the U.S. applicable tax rate for the year ended March 31, 2018.
Deferred tax expense includes the benefit arising from a previously unrecognised tax loss, tax credit or temporary
difference of a prior period, and expenses or benefits arising from write-downs of deferred tax assets or the reversal
of previous write-downs of deferred tax assets. Due to these effects, the deferred tax expense decreased by ¥5,737
million and decreased by ¥4,854 million ($45,658 thousand) for the years ended March 31, 2017 and 2018,
respectively.
89
(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 30.7% for the years ended March 31, 2017 and 2018. Foreign subsidiaries are
subject to income tax at their locations.
%
Year ended
March 31, 2017
30.7
(2.7)
(0.3)
(2.5)
(2.6)
4.8
27.4
Year ended
March 31, 2018
30.7
(5.5)
2.8
(5.9)
7.8
3.5
33.4
Effective statutory tax rate
Different tax rates applied to foreign subsidiaries
Expenses not deductible for tax purposes
Reassessment of recoverability of deferred tax assets
Changes in applicable tax rates
Other
Actual tax rate
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,
2017
81,651
59,981
141,633
2018
81,459
73,299
154,759
Thousands of
U.S. dollars
March 31,
2018
766,240
689,493
1,455,733
Trade and other payables are classified as financial liabilities measured at amortised cost.
20. Bonds issued, Borrowings and Lease liabilities
(1) Breakdown of Bonds issued, Borrowings and Lease liabilities
The breakdown of “Bonds issued, borrowings and lease liabilities” was as follows:
90
Thousands ofU.S. dollarsMarch 31,201720182018Current borrowings16,11825,949244,0882.13-Current portion of non-currentborrowings50,000----Current portion of bonds issued(Note 2)9,9959,99594,017--Non-current borrowings49950,415474,2260.442027Bonds issued (Note 2)69,74279,707749,779--Lease liabilities2164974,6751.642018 to 2023 Total146,572166,5651,566,785Current liabilities76,20036,082339,403Non-current liabilities70,371130,4831,227,382 Total146,572166,5651,566,785Millions of yen%DueMarch 31,Average interestrate (Note 1)
(Note 1) Average interest rates are the weighted average interest rates for the balances at the end of the reporting
period.
(Note 2) The summary of issuing conditions of the bonds issued was as follows:
*The figures in parentheses represent the current portion of bonds issued.
Bonds issued, borrowings and lease liabilities are classified as financial liabilities measured at amortised cost.
There are no financial covenants on bonds issued and borrowings that have a significant impact on Epson’s
financing activities.
91
Thousands ofU.S. dollarsMarch 31,20172018201810,000(10,000)10,00094,064(10,000)(94,064)The CompanyThe 12th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Jun 13, 20140.35NonJun 13, 201910,00010,00094,064The CompanyThe 13th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.10NonSep 21, 202120,00020,000188,129The CompanyThe 14th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.27NonSep 21, 202320,00020,000188,129The CompanyThe 15th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 21, 20160.34NonSep 18, 202610,00010,00094,064The CompanyThe 16th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 6, 20170.26NonSep 6, 2024-10,00094,064The CompanyThe 17th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 6, 20170.36NonSep 6, 2027-10,00094,06480,00090,000846,578(10,000)(10,000)(94,064)Millions of yeninterestrateMarch 31,Maturity dateNon-CompanyName of bonds issuedIssue date%CollateralThe CompanyThe 11th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)-The CompanyThe 9th Series unsecuredstraight bonds issued (withinter-bond pari passu clause)Sep 12, 20120.67Sep 12, 2017Sep 11, 20130.57Sep 11, 2018Non10,000
(2) Reconciliation of Liabilities arising from Financing Activities
The schedule of “Liabilities arising from Financing Activities” was as follows:
“Non-current borrowings” and “Bonds issued” in the tables above include their current portion.
92
FY2017: Year ended March 31, 2018Foreign exchangemovementOtherCurrent borrowings16,11811,590(1,760)-25,949Non-current borrowings50,499(91)-650,415Bonds issued79,7389,896-6889,703Lease liabilities216(106)4384497 Total146,57221,289(1,756)459166,565FY2017: Year ended March 31, 2018Foreign exchangemovementOtherCurrent borrowings151,613109,019(16,544)-244,088Non-current borrowings475,016(865)-75474,226Bonds issued750,05193,086-659843,796Lease liabilities2,031(997)373,6044,675 Total1,378,711200,243(16,507)4,3381,566,785Millions of yenThousands of U.S. dollarsAs of April 1,2017Changes fromcash flowsNon-cash changesAs of March 31,2018As of April 1,2017Changes fromcash flowsNon-cash changesAs of March 31,2018
21. Provisions
The breakdown and the schedule of “Provisions” were as follows:
93
FY2016: Year ended March 31, 2017Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201611,1859,0722,2111335,35827,960Arising during the year11,1039,3951,149214,46126,131Utilised(10,725)(9,072)(499)-(3,708)(24,005)Unused amounts reversed(460)-(320)-(171)(951)Exchange differences ontranslation of foreignoperations(203)(434)(16)(8)(281)(944)As of March 31, 201710,8998,9602,5241465,65828,190Current liabilities9,2958,96026263,67121,981Non-current liabilities1,604-2,4981191,9866,209 Total10,8998,9602,5241465,65828,190FY2017: Year ended March 31, 2018Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201710,8998,9602,5241465,65828,190Arising during the year12,9759,9521,2361187,35231,635Utilised(10,392)(8,960)(43)(26)(4,542)(23,967)Unused amounts reversed(507)---(308)(816)Exchange differences ontranslation of foreignoperations(34)185223138315As of March 31, 201812,94010,1383,7192628,29735,358Current liabilities10,83010,138230815,12226,403Non-current liabilities2,110-3,4881803,1758,954 Total12,94010,1383,7192628,29735,358FY2017: Year ended March 31, 2018Provision for productwarrantiesProvision forrebatesAsset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 2017102,52084,28123,7411,37353,252265,167Arising during the year122,03893,62211,6271,11969,166297,572Utilised(97,751)(84,281)(404)(244)(42,764)(225,444)Unused amounts reversed(4,769)---(2,906)(7,675)Exchange differences ontranslation of foreignoperations(319)1,740182161,3082,963As of March 31, 2018121,71995,36234,9822,46478,056332,583Current liabilities101,87295,3622,16376148,200248,358Non-current liabilities19,847-32,8191,70329,85684,225 Total121,71995,36234,9822,46478,056332,583Millions of yenMillions of yenThousands of U.S. dollars
(1) Provision for product warranties
Epson recognises provisions 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. These expenditures are expected to be paid mainly after two years or more.
(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. These expenditures are expected
to be paid in the next fiscal year.
(3) Asset retirement obligations
Epson recognises provisions 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 expenditures are expected to be paid
mainly after five years or more. However, they may be affected by future business plans.
(4) Provision for loss on litigation
Epson recognises provisions 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 expenditures are expected to be paid
mainly after three years or more.
22. Other Liabilities
The breakdown of “Other current liabilities” and “Other non-current liabilities” was as follows:
Millions of yen
March 31,
2017
28,948
25,543
24,847
27,175
106,514
102,992
3,521
106,514
2018
25,792
28,238
25,156
29,890
109,078
97,643
11,434
109,078
Thousands of
U.S. dollars
March 31,
2018
242,611
265,619
236,628
281,231
1,026,089
918,505
107,584
1,026,089
Accrued expense
Accrued bonus to employees
Accrued employee’s unused paid vacations
Other
Total
Current liabilities
Non-current liabilities
Total
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.
94
(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
Effects of business combinations and disposals
Balance at the end of the year
Millions of yen
Year ended
March 31,
2017
311,452
11,550
2,284
2018
308,935
10,267
2,832
Thousands of
U.S. dollars
Year ended
March 31,
2018
2,905,982
96,576
26,639
1,341
20,932
196,895
(4,502)
(17,455)
(164,189)
(290)
(2,567)
(10,358)
26
308,935
-
748
(9,343)
-
316,917
-
7,045
(87,884)
-
2,981,064
(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 ¥7,870 million ($74,028 thousand) for the year ending March 31, 2019.
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,
2017
256,606
1,579
7,498
(1,974)
7,149
1,169
(8,375)
263,654
2018
263,654
2,064
8,725
1,123
6,992
1,167
(9,119)
274,607
Thousands of
U.S. dollars
Year ended
March 31,
2018
2,480,048
19,415
82,071
10,574
65,769
10,977
(85,777)
2,583,077
95
(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,
2017
303,459
(263,654)
39,804
5,476
45,281
45,281
0
45,281
2018
311,041
(274,607)
36,433
5,876
42,309
42,321
(11)
42,309
Thousands of
U.S. dollars
March 31,
2018
2,925,782
(2,583,077)
342,705
55,282
397,987
398,090
(103)
397,987
(6) Breakdown of Plan Assets
The breakdown of plan assets by major category was as follows.
In plan assets, there are no transferable financial instruments, real estate held by Epson or other assets used by
Epson.
Millions of yen
March 31,
2017
2018
Thousands of
U.S. dollars
March 31,
2018
Investments quoted in active markets
Equity securities
Bonds receivable
Alternative investments (Note 1)
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 2)
Alternative investments (Note 1)
Other
Total
16,319
6,795
2,990
3,477
3,223
32,806
33,011
57,939
102,648
36,840
408
230,848
96
17,338
4,543
3,306
3,924
3,592
32,705
30,827
57,927
111,373
41,297
475
241,902
163,089
42,733
31,097
36,910
33,809
307,638
289,972
544,887
1,047,624
388,458
4,498
2,275,439
(Note 1) Alternative investments are the investments through hedge funds, multi-asset funds, securitisation funds
and other funds.
(Note 2) A certain interest rate and principal for the general accounts of life insurance companies are guaranteed by
life insurance companies.
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 medium 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.
(7) Matters Related to Actuarial Assumptions
The major item of actuarial assumptions was as follows:
Discount rate
0.9
1.0
March 31, 2017
March 31, 2018
%
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, 2018 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,
2018
(47,533)
56,753
Thousands of
U.S. dollars
March 31,
2018
(447,116)
533,844
The weighted-average duration of the defined benefit obligations at March 31, 2018 was 15.8 years.
(8) Defined Contribution Plans
Expenses for the defined contribution plans were ¥18,781 million and ¥20,346 million ($191,383 thousand) for the
years ended March 31, 2017 and 2018, respectively.
97
24. Equity and Other Equity Items
(1) Share Capital and Capital Surplus
(A) Shares Authorised
The number of authorised shares as of March 31, 2017 and 2018 was 1,214,916,736 ordinary shares.
(B) Shares Issued and Fully Paid
The schedule of the number of issued shares and the amount of “Share capital” and “Capital surplus” was as
follows:
(Note) The shares issued by the Company are ordinary shares with no par value that have no restriction on any
content of rights.
(2) Treasury Shares
The schedule of the number of treasury shares and the corresponding amount was as follows:
(Note 1) Increase in the number of treasury shares during the year ended March 31, 2017 resulted from:
the purchase by the resolution of the board of directors
the purchase by BIP trust
the purchase of odd shares
5,370,000 shares
180,000 shares
1,261 shares
(Note 2) Decrease in the number of treasury shares during the year ended March 31, 2018 resulted from:
the derivery to beneficiaries of BIP trust
the purchase of odd shares
(6,472) shares
954 shares
(Note 3) The number of treasury shares as of March 31, 2017 included 180,000 shares held by BIP trust.
(Note 4) The number of treasury shares as of March 31, 2018 included 173,528 shares held by BIP trust.
98
Number of ordinaryshares issued(Note)Share capitalCapital surplusShare capitalCapital surplusAs of April 1, 2016399,634,77853,20484,321Increase (decrease)--0As of March 31, 2017399,634,77853,20484,321500,460793,161Increase (decrease)--43-404As of March 31, 2018399,634,77853,20484,364500,460793,565Thousands of U.S. dollarsMillions of yena shareThousands ofU.S. dollarsNumber oftreasury sharesAmountAmountAs of April 1, 2016 41,860,396 20,471Increase (decrease) (Note1) 5,551,261 10,340As of March 31, 2017 (Note3) 47,411,657 30,812 289,831Increase (decrease) (Note2) (5,518) (8) (85)As of March 31, 2018 (Note4) 47,406,139 30,803 289,746a shareMillions of yen
(3) Other Components of Equity
(A) Remeasurement of net defined benefit liabilities (assets)
This comprises actuarial gains and losses in the present value of the defined benefit obligation and the return on
plan assets excluding amounts included in net interest on the net defined benefit liabilities (assets). The amount is
recognised as other comprehensive income and is transferred immediately from other components of equity to
retained earnings.
(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 Epson consolidates financial statements of
foreign operations 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.
25. Dividends
Dividends paid were as follows:
(Note) The amount of dividends includes dividends of ¥5 million corresponding to the Company’s shares held by
BIP trust.
(Note 1) The amount of dividends includes dividends of ¥5 million corresponding to the Company’s shares held by
BIP trust.
(Note 2) The amount of dividends includes dividends of ¥5 million corresponding to the Company’s shares held by
BIP trust.
(Note 1) The amount of dividends includes dividends of $52 thousand corresponding to the Company’s shares held
by BIP trust.
(Note 2) The amount of dividends includes dividends of $52 thousand corresponding to the Company’s shares held
by BIP trust.
99
FY2016: Year ended March 31, 2017Millions of yenYen(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective date30March 31, 2016June 29, 2016Board of Directors Meeting(October 27, 2016)Ordinary shares(Note) 10,572Annual Shareholders Meeting(June 28, 2016)Ordinary shares10,73330September 30,2016November 30,2016FY2017: Year ended March 31, 2018Millions of yenYen(Resolution)Total dividendsDividendsper shareMarch 31, 2017June 29, 2017Class of sharesBasis dateEffective dateBoard of Directors Meeting(October 26, 2017)Ordinary shares(Note2) 10,57230Annual Shareholders Meeting(June 28, 2017)Ordinary shares(Note1) 10,57230September 30,2017November 30,2017FY2017: Year ended March 31, 2018Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareSeptember 30,2017November 30,2017Board of Directors Meeting(October 26, 2017)Ordinary shares(Note2) 99,4450.28Annual Shareholders Meeting(June 28, 2017)Ordinary shares(Note1) 99,4450.28Class of sharesBasis dateEffective dateMarch 31, 2017June 29, 2017
Dividends, whose effective dates fall on in the next year, were as follows:
(Note) The amount of dividends includes dividends of ¥5 million corresponding to the Company’s shares held by
BIP trust.
(Note) The amount of dividends includes dividends of ¥5 million corresponding to the Company’s shares held by
BIP trust.
(Note) The amount of dividends includes dividends of $47 thousand corresponding to the Company’s shares held
by BIP trust.
26. Revenue
The breakdown of “Revenue” was as follows:
Sale of goods
Royalty income
Other
Total
Millions of yen
Year ended
March 31,
2017
1,012,810
4,174
7,871
1,024,856
2018
1,087,151
4,255
10,709
1,102,116
Thousands of
U.S. dollars
Year ended
March 31,
2018
10,226,234
40,024
100,744
10,367,002
100
FY2016: Year ended March 31, 2017Millions of yenYen(Resolution)Total dividendsDividendsper share(Note) 10,57230Class of sharesBasis dateEffective dateAnnual Shareholders Meeting(June 28, 2017)March 31, 2017June 29, 2017Ordinary sharesFY2017: Year ended March 31, 2018Millions of yenYen(Resolution)Total dividendsDividendsper shareAnnual Shareholders Meeting(June 27, 2018)Ordinary shares(Note) 11,27632March 31, 2018June 28, 2018Class of sharesBasis dateEffective dateFY2017: Year ended March 31, 2018Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareJune 28, 2018Annual Shareholders Meeting(June 27, 2018)Ordinary shares(Note) 106,0670.30March 31, 2018Class of sharesBasis dateEffective date
27. Selling, General and Administrative Expenses
The breakdown of “Selling, general and administrative expenses” was as follows:
Millions of yen
Year ended
March 31,
2017
(95,939)
(52,735)
(29,361)
(21,053)
(19,291)
(16,097)
(65,687)
(300,167)
2018
(103,354)
(50,336)
(33,742)
(21,886)
(19,468)
(18,599)
(78,674)
(326,062)
Thousands of
U.S. dollars
Year ended
March 31,
2018
(972,194)
(473,483)
(317,392)
(205,869)
(183,124)
(174,950)
(740,074)
(3,067,086)
Employee benefit expense
Research and development expense
Promotion expense
Advertising expense
Service contract 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
Millions of yen
Year ended
March 31,
2017
(203,531)
(18,401)
(10,372)
(18,781)
(1,140)
(252,227)
2018
(216,443)
(20,617)
(11,160)
(20,346)
(5,726)
(274,294)
Thousands of
U.S. dollars
Year ended
March 31,
2018
(2,035,960)
(193,932)
(104,976)
(191,383)
(53,882)
(2,580,133)
The above table does not include Termination benefits. The amounts related to Termination benefits are stated in
“30. Other Operating Expense.”
29. Other Operating Income
The breakdown of “Other operating income” was as follows:
Insurance income
Foreign exchange gain
Other
Total
Millions of yen
Year ended
March 31,
2017
2018
210
1,258
3,952
5,421
101
1,684
-
3,175
4,860
Thousands of
U.S. dollars
Year ended
March 31,
2018
15,840
-
29,875
45,715
30. Other Operating Expense
The breakdown of “Other operating expense” was as follows:
Foreign exchange loss
Termination benefits
Impairment loss
Other
Total
Millions of yen
Year ended
March 31,
2017
-
(398)
(239)
(2,698)
(3,335)
2018
(6,182)
(3,322)
(2,091)
(3,046)
(14,643)
31. Finance Income and Finance Costs
The breakdowns of “Finance income” and “Finance costs” were as follows:
Finance Income
Interest income
Dividend income
Other
Total
Finance Costs
Foreign exchange loss (Note)
Interest expense
Employee benefit expense
Other
Total
Millions of yen
Year ended
March 31,
2017
2018
1,007
364
11
1,383
947
327
2
1,277
Millions of yen
Year ended
March 31,
2017
2018
(301)
(826)
(704)
(25)
(1,858)
(1,662)
(1,243)
(768)
(17)
(3,691)
Thousands of
U.S. dollars
Year ended
March 31,
2018
(58,150)
(31,248)
(19,668)
(28,673)
(137,739)
Thousands of
U.S. dollars
Year ended
March 31,
2018
8,919
3,075
18
12,012
Thousands of
U.S. dollars
Year ended
March 31,
2018
(15,644)
(11,692)
(7,224)
(159)
(34,719)
(Note) The increase or decrease in the fair value of currency derivatives is included in the foreign exchange gain
(loss).
102
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 was classified into “Discontinued operations.”
(1) Reportable Segments
Small- and medium-sized liquid crystal displays business: Other
(2) The analysis of profit and loss of discontinued operations
Millions of yen
Year ended
March 31,
2017
2018
Selling, general and administrative expenses
Other operating expense
Loss from operating activities
Loss before tax
Loss from discontinued operations
(16)
(565)
(582)
(582)
(582)
-
-
-
-
-
(3) The analysis of cash flow of discontinued operations
Net cash from (used in) operating activities
Total
Millions of yen
Year ended
March 31,
2017
2018
(14)
(14)
(564)
(564)
Thousands of
U.S. dollars
Year ended
March 31,
2018
-
-
-
-
-
Thousands of
U.S. dollars
Year ended
March 31,
2018
(5,305)
(5,305)
103
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:
104
FY2016: Year ended March 31, 2017Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)9,959-9,95982610,785Net gain (loss) on revaluation of financial assets measured atFVTOCI (Note)2,768-2,768(548)2,219Exchange differences on translation of foreign operations(5,477)-(5,477)-(5,477)Net changes in fair value of cash flow hedges1,726(1,658)67(20)47Share of other comprehensive income of investmentsaccounted for using the equity method(20)-(20)-(20) Total8,956(1,658)7,2972577,555 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2017: Year ended March 31, 2018Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)5,248-5,248(250)4,998Net gain (loss) on revaluation of financial assets measured atFVTOCI (Note)(557)-(557)186(371)Exchange differences on translation of foreign operations(5,266)-(5,266)－(5,266)Net changes in fair value of cash flow hedges(3,836)4,477640(196)444Share of other comprehensive income of investmentsaccounted for using the equity method13-13－13 Total(4,398)4,47778(260)(182) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2017: Year ended March 31, 2018Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)49,365-49,365(2,352)47,013Net gain (loss) on revaluation of financial assets measured atFVTOCI (Note)(5,249)-(5,249)1,750(3,499)Exchange differences on translation of foreign operations(49,534)-(49,534)-(49,534)Net changes in fair value of cash flow hedges(36,092)42,1126,020(1,844)4,176Share of other comprehensive income of investmentsaccounted for using the equity method122-122-122 Total(41,388)42,112724(2,446)(1,722) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeMillions of yenMillions of yenThousands of U.S. dollars
34. Earnings per Share
(1) Basis of calculating basic earnings per share
(A) 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,
2017
2018
Thousands of
U.S. dollars
Year ended
March 31,
2018
48,903
41,836
393,528
(582)
-
-
48,320
41,836
393,528
(B) Weighted-average number of ordinary shares outstanding during the period
Thousands of shares
Year ended
March 31, 2017
Year ended
March 31, 2018
Weighted-average number of
ordinary shares outstanding
353,160
352,228
105
(2) Basis of calculating diluted earnings per share
(A) Profit attributable to ordinary shareholders of the parent company
Millions of yen
Year ended
March 31,
2017
2018
Thousands of
U.S. dollars
Year ended
March 31,
2018
48,903
41,836
393,528
Profit from continuing operations
attributable to owners of the parent
company
Adjustments
-
-
-
Profit from continuing operations
attributable to owners of the parent
company used for calculation of diluted
earnings per share
Loss from discontinued operations
attributable to owners of the parent
company
Adjustments
Loss from discontinued operations
attributable to owners of the parent
company used for calculation of diluted
earnings per share
Profit attributable to owners of the parent
company
48,903
41,836
393,528
(582)
-
(582)
-
-
-
-
-
-
48,320
41,836
393,528
Adjustments
-
-
-
Profit used for calculation of diluted
earnings per share
48,320
41,836
393,528
(B) Weighted-average number of ordinary shares outstanding during the period
Weighted-average number of ordinary shares
outstanding
Effect of dilutive potential ordinary shares
BIP trust for eligible officers
Weighted-average number of ordinary shares
diluted
Thousands of shares
Year ended
March 31, 2017
Year ended
March 31, 2018
353,160
352,228
20
353,181
69
352,297
(Note) For the purpose of calculation of basic earnings per share and diluted earnings per share, the shares of the
Company held by BIP trust are accounted as treasury shares and the number of those shares are deducted from
weighted-average number of ordinary shares outstanding during the period.
106
35. Share-based Payment
(1) Summary of Performance-Linked Stock Compensation Plan
The Company has employed a framework referred to as BIP (Board Incentive Plan) trust as performance-linked
equity-settled share-based payment plan for the Company’s directors and executive officers who have been
engaged by the Company (collectively referred to hereafter as “Eligible Officers,” and excluding outside directors
and persons such as Audit and Supervisory Committee members who are not directly engaged in the operations of
the Company, and persons residing outside Japan). The plan is intended to heighten directors’ sense of shared
interest with shareholders and to show a commitment to sustaining growth and increasing corporate value over the
medium and long-term.
The Eligible Officers are awarded a specific number of points each year based on their position and other factors (1
point = 1 share). Such points fluctuate depending on the levels of achievement of the medium and long-term
operating performance targets of Epson. The vesting condition is basically for the Eligible Officers to render
services for three years to a vesting date after a grant date of points.
(2) Number of Granted Points and Weighted Average Fair Value
The fair values of granted points at the grant date are measured based on observable market prices. Moreover, the
expected dividends are incorporated into the measurement of fair values. The number of granted points and
weighted average fair value at the grant date were as follows:
Number of granted points
Weighted average fair value at the grant date
Year ended
March 31,
2017
41,954
¥1,754
2018
42,808
¥2,313
Year ended
March 31,
2018
-
$22
(3) Stock Compensation Expenses
The total expenses recognised from the performance-linked stock compensation plan were ¥12 million and ¥54
million ($507 thousand) for the years ended March 31, 2017 and 2018, respectively.
107
36. 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,
2017
146,572
(221,782)
(75,209)
492,196
2018
166,565
(229,678)
(63,112)
512,727
Thousands of
U.S. dollars
March 31,
2018
1,566,785
(2,160,455)
(593,670)
4,822,942
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 monitors
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 regularly 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 does not transact derivatives for speculation purposes or trading purposes.
(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.
108
The analysis of the aging of “Trade and other receivables” and “Other Financial Assets” that are past due but not
impaired as of March 31, 2018 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,
2018
5,697
970
146
247
7,061
Thousands of
U.S. dollars
March 31,
2018
53,598
9,124
1,373
2,323
66,418
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” and “Other Financial Assets” in the consolidated statement of financial position.
The schedule of the allowance account for credit losses of “Trade and other receivables” and “Other Financial
Assets” was as follows:
Balance as of April 1
Addition (Note)
Decrease (utilised)
Decrease (reversal)
Other
Balance as of March 31
Millions of yen
March 31,
2017
2018
1,479
401
(355)
(11)
(28)
1,485
1,485
602
(494)
(85)
(21)
1,486
Thousands of
U.S. dollars
March 31,
2018
13,968
5,651
(4,646)
(799)
(197)
13,977
(Note) “Trade and other receivables” and “Other Financial Assets” for which impairment was recognised
individually at March 31, 2017 and 2018 were ¥33 million and ¥32 million ($301 thousand), respectively; and their
corresponding allowance account for credit losses were ¥33 million and ¥32 million ($301 thousand), respectively.
109
(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:
110
FY2016: As of March 31, 2017CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables141,633141,633141,633----- Borrowings66,61866,61866,118---500- Bonds issued79,73880,00010,00010,00010,000-20,00030,000 Lease obligations2162218969381840 Other1,7921,7922066942106841,282 Total289,998290,265218,04710,13810,08112520,58831,282Derivative financial liabilities Foreign exchange forward contract1,1121,1121,112----- Total1,1121,1121,112-----FY2017: As of March 31, 2018CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables154,759154,759154,759----- Borrowings76,36476,44925,949-14,00050018,00018,000 Bonds issued89,70390,00010,00010,000-20,000-50,000 Lease obligations49750614011088623371 Other1,6421,64229108915811,397 Total322,968323,357190,87910,21814,09720,57718,11469,469Derivative financial liabilities Foreign exchange forward contract171171171----- Total171171171-----FY2017: As of March 31, 2018CarryingamountContractualcash flowDue within1 yearDue after 1year through 2 yearsDue after 2years through3 yearsDue after 3years through4 yearsDue after 4years through 5 yearsDue after5 years Trade and other payables1,455,7331,455,7331,455,733----- Borrowings718,314719,113244,088-131,6904,703169,316169,316 Bonds issued843,796846,57894,06494,064-188,129-470,321 Lease obligations4,6754,7641,3161,034827583310694 Other15,45415,4543241,0178514176213,125 Total3,037,9723,041,6421,795,52596,115132,602193,556170,388653,456Derivative financial liabilities Foreign exchange forward contract1,6081,6081,608----- Total1,6081,6081,608-----Non-derivative financial liabilitiesMillions of yenNon-derivative financial liabilitiesMillions of yenNon-derivative financial liabilitiesThousands of U.S. dollars
(5) Foreign Exchange Risk
Epson operates businesses globally and, therefore, is mainly 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 risks (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:
(Note) Cash flow hedge is applied, and derivative transactions are measured at fair value in the consolidated
statement of financial position.
111
Derivative transactions to which hedge accounting is not appliedContractamountOver oneyearFair valueContractamountOver oneyearFair valueContractamountOver oneyearFair valueForeign exchange forward contractBuying6,456-(9)305-22,868-18Selling31,577-(345)35,078-480329,979-4,524Non-Deliverable ForwardSelling3,761-(163)3,345-(71)31,464-(667) Total41,794-(519)38,730-412364,311-3,875Derivative transactions to which hedge accounting is appliedContractamountOver oneyearFair valueContractamountOver oneyearFair valueContractamountOver oneyearFair value(Note)Foreign exchange forward contractSelling31,171-11334,371-538323,319-5,070Non-Deliverable ForwardSelling7,231-(256)7,799-(42)73,360-(395) Total38,402-(143)42,171-495396,679-4,675201720182018Millions of yenThousands of U.S. dollarsMarch 31,March 31,201720182018Millions of yenThousands of U.S. dollarsMarch 31,March 31,
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, 2018 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,
2018
Thousands of
U.S. dollars
March 31,
2018
Profit before tax
1,443
13,573
(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, 2018 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,
2018
Thousands of
U.S. dollars
March 31,
2018
Profit before tax
1,053
9,904
(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, 2018 was ¥762 million ($7,167 thousand) due to the
changes in the fair value.
112
(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)
Current borrowings are measured at their carrying amounts, because they are settled on a short-term basis and 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 by using the interest rates that would be applied if similar new borrowings were conducted.
(Bonds issued)
The fair values are calculated based on prices obtained from financial institutions.
(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.
113
(B) Fair value hierarchy
The fair value hierarchy of financial instruments is categorised 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 unobservable inputs 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.
(i) Financial instruments measured at amortised cost
The carrying amounts and the fair value hierarchy of financial instruments measured at amortised cost were as
follows. The fair values of financial instruments that are not listed on the tables below approximate the carrying
amounts.
“Borrowings” and “Bonds issued” in the tables above include their current portion.
There were no transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy during
each reporting period.
114
FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings66,618-66,674-66,674 Bonds issued79,738-79,838-79,838Total146,356-146,512-146,512FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings76,364-76,936-76,936 Bonds issued89,703-89,944-89,944Total166,067-166,880-166,880FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial liabilities measured atamortised cost Borrowings718,314-723,694-723,694 Bonds issued843,796-846,053-846,053Total1,562,110-1,569,747-1,569,747Millions of yenCarryingamountFair value Thousands of U.S. dollarsCarryingamountFair value CarryingamountFair value Millions of yen
(ii) Financial instruments measured at fair value
The fair value hierarchy of financial instruments measured at fair value was as follows:
There were no transfers of financial instruments between Level 1 and Level 2 of the fair value hierarchy during
each reporting period.
115
FY2016: As of March 31, 2017Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-449-449 Equity securities13,310-2,49815,809Total13,3104492,49816,258Financial liabilities measured atfair valueDerivative financial liabilities-1,112-1,112Total-1,112-1,112FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-1,080-1,080 Equity securities12,713-2,52815,242Total12,7131,0802,52816,322Financial liabilities measured atfair valueDerivative financial liabilities-171-171Total-171-171FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial assets measured atfair value Derivative financial assets-10,158-10,158 Equity securities119,584-23,779143,363Total119,58410,15823,779153,521Financial liabilities measured atfair valueDerivative financial liabilities-1,608-1,608Total-1,608-1,608Thousands of U.S. dollarsFair value Fair value Millions of yenFair value Millions of yen
The movement of financial instruments categorised within Level 3 of the fair value hierarchy was as follows:
Millions of yen
Year ended
March 31,
2017
2,054
2018
2,498
550
(54)
(51)
2,498
29
(0)
-
2,528
Thousands of
U.S. dollars
Year ended
March 31,
2018
23,497
282
(0)
-
23,779
Balance as of April 1
Gains and losses
Other comprehensive income
Sales
Other
Balance as of March 31
37. Principal Subsidiaries
The content of principal subsidiaries is stated in “Additional Information 1. Principal subsidiaries and affiliates.”
38. 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 for directors and other members of key management personnel was as follows:
Short-term remuneration
Stock compensation
Total
Millions of yen
Year ended
March 31,
2017
2018
475
6
481
419
25
445
Thousands of
U.S. dollars
Year ended
March 31,
2018
3,950
235
4,185
(Note) The Company has introduced an officers’ shareholding association system to link compensation more
closely to shareholders’ value. The acquisition of the Company’s shares accounts for a portion of the short-term
remuneration.
39. Commitments
Commitments for the acquisition of assets after the fiscal year end were as follows:
Acquisition of property, plant and equipment
Acquisition of intangible assets
Total
Millions of yen
March 31,
2017
25,994
613
26,608
2018
37,262
2,203
39,465
Thousands of
U.S. dollars
March 31,
2018
350,503
20,722
371,225
116
40. Contingencies
Material litigation
In general, litigation has uncertainties and it is difficult to make reliable estimate 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 had the following material actions.
(1) The liquid crystal display price-fixing cartel
The Company is currently under investigation by a certain anti-monopoly-related authority, regarding allegations
of involvement in a liquid crystal display price-fixing cartel.
(2) The civil action on copyright fee of ink-jet printers
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.
41. Subsequent Events
No material subsequent events were identified.
42. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by Minoru Usui (President and Representative Director) and
Tatsuaki Seki (Director and General Administrative Manager, Management Control Division) on June 27, 2018.
117
Report of Independent Auditors
118
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
*
Epson Direct
Corporation
Miyazaki Epson
Corporation
Shinjuku-ku,
Tokyo
4,000
(million JPY)
Printing solutions,
Visual
communications,
Wearable & Industrial
products
100.0
Sales of the Company’s
products,
Interlocking directors,
Financial assistance,
Rental of assets
Matsumoto-shi,
Nagano
150
(million JPY)
Printing solutions
100.0
(100.0)
Sales of PCs, etc.,
Rental of assets
Miyazaki-shi,
Miyazaki
100
(million JPY)
Wearable & Industrial
products
100.0
Manufacture of crystal
devices
Tohoku Epson
Corporation
Sakata-shi,
Yamagata
100
(million JPY)
Printing solutions,
Wearable & Industrial
products
Akita Epson
Corporation
Yuzawa-shi,
Akita
80
(million JPY)
Printing solutions,
Wearable & Industrial
products
Epson Atmix
Corporation
Hachinohe-shi,
Aomori
450
(million JPY)
Wearable & Industrial
products
100.0
100.0
Manufacture of printer
components and
semiconductors,
Financial assistance
Manufacture of printer
components, watch
movements and sensing
equipment,
Financial assistance
100.0
Manufacture and sales of
metal powders, etc.,
Rental and borrowing of
assets
U.S. Epson, Inc.
*
Long Beach,
U.S.A.
126,941
(thousand USD)
Holding company
100.0
Holding company in
Americas,
Interlocking directors
Regional headquarters in
Americas,
Sales of printers, 3LCD
projectors and factory
automation products, etc.,
Interlocking directors
Sales of electronic devices
100.0
(100.0)
100.0
(100.0)
100.0
(100.0)
Manufacture of printer
consumables
Epson America, Inc.
*
Long Beach,
U.S.A.
40,000
(thousand USD)
Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Epson Electronics
America, Inc.
Epson Portland Inc.
San Jose,
U.S.A.
Portland,
U.S.A.
10,000
(thousand USD)
Wearable & Industrial
products
31,150
(thousand USD)
Printing solutions
119
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,
Printing solutions,
Visual
communications
Epson (U.K.) Ltd.
Hemel
Hempstead,
UK
1,600
(thousand GBP)
Printing solutions,
Visual
communications
Epson Deutschland
GmbH
Dusseldorf,
Germany
5,200
(thousand EUR)
Printing solutions,
Visual
communications,
Wearable & Industrial
products
100.0
Regional headquarters in
Europe,
Sales of printers and 3LCD
projectors, etc.,
Interlocking directors
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.,
Guaranty of liabilities
100.0
(100.0)
Sales of printers, 3LCD
projectors and factory
automation products, etc.
2,000
(thousand EUR)
Wearable & Industrial
products
100.0
(100.0)
Sales of electronic devices,
Interlocking directors
Epson Europe
Electronics GmbH
Epson France S.A.S.
Epson Italia S.p.A.
For.Tex S.r.l.
Munich,
Germany
Levallois-
Perret,
France
Milan,
Italy
Como,
Italy
4,000
(thousand EUR)
3,000
(thousand EUR)
80
(thousand EUR)
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions
Printing solutions,
Visual
communications
Epson Iberica, S.A.U.
Cerdanyola,
Spain
1,900
(thousand EUR)
Epson Telford Ltd.
Fratelli Robustelli S.r.l.
Telford,
UK
Como,
Italy
8,000
(thousand GBP)
Printing solutions
90
(thousand EUR)
Printing solutions
Epson (China) Co., Ltd.
*
Beijing,
China
1,211
(million CNY)
Epson Singapore
Pte. Ltd.
Singapore
200
(thousand SGD)
Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Regional headquarters,
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Epson Korea Co., Ltd.
Seoul,
Korea
1,466
(million KRW)
Printing solutions,
Visual
communications
120
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
(100.0)
Sales, etc. of printer
consumables
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
(100.0)
Manufacture of printer
consumables,
Interlocking directors
100.0
(100.0)
Manufacture, etc. of
printers,
Interlocking directors
100.0
100.0
Regional headquarters in
China,
Sales of printers, 3LCD
projectors and factory
automation products, etc.,
Interlocking directors
Regional headquarters in
Asia-Pacific,
Sales of printers, 3LCD
projectors and electronic
devices, etc.,
Interlocking directors
100.0
Sales of printers and 3LCD
projectors, etc.
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications
Printing solutions,
Visual
communications,
Wearable & Industrial
products
Epson Hong Kong Ltd.
Hong Kong,
China
2,000
(thousand HKD)
Epson Taiwan
Technology & Trading
Ltd.
Taipei,
Taiwan
25,000
(thousand TWD)
P.T. Epson Indonesia
Jakarta,
Indonesia
918,000
(thousand IDR)
Epson (Thailand)
Co., Ltd.
Bangkok,
Thailand
103,000
(thousand THB)
Epson Philippines
Corporation
Pasig,
Philippines
50,000
(thousand PHP)
Epson Australia
Pty. Ltd.
North Ryde,
Australia
1,000
(thousand AUD)
Epson India Pvt. Ltd.
Bangalore,
India
108,628
(thousand INR)
Hong Kong,
China
81,602
(thousand USD)
Shenzhen,
China
56,641
(thousand USD)
Epson Precision
(Hong Kong) Ltd.
*
Epson Engineering
(Shenzhen) Ltd.
*
Epson Precision
(Shenzhen) Ltd.
Orient Watch
(Shenzhen) Ltd.
Tianjin Epson Co., Ltd.
Shenzhen,
China
Shenzhen,
China
Tianjin,
China
100.0
100.0
Sales of printers, 3LCD
projectors, watch
movements, factory
automation products and
electronic devices, etc.
Sales of printers, 3LCD
projectors, factory
automation products and
electronic devices, etc.,
Interlocking directors
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.
100.0
Sales of printers and 3LCD
projectors, etc.,
Interlocking directors
100.0
(100.0)
Sales of printers and 3LCD
projectors, etc.,
Interlocking directors
100.0
Management of components
of printers and 3LCD
projectors, etc. used for
contract services
100.0
(100.0)
Manufacture of printers,
3LCD projectors and factory
automation products, etc.
100.0
(100.0)
Manufacture of watches,
etc.,
Interlocking directors
25,000
(thousand USD)
Wearable & Industrial
products
37,748
(thousand CNY)
Wearable & Industrial
products
100.0
(100.0)
Manufacture of watches,
etc.
172,083
(thousand CNY)
Printing solutions
80.0
(80.0)
Manufacture of printer
consumables, etc.,
Interlocking directors
121
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
100.0
Manufacture of
semiconductors, and surface
finishing
71,700
(thousand SGD)
Wearable & Industrial
products
7,000
(thousand USD)
Printing solutions
100.0
(100.0)
Manufacture of printer
consumables
23,000
(thousand USD
Printing solutions
100.0
Manufacture of printers,
Interlocking directors
Singapore
Batam,
Indonesia
Bekasi,
Indonesia
Singapore Epson
Industrial Pte. Ltd.
P.T. Epson Batam
P.T. Indonesia Epson
Industry
*
Epson Precision
(Thailand) Ltd.
*
Chachoengsao,
Thailand
3,250,000
(thousand THB)
Wearable & Industrial
products
100.0
Manufacture of crystal
devices,
Interlocking directors
Epson Precision
(Philippines), Inc.
*
Lipa,
Philippines
157,533
(thousand USD)
Printing solutions,
Visual
communications
100.0
Manufacture of printers and
3LCD projectors
Epson Precision
Malaysia Sdn. Bhd.
Kuala Lumpur,
Malaysia
16,000
(thousand MYR)
Wearable & Industrial
products
100.0
Manufacture of crystal
devices,
Interlocking directors
Epson Precision
(Johor) Sdn. Bhd.
Johor,
Malaysia
22,800
(thousand MYR)
Wearable & Industrial
products
100.0
(100.0)
Manufacture of watch
components
42 other companies
–
–
–
–
–
(Equity method affiliates)
Two companies
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 revenues 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
Total equity
Total assets
(Millions of yen)
Epson Sales Japan Corporation
186,349
2,451
Epson America, Inc.
309,154
12,359
1,408
7,123
16,385
71,952
44,462
135,124
Figures for Epson America, Inc. are included in consolidated business results.
122
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, 2018
Number of
shareholders
(Persons)
Number of
shares owned
(Units)
Percentage of
shares owned
(%)
–
89
57
350
540
25
41,823
42,884
–
–
1,442,043
130,678
545,655
675,517
185
1,201,078 3,995,156
119,178
–
36.10
3.27
13.66
16.91
0.00
30.06
100.00
–
Notes
1. 47,232,611 shares of treasury stock are included as 472,326 units under “Japanese individuals and others” and 11
shares under “Shares less than one unit.” Treasury shares do not include the Company’s shares (173,528 shares)
owned by the officer compensation BIP trust.
2. Six units in the name of Japan Securities Depository Center, Inc. are included under “Other Japanese
corporations.”
123
3. Major shareholders
Name
Address
Number of shares held (Shares)
Shareholding
ratio (%)
As of March 31, 2018
The Master Trust Bank
of Japan, Ltd. (Trust
account)
Japan Trustee Services
Bank, Ltd. (Trust
account)
Sanko Kigyo Kabushiki
Kaisha
Seiko Holdings
Corporation
11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
6-1, Ginza 5-chome, Chuo-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
Trust & Custody
Services Bank, Ltd.
(Securities investment
trust account)
13-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
(Harumi Island Triton Square
Office Tower Z, 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
Harumi Island Triton Square
Office Tower Z, 8-12, Harumi
1-chome, Chuo-ku, Tokyo
49,052,300
13.91
25,593,700
20,000,000
12,000,000
11,932,612
11,199,936
7.26
5.67
3.40
3.38
3.17
8,736,000
2.47
8,153,800
2.31
7,229,567
2.05
6,308,800
1.79
Total
–
160,206,715
45.46
Notes
1. Although the Company holds 47,232,611 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
outstanding is 11.81%.) Treasury shares do not include the Company’s shares (173,528 shares) owned by the
officer compensation BIP trust.
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. Mr. Noboru Hattori passed away on August 10, 2017. As the name change procedure has not been completed as
of March 31, 2018, the name on the shareholder register is presented.
124
4. Sumitomo Mitsui Trust Bank, Limited and its joint holders submitted a Report of Possession of Large Volume to
the Director of the Kanto Local Finance Bureau as of August 21, 2017, claiming that they hold the Company’s
shares as follows as of August 15, 2017. 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.
Name
Address
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui Trust
Asset Management Co.,
Ltd.
Nikko Asset Management
Co., Ltd.
4-1, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
33-1, Shiba 3-chome,
Minato-ku, Tokyo
7-1, Akasaka 9-chome,
Minato-ku, Tokyo
Total
–
Number of shares held
(Shares)
Shareholding ratio
(%)
8,216,000
676,600
13,081,800
21,974,400
2.06
0.17
3.27
5.50
5. Mizuho Bank, Ltd. and its joint holders submitted a Report of Possession of Large Volume to the Director of the
Kanto Local Finance Bureau as of August 22, 2017, claiming that they hold the Company’s shares as follows as
of August 15, 2017. 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.
Name
Address
Mizuho Bank, Ltd.
Mizuho Securities Co.,
Ltd.
Mizuho Trust & Banking
Co., Ltd.
Asset Management One
Co., Ltd.
5-5, Otemachi 1-chome,
Chiyoda-ku, Tokyo
5-1, Otemachi 1-chome,
Chiyoda-ku, Tokyo
2-1, Yaesu 1-chome,
Chuo-ku, Tokyo
8-2, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
Total
–
Number of shares held
(Shares)
Shareholding ratio
(%)
13,894,000
581,300
400,000
16,323,266
31,198,566
3.48
0.15
0.10
4.08
7.81
6. Mitsubishi UFJ Financial Group, Inc. and its joint holders submitted a Report of Possession of Large Volume to
the Director of the Kanto Local Finance Bureau as of September 19, 2017, claiming that they hold the
Company’s shares as follows as of September 11, 2017. 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.
Name
Address
Mitsubishi UFJ Trust and
Banking Corporation
Mitsubishi UFJ Kokusai
Asset Management Co.,
Ltd.
4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
12-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
Total
–
Number of shares held
(Shares)
Shareholding ratio
(%)
11,142,600
6,620,200
17,762,800
2.79
1.66
4.44
125
7. Nomura Securities Co., Ltd. and its joint holders submitted a Report of Possession of Large Volume to the
Director of the Kanto Local Finance Bureau as of October 5, 2017, claiming that they hold the Company’s
shares as follows as of September 29, 2017. 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.
Name
Address
Nomura Securities Co.,
Ltd.
NOMURA
INTERNATIONAL PLC
Nomura Asset
Management Co., Ltd.
Total
9-1, Nihonbashi 1-chome,
Chuo-ku, Tokyo
1 Angel Lane, London
EC4R 3AB, United
Kingdom
12-1, Nihonbashi
1-chome, Chuo-ku, Tokyo
–
Number of shares held
(Shares)
Shareholding ratio
(%)
-261,250
-0.07
798,590
28,044,800
28,582,140
0.20
7.02
7.15
126
4. Officer and employee stock ownership plans
The Company has introduced a transparent & fair performance-linked stock compensation plan (hereinafter
referred to as the “Plan”) for the Company’s directors and executive officers who have been engaged by the
Company (hereinafter collectively referred to as the “Eligible Officers,” and excluding outside directors and
persons such as Audit and Supervisory Committee members who are not directly engaged in the operations of the
Company, and persons residing outside Japan). The Plan is intended to heighten directors’ sense of shared interest
with shareholders and to show a commitment to sustaining growth and increasing corporate value over the mid- to
long-term.
(1) Summary of the Plan
The Plan has employed a framework referred to as the officer compensation BIP trust. The BIP trust is an incentive
plan for officers modeled on the U.S. Performance Share and Restricted Stock systems. The Plan provides the
officers with Epson’s own shares, which will be acquired through the BIP trust based on the levels of achievement
of operating performance targets.
f
o
t
n
e
m
e
r
i
t
e
r
d
n
a
r
e
f
s
n
a
r
t
s
i
t
a
r
G
)
7
(
s
t
e
s
s
a
l
a
u
d
i
s
e
r
f
o
y
r
e
v
i
l
e
D
)
8
(
s
e
r
a
h
s
l
a
u
d
i
s
e
r
Trustor
Epson
s
t
s
o
c
f
o
t
n
e
m
y
a
P
)
3
(
s
d
n
e
d
i
v
i
D
)
4
(
i
d
s
e
r
a
h
s
n
o
s
p
E
)
3
(
Trustee
t
n
e
m
h
s
i
l
b
a
t
s
e
t
s
u
r
T
)
2
(
e
r
a
h
s
f
o
t
n
e
m
h
s
i
l
b
a
t
s
E
)
1
(
s
n
o
i
t
a
l
u
g
e
r
y
r
e
v
i
l
e
d
(6) Delivery of Epson
shares and cash
benefits
(3) Epson shares
Mitsubishi UFJ Trust and Banking Corp.
(Joint trustee: The Master Trust Bank of Japan, Ltd.)
Stock market
BIP trust
Beneficiaries
The Eligible
Officers
(3) Payment of costs
(5) Instruction not to
exercise voting rights
Trust
administrator
1) Epson will establish share delivery regulations related to the content of the Plan.
2) In accordance with the trust agreement, Epson contributes funds on the trustee’s behalf within the scope of
approval by resolution at the General Meeting of Shareholders and establishes a trust with beneficiaries who are
the Officers who satisfy the beneficiary requirements (hereinafter referred to as the “Trust”).
3) According to the trust administrator’s instructions, the Trust uses funds contributed as in 2) above as the source
of funds to acquire Epson shares from Epson (disposal of treasury shares) or in the stock market.
4) The allocation of surplus funds for the Epson shares within the Trust for the Epson shares is handled in the same
manner as for other Epson shares, and is appropriated for necessary expenses for the Plan.
5) Throughout the trust period, voting rights are not to be exercised on Epson shares within the Trust.
6) During the trust period, the Eligible Officers are awarded a specific number of points each year based on their
position and other factors, in accordance with the share delivery regulations established in 1) above. Such points
fluctuate depending on the levels of achievement of the mid- to long-term operating performance targets of
Epson. Furthermore, Epson shares, which correspond to a certain proportion of such points, will be delivered to
the Eligible Officers, in principle, after the lapse of three years following the awarding of points. As regards
127
Epson shares corresponding to the remaining portion of points, the Eligible Officers will receive cash equivalent
to the amounts obtained through the conversion of such shares into cash within the Trust as prescribed in the
trust agreement.
7) If residual shares remain in the Trust at the expiry of the trust period in the event that operating performance
targets are not met during the trust period, Epson may continue to use the Trust by amending the trust
agreement and making additional contribution. Otherwise, Epson will acquire such residual shares, through
gratis transfer, and retire them by resolution of the Board of Directors.
8) Upon the termination of the Trust, residual assets remaining after allocation to beneficiaries are to be attributed
to Epson within the scope of trust expense reserve after subtracting funds for acquiring shares from the trust
money. The portion exceeding the trust expense reserve is planned to be donated to organization(s) having no
interests with Epson and any of its officers.
Note: The Trustor may continue the Plan by contributing additional money as funds for acquiring its own shares
for the Trust within the scope of the funds for acquiring shares, of which the amount is subject to approval
by resolution at the General Meeting of Shareholders.
(2) Overview of the trust agreement
1) Type of Trust
2) Purpose of the Trust
3) Trustor
4) Trustee
5) Beneficiaries
6) Trust administrator
7) Date of trust agreement
8) Trust period
9) Plan launch date
10) Exercise of voting rights
11) Class of shares to be acquired
12) Amount of initial trust money
13) Maximum amount of trust money
14) Method of acquiring shares
15) Period for acquiring shares
16) Vested rightholder
17) Residual assets
Monetary trust other than a designated individually operated
monetary trust (third party benefit trust)
Provide incentives to the Eligible Officers
Epson
Mitsubishi UFJ Trust and Banking Corporation
(Joint trustee: The Master Trust Bank of Japan, Ltd.)
The Eligible Officers who meet the beneficiary requirements
A third-party specialist without relationship with Epson
August 2, 2016
August 2, 2016 through August 31, 2019 (planned)
October 1, 2016
Voting rights not to be exercised
Common stock of Epson
320 million yen (including trust fees and expenses)
500 million yen (including trust fees and expenses)
Acquisition in the stock market
August 4, 2016 through August 31, 2016
Epson
Residual assets that Epson may receive as the vested
rightholder shall be within the scope of trust expense reserve
after subtracting funds for acquiring shares from the trust
money.
(3) Content of trust/stock related business
1) Trust-related business
2) Stock-related business
Mitsubishi UFJ Trust and Banking Corporation and The Master Trust Bank of
Japan, Ltd. handle the trust-related business as trustees of the BIP Trust.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. handles the business
related to the delivery of Epson shares to the beneficiaries in accordance with a
business consignment agreement.
(4) Total number or total amount of shares to be acquired by the Eligible Officers
180,000 shares
(5) Scope of beneficiaries and persons entitled to other rights under the Plan
The Eligible Officers who meet the beneficiary requirements
128
5. Epson stock price
(1) High and low stock prices for the previous five years
Year
Fiscal year
72nd year
March 2014
73rd year
March 2015
74th year
March 2016
75th year
March 2017
76th year
March 2018
High (¥)
Low (¥)
3,390
795
5,970
□2,333
2,752
□2,120
2,357
1,492
2,657
1,543
2,976
1,810
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 2017
November
December
January 2018
February
March
High (¥)
Low (¥)
Note
2,948
2,639
2,799
2,577
2,775
2,616
2,810
2,606
2,479
1,991
2,075
1,810
High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data.
129
6. 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
JR Shinjuku Miraina Tower, 4-1-6 Shinjuku, Tokyo
160-8801, Japan
Tel: +81 3-5368-0700 (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
1-1, Nikkocho, Fuchu, Tokyo, Japan
Tel: +81-42-204-0303
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)
130
3-3-5 Owa, Suwa, Nagano 392-8502, Japan
TEL: +81-266-52-3131
https://global.epson.com