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EpsonAnnual Report 2019
SEIKO EPSON CORPORATION
April 2018 - March 2019
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 ....................................................................................................................... 4
1. Overview of the business group ............................................................................................................ 4
2. Major equipment and facilities ............................................................................................................ 8
3. Overview of capital expenditures ....................................................................................................... 10
4. Plans for new additions or disposals .................................................................................................. 11
5. Major management contracts............................................................................................................. 12
Risks Related to Epson’s Business Operations ......................................................................................... 13
Management Analysis of Financial Position, Operating Results and Cash Flows ................................. 19
1. Operating results overview ................................................................................................................. 19
2. Manufacturing, orders received and sales......................................................................................... 22
3. Management analysis and discussion on operating results, etc. ...................................................... 23
4. Research and development activities ................................................................................................. 25
5. Management policy, business environment and issues to be addressed, etc. .................................. 27
6. Dividend policy .................................................................................................................................... 32
Corporate Governance ................................................................................................................................ 33
1. Overview of corporate governance .................................................................................................... 33
2. Officers ................................................................................................................................................. 40
3. Officer compensation, etc. .................................................................................................................. 49
4. Securities held by the Company ......................................................................................................... 54
Index to Consolidated Financial Statements ............................................................................................. 57
Consolidated Statement of Financial Position ...................................................................................... 58
Consolidated Statement of Comprehensive Income ............................................................................. 60
Consolidated Statement of Changes in Equity...................................................................................... 62
Consolidated Statement of Cash Flows ................................................................................................. 64
Notes to Consolidated Financial Statements ......................................................................................... 65
Additional Information ............................................................................................................................. 123
1. Principal subsidiaries and affiliates ................................................................................................. 123
2. Distribution of ownership among shareholders .............................................................................. 127
3. Major shareholders ........................................................................................................................... 128
4. Officer and employee stock ownership plans .................................................................................. 130
5. Corporate data and investor information ....................................................................................... 133
2
Consolidated Financial Highlights
Millions of yen
Thousands of
U.S. dollars
For the years ended March 31
2015
2016
2017
2018
2019
2019
Revenue
1,086,341
1,092,481
1,024,856
1,102,116
1,089,676
9,828,411
Profit before tax
132,536
91,530
67,470
62,663
72,040
649,770
Profit for the period attributable to
owners of the parent company
Total comprehensive income for the
period
Equity attributable to owners of the
parent company
112,560
45,772
48,320
41,836
53,710
484,441
145,483
(1,469)
55,982
41,581
49,542
446,847
494,325
467,818
492,196
512,727
540,181
4,872,201
Total assets
1,006,282
941,340
974,387
1,033,350
1,038,389
9,365,824
Equity attributable to owners of the
parent company, per share (Note 2)
Yen
1,381.66
Yen
1,307.58
Yen
1,397.40
Yen
1,455.67
Yen
1,533.57
Basic earnings per share (Note 2)
Diluted earnings per share (Note 2)
Equity attributable to owners of the
parent company ratio
Return on equity
Price earnings ratio
Dividend payout ratio
Total shareholder return
(Comparison index: TOPIX (Dividend
included))
Net cash from (used in) operating
activities
Net cash from (used in) investing
activities
Net cash from (used in) financing
activities
Cash and cash equivalents at end of
period
Number of employees
Yen
314.61
Yen
314.61
%
49.12
%
26.28
times
6.77
%
18.3
%
136.4
(130.7)
Yen
127.94
Yen
127.94
%
49.70
%
9.51
times
14.21
%
46.9
%
120.6
(116.5)
Yen
136.82
Yen
136.82
%
50.51
%
10.07
times
17.13
%
43.9
%
157.1
(133.7)
Yen
118.78
Yen
118.75
%
49.62
%
8.33
times
15.92
%
52.2
%
132.7
(154.9)
Yen
152.49
Yen
152.44
%
52.02
%
10.20
times
11.12
%
40.7
%
124.4
(147.1)
$
13.83
$
1.38
$
1.37
-
-
-
-
-
108,828
113,054
96,873
84,279
76,961
694,155
(32,735)
(51,558)
(75,759)
(74,661)
(82,738)
(746,261)
(55,392)
(67,171)
(26,691)
37
(49,430)
(445,837)
245,330
230,498
221,782
229,678
175,238
1,580,571
persons
69,878
persons
67,605
persons
72,420
persons
76,391
persons
76,647
-
Notes
1. The Consolidated Financial Statements have been prepared on the basis of International Financial Reporting
Standards (IFRS) from the year ended March 31, 2014.
2. Seiko Epson Corporation (the “Company”) completed the Company’s ordinary shares split with an effective
date of April 1, 2015. As a result, each share of the Company’s ordinary shares was split into two shares.
“Equity attributable to owners of the parent company, per share,” “Basic earnings per share” and “Diluted
earnings per share” were calculated under the assumption that the shares split took effect at the beginning of the
year ended March 31, 2015.
U.S. dollar amounts are presented for the convenience of the readers. This translation should not be construed
to imply that the yen amounts actually represent, or have been or could be converted into, equivalent amounts
in U.S. dollars. The exchange rate of ¥110.87 = U.S.$1 at the end of the reporting period has been used for the
purpose of presentation.
3
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.
4
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
Inkjet printers, serial impact
dot matrix printers, page
printers, color image
scanners, and related
consumables, dry process
office papermaking systems,
and others
Professional printing
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.
PT. Epson Batam
PT. 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.
PT. 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 mainly for business, education, the home, and event; 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.
PT. Epson Indonesia
Epson (Thailand) Co., Ltd.
Epson Philippines Corporation
Epson Australia Pty. Ltd.
Epson India Pvt. Ltd.
5
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 wristwatches, watch movements and others,
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 deals with small, accurate, energy-efficient devices for external customers, and also develops and
manufactures devices tailored to needs of 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.
6
The major Epson Group companies involved in this segment are listed in the table below.
Business area
Main products
Watches
Wristwatches, watch
movements, and others
Wearable products
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 America, Inc.
Epson Europe Electronics GmbH
Epson Hong Kong Ltd.
Epson Taiwan Technology &
Trading Ltd.
Epson Singapore Pte. Ltd.
Other Business Segment
This segment comprises the businesses of Epson Group companies that offer services for and within the Epson
Group.
7
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, 2019
Book value (Millions of yen)
Buildings and
structures
Machinery,
equipment
and
vehicles
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
1,201
(42,384)
[2,136]
–
(–)
6,630
(216,780)
[12,558]
3,764
(179,759)
[1,758]
749
(75,912)
[33,982]
1,443
(113,082)
[28,909]
1,375
(160,529)
129
(39,943)
[1,503]
1,996
(247,143)
2,177
(538,829)
3,221
(15,681)
1,068
(43,061)
[6,067]
81
2,958
482
99
715
80
3,682 67,907
5,940
202
5,282
609
1,488
6,974
1,560
743 22,081
1,117
156
7,302
227
188
3,703
506
660 12,443
660
542 15,088
54
5,258
352
5,441
23
253
781
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)
Overall
administration and
other
Overall
administration and
other
Printing solutions
Other
Other facilities
1,463
212
Other facilities
616
–
Printer development and
design and component
manufacturing facilities
Research and development
facilities
38,488
19,105
Other
Other facilities
1,288
27
Visual
communications
Wearable &
Industrial products
Suwa Minami Plant
(Fujimi-machi,
Suwa-gun, Nagano)
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
3,323
1,412
5,951
13,942
Chitose Plant
(Chitose-shi,
Hokkaido)
Ina Plant
(Minowa-machi,
Kamiina-gun,
Nagano)
Visual
communications
Liquid crystal panel
manufacturing facilities
2,169
3,599
Wearable &
Industrial products
Crystal device development
and design facilities
1,819
1,565
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
6,790
2,996
7,647
4,721
Other facilities
1,981
1
Wearable &
Industrial products
Watch development, design
and manufacturing facilities
1,659
2,361
8
(2) Domestic subsidiaries
Company name
(location)
Business segment
Type of facilities
As of March 31, 2019
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
15
4,274
91
Epson Atmix
Corporation
(Hachinohe-shi,
Aomori)
Wearable &
Industrial products
Manufacturing facilities for
metal powders, etc.
3,624
2,981
–
(–)
677
(87,969)
310
(30,653)
[34,208]
462
481
1,953
391
5,435
1,133
122
7,039
308
(3) Overseas subsidiaries
Company name
(location)
Business segment
Type of facilities
As of March 31, 2019
Book value (Millions of yen)
Buildings and
structures
Machinery,
equipment
and
vehicles
Land
(Area: m2)
Other
Total
Number of
employees
(Persons)
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
3,721
3,557
2,509
1,443
–
(–)
[64,104]
–
(–)
[41,567]
PT. Epson Batam
(Batam, Indonesia)
Printing solutions
Printer consumables
manufacturing facilities
668
4,362
2,973 10,252
8,456
343
4,296
812
257
5,288
3,025
10,855
1,430
16,300
2,067
6,210
6,451
7,614 20,276
Printing solutions
Printer manufacturing facilities
Wearable &
Industrial products
Crystal device manufacturing
facilities
PT. 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
481
(117,489)
[130,000]
318
(32,437)
616
(97,435)
7,077 46,508
12,139
26,811
2,285
3,060
5,700
3,790
2,656
142
385
25
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.
9
–
(–)
[8,644]
–
(–)
[254,871]
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 ¥82.0 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 ¥46.8 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 ¥11.4 billion in the fiscal
year under review.
Wearable & Industrial products segment
Investment used for commercializing new products such as wristwatches, sensing equipment, factory automation
products, crystal devices and semiconductors, and for increasing production capacity, rationalizing, upgrading and
maintaining equipment and facilities amounted to ¥13.9 billion in the fiscal year under review.
Other and overall
Investment used for strengthening R&D structure, etc. amounted to ¥9.8 billion in the fiscal year under review.
10
4. Plans for new additions or disposals
Epson plans to allocate ¥85.0 billion to capital expenditures for the fiscal year ending March 31, 2020.
Business segment
Planned amount of
capital expenditures
(Billions of yen)
Main type and purpose of equipment and facilities
Printing solutions
Visual
communications
Wearable &
Industrial products
43.0
16.0
16.0
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
10.0 Strengthening R&D and manufacturing structures, etc.
Total
85.0
–
Notes
1. The above amounts do not include consumption tax.
2. The above amounts include capital expenditures through finance leases and operating leases.
3. Required funds will be covered by current funds in hand.
4. 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.
11
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 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
August 22, 2008 until
the expiry of the
patents
June 28, 2018 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
Seiko Epson
Corporation
Microsoft Corporation
U.S.A.
Eastman Kodak Company U.S.A.
Xerox Corporation
U.S.A.
Canon Incorporated
Japan
Seiko Epson
Corporation
BROTHER
INDUSTRIES, LTD.
Japan
12
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 ¥723.6 billion in revenue in the printing solutions segment in the year ended March 2019 accounted for about
two-thirds of Epson’s ¥1,089.6 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
13
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 creating value sought by customers. 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 2019. 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
2019, 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. 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 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
14
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 parts 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 quality problems of supplier’s parts, 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 have
strengthened 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
the response to global climate change accompanying the Paris Agreement, which was adopted at the 21st
15
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 engaged 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 greenhouse gases (GHG) 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. Our goals for GHG emissions reduction have been approved by the Science
Based Targets initiative (SBTi); and we have worked on activities to reduce GHG emissions over the medium- to
long term, including the activities to drive the use of renewable energy.
As a result of these efforts, Epson has reduced its GHG emissions (Scope 1 and 2) for the 2018 fiscal year to
500,000 tons. This represents an approximately 15% reduction since the 2017 fiscal year, a base fiscal year.
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, our
business plans could be adversely affected.
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 retirement payment plan 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
16
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.
The investigation of the Company by a certain anti-monopoly-related authority regarding allegations of
involvement in a liquid crystal display price-fixing cartel has been completed.
Furthermore, regarding the inkjet printer products sold in France, authorities have initiated investigations following
an allegation made by a consumer organization in the country in 2017, 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 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 to be disclosed 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
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 infectious diseases such as new strains of the influenza virus,
infection by computer viruses, 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 caused by natural
disasters on suppliers, 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.
18
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. Europe and Latin America also gradually recovered, though the economies of some
countries, such as Argentina, regressed. The Chinese economy had been picking up, but trade friction with the
U.S. as well as other factors caused capital expenditure demand to decelerate. The Japanese economy continued
to register signs of a gradual economic recovery, as consumer spending picked up in response to a stable
employment and improved income situation. There is concern of further economic deceleration moving forward.
An expansion of the effects of U.S.-China trade friction, the direction of Brexit, and political risks in Latin
America are among the factors fueling a growing sense of uncertainty.
The average exchange rates of the yen against the U.S. dollar and of the yen against the euro during the year
were ¥110.86 and ¥128.40, respectively. The yen-dollar exchange rate was nearly the same as in the previous
period while the value of the yen against the euro increased by 1%.
In this business environment, operating results in the fiscal year under review are as follows.
Year ended
March 31,
2018
Year ended
March 31,
2019
Change
Percentage of
change
Main reason(s) for change
(Billions of yen)
Revenue
1,102.1
1,089.6
(12.4)
(1.1%)
Decreased revenue in Wearable &
Industrial Products Segment and
decreases caused by the impact of
foreign exchange rates
Cost of sales
(701.2)
(677.0)
24.2
11.7
400.8
412.6
(326.0)
(342.1)
(16.0)
–
Changes in revenue and decreases
caused by the impact of foreign
exchange rates
2.9%
Increases caused by the strategic
investment in future growth
–
Business profit *
74.7
70.4
(4.2)
(5.7%)
Decreases caused by the strategic
investment in future growth and
impact of foreign exchange rates
(9.7)
0.8
10.6
–
Decreases in foreign exchange losses
and increases caused by gain on sales
of idle properties
65.0
(2.4)
62.6
71.3
0.5
72.0
6.3
2.9
9.3
2.9
9.8%
–
15.0%
Decreases in foreign exchange losses
–
Decreases compared with income
taxes in the previous fiscal year
which include the impact of increases
caused by a reversal of deferred tax
assets accompanying U.S. tax reform
Income taxes
(20.8)
(17.9)
Profit for the
period
41.7
54.0
12.2
29.4%
* Business profit is calculated after deducting cost of sales and selling, general and administrative expenses from
revenue.
19
Gross profit
Selling, general
and administrative
expenses
Other operating
income and Other
operating expense
Profit from
operating activities
Finance income
and Finance costs
Profit before tax
A breakdown of operating results in each segment is provided below.
Printing Solutions Segment
Printer business revenue decreased. Inkjet printer revenue as a whole moved sideways. Although revenue from
high-capacity ink tank inkjet printers grew with ongoing expansion of sales in both emerging and developed
markets, these gains were offset by a combination of negative foreign exchange effects and shrinking revenue
from ink cartridge printers, the result of limiting promotions to appropriate level and maintaining prices even as
competitors aggressively stepped up their own price promotions. Consumables revenue decreased. Although
revenue from ink bottles for high-capacity ink tank inkjet printers grew, ink cartridge sales slipped along with the
consumer ink cartridge printer install base. Foreign exchange effects also negatively impacted consumables
revenue. Serial impact dot matrix (SIDM) printer revenue declined as the market contracted.
Revenue in the professional printing business was consistent with the previous period. Large-format inkjet
printer revenue as a whole was flat year on year, as solid sales in the growing signage and textile printer markets
were offset by a combination of negative foreign exchange effects and weaker sales in the photo and graphics
markets, where competitors aggressively conducted promotion activities. Point-of-sale (POS) system product
revenue was flat year on year.
Segment profit in the printing solutions business was flat year on year despite the revenue growth in high-
capacity ink tank inkjet printers and the positive effects of the change in the method of accounting for printhead
inventory devaluations. This sideways movement is mainly attributable to strategic investment in future growth
and the negative foreign exchange effects resulting from plummeting currencies in Latin America and some
other emerging nations.
As a result of the foregoing factors, revenue in the printing solutions segment was ¥723.6 billion, down 1.8%
year on year. Segment profit was ¥94.5 billion, down 0.4% year on year.
Visual Communications Segment
Revenue in the visual communications segment increased, although it was tempered by negative foreign
exchange effects. The increase was largely due to an improved model mix in which high added value 3LCD laser
projectors in the high-brightness zone accounted for a higher percentage of total unit shipments, as well as to
strong sales of ultra-short throw education projectors.
Segment profit in the visual communications segment declined because the effects of higher revenue were offset
by strategic investment in future growth and negative foreign exchange effects.
As a result of the foregoing factors, revenue in the visual communications segment was ¥203.3 billion, up 2.2%
year on year. Segment profit was ¥21.2 billion, down 13.1% year on year.
Wearable & Industrial Products Segment
Revenue in the wearable products business decreased due to sluggish demand for movements and a slow
overseas watch market.
Revenue in the robotics solutions business decreased mainly due to trade friction between the U.S. and China,
which caused a pullback in capital expenditure in the Greater China Region.
Revenue in the microdevices business decreased. Semiconductor revenue was flat year on year, but quartz
business revenue fell on lower demand for crystal devices in the contracting Chinese mobile and consumer
electronics markets.
Segment profit in the wearable & industrial products segment declined in response to lower crystal device and
robotics solutions revenue and foreign exchange effects.
As a result of the foregoing factors, revenue in the wearable & industrial products segment was ¥163.4 billion,
down 2.3% year on year. Segment profit was ¥5.5 billion, down 23.0% year on year.
20
Other
Other revenue was flat year on year, amounting to ¥0.9 billion, as was the segment loss of ¥0.5 billion.
Adjustments
Adjustments to the total profit of reporting segments amounted to negative ¥50.2 billion. (Adjustments in the
same period last year were negative ¥51.1 billion.) The main components of the adjustment were basic
technology research and development expenses that do not correspond to the reporting 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 ¥76.9 billion. The total for the previous year was ¥84.2
billion. Whereas Epson recorded ¥54.0 billion in profit for the year, there was a ¥24.9 billion increase in
inventories and ¥17.5 billion in income taxes paid. Net cash was positively affected by the recording of ¥56.1
billion in depreciation and amortization.
Net cash used in investing activities totaled ¥82.7 billion (compared to ¥74.6 billion in the previous fiscal year).
The Company used ¥90.3 billion in the acquisition of property, plant and equipment, and the purchase of
intangible assets. Meanwhile, there were ¥9.3 billion in proceeds from sales of property, plant and equipment.
Net cash used in financing activities totaled ¥49.4 billion (compared to ¥0.0 billion in positive net cash in the
previous fiscal year), chiefly due to ¥22.1 billion in dividends paid, a ¥10.0 billion redemption of bonds payable,
and a net decrease of ¥16.8 billion in current borrowings.
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥175.2 billion (compared to ¥229.6
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/
21
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, 2019
(From April 1, 2018, to March 31, 2019)
(Millions of yen)
Change
compared to
previous fiscal
year (%)
Printing solutions
Visual communications
Wearable & Industrial products
Total for the segments
Other
Total
712,628
201,307
154,186
1,068,122
–
1,068,122
96.1
96.5
96.3
96.2
–
96.2
Notes
1. The above figures are based on sales prices. Intersegment transactions are offset and therefore eliminated.
2. The above figures do not include consumption tax.
3. The above figures include outsourced manufacturing.
(2) Orders received
Epson’s policy is to manufacture products based on sales forecasts. Accordingly, this section does not apply.
(3) Actual sales
The following table shows actual sales information by segment in the fiscal year under review.
Business segment
Year ended March 31, 2019
(From April 1, 2018, to March 31, 2019)
(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.
722,958
203,305
154,074
1,080,337
187
1,080,525
98.2
102.2
97.2
98.8
100.1
98.8
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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 ¥1,038.3 billion, an increase of ¥5.0 billion from the previous fiscal
year end. While cash and cash equivalents decreased by ¥54.4 billion due largely to the acquisition of property,
plant and equipment, and intangible assets and to the dividends paid, total assets increased chiefly due to a ¥27.5
billion increase in inventories, a ¥27.1 billion increase in property, plant and equipment and intangible assets,
and a ¥7.8 billion increase in trade and other receivables.
Total liabilities were ¥495.6 billion, down ¥22.6 billion compared to the end of the last fiscal year. Total
liabilities decreased mainly because of a ¥24.2 billion decrease in bonds issued, borrowings and lease liabilities.
The equity attributable to owners of the parent company totaled ¥540.1 billion, a ¥27.4 billion increase compared
to the previous fiscal year end. While the Company paid ¥22.1 billion in dividends, equity attributable to owners
of the parent company increased mainly because retained earnings increased owing to the recording of ¥53.7
billion in profit for the period attributable to owners of the parent company.
Working capital, defined as current assets less current liabilities, was ¥325.1 billion, an increase of ¥8.3 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 ¥85.0 billion to capital expenditures for the fiscal year ending March 31, 2020, 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.” The above
amount of planned capital expenditures includes capital expenditures through finance leases and operating
leases.
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 ¥142.3 billion, down ¥24.2
billion compared to the previous fiscal year end, due to redemption of bonds and a decrease in borrowings. The
balance of cash and cash equivalents at the end of the fiscal year under review totaled ¥175.2 billion, down ¥54.4
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.
(3) Management policy, corporate strategy, objective indices to assess the status of achievement of
management goals, etc.
In the three years under the Phase 1 Mid-Range Business Plan (FY2016-2018) toward achieving Epson 25, we
made significant progress towards future growth in some areas, but in others fell behind schedule or did not fully
accomplish what we expected. Moreover, the company was affected by changes in the business environment
greater than anticipated, and the financial performance for the final fiscal year fell short of the targets set out in
the Phase 1 Mid-Range Business Plan.
Based on the results described above, 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
23
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 ¥2.3 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
¥7.4 billion.
24
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 core technologies that evolved from the efficient, compact, and precision technologies
that have been an Epson strength since its founding. 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 ¥58.2 billion. The printing solutions segment accounted for ¥25.2
billion, the visual communications segment for ¥10.1 billion, and the wearable and industrial products segment
for ¥5.9 billion. The “other” segment and corporate segment accounted for the remaining ¥16.9 billion.
The main R&D accomplishments in each segment are described below.
Printing solutions segment
In the printer business, Epson launched two new business-spec Epson Smart Charge1 A4 color inkjet printers, a
multifunction model and a single-function model. These models have a 64% smaller footprint than the PX-
M840FX (an earlier Smart Charge model) and fit into narrow spaces in a back office or on a counter.
Epson also launched six new models (one of which has two color variations) of high-capacity ink tank
(EcoTank) printers. In addition to a pair of compact standard models with a front paper feeder, we released three
white models for greater flexibility in matching the printer to the usage environment and two A4 monochrome
business printer models that make ideal replacements for office laser printers. The augmented lineup gives
customers a chance to select the model that best fits their needs, whether at home or in the office.
In the professional printing business, we launched a new digital label press that uses UV curing ink. This UV
label press is equipped with PrecisionCore lineheads that deliver outstanding print results at high print speeds. It
also comes equipped with features that reduce operation time and trouble. These features enable the press to
accommodate industrial label print jobs as well as short- and medium-run print jobs, thus helping to increase
print process efficiency.
On the software end, Epson developed Color Control Technology, a color management technology that enhances
color reproduction in commercial and industrial printing. Epson began using this new technology to provide
services such as printer color matching, spot color matching, and media profile creation. Color Control
Technology, developed to address color-related issues in commercial and industrial printing, helps to ensure that
customers get the print quality and high productivity they need.
1 Smart Charge is a managed print service that allows service subscribers to use printers, ink, and
maintenance services provided by Epson for a fixed monthly rate. (Subscribers do not purchase printers,
but printer delivery and installation, if needed, may be charged separately.)
Visual communications segment
Epson expanded and upgraded its lineup of laser projectors by launching six bright new business models (one
with two color variations). The models designed for use in meeting rooms and auditoriums provide the
brightness, image quality, and reliability of a laser light source in a compact, lightest-in-class2 body.
The models designed for spatial projection and events are equipped with Epson’s first native 4K panels and
deliver crisp, vivid images thanks to the high color reproduction and high-definition of Epson’s 3LCD system.
Epson unveiled new transparent smart glasses with dual (binocular) displays that are great for monitoring things
such as the piloting of drones and inspection and measurement equipment. We also participated in an
investigative commission organized and run by the Fire Equipment and Safety Center of Japan to explore the use
of smart glasses in fire prevention and rescue systems using G-space information3. We were involved in a joint
effort to develop concept models of smart masks and smart goggles based on Epson’s smart glasses technology
for use in a next-generation rescue system.
2 Among laser projectors in Japan that produce at least 6,000 lumens per research conducted by Epson in
June 2018
3 Geospatial information. Information consisting of information that indicates a specific point in space or
area location, and position information and information associated with position information
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Wearable and industrial products segment
In the wearable products business, Epson launched Orient Star models equipped with the new Series 46 F7-50
movement. The new movement increases the power reserve to 50 hours, up from a previous high of 40 hours.
The use of a new front-loaded assembly4 gives cases a thin profile while realizing a roomy dial and a luxurious-
looking case design.
In the robotics solutions business, Epson launched new industrial robots, including a compact 6-axis (vertically
articulated) model and a SCARA (horizontally articulated) model. The new 6-axis robot has a 1,000-mm reach,
handles payloads up to 6 kg, and takes up about 75% less installation space than Epson’s 1,400-mm 6-axis robot
arms5. This robot saves space in factories, where they are mostly used to transport and assemble small parts for
consumer and vehicle electronics. The new SCARA robot is designed for maximum installation simplicity and
usability, with a controller built into the base. It has a battery-less motor that reduces running costs, and, with the
ability to handle payloads up to 6 kg, can transport larger, heavier objects. This robot can be outfitted with heavy
end-effectors to help increase factory productivity.
In September 2018, Epson installed a new robot production line at its Toyoshina Plant, site of the company’s
robotics R&D center. This move is designed to facilitate closer collaboration with Epson’s domestic and foreign
production sites, as well as to maximize the efficiency of the cycle for developing challenging key components,
establishing designs and mass production technology, and manufacturing the products. The company expects the
production line to yield benefits in the form of faster time-to-market and improved assembly efficiency.
In the microdevices business, Epson developed a new axial accelerometer for structural health monitoring6.
Offering the low noise, durability, and productivity needed to accelerate the spread of serious structural health
monitoring systems, this sensor provides high accuracy without sacrificing durability. The product helps to
address problems associated with aging social infrastructure and the escalating cost of maintenance by enabling
accurate earthquake detection, environmental vibration measurement, industrial equipment and vehicle vibration
and path monitoring, and continuous monitoring of structures such as buildings, road infrastructure, bridges,
tunnels, and steel towers.
4 A front loaded assembly (FLA) is a method of assembly in which a movement is inserted from above the
case. Movements are ordinarily mounted from below the case, which necessitates a caseback that is larger
than the dial. With FLA, however, a taper is made from the case side to the caseback (tapered back) to
reduce the height (thickness) of the case.
In comparative tests conducted by Epson based on assumed usage
5
6 Technology for diagnosing the health of structures using sensors
26
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
In March 2019, Epson established the Epson 25 Phase 2 Mid-Range Business Plan (FY2019-2021) (hereinafter,
the “Phase 2 Mid-Range Business Plan”), a three-year plan starting in FY2019, toward achieving the Epson 25
Corporate Vision (hereinafter, “Epson 25”) that describes what Epson would like to achieve in the days ahead.
Although the business environment in which Epson operates is projected to remain unpredictable and
challenging, 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 Phase 1 Mid-Range Business Plan (FY2016-2018) review
As stated in Epson 25, established in 2016, Epson envisions creating a new connected age of people, things and
information with efficient, compact and precision technologies by 2025. To accomplish this, Epson seeks to
drive innovations in four areas where it can leverage its competitive advantages and aims to enrich lives and
contribute to sustainability.
In the three years under the Phase 1 Mid-Range Business Plan (FY2016-2018) toward achieving Epson 25, we
made significant progress towards future growth in some areas, but in others fell behind schedule or did not fully
accomplish what we expected. Moreover, the company was affected by changes in the business environment
greater than anticipated, and the financial performance for the final fiscal year fell short of the targets set out in
the Phase 1 Mid-Range Business Plan.
27
Main Accomplishments and Challenges in Phase 1
- We accomplished our goals of strengthening core technologies, increasing production capacity, and launching
-
strategic products, but we still have issues in terms of speed.
In sales, we made a certain amount of progress in enhancing our sales structures in Japan and Western
Europe, and in accumulating customer insights, but there were delays in improving the sales structure in other
regions. Meanwhile, we lagged in providing products and services that capitalize on the accumulated insights
and fell behind in establishing effective selling techniques.
- We made aggressive capital expenditures and had active research and development programs, but, on the
whole, we could have done better in determining priorities.
② Phase 2 business plan concept
We will continue to commit to the goals of Epson 25, and transform business operations to achieve high
profitability by managing priorities in responding to social issues and changes in the business
environment.
Policies
1) Accelerate growth by taking maximum advantage of assets and through collaboration and open innovation
- Strengthen solution selling business
- Rapidly strengthen product portfolio, including through collaboration
- Strengthen external sales of core devices and open innovation
-
2) Strengthen global operation under Head Office control
- Select and focus on priority business areas and regions
-
- Strengthen company-wide integrated IT infrastructure
3) Invest management resources in a disciplined manner according to the economic environment and strategy
Invest management resources in robotics to accelerate growth to make it a core business
Improve the organization and allocate personnel to strengthen B2B solution selling
effectiveness
- Rebuild product portfolios based on priorities
- Strengthen financial discipline
③ Financial targets under Phase 2 business plan and Epson 25
Revenue
Printing Solutions
Visual Communications
Wearable & Industrial Products
Business profit 1
ROS
ROE
FY2021 Target
FY2025 Target
¥1,200 billion
¥1,700 billion
¥780 billion
¥225 billion
¥195 billion
¥96 billion
8%
Sustain over 10%
–
–
–
¥200 billion
12%
15%
Exchange Rate USD/EUR/Other 2
¥110/¥125/92
¥115/¥125/100
1 Business profit is calculated by subtracting cost of sales and selling, general and administrative expenses
2
from revenue.
Index showing weighted average variance of rates for currencies other than USD and EUR against a
benchmark of 100 in FY2025.
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④ New initiatives
Initiatives in each of our innovation areas
Inkjet innovation
-
In the home & SOHO, and office shared printers*, Epson is transitioning away from a business model that is
reliant on consumables by accelerating the displacement of laser printers and ink cartridge printers with high-
capacity ink models such as high-capacity ink tank printers and high-speed linehead inkjet multifunction
printers.
* Office shared printer: A printer category for high-print volume office users
In the commercial and industrial segments, rapidly expand the lineup of high productivity products through
platforming and collaboration with partners. Expand business by responding to a diverse range of needs with
external print head sales and open innovation.
-
- Capture needs spawned by rapid digitization and embrace collaboration and open innovation to create new
printing services.
Visual innovation
- Refine laser light source platforms, expand the lineup in the high-lumen and other segments, and promote the
advantages of projectors.
- Develop new markets by creating demand in the spatial design market with accent lighting projectors, and by
developing small projectors.
- For smart glasses, accelerate open innovation to broaden the range of their application through enhancing the
selection of interface models that enable connections with PCs and smartphones and external sales of optical
engine modules.
Wearables innovation
- Continue to focus resources on the high-value-added analog watch segment to capitalize on Epson’s unique
technologies.
Robotics innovation
- Accelerate the growth of robotics into a future core business by leveraging a solid foundation of technology
and infrastructure while also actively collaborating with partners to further increase product competitiveness
and improve its ability to propose solutions.
- Use AI to further improve usability and enter the collaborative robot market.
Strengthening sales capabilities
- Epson will strengthen Head Office control over global sales strategies and management functions while
simultaneously transitioning to B2B sales methods that emphasize customer intimacy and solution selling.
Sustainability initiatives
- For our sustainability initiatives, we will approach heightened expectations for achieving sustainability as a
business opportunity. For example, we will accelerate innovation using printing and environmental
performance, ink versatility and other advantages of inkjet technology to contribute to sustainability.
29
⑤ Financial targets under Phase 2 business plan
1) Cash Flow
- Restore our ability to generate cash flow by steadily growing profit and increasing operations efficiency.
- By allocating generated cash to growth areas based on identified priorities, we will pay steady dividends
while maintaining a healthy financial structure.
Operating CF
FCF
Phase 1 Mid-range Result
Phase 2 Mid-range Target
3-year total: ¥258.1 billion
3-year total: ¥370 billion
3-year total: ¥24.9 billion
3-year total: ¥170 billion
2) R&D Expenses and Capital Expenditure
Phase 1 Mid-range Result
Phase 2 Mid-range Target
R&D expenses
3-year total: ¥161.3 billion
Aggressively invest in new
products and key technologies
necessary to achieve Epson 25
Capital expenditure (excluding
lease)
3-year total: ¥236.8 billion
3-year total: ¥200 billion
(Production capacity, new products)
(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
The Company established in March 2016 the Epson 25 Corporate Vision, which describes what the company
would like to achieve by the start of the 2025 fiscal year.
In the three years under the Phase 1 Mid-Range Business Plan (FY2016-2018) toward achieving Epson 25,
we made significant progress towards future growth in some areas, but in others fell behind schedule or did
not fully accomplish what we expected. Moreover, the company was affected by changes in the business
environment greater than anticipated, and the financial performance for the final fiscal year fell short of the
targets set out in the Phase 1 Mid-Range Business Plan.
In the Phase 2 Mid-Range Business Plan (FY2019-2021), which was established in March 2019, we will
continue to commit to the goals of Epson 25, and transform business operations to achieve high profitability
by managing priorities in responding to social issues and changes in the business environment.
30
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. The measures were then revised for further enhancement of their
appropriateness and objectivity, and shareholders approved their updating at the June 28, 2017 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 that benefit neither
the Company’s corporate value nor the common interests of its shareholders by having shareholders decide
whether to allow such acquisitions and by giving the Epson board of directors the time and information they
need to present shareholders with an alternative proposal and enable the board to 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.
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.
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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.
Based on our start-of-year target, the Company has paid an annual dividend of ¥62 per share.
In line with the basic policy on shareholder return, the Company resolved at the meeting of its board of directors
held on April 26, 2019 to repurchase its own shares pursuant to Article 156 of the Companies Act as applied by
replacing the relevant terms pursuant to Article 165, Paragraph 3 of the Act. Details are provided in “Index to
Consolidated Financial Statements, Notes to Consolidated Financial Statements, 40. Subsequent Events.”
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 30, 2018, by resolution
of the board of directors
June 26, 2019, by resolution of
the general shareholders’ meeting
Cash dividends
(Millions of yen)
Cash dividend per share
(Yen)
10,924
10,924
31
31
Notes
1. The total amount of dividends to be paid based on the resolution of the board of directors on October 30,
2018 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
26, 2019 includes ¥5 million of cash dividends for the Company’s shares held through the BIP trust.
32
Corporate Governance
1. Overview of 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 term, 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) 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 advisory committees 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 term. 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 described in “2. Officers.”
Meetings of the Board of Directors are, as a rule, held once per month and as needed. In FY2018, the Company
held a total of 13 meetings of the Board of Directors with 92.3% attendance by Director Omiya and 100% by all
the other Directors. In accordance with the Regulations of the Board of Directors, Chairman of the Board shall
act as a chairman of the Board meetings. In case of vacancy or absence of Chairman of the Board, however,
President and Representative Director shall instead act as a chairman of the Board meetings. Currently, President
and Representative Director acts as the chairman of the Board meetings since the position of Chairman of the
Board is vacant.
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 management decisions and increase business agility as a company with an Audit &
Supervisory Committee, Epson has expanded the scope of affairs delegated to executive management from the
Board of Directors, including capital investments below a certain threshold; and has limited board deliberations
only to the most important issues, including governance, capital policy, compliance, risk management and
megatrend and medium- to long-term strategies. Corporate Governance Policy states that at least one-third of the
board members should be outside directors.
33
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
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.
Director Nomination Committee and Director Compensation Committee
Epson has established the Director Nomination Committee and the Director Compensation Committee as
advisory bodies to the Board of Directors, with their secretariats operated by the human resources department.
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.
The overview of each of these Committees is as follows.
Composition
For the both Committees, President and Representative Director shall act as a chairman and Outside Directors
and Director in charge of human resources as the other Committee members based on internal regulations
defined by the Board of Directors. The two Committees currently consist of the members as shown below.
Chairman:
Committee members: Hideaki Omiya, Mari Matsunaga, Michihiro Nara, Chikami Tsubaki, Yoshio Shirai,
Minoru Usui, President and Representative Director
Outside Directors
Masayuki Kawana, 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.
Activities of the Director Nomination Committee
The Committee met three times during the period from April 2018 to the Ordinary General Meeting of
Shareholders held in June 2019. The Committee discussed policies and process for selecting Officers (Directors,
Executive Officers and Special Audit & Supervisory Officers), proposed candidates, and deliberated on
34
selection/dismissal policies of Officers, successor development plan and the status of development, in
accordance with the amended Corporate Governance Policy. Of the Committee members, Mr. Omiya and Ms.
Matsunaga were absent once, but they were individually updated on details of the deliberations at a later date.
Activities of the Director Compensation Committee
The Committee met four times during the period from April 2018 to the Ordinary General Meeting of
Shareholders held in June 2019. The Committee deliberated on matters including the necessity for revising the
monthly compensation for Directors who are not Audit & Supervisory Committee members, and the amount of
base compensation and bonuses and the number of base points under the stock compensation plan for Executive
Officers including those who are concurrently serving as Directors. Of the Committee members, Mr. Omiya and
Ms. Matsunaga were absent once, but they were individually updated on details of the deliberations at a later
date.
Epson’s system of corporate governance is schematically represented below.
35
(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 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 takes 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
reporting required by the Financial Instruments and Exchange Act but will also include reporting over the
scope deemed necessary by management.
36
(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 agilely 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
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.
37
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 representative director or Board of Directors, 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 the representative director regularly meet to enable the Committee
to directly assess business operations.
(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.
38
(4) 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.
(5) Election and dismissal 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 dismissal of directors do not vary from the provisions of the Companies Act.
(6) Matters requiring resolutions of general meetings of shareholders that can be implemented by
resolutions of the Board of Directors
Treasury share acquisition
The Company’s Articles of Incorporation allow the Company to acquire treasury shares 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.
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.
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 Directors) to fully apply themselves to their expected roles.
(7) 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
Article 423, Paragraph 1 of the Companies Act, pursuant to the provisions of Article 427, Paragraph 1 of the 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.
(8) 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.
39
2. Officers
(1) List of Officers
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.
Name
Minoru Usui
Koichi Kubota
Position and current function
President and Representative Director
Representative Director,
Senior Managing Executive Officer
Chief Operating Officer, Printing Solutions
Operations Division
Tatsuaki Seki
Director,
Yasunori Ogawa
Director,
Managing Executive Officer
General Administrative Manager, Management
Control Division
Managing Executive Officer
Chief Operating Officer, Wearable Products &
Industrial Solutions Operations Segment
General Administrative Manager, Technology
Development Division
Masayuki Kawana
Director,
Executive Officer
General Administrative Manager, Human
Resources Division and CSR Management Office
Chairman, Epson Sales Japan Corporation
Toshiya Takahata
Director,
Executive Officer
General Administrative Manager, Corporate
Planning Division
General Administrative Manager, DX Division
Hideaki Omiya
Mari Matsunaga
Taro Shigemoto
Outside Director
Outside Director
Director,
Full-Time Audit & Supervisory Committee
Member
Michihiro Nara
Outside Director,
Audit & Supervisory Committee Member
Chikami Tsubaki
Outside Director,
Audit & Supervisory Committee Member
Yoshio Shirai
Outside Director,
Audit & Supervisory Committee Member
Motonori Okumura
Managing Executive Officer
General Administrative Manager, Production
Planning Division
Deputy Chief Operating Officer, Wearable
Products & Industrial Solutions Operations
Segmentt
40
Name
Position and current function
Junichi Watanabe
Managing Executive Officer
Deputy Chief Operating Officer, Wearable
Products & Industrial
Solutions Operations Segment
Chief Operating Officer, Wearable Products
Operations Division
Deputy General Administrative Manager,
Production Planning Division
Managing Executive Officer
Deputy Chief Operating Officer, Printing Solutions
Operations Division
Hideki Shimada
Akihiro Fukaishi
Executive Officer
President, Epson (China) Co., Ltd.
Yoshiyuki Moriyama
Executive Officer
Naoyuki Saeki
Chairman and President, Epson Engineering
(Shenzhen) Ltd.
Executive Officer
General Administrative Manager, Sales &
Marketing Division
Nobuyuki Shimotome
Executive Officer
Chief Operating Officer, Microdevices Operations
Division
Kazuyoshi Yamamoto
Executive Officer
President, Epson Europe B.V.
Munenori Ando
Executive Officer
Hitoshi Igarashi
Executive Officer
Managing Director, Epson Singapore Pte. Ltd.
Deputy Chief Operating Officer, Printing Solutions
Operations Division
Keith Kratzberg
Executive Officer
President and Chief Executive Officer,
Epson America, Inc.
Isamu Otsuka
Executive Officer
President, Epson Atmix Corporation
Eiichi Abe
Executive Officer
President, PT. Indonesia Epson Industry
Kazuhiro Ichikawa
Executive Officer
Deputy General Administrative Manager,
Technology Development Division
Keijiro Naito
Executive Officer
Chief Operating Officer, Visual Products
Operations Division
41
Name
Position and current function
Kazunori Kumakura
Executive Officer
Yoshifumi Yoshida
In Charge of IT Infrastructure Enhancement,
DX Division
Executive Officer
Chief Operating Officer, Robotics Solutions
Operations Division
Andrea Zoeckler
Executive Officer
Yoshiro Nagafusa
Executive Officer
Senior Vice President, Epson Europe B.V.
Satoru Hosono
Executive Officer
Senior Vice President, Epson America, Inc.
Deputy General Administrative Manager,
Technology Development Division
Fuminori Suzumura
Executive Officer
President, Epson Sales Japan Corp.
Akifumi Takei
Executive Officer
Sunao Murata
Technology Officer
President, Epson Precision (Philippines), Inc.
Deputy General Administrative Manager, DX
Division
Tsuyoshi Kitahara
Technology Officer
In Charge of Exploration for New Technology
Development, Technology Development Division
Akihiko Toeda
Special Audit & Supervisory Officer
General Administrative Manager, Audit &
Supervisory Committee Office
(2) Outside Officers
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, Independent 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.
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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;
(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 with a relationship of reciprocal employment of Outside Director8; 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
8
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.
“Reciprocal employment of Outside Director” means accepting an Outside Director from an entity that
currently employs someone from the Company as an Outside Director.
43
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 President and CEO and a Chairman of the Board of Mitsubishi Heavy Industries,
Ltd. and has a wealth of experience and insight as a corporate manager and engineer.
As an Outside Director of the Company, 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 open innovation promotion, etc. Epson
believes that she will monitor management appropriately to achieve 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 outside officer and achievements as an
Outside Director who is Audit & Supervisory Committee Member of the Company. Epson believes that he
will contribute to monitoring management appropriately to achieve sustained growth and increase medium-
to long-term corporate value, as well to ensure soundness of the management. 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 contribute to monitoring management appropriately to achieve
sustained growth and increase medium to long-term corporate value, as well to ensure soundness of the
management. 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
44
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 contribute to monitoring management appropriately to achieve sustained growth
and increase medium-to long-term corporate value, as well to ensure soundness of the management.
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 overall business issues and offer recommendations.
Mr. Shirai has served as an executive at Toyota Tsusho Corporation within the past five years. The
Company has had no transactions with 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.
(3) Interconnections between supervision or audits by Outside Directors or Outside Audit & Supervisory
Committee Members and internal audits, audits by Audit & Supervisory Committee Members, and
accounting audits; as well as relationship of these supervision/audits to the internal control department
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 report 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.
Through these measures, Epson has secured the effectiveness of systematic audit performed by the Audit &
Supervisory Committee.
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 requests or 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 & 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 work together to enhance the effectiveness of audit
by sharing the results of their risk assessment at the beginning of each fiscal year and then confirm the audit plan
of financial auditors, and also periodically discuss issues during the period. 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.
45
Cooperation between Outside Directors and internal control functions
Outside Directors who are Audit & Supervisory Committee members and those who are not work cooperatively
by attending meetings of the Compliance Committee, regular meetings with representative directors, and
meetings solely of Outside Directors; and also work to enhance collaboration between the supervision or audits
by Outside Directors and the internal control functions through on-site audits and on-site visits at subsidiaries
both home and abroad.
(3) 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 daily
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 audit 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.
Through these measures, Epson has secured the effectiveness of systematic audit performed by the Audit &
Supervisory Committee.
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 report 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.
Through these measures, Epson has secured the effectiveness of systematic audit performed by the Audit &
Supervisory Committee.
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 requests or instructions of the Audit & Supervisory Committee.
The Audit & Supervisory Committee and the internal audit departments will thus proactively cooperate going
46
forward, but Epson set up an Audit & Supervisory Committee Office headed by the Special Audit & 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 division in charge of whistleblowing regularly keeps the Audit & Supervisory Committee updated on
compliance violation matters. The division provides the Committee with detailed reports especially on matters of
material importance immediately after it is notified of such matters, and the Committee examines whether it
should deal with the matter based on the detailed report. Also, controls are in place to protect whistleblowers
from reprisal for having made a report. Allegations shall be reported to the Audit & Supervisory Committee, the
Compliance Committee, and the Corporate Strategy Council in a way that whistleblowers cannot be identified;
and the identity of the reporter shall be protected even if the president or a Board of Directors, for example, is
asked to correct the matter based on the report.
The Audit & Supervisory Committee and financial auditors enhance the effectiveness of audits by sharing the
results of their risk assessment at the beginning of each fiscal year and then confirming the audit plan of financial
auditors, and also periodically discuss issues during the period. 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.
(4) 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
6
3
6
2) Composition of auditing team
The auditing team comprises 42 staff including 21 certified public accountants, 2 accountant
examination passers, and 19 other accounting staff.
3) Policy and reasons for selection of financial auditors
The Audit & Supervisory Committee has established the “Policies on Selection / Non-reappointment
of Financial Auditors” and “Implementation Standards in Relation to Selection of Financial Auditors”
prescribing details of the procedures whereby Epson can maintain and further strengthen its optimal
financial audit system.
The Audit & Supervisory Committee appointed Ernst & Young ShinNihon LLC as financial auditor
based on the decision that the auditing firm has a competitive advantage in terms of audit quality
management system, governance system that supports the management of audit quality, and global
audit system; the Committee reached the decision through evaluation of the auditing firm based on the
Implementation Standards stated above.
In the event that any of the items set forth in the clauses of Article 340, Paragraph 1 of the Companies
Act is met, and the Audit & Supervisory Committee deems it appropriate to dismiss the financial
auditor, the Audit & Supervisory Committee shall dismiss the financial auditor subject to the
unanimous consent of Audit & Supervisory Committee members. In addition, if the Audit &
Supervisory Committee deems that (i) the quality of audit, quality control, independence and other
aspects of the financial auditor are likely to hinder the execution of proper audits, (ii) an audit system
more appropriate to the Company would be achieved by replacing the audit firm, or (iii) otherwise it
would be necessary, the Audit & Supervisory Committee shall, based on its resolution, determine the
details of the proposal to dismiss or not reappoint the financial auditor for submission to the General
Meeting of Shareholders.
47
4) Evaluation of financial auditor by the Audit & Supervisory Committee
Based on the Implementation Standards stated above, the Audit & Supervisory Committee shall
annually evaluate more than one auditing firm with a network overseas, including the current financial
auditor; the evaluation items range widely from their quality of audit, governance system to global
supervision system. The Committee has judged, through comprehensive analysis and deliberation of
these items, that Ernst & Young ShinNihon LLC has a relative competitive advantage.
(5) Details of audit remuneration
Epson has adopted items (i) through (iii) of the “Points of Attention Concerning Preparation of Form 2 (56) d-(f)
from the revised “Cabinet Ordinance on the Disclosure of Corporate Affairs, etc.” following the promulgation of
the “Cabinet Office Ordinance Partially Amending the Cabinet Office Ordinance on the Disclosure of Corporate
Affairs, etc.” (Cabinet Office Ordinance No. 3, January 31, 2019) to comply with certain transition provisions.
a. Remuneration for audits by certified public accountants
Category
Previous fiscal year
Fiscal year under review
Remuneration for
audit certification
work
Remuneration for
non-audit work
Remuneration for
audit certification
work
Remuneration for
non-audit work
(Millions of yen)
167
2
171
Filing company
Consolidated
subsidiaries
Total
46
214
Non-audit services performed for Epson include various consultancy services.
–
2
52
223
0
–
0
b. Other important remuneration
Previous fiscal year
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.
Fiscal year under review
Total payments for audits carried out on behalf of 60 consolidated overseas subsidiaries by certified public
accountants belonging to the Ernst & Young network for the fiscal year ended March 31, 2019, amounted to
¥572 million.
c. Reason for the Audit & Supervisory Committee consenting to the fees, etc. of the Accounting Auditor
Taking into consideration the “Practical Guidelines for Cooperation with Financial Auditor” announced by the
Japan Audit & Supervisory Board Members Association, Audit & Supervisory Committee has given consent to
the compensation, etc., to be paid to the financial auditor as stipulated in Article 399, Paragraph 1 of the
Companies Act, as a result of confirming the policies and the content of the auditing plan that form the basis of
compensation to the financial auditor, auditing time and auditing compensation, as well as the auditing plan and
its results for the previous fiscal year, and examining the validity of quotation for the auditing.
48
3. Officer compensation, etc.
(1) Amount of officer compensation, etc. and policies for determining the method of calculating the
amount
With an aim to ensure transparency and objectivity, compensation of officers is determined through resolution at
the General Meeting of Shareholders and the Board of Directors’ meeting for the Directors who are not Audit &
Supervisory Committee members, or through resolution at the General Meeting of Shareholders and discussion
by Audit & Supervisory Committee members for the Directors who are Audit & Supervisory Committee
members, after going through a fair, transparent and rigorous reporting by the Director Compensation Committee
(an advisory body to the Board of Directors) composed primarily of Outside Directors.
With regard to compensation of the Directors who are not Audit & Supervisory Committee members, the Audit
& Supervisory Committee shares and discusses what have been examined by the Director Compensation
Committee to confirm whether there are special items to be stated at the General Meeting of Shareholders.
Although the matters related to the compensation, including its amount, of the Directors who are not Audit &
Supervisory Committee members are left to the discretion of President and Representative Director, these
matters are determined based on what have been deliberated and approved at the Director Compensation
Committee.
The overview of the Director Compensation Committee is as follows.
Composition
President and Representative Director shall act as chairman and Outside Directors and Director in charge of
human resources as other members based on internal regulations defined by the Board of Directors. The
Committee currently consists of the members as shown below.
Chairman:
Committee members: Hideaki Omiya, Mari Matsunaga, Michihiro Nara, Chikami Tsubaki, Yoshio Shirai,
Minoru Usui, President and Representative Director
Outside Directors
Masayuki Kawana, Director in charge of human resources
Directors who are full-time members of the Audit & Supervisory Committee can attend meetings of the
Committee as observers.
Activities of the Director Compensation Committee
The Committee met four times during the period from April 2018 to the Ordinary General Meeting of
Shareholders held in June 2019. The Committee deliberated on matters including the necessity for revising the
monthly compensation for Directors who are not Audit & Supervisory Committee members, and the amount of
base compensation and bonuses and the number of base points under the stock compensation plan for Executive
Officers including those who are concurrently serving as Directors. Of the Committee members, Mr. Omiya and
Ms. Matsunaga were absent once, but they were individually updated on details of the deliberations at a later
date.
Policies
The Company stipulates the Basic Policy regarding Officer Compensation in the internal regulations defined by
the Board of Directors.
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.
49
Compensation system
Director and executive officer compensation of the Company consists of base compensation, bonuses, and stock
compensation. In FY2018, the base compensation accounted for about 69% (fixed compensation about 65% and
variable compensation about 4%), bonuses for about 20% and stock compensation for about 11% of the overall
compensation for executive officers. Epson’s compensation system for directors and executive officers is
designed to provide incentives given that bonuses vary depending on the level of business profit achieved and
may not be paid in case the business profit does not reach a certain threshold.
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.
Through the resolution at the Ordinary General Meeting of Shareholders held on June 28, 2016, the maximum
base compensation was set at 62 million yen per month for Directors who are not Audit & Supervisory
Committee members (eight as of the filing date of the Annual Securities Report) (including 10 million yen per
month for two Outside Directors) and at 20 million yen per month for Directors who are Audit & Supervisory
Committee members (four as of the filing date of the Annual Securities Report).
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.
The amount of bonuses is calculated based on the calculation criteria predefined by the Board of Directors.
However, given its nature as a short-term incentive, the final payment amount is determined at the General
Meeting of Shareholders based on the level of annual business profit in consideration of non-recurring losses
incurred, to ensure its transparency. The amount of bonuses varies depending on business performance and may
not be paid in cases where business profit failed to reach a certain threshold. More recently, it was resolved at the
Ordinary General Meeting of Shareholders held on June 26, 2019 that the amount of bonuses to Directors would
be 71 million yen (the amount to be paid to five Directors excluding Outside Directors and Directors who are
Audit & Supervisory Committee members).
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.
Epson has introduced a highly transparent and fair performance-linked stock compensation plan for the purpose
of making clear the linkage between the compensation of officers and its stock value, 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 interest with its shareholders.
The stock compensation basically accounts for 10% to 22% of the base compensation commensurate with
responsibility and position of each officer. The number of shares awarded varies depending on the achievement
level with respect to the operating performance targets during the subject period (three years). Such operating
performance targets include a business profit, ROS and ROE specified in the mid-range business plan.
At the Ordinary General Meeting of Shareholders held on June 28, 2016, it was resolved that the stock
compensation plan stated above would be implemented during the three years from the fiscal year ended March
31, 2017 through the fiscal year ended March 31, 2019. The formula for calculating the performance coefficient
and the levels of achievements are as shown below.
Performance coefficient = {(Business profit factor) + (ROS factor) + (ROE factor) + (Operating cash flow
factor) + (Qualitative evaluation factor × 2)} ÷ 6
50
Quantitative evaluation
As at the end of FY2018
Average for
three years from
FY2016 through
FY2018
Cumulative for
three years from
FY2016 through
FY2018
Qualitative
evaluation (*)
As at the end of
FY2018
Performance
coefficient
(times)
Business profit
ROS
ROE
Operating CF
116.0 billion yen
or more
106.0 billion yen
or more
96.0 billion yen
or more
86.0 billion yen
or more
Less than 86.0
billion yen
10% or more
12% or more
9% or more
11% or more
8% or more
10% or more
7% or more
9% or more
Less than 7%
Less than 9%
350.0 billion yen
or more
340.0 billion yen
or more
330.0 billion yen
or more
320.0 billion yen
or more
Less than 320.0
billion yen
Far above
expectation
Above
expectation
Meets
expectation
Below
expectation
Far below
expectation
1.10
1.05
1.00
0.95
0.90
* Items and method of qualitative evaluation
The Director Compensation Committee makes a qualitative evaluation based on the progress of strategies
towards achieving the operating performance targets for the “Epson 25” Phase 2 Mid-Range Business Plan, the
amount of effect of exchange rate changes, and other evaluation items.
Although Epson had aimed to achieve a performance coefficient of 1.00 or over, the performance coefficient
stood at about 0.908 given a business profit of less than 86.0 billion yen, ROS of less than 7%, and ROE of more
than 9%, operating cash flows of less than 320.0 billion yen, and qualitative evaluation of “Far below
expectation.”
Performance coefficient = {(Business profit factor) + (ROS factor) + (ROE factor) + (Operating cash flow
factor) + (Qualitative evaluation factor × 2)} ÷ 6
= {0.90 + 0.90 + 0.95 + 0.90 + ((0.90) × 2)} ÷ 6 ≒ 0.908
As a result of deliberations at the meeting of the Director Compensation Committee, it was revealed that all the
quantitative evaluation items fell below expectations and the performance coefficient stood at 0.90, the lower
end of the evaluation range, due also to the absence of qualitative evaluation factors to add points.
At the meeting held on May 16, 2019, the Board of Directors has resolved to expand the variance range of the
performance coefficient from 0.80 to 1.20 to increase elasticity of the targets and continue with the stock
compensation plan for three years from the fiscal year ending March 31, 2020 through the fiscal year ending
March 31, 2022.
51
(2) Total amount of compensation, total compensation by type, and number of officers to be paid by each
category
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
356
(28)
81
(48)
437
232
(28)
81
(48)
13
(–)
–
(–)
71
(–)
–
(–)
314
13
71
38
(–)
–
(–)
38
8
(2)
5
(3)
13
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. Epson has established the criteria for shareholding by its officers based on internal
regulations defined by the Board of Directors to demonstrate its commitment to and responsibilities for
business operations to all shareholders.
3. Upon the resolution at the Ordinary General Meeting of Shareholders held on June 28, 2016, the maximum
base compensation was set 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
per month for Directors who are Audit & Supervisory Committee members.
4. The amount above includes 71 million yen in bonuses to be paid to five Directors (excluding Outside
Directors and Directors who are Audit & Supervisory Committee members), as resolved at the Ordinary
General Meeting of Shareholders held on June 26, 2019.
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 an Audit & Supervisory Committee member
who retired at the conclusion of the Ordinary General Meeting of Shareholders held on June 27, 2018 and
one Director who is not an Audit & Supervisory Committee member who retired on September 30, 2018.
7. Stock options are not granted.
52
(3) Total compensation paid to persons 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
109
Director
60
8
23
18
Note: The stock compensation stated above represents the amount recorded for the current fiscal year based on
Japanese Generally Accepted Accounting Principles (JGAAP).
53
4. Securities held by the Company
(1) Criteria for and approach to classification of investment securities
Epson has classified its investment equity securities held only for earning capital or income gains into stocks
held purely for investment purposes and those held for other purposes as stocks held for cross-shareholding
purposes.
The Company currently holds no securities classified as stocks held purely for investment purposes.
(2) Stocks held for reasons other than pure investment
a. Method of examining the rationale of shareholding policy and shareholding, and deliberations on
whether or not Epson should hold specific shares at the Board of Directors’ or other meetings
The Company may acquire and hold shares in companies, including the suppliers of key components
and parts, major buyers of its products, major providers of funds and major providers of financial
services, when it judges that such acquisition/holding of shares will help maintain and strengthen
steady business relationships with these companies and ultimately enhance its corporate value over the
medium- to long-term. Such acquisition/holding of shares, however, is preceded by a screening
process to confirm the creditworthiness and safety of investing in these companies (equity securities
held based on this policy is referred to as “stocks held for cross-shareholding purposes”).
Every year, the Board of Directors evaluates on an individual basis, both quantitatively and
comprehensively, the risks of the stocks it invests in for cross-shareholding purposes, as well as the
profits obtainable by maintaining and strengthening trading relationships with the companies in
comparison through comparing them against the internal hurdle rate specified based on the cost of
capital, and it examines the rationality of holding such stocks for cross-shareholding purposes from a
medium- to long-term perspective. When it deems that holding of the stocks for cross-shareholding
purposes as unreasonable, the Company reduces the shareholding. During the current fiscal year,
Epson actually sold part of its stocks held for cross-shareholding purposes.
b. Balance sheet total of stocks held for reasons other than pure investment
Unlisted stocks
Stocks other than
unlisted stocks
Number of
issues
Balance sheet total
(millions of yen)
8
11
953
7,050
Issues for which the number of shares held by Epson increased during the current fiscal year
Number of
issues
Total acquisition
price to increase
shares
(millions of yen)
1
–
236
–
Reasons for the increase of the number of
shares
Initial capital contribution to develop and
strengthen new businesses
–
Unlisted stocks
Stocks other than
unlisted stocks
Issues for which the number of shared held by Epson decreased during the current fiscal year
Number of
issues
Total sale
proceeds from
decreasing shares
(millions of yen)
Unlisted stocks
Stocks other than
unlisted stocks
1
1
–
2,127
54
c. Number of special investment securities / equity securities deemed to be held for each issue and
information including amounts recorded on the balance sheet
Special investment securities
Company
FY2018
FY2017
Stocks (shares) Stocks (shares)
Balance sheet
total (millions
of yen)
Balance sheet
total (millions
of yen)
15,008,880
15,008,880
Mizuho Financial
Group, Inc.
2,571
2,872
NGK Insulators, Ltd.
1,257,000
2,507,000
2,021
4,597
Seiko Holdings
Corporation
328,816
328,816
866
846
Otsuka Corporation
120,000
60,000
496
643
The Hachijuni Bank,
Ltd.
489,500
489,500
224
279
Reasons for holding shares, quantitative
effect of holding shares, and reasons for
the increase of the number of shares
Shares held
by Epson
To maintain and strengthen the business
relationship with a source of steady
funding and a provider of financial
services.
The effect of holding the shares was
examined at the Board of Directors’
meeting (held in September 2018) based
on the method in (2) a. above but its
quantitative results are not disclosed
here as the results fall under insider
information on business operation (the
same applies hereunder).
To maintain and strengthen the business
relationship with a supplier of key parts
used in Epson products.
Epson has a transactional relationship
primarily with the Wearable & Industrial
Products business segment.
Epson sold part of its shareholdings in
the company based on the results of
examination by the Board of Directors.
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Wearable & Industrial
Products business segment.
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Printing Solutions
business segment.
The number of shares held has increased
due to the 2-for-1 share split (on April 1,
2018).
To maintain and strengthen the business
relationship with a source of steady
funding and a provider of financial
services.
Yes
Yes
Yes
None
Yes
55
FY2018
FY2017
Stocks (shares) Stocks (shares)
Balance sheet
total (millions
of yen)
Balance sheet
total (millions
of yen)
190,000
190,000
Company
Hakuto Co., Ltd.
222
296
332,640
332,640
211
327
221,980
221,980
192
227
65,000
65,000
165
252
100,000
100,000
43
41
33,200
33,200
34
41
Marubun Corporation
King Jim Co., Ltd.
Joshin Denki Co.,
Ltd.
Pixelworks, Inc.
Nippon BS
Broadcasting
Corporation
Reasons for holding shares, quantitative
effect of holding shares, and reasons for
the increase of the number of shares
Shares held
by Epson
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Wearable & Industrial
Products business segment.
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Wearable & Industrial
Products business segment.
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Printing Solutions
business segment.
To maintain and strengthen the business
relationship with a major buyer of Epson
products.
Epson has a transactional relationship
primarily with the Printing Solutions
business segment.
To maintain and strengthen the business
relationship with a supplier of key parts
used in Epson products.
Epson has a transactional relationship
primarily with the Visual
Communications business segment.
To maintain and strengthen the business
relationship with a company whose
parent company is a major buyer of
Epson products.
Epson has a transactional relationship
primarily with the Printing Solutions
business segment.
Yes
Yes
None
None
None
None
(3) Stocks held purely for investment purposes
None
56
Index to Consolidated Financial Statements
Seiko Epson Corporation and Subsidiaries
Consolidated Statement of Financial Position................................................................................................ 58
Consolidated Statement of Comprehensive Income ...................................................................................... 60
Consolidated Statement of Changes in Equity ............................................................................................... 62
Consolidated Statement of Cash Flows ........................................................................................................... 64
Notes to Consolidated Financial Statements .................................................................................................. 65
Report of Independent Auditors ................................................................................................................... 122
57
Consolidated Statement of Financial Position
Years ended March 31, 2018 and 2019:
58
Thousands ofU.S. dollarsNotesMarch 31,2018March 31,2019March 31,2019Assets Current assets Cash and cash equivalents8,35229,678175,2381,580,571 Trade and other receivables9,35165,282173,1731,561,946 Inventories5,10223,227250,7632,261,775 Income tax receivables2,9423,99436,024 Other financial assets11,351,5131,46613,222 Other current assets1216,48517,938161,793 Subtotal639,129622,5755,615,360 Non-current assets held for sale43-- Total current assets639,172622,5755,615,360 Non-current assets Property, plant and equipment13,15297,927321,9562,903,905 Intangible assets1422,03725,191227,212 Investment property171,2191,46113,177 Investments accounted for using the equity method1,5461,57114,169 Net defined benefit assets2311-- Other financial assets11,3520,43317,907161,513 Other non-current assets125,2996,02854,369 Deferred tax assets1845,70141,696376,080 Total non-current assets394,178415,8143,750,464 Total assets1,033,3501,038,3899,365,824Millions of yen
59
Thousands ofU.S. dollarsNotesMarch 31,2018March 31,2019March 31,2019Liabilities and equity Liabilities Current liabilities Trade and other payables19,35154,759144,3991,302,417 Income tax payables7,2963,81434,400 Bonds issued, borrowings and lease liabilities20,3536,08221,363192,685 Other financial liabilities352013312,985 Provisions2126,40312,677114,341 Other current liabilities2297,643114,8871,036,231 Total current liabilities322,387297,4732,683,079 Non-current liabilities Bonds issued, borrowings and lease liabilities20,35130,483120,9871,091,251 Other financial liabilities351,6131,95517,633 Net defined benefit liabilities2342,32153,498482,529 Provisions218,9549,13482,384 Other non-current liabilities2211,43411,697105,501 Deferred tax liabilities181,0498948,063 Total non-current liabilities195,856198,1691,787,399 Total liabilities518,244495,6424,470,478 Equity Share capital2453,20453,204479,877 Capital surplus2484,36484,427761,495 Treasury shares24(30,803)(30,788)(277,694) Other components of equity2447,96050,440454,947 Retained earnings358,001382,8973,453,567 Equity attributable to owners of the parent company512,727540,1814,872,201 Non-controlling interests2,3782,56523,135 Total equity515,106542,7474,895,345 Total liabilities and equity1,033,3501,038,3899,365,824Millions of yen
Consolidated Statement of Comprehensive Income
Years ended March 31, 2018 and 2019:
60
Thousands ofU.S. dollarsNotes20182019Revenue7,261,102,1161,089,6769,828,411Cost of sales5,10,13,14(701,268)(677,064)(6,106,827)Gross profit400,848412,6123,721,583Selling, general and administrative expenses13,14,27(326,062)(342,113)(3,085,712)Other operating income294,8606,39357,662Other operating expense13,30(14,643)(5,536)(49,932)Profit from operating activities65,00371,355643,591Finance income311,2772,45022,097Finance costs31(3,691)(1,865)(16,821)Share of profit of investments accounted for using theequity method7499892Profit before tax62,66372,040649,770Income taxes18(20,899)(17,995)(162,307)Profit for the period41,76454,044487,453Profit for the period attributable to:Owners of the parent company41,83653,710484,441Non-controlling interests(72)3343,012Profit for the period41,76454,044487,453Millions of yenYear endedMarch 31,Year endedMarch 31,2019
61
Thousands ofU.S. dollarsNotes20182019Other comprehensive income Items that will not be reclassified subsequently to profit or loss, net of taxRemeasurement of net defined benefit liabilities (assets)324,998(8,052)(72,625)Net gain (loss) on revaluation of financial assetsmeasured at FVTOCI (Note)32(371)(1,325)(11,950)Subtotal4,626(9,378)(84,585) Items that may be reclassified subsequently to profit or loss, net of taxExchange differences on translation of foreignoperations32(5,266)5,08245,837Net changes in fair value of cash flow hedges32444(195)(1,758)Share of other comprehensive income of investmentsaccounted for using the equity method3213(10)(90)Subtotal(4,809)4,87643,979Total other comprehensive income, net of tax(182)(4,501)(40,597)Total comprehensive income for the period41,58149,542446,847Total comprehensive income for the periodattributable to:Owners of the parent company41,61249,235444,078Non-controlling interests(30)3072,769Total comprehensive income for the period41,58149,542446,847 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeU.S. dollarsNotes20182019Earnings per share for the period:Basic earnings per share for the period33118.78152.491.38Diluted earnings per share for the period33118.75152.441.37Millions of yenYear endedMarch 31,Year endedMarch 31,2019YenYear endedMarch 31,Year endedMarch 31,2019
Consolidated Statement of Changes in Equity
Years ended March 31, 2018 and 2019:
62
NotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchangedifferences ontranslation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents ofequityAs of April 1, 2017 53,20484,321(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 transactions34-4311------54-54Transfer 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, 2018 53,20484,364(30,803)-4,65842,97033147,960358,001512,7272,378515,106 (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 toowners of theparent company
63
NotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchangedifferences ontranslation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents ofequityAs of April 1, 2018 53,20484,364(30,803)-4,65842,97033147,960358,001512,7272,378515,106Cumulative effects of change inaccounting policy2--------330330-330As of April 1, 2018 (restated) 53,20484,364(30,803)-4,65842,97033147,960358,332513,0582,378515,437Profit for the period --------53,71053,71033454,044Other comprehensive income ---(8,052)(1,325)5,099(195)(4,474)-(4,474)(27)(4,501)Total comprehensive income for the period ---(8,052)(1,325)5,099(195)(4,474)53,71049,23530749,542Acquisition of treasury shares24--(0)------(0)-(0)Dividends25--------(22,190)(22,190)(120)(22,310)Share-based payment transactions34-6215------78-78Transfer from other components of equityto retained earnings ---8,052(1,098)--6,954(6,954)---Total transactions with the owners -62148,052(1,098)--6,954(29,145)(22,112)(120)(22,233)As of March 31, 2019 53,20484,427(30,788)-2,23448,06913650,440382,897540,1812,565542,747 (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeNotesRemeasurement ofnet defined benefitliabilities (assets)Net gain (loss) onrevaluation offinancial assetsmeasured atFVTOCI (Note)Exchangedifferences ontranslation offoreign operationsNet changes in fairvalue of cash flowhedgesTotal othercomponents ofequityAs of April 1, 2018 479,877760,927(277,829)-42,013387,5712,985432,5783,229,0154,624,57821,4484,646,035Cumulative effects of change inaccounting policy2--------2,9762,976-2,976As of April 1, 2018 (restated) 479,877760,927(277,829)-42,013387,5712,985432,5783,232,0014,627,56321,4484,649,021Profit for the period --------484,441484,4413,012487,453Other comprehensive income ---(72,625)(11,950)45,990(1,758)(40,353)-(40,353)(243)(40,597)Total comprehensive income for the period ---(72,625)(11,950)45,990(1,758)(40,353)484,441444,0782,769446,847Acquisition of treasury shares24--(0)------(0)-(0)Dividends25--------(200,144)(200,144)(1,082)(201,226)Share-based payment transactions34-559135------703-703Transfer from other components of equityto retained earnings ---72,625(9,903)--62,722(62,722)---Total transactions with the owners -55912672,625(9,903)--62,722(262,875)(199,440)(1,082)(200,532)As of March 31, 2019 479,877761,495(277,694)-20,149433,5611,226454,9473,453,5674,872,20123,1354,895,345 (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 toowners of theparent companyThousands of U.S. dollarsEquity attributable to owners of the parent companyNon-controllinginterestsTotal equityShare capitalCapital surplusTreasury sharesOther components of equityRetainedearningsTotal equityattributable toowners of theparent company
Consolidated Statement of Cash Flows
Years ended March 31, 2018 and 2019:
64
Thousands ofU.S. dollarsYear ended March 31,Notes201820192019Cash flows from operating activitiesProfit for the period41,76454,044487,453Depreciation and amortisation49,99356,137506,331Impairment loss (reversal of impairment loss)2,0917436,701Finance (income) costs2,414(585)(5,276)Share of (profit) loss of investments accounted for using the equitymethod(74)(99)(892)Loss (gain) on sale and disposal of property, plant and equipment,intangible assets and investment property797(3,221)(29,052)Income taxes20,89917,995162,307Decrease (increase) in trade receivables(9,528)(4,750)(42,842)Decrease (increase) in inventories(17,199)(24,915)(224,722)Increase (decrease) in trade payables3,087(6,826)(61,567)Increase (decrease) in net defined benefit liabilities1,6121,66314,999Other9,8873,47331,324Subtotal105,74593,659844,764Interest and dividends income received1,2792,05518,535Interest expenses paid(1,038)(1,164)(10,498)Payment for loss on litigation(564)--Income taxes paid(21,142)(17,588)(158,636)Net cash from (used in) operating activities84,27976,961694,155Cash flows from investing activitiesPurchase of investment securities-(900)(8,117)Proceeds from sales of investment securities162,14419,337Purchase of property, plant and equipment(69,237)(79,858)(720,285)Proceeds from sale of property, plant and equipment8589,31383,999Purchase of intangible assets(4,368)(10,445)(94,209)Proceeds from sale of intangible assets113117Proceeds from sale of investment property922198Purchase of investments in subsidiaries-(887)(8,000)Other(1,942)(2,142)(19,319)Net cash from (used in) investing activities(74,661)(82,738)(746,261)Cash flows from financing activitiesNet increase (decrease) in current borrowings2011,590(16,832)(151,817)Proceeds from non-current borrowings2049,908--Repayment of non-current borrowings20(50,000)(135)(1,217)Proceeds from issuance of bonds issued2019,896--Redemption of bonds issued20(10,000)(10,000)(90,195)Payment of lease obligations20(106)(150)(1,352)Dividends paid25(21,133)(22,190)(200,144)Dividends paid to non-controlling interests(116)(120)(1,082)Purchase of treasury shares(2)(0)(0)Net cash from (used in) financing activities37(49,430)(445,837)Effect of exchange rate changes on cash and cash equivalents(1,759)7676,918Net increase (decrease) in cash and cash equivalents7,895(54,439)(491,016)Cash and cash equivalents at beginning of period8221,782229,6782,071,597Cash and cash equivalents at end of period8229,678175,2381,580,571Millions 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 ¥110.87 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.
(5) Changes in Accounting Policies
Epson adopted the following standards and interpretations for the reporting period.
IFRS
Description of new and revised standards
IFRS 9
Financial Instruments
IFRS 15 Revenue from Contracts with Customers
Amendments to hedge accounting
Limited changes to classification and measurement of
financial assets, and introduction of an expected credit
loss impairment model
Amendments to accounting treatment for recognising
revenue
(A) Adoption of IFRS9 Financial Instruments
Epson adopted IFRS9 Financial Instruments (revised July 2014) (“IFRS9”) for the reporting period in conformity
with certain transition provisions.
The impact on the consolidated result of operations from the adoption of IFRS9 was not material.
(B) Adoption of IFRS15 Revenue from Contracts with Customers
Epson adopted IFRS15 Revenue from Contracts with Customers (issued May 2014) and Clarifications to IFRS15
(issued April 2016) (“IFRS15”) for the reporting period.
Epson applied IFRS15 retrospectively to recognise the cumulative effect of initially applying IFRS15 as an
adjustment to the opening balance of retained earnings of the reporting period.
Epson recognises revenue by applying the following five steps approach.
65
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when Epson satisfies a performance obligation
Epson is mainly engaged in the manufacture and sale of products of Printing Solutions, Visual Communications,
and Wearable & Industrial Products. Usually Epson transfers control of a promised good and satisfies a
performance obligation at the time of delivery of the good. Therefore, Epson recognises revenue at the time of its
delivery. Revenue is measured at the amount of consideration promised in a contract with a customer taking into
consideration the effects of price discount, sales rebate, etc.
The impact on the consolidated result of operations from the adoption of IFRS15 was insignificant.
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.
(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
66
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
(A) Financial Assets
(i) Initial Recognition and Measurement
Financial assets are measured at the sum of their fair values and transaction costs that are directly attributable to
the acquisition of the financial assets at initial recognition. However, in the measurement after initial recognition
(subsequent measurement), the transaction costs of financial assets classified as subsequently measured at fair
value through profit or loss are recognised through profit or loss.
Financial assets are initially recognised on the trade date when Epson becomes party to the contractual provisions
of the financial instrument.
(ii) Classification and Subsequent Measurement
At initial recognition, Epson classifies financial assets as subsequently measured at amortised cost, fair value
through other comprehensive income or fair value through profit or loss.
(a) Financial assets are classified as financial assets measured at amortised cost if both of the following
conditions are met:
1) the financial assets are held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows and
2) the contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
(b) Financial assets are classified as financial assets measured at fair value through other comprehensive income
if both of the following conditions are met:
1) the financial assets are held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets and
2) the contractual terms of the financial assets give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
(c) Financial assets except for those provided above are classified as financial assets measured at fair value
through profit or loss.
However, Epson may designate financial assets as measured at fair value through other comprehensive income
for particular investments in equity instruments that are not held for trading and so forth, and recognises
subsequent changes in fair value in other comprehensive income. The cumulative gain or loss previously
recognised in other comprehensive income is reclassified to retained earnings when the financial assets are
derecognised or the decline in their fair values is significant. Dividends on the financial assets are recognised in
profit or loss for each fiscal year.
(iii) Derecognition
Financial assets are derecognised when the contractual rights to the cash flows from them expire or when
substantially all the risks and rewards of ownership of them are transferred.
(iv) Impairment
For impairment of financial assets, loss allowance for expected credit losses are recognised.
At each reporting date, Epson assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition.
If the credit risk on a financial instrument has not increased significantly since initial recognition, the loss
allowance for that financial instrument is measured at an amount equal to 12-month expected credit losses.
67
Meanwhile, if the credit risk on a financial instrument has increased significantly since initial recognition, the
loss allowance for that financial asset is measured at an amount equal to the lifetime expected credit losses.
However, the loss allowance for trade receivables, contract assets and lease receivables are measured at an
amount equal to lifetime expected credit losses.
Expected credit losses of a financial instrument is measured in a way that reflects:
(a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
(b) the time value of money; and
(c) reasonable and supportable information that is available without undue cost or effort at the reporting date
about past events, current conditions and forecasts of future economic conditions.
When impairment is recognised, the carrying amount of the financial asset is reduced through an allowance
account for credit losses and the amount of expected credit losses is recognised as impairment loss in profit or
loss. If the amount of the impairment loss decreases due to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed in profit or loss through an allowance account
for credit losses.
(B) 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 initially recognised on the trade date when Epson becomes party to the contractual
provisions of the financial instrument.
(ii) Classification and Subsequent Measurement
Financial liabilities are classified into financial liabilities measured subsequently at fair value through profit or
loss and financial liabilities measured at amortised cost at initial recognition.
After initial recognition, financial liabilities are measured based on the classification as follows:
(a) Financial Liabilities Measured at Fair Value through Profit or Loss
The 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
The 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.
(C) 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.
(D) 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.
(E) 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
68
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.
(F) 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.
(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 17 years
The estimated useful life, depreciation method and residual value are reviewed at each fiscal year end and, if
69
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.
(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.
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.
(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
70
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.
(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
Epson recognises revenue by applying the following five steps approach.
71
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognise revenue when Epson satisfies a performance obligation
Epson is mainly engaged in the manufacture and sale of products of Printing Solutions, Visual Communications,
and Wearable & Industrial Products. Usually Epson transfers control of a promised good and satisfies a
performance obligation at the time of delivery of the good. Therefore, Epson recognises revenue at the time of its
delivery. Revenue is measured at the amount of consideration promised in a contract with a customer taking into
consideration the effects of price discount, sales rebate, etc.
(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.
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.
72
(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
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.”
73
(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 “39. Contingencies.”
5. Changes in Accounting Estimates
Change of Method to Estimate Net Realisable Value of Inventories
Epson has inventories of printheads that are used in several product lines. Epson formerly allocated these printhead
inventories to the product lines where Epson intended to finally use them, and the net realisable values of the
inventories were calculated by product line after allocation. However, effective from the year ended March 31,
2019, Epson changed the method and began calculating the net realisable value of the printhead itself.
This change was made to better mirror the current business reality. Epson has shifted in recent years toward an
emphasis on high-capacity ink tank printers rather than ink cartridge printers and has adopted a strategy of
expanding external printhead sales. Meanwhile, a broad range of printhead applications has emerged, making it
more difficult to identify product lines at the printhead manufacturing stage.
Under the new method, the cost of sales decreased by ¥5,418 million ($48,868 thousand), and profit from operating
activities and profit before tax increased by the same amount for the year ended March 31, 2019.
74
6. New Standards and Interpretations Not Yet Applied
The new standards, amended standards and new interpretations that were issued as of the date of approval of the
consolidated financial statements but have not yet been applied by Epson are as follows.
IFRS
Date of mandatory
application
(from the fiscal year
beginning on or
after)
Reporting
periods of
application by
Epson
(The reporting
period ending)
IFRS 16 Leases
January 1, 2019
March 31, 2020
Description of new and revised standards
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
Applying IFRS16 Leases which provides a single lease accounting model, Epson will in principle recognise a right-
of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to
make lease payments on the consolidated statement of financial position for all leases.
This is expected to result in an increase of approximately ¥27 billion ($244 million) in the assets and ¥28 billion
($253 million) in the liabilities and a decrease of approximately ¥1 billion ($9 million) in the equity (retained
earnings).
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.
75
(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.
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
Intersegment revenues
449
2
8,801
9,253
Total revenue
736,688
198,891
167,336
1,102,916
187
749
936
8,265
1,102,116
(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
Profit from operating activities
(expense)
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
Profit before tax
(9,782)
65,003
(2,414)
74
62,663
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Printing
Solutions
Reportable segments
Visual
Communi-
cations
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 and expenses relating to new businesses and general corporate
functions 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.
76
FY2018: Year ended March 31, 2019
Millions of yen
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenues
722,958
203,305
154,074 1,080,337
Intersegment revenues
721
3
9,336
10,061
Total revenue
723,679
203,309
163,410 1,090,399
187
762
950
9,151 1,089,676
(10,824)
-
(1,672) 1,089,676
Segment profit (loss)
(Business profit)
(Note 1)
94,554
21,232
5,508
121,296
(541)
(50,256)
70,498
Other operating income
Profit from operating activities
(expense)
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
Profit before tax
856
71,355
585
99
72,040
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 4)
Consolidated
(30,653)
(9,871)
(9,198)
(49,724)
(18)
(5,897)
(55,639)
(85)
(347)
(106)
(539)
-
(204)
(743)
Segment assets
463,833
129,254
151,921
745,010
284
293,094 1,038,389
Capital expenditures
46,813
11,408
13,980
72,202
10
9,862
82,075
(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 (¥50,256) million comprised “Eliminations” of
¥431 million and “Corporate expenses” of (¥50,687) million. “Corporate expenses” included expenses relating to
research and development for basic technology and expenses relating to new businesses and general corporate
functions which are not attributed to reportable segments.
(Note 4) “Adjustments” to Segment assets of ¥293,094 million comprised “Eliminations” of (¥5,893) million and
“Corporate assets” of ¥298,988 million.
77
FY2018: Year ended March 31, 2019
Thousands of U.S. dollars
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 3)
Consolidated
Revenue
External revenues
6,520,772 1,833,724 1,389,681 9,744,177
1,686
82,538 9,828,411
Intersegment revenues
6,503
27
84,206
90,745
6,872
(97,627)
-
Total revenue
6,527,275 1,833,760 1,473,888 9,834,932
8,568
(15,080) 9,828,411
Segment profit (loss)
(Business profit)
(Note 1)
852,836
191,503
49,679 1,094,038
(4,879)
(453,287)
635,861
Other operating income
Profit from operating activities
(expense)
Finance income (costs)
Share of profit of
investments accounted for
using the equity method
Profit before tax
7,720
643,591
5,276
892
649,770
Other items
Depreciation and
amortisation
Impairment losses of
assets other than
financial assets
Printing
Solutions
Reportable segments
Visual
Communi-
cations
Wearable &
Industrial
Products
Subtotal
Other
(Note 2)
Adjustments
(Note 4)
Consolidated
(276,476)
(89,032)
(82,962)
(448,489)
(162)
(53,188)
(501,839)
(766)
(3,129)
(956)
(4,861)
-
(1,839)
(6,701)
Segment assets
4,183,575 1,165,515 1,370,262 6,719,671
2,561 2,643,582 9,365,824
Capital expenditures
422,233
102,895
126,093
651,231
90
88,951
740,281
(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 ($453,287) thousand comprised
“Eliminations” of $3,887 thousand and “Corporate expenses” of ($457,175) thousand. “Corporate expenses”
included expenses relating to research and development for basic technology and expenses relating to new
businesses and general corporate functions which are not attributed to reportable segments.
(Note 4) “Adjustments” to Segment assets of $2,643,582 thousand comprised “Eliminations” of ($53,152)
thousand and “Corporate assets” of $2,696,743 thousand.
78
(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,
2018
2019
Thousands of U.S. dollars
March 31,
2019
199,251
41,197
30,238
23,377
33,964
328,030
217,072
48,803
29,082
23,885
37,365
356,209
1,957,896
440,182
262,307
215,432
337,016
3,212,852
(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,
2019
2018
Thousands of U.S. dollars
Year ended March 31,
2019
250,119
216,116
144,014
491,866
1,102,116
251,454
212,720
146,957
478,544
1,089,676
2,268,007
1,918,643
1,325,489
4,316,262
9,828,411
(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,
2018
109,589
120,088
229,678
2019
113,646
61,592
175,238
Thousands of
U.S. dollars
March 31,
2019
1,025,038
555,533
1,580,571
79
9. Trade and Other Receivables
The breakdown of “Trade and other receivables” was as follows:
Notes and trade receivables
Other receivables
Allowance account for credit losses
Total
Millions of yen
March 31,
2018
151,032
15,682
(1,433)
165,282
2019
156,784
17,490
(1,101)
173,173
Thousands of
U.S. dollars
March 31,
2019
1,414,124
157,752
(9,930)
1,561,946
Trade and other receivables are presented net of the allowance account for credit losses in the consolidated
statement of financial position.
Trade and other receivables are classified as financial assets measured at amortised cost.
10. Inventories
The breakdown of “Inventories” was as follows:
Merchandise and finished goods
Work in process
Raw materials
Supplies
Total
Millions of yen
March 31,
2018
131,612
55,651
25,159
10,805
223,227
2019
145,064
61,585
32,430
11,683
250,763
Thousands of
U.S. dollars
March 31,
2019
1,308,415
555,470
292,504
105,375
2,261,775
The amount of inventories included in cost of sales recognised as an expense totaled (¥667,638) million and
(¥657,953) million (($5,934,454) thousand) for the years ended March 31, 2018 and 2019, respectively.
Losses recognised as cost of sales as a result of valuations for the years ended March 31, 2018 and 2019 were
(¥29,708) million and (¥21,825) million (($196,852) thousand), respectively. In addition, Epson has no
inventories pledged as collateral.
80
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,
2018
2019
1,080
15,242
58
101
5,519
(53)
21,947
1,513
20,433
21,947
826
11,557
736
51
6,252
(50)
19,374
1,466
17,907
19,374
Thousands of
U.S. dollars
March 31,
2019
7,450
104,239
6,638
459
56,390
(450)
174,745
13,222
161,513
174,745
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 are classified mainly as
financial assets measured at fair value through profit or loss, 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.
81
Fair valueDividendsreceived (Note)Fair valueDividendsreceived (Note)Fair valueDividendsreceived (Note)NGK Insulators, Ltd.4,5971022,0216018,228541Mizuho Financial Group, Inc.2,8721122,57111223,1891,010(Note) Dividends received from the derecognised financial assets during the reporting periods are not included.Millions of yenThousands of U.S. dollarsMarch 31, 2018March 31, 2019March 31, 2019FY2017: Year ended March 31, 2018Fair value at thedate of saleAccumulatedgainsDividendsreceivedAccumulated gainstransferred intoretained earnings(net of tax) (Note)NGK 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 yen
12. Other Assets
The breakdown of “Other assets” was as follows:
Prepaid expense
Advances to suppliers
Other
Total
Current assets
Non-current assets
Total
Millions of yen
March 31,
2018
13,829
3,939
4,016
21,784
16,485
5,299
21,784
2019
15,194
5,486
3,286
23,967
17,938
6,028
23,967
Thousands of
U.S. dollars
March 31,
2019
137,043
49,481
29,638
216,172
161,793
54,369
216,172
82
FY2018: Year ended March 31, 2019Fair value at thedate of saleAccumulatedgainsDividendsreceivedAccumulated gainstransferred intoretained earnings(net of tax) (Note)NGK Insulators, Ltd.2,1271,426601,117(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.FY2018: Year ended March 31, 2019Fair value at thedate of saleAccumulatedgainsDividendsreceivedAccumulated gainstransferred intoretained earnings(net of tax) (Note)NGK Insulators, Ltd.19,18412,86154110,074(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 yenThousands of U.S. dollars
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:
83
CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 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 fromconstruction in progress24,35223,60710,915(58,875)--Other565(1,586)112(303)(2,547)(3,759)As of March 31, 2018483,810486,174187,71628,5443671,186,613Individual acquisition2,9813,9015,03865,4063477,363Acquisition of subsidiary369461--417Transfer from (to)investment property(316)----(316)Sale or disposal(9,914)(12,974)(9,891)(13)(118)(32,913)Exchange differences ontranslation of foreign operations1,8922,3754,090374(9)8,723Transfer fromconstruction in progress34,25123,26814,500(72,020)--Other448(2,415)(908)(446)(88)(3,410)As of March 31, 2019513,523500,375200,54621,8451861,236,477CostLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20184,363,7594,385,0811,693,118257,4543,31010,702,741Individual acquisition26,88735,18545,440589,934306697,781Acquisition of subsidiary3,3284149--3,761Transfer from (to)investment property(2,850)----(2,850)Sale or disposal(89,420)(117,019)(89,212)(117)(1,064)(296,861)Exchange differences ontranslation of foreign operations17,06521,42136,8903,373(81)78,677Transfer fromconstruction in progress308,929209,867130,783(649,589)--Other4,040(21,782)(8,189)(4,022)(793)(30,756)As of March 31, 20194,631,7574,513,1681,808,839197,0321,67711,152,493Millions 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.
84
Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 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)Depreciation expense (Note)(10,564)(22,198)(16,985)-(19)(49,768)Impairment losses(249)(155)(8)--(412)Acquisition of subsidiary(19)(39)(1)--(60)Transfer to (from)investment property58----58Sale or disposal4,49712,3579,595-2926,479Exchange differences ontranslation of foreign operations(510)(1,414)(3,368)-8(5,285)Other(199)2,609740-13,152As of March 31, 2019(342,276)(404,550)(167,523)-(171)(914,521)Accumulated Depreciation andAccumulated Impairment LossesLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 2018(3,024,172)(3,569,126)(1,420,537)-(1,713)(8,015,558)Depreciation expense (Note)(95,282)(200,216)(153,197)-(171)(448,886)Impairment losses(2,245)(1,398)(72)--(3,716)Acquisition of subsidiary(171)(351)(9)--(541)Transfer to (from)investment property523----523Sale or disposal40,561111,45486,542-261238,829Exchange differences ontranslation of foreign operations(4,599)(12,753)(30,377)-72(47,668)Other(1,794)23,5326,674-928,429As of March 31, 2019(3,087,183)(3,648,868)(1,510,985)-(1,542)(8,248,588)Millions of yenThousands of U.S. dollars
The carrying amount of property, plant and equipment includes the carrying amount of the following leased assets:
(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, 2018 and 2019, 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.
85
Carrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of April 1, 2017133,75981,57530,37126,7232,764275,195As of March 31, 2018148,52090,46430,22028,544177297,927As of March 31, 2019171,24795,82533,02321,84515321,956Carrying AmountLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesConstructionin progressOtherTotalAs of March 31, 20181,339,586815,946272,571257,4541,5962,687,174As of March 31, 20191,544,574864,300297,853197,0321352,903,905Millions of yenThousands of U.S. dollarsLeased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of April 1, 20175717830267As of March 31, 201828219944526As of March 31, 201971718629932Leased AssetsLand, buildingsand structuresMachinery,equipment andvehiclesTools, furnitureand fixturesTotalAs of March 31, 20182,5431,7943964,744As of March 31, 20196,4671,6772618,406Millions of yenThousands of U.S. dollars
14. Intangible Assets
The schedules of the cost, accumulated amortisation and accumulated impairment losses, and carrying amount of
“Intangible assets” were as follows:
86
CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 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, 201848,78213,80910,0104,9654,13881,706Individual acquisition4,8272,2631,246-5258,863Acquisition of subsidiary53--741749Sale or disposal(4,898)(2,415)(12)-(73)(7,400)Exchange differences ontranslation of foreign operations173-7(112)2189Other1668(28)-(30)116As of March 31, 201949,05513,66911,2234,8535,32384,125CostSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2018439,992124,55190,28544,78237,322736,953Individual acquisition43,53720,41111,238-4,73579,940Acquisition of subsidiary4527--6,6836,755Sale or disposal(44,177)(21,782)(108)-(658)(66,744)Exchange differences ontranslation of foreign operations1,560-63(1,010)189802Other1,49772(252)-(270)1,046As of March 31, 2019442,455123,288101,22643,77148,011758,771Millions 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.
87
Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 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)Amortisation expense (Note)(4,205)(682)(987)-(477)(6,352)Impairment losses(0)---(0)(0)Acquisition of subsidiary(2)(3)---(5)Sale or disposal4,8862,41312-577,369Exchange differences ontranslation of foreign operations(114)-(6)-(45)(166)Other(120)(8)--19(109)As of March 31, 2019(35,570)(11,113)(9,790)-(2,459)(58,934)Accumulated Amortisation andAccumulated Impairment LossesSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2018(324,830)(115,739)(79,444)-(18,147)(538,179)Amortisation expense (Note)(37,927)(6,151)(8,902)-(4,302)(57,292)Impairment losses(0)---(0)(0)Acquisition of subsidiary(18)(27)---(45)Sale or disposal44,06921,764108-51466,465Exchange differences ontranslation of foreign operations(1,028)-(54)-(405)(1,497)Other(1,082)(72)--171(983)As of March 31, 2019(320,826)(100,234)(88,301)-(22,179)(531,559)Millions of yenThousands of U.S. dollars
15. Finance Lease Transactions
Epson leases instantaneous voltage drop compensators, host gas supply facilities for factory and other 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,
2018
2019
Thousands of
U.S. dollars
March 31,
2019
140
(3)
137
293
(4)
289
71
(0)
70
506
(8)
497
168
(7)
161
412
(19)
393
408
(18)
389
989
(45)
944
1,515
(63)
1,452
3,716
(171)
3,544
3,679
(162)
3,508
8,920
(405)
8,514
88
Carrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of April 1, 201712,7341,5561,4534,7611,04721,553As of March 31, 201812,7679771,2024,9652,12522,037As of March 31, 201913,4842,5561,4324,8532,86325,191Carrying AmountSoftwarePatent rightsProductdevelopmentassetsGoodwillOtherTotalAs of March 31, 2018115,1528,81210,84144,78219,166198,764As of March 31, 2019121,61923,05412,91643,77125,823227,212Millions of yenThousands of U.S. dollars
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,
2018
6,497
12,576
2,854
21,928
2019
6,632
15,434
6,966
29,033
Thousands of
U.S. dollars
March 31,
2019
59,817
139,208
62,830
261,865
(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,
2018
9,203
118
2019
9,222
117
Thousands of
U.S. dollars
Year ended
March 31,
2019
83,178
1,055
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
89
Millions of yen
Year ended
March 31,
2018
1,288
-
(10)
(7)
(34)
(17)
1,219
2,694
(1,405)
1,288
2,568
(1,348)
1,219
2019
1,219
257
(16)
-
(9)
9
1,461
2,568
(1,348)
1,219
2,879
(1,418)
1,461
Thousands of
U.S. dollars
Year ended
March 31,
2019
10,994
2,318
(144)
-
(81)
81
13,177
23,162
(12,158)
10,994
25,967
(12,789)
13,177
(2) Fair Value
The carrying amount and the fair value of “Investment property” were as follows:
Millions of yen
March 31, 2018
March 31, 2019
Thousands of
U.S. dollars
March 31, 2019
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Investment property
1,219
907
1,461
1,988
13,177
17,930
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
Net defined benefit liabilities
Fixed assets (Note 1)
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,
2018
2019
Thousands of
U.S. dollars
March 31,
2019
19,487
10,784
6,113
6,413
20,428
63,226
(12,826)
(3,058)
(2,689)
(18,574)
44,651
15,964
7,586
6,699
5,440
23,640
59,331
(13,601)
(2,596)
(2,330)
(18,528)
40,802
143,988
68,422
60,422
49,066
213,222
535,140
(122,675)
(23,414)
(21,015)
(167,114)
368,016
(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,
2018 and 2019, 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.
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
90
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, 2018 and 2019, were ¥41,434 million and ¥47,931 million ($432,317 thousand), respectively. The
amounts of deductible temporary differences, for which deferred tax assets have not been recognised, as of March
31, 2018 and 2019, were ¥95,935 million and ¥104,679 million ($944,159 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,
2018
-
-
32,907
7,323
1,203
41,434
2019
-
38,357
-
11
9,562
47,931
Thousands of
U.S. dollars
March 31,
2019
-
345,963
-
99
86,245
432,317
Epson has no taxable temporary differences associated with investments in subsidiaries for which deferred tax
liabilities have not been recognised as of March 31, 2018 and 2019.
(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,
2018
(20,984)
84
(20,899)
2019
(13,548)
(4,447)
(17,995)
Thousands of
U.S. dollars
Year ended
March 31,
2019
(122,197)
(40,110)
(162,307)
Deferred tax expense increased by ¥4,867 million mainly due to the effect of changes in the U.S. applicable tax rate
for the year ended March 31, 2018. Deferred tax expense increased by ¥86 million ($775 thousand) mainly due to
the effect of changes in Japanese applicable tax rate for the year ended March 31, 2019.
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 ¥4,854
million and increased by ¥1,510 million ($13,619 thousand) for the years ended March 31, 2018 and 2019,
respectively.
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(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% and 30.5% for the years ended March 31, 2018 and 2019 respectively.
Foreign subsidiaries are subject to income tax at their locations.
%
Year ended
March 31, 2018
30.7
(5.5)
2.8
(5.9)
7.8
3.5
33.4
Year ended
March 31, 2019
30.5
(6.7)
(2.9)
2.4
0.1
1.6
25.0
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,
2018
81,459
73,299
154,759
2019
76,439
67,960
144,399
Thousands of
U.S. dollars
March 31,
2019
689,447
612,970
1,302,417
Trade and other payables are classified as financial liabilities measured at amortised cost.
92
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:
(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.
93
Thousands ofU.S. dollarsMarch 31,201820192019Current borrowings25,94911,204101,0552.76-Current portion of bonds issued(Note 2)9,9959,99790,168--Non-current borrowings50,41550,435454,9020.442027Bonds issued (Note 2)79,70769,769629,286--Lease liabilities4979448,5140.832019 to 2034 Total166,565142,3511,283,945Current liabilities36,08221,363192,685Non-current liabilities130,483120,9871,091,251 Total166,565142,3511,283,945Millions of yen%DueMarch 31,Average interestrate (Note 1)Thousands ofU.S. dollarsMarch 31,20182019201910,000(10,000)10,00090,195(10,000)(90,195)The CompanyThe 13th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 21, 20160.10NonSep 21, 202120,00020,000180,391The CompanyThe 14th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 21, 20160.27NonSep 21, 202320,00020,000180,391The CompanyThe 15th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 21, 20160.34NonSep 18, 202610,00010,00090,195The CompanyThe 16th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 6, 20170.26NonSep 6, 202410,00010,00090,195The CompanyThe 17th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 6, 20170.36NonSep 6, 202710,00010,00090,19590,00080,000721,565(10,000)(10,000)(90,195)Millions of yeninterestrateMarch 31,Maturity dateNon-CompanyName of bonds issuedIssue date%CollateralThe CompanyThe 12th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)-The CompanyThe 11th Series unsecuredstraight bonds issued (with inter-bond pari passu clause)Sep 11, 20130.57Sep 11, 2018Jun 13, 20140.35Jun 13, 2019Non10,000
(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.
94
FY2017: Year ended March 31, 2018Acquisition orloss of controlForeign 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)459166,565FY2018: Year ended March 31, 2019Acquisition orloss of controlForeign exchangemovementOtherCurrent borrowings25,949(16,832)-2,087-11,204Non-current borrowings50,415(135)135-1950,435Bonds issued89,703(10,000)--6479,767Lease liabilities497(150)-(0)597944 Total166,565(27,118)1352,087681142,351FY2018: Year ended March 31, 2019Acquisition orloss of controlForeign exchangemovementOtherCurrent borrowings234,048(151,817)-18,823-101,055Non-current borrowings454,721(1,217)1,217-171454,902Bonds issued809,082(90,195)--577719,464Lease liabilities4,482(1,352)-(0)5,3848,514 Total1,502,345(244,592)1,21718,8236,1421,283,945As of April 1,2017Changes fromcash flowsAs of March 31,2018As of April 1,2018Changes fromcash flowsAs of March 31,2019As of April 1,2018Changes fromcash flowsAs of March 31,2019Non-cash changesNon-cash changesNon-cash changesMillions of yenMillions of yenThousands of U.S. dollars
21. Provisions
The breakdown and the schedule of “Provisions” were as follows:
(Note) With the application of IFRS15, provision for rebates, which were previously included in “Provisions,” are
presented in “Other current liabilities” on the consolidated statement of financial position from the fiscal year
ended March 31, 2019.
95
FY2017: 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 Total12,94010,1383,7192628,29735,358FY2018: Year ended March 31, 2019Provision for productwarrantiesProvision forrebates (Note)Asset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 201812,940-3,7192628,29725,219Arising during the year12,948-3331781,58215,043Utilised(12,326)-(239)(121)(4,881)(17,569)Unused amounts reversed(613)---(286)(900)Exchange differences ontranslation of foreignoperations(9)-(3)(6)3918As of March 31, 201912,938-3,8083134,75121,812Current liabilities10,587-2281381,72312,677Non-current liabilities2,351-3,5801743,0279,134 Total12,938-3,8083134,75121,812FY2018: Year ended March 31, 2019Provision for productwarrantiesProvision forrebates (Note)Asset retirementobligationsProvision forloss onlitigationOtherprovisionsTotalAs of April 1, 2018116,713-33,5432,36374,835227,464Arising during the year116,785-3,0031,60514,268135,681Utilised(111,175)-(2,155)(1,091)(44,024)(158,464)Unused amounts reversed(5,528)---(2,579)(8,117)Exchange differences ontranslation of foreignoperations(81)-(27)(54)351162As of March 31, 2019116,695-34,3462,82342,851196,734Current liabilities95,490-2,0561,24415,540114,341Non-current liabilities21,205-32,2901,56927,30282,384 Total116,695-34,3462,82342,851196,734Millions of yenMillions of yenThousands of U.S. dollars
(1) Provision for product warranties
For warranty expenditures, Epson recognises the provisions for estimated amounts based on the rate of historical
service contract expenses to sales as well as estimated amounts for those products where future warranty expenses
can be reliably estimated. Most of these expenditures are expected to be paid in the next fiscal year.
(2) Asset retirement obligations
Epson recognises provisions for asset retirement obligation which derive from the acquisition, construction,
development or normal use of property, plant and equipment. Epson is required to bear the amount of asset
retirement obligation 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.
(3) Provision for loss on litigation
Epson recognises provisions for loss on litigation based on the reasonably estimated compensation for damages and
litigation expenses at an amount deemed necessary at the end of the period. These expenditures are expected to be
paid mainly after three years or more.
22. Other Liabilities
The breakdown of “Other liabilities” was as follows:
Accrued expense
Accrued bonus to employees
Accrued employee’s unused paid vacations
Contract liabilities
Refund liabilities
Other
Total
Current liabilities
Non-current liabilities
Total
Millions of yen
March 31,
2018
25,792
28,238
25,156
-
-
29,890
109,078
97,643
11,434
109,078
2019
23,105
27,015
25,167
17,773
19,566
13,955
126,585
114,887
11,697
126,585
Thousands of
U.S. dollars
March 31,
2019
208,397
243,663
226,995
160,304
176,476
125,868
1,141,742
1,036,231
105,501
1,141,742
96
23. Post-employment Benefits
The Company and some Japanese subsidiaries have the following defined benefit plans: defined benefit corporate
pension plans and lump-sum severance plans. In addition, they also have defined contribution plans.
Some overseas subsidiaries have defined benefit plans and defined contribution plans.
Epson’s major defined benefit plans are administrated by the Corporate Pension Fund (the “Fund”) in accordance
with the Defined-Benefit Corporate Pension Act (Act No. 50 of 2001).
The benefits of defined benefit plans are determined based on conditions, such as years of service, the salary
proportional method based on average employee salaries for services or final base salaries for retirement benefits
and a funded method based on the points employees have earned for each year of service.
The Fund has a Board of Representatives consisting of representatives of the Company and its Japanese subsidiaries
and representatives of the plan participants in accordance with the rules of the Fund. The Board of Representatives
is responsible for changes in the rules of the Fund, dismissal of the board members including members who execute
operations related to the administration and investment of pension reserves for the Fund, and resolutions of the
business report and the closing of account.
(1) Schedule of Defined Benefit Obligations
The schedule of the defined benefit obligations was as follows:
Balance at the beginning of the year
Service cost
Interest cost
Remeasurement
Actuarial gains and losses arising from
changes in demographic assumptions
Actuarial gains and losses arising from
changes in financial assumptions
Past service cost and losses (gains) arising
from settlements
Exchange differences on translation of foreign
operations
Benefits paid
Effects of business combinations and disposals
Balance at the end of the year
Millions of yen
Year ended
March 31,
2018
308,935
10,267
2,832
20,932
(17,455)
-
748
(9,343)
-
316,917
2019
316,917
10,137
3,123
2,277
7,892
84
(676)
(10,427)
1
329,331
Thousands of
U.S. dollars
Year ended
March 31,
2019
2,858,455
91,431
28,168
20,537
71,182
757
(6,097)
(94,047)
9
2,970,424
97
(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 ¥7,815 million ($70,487 thousand) for the year ending March 31, 2020.
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,
2018
263,654
2,064
8,725
1,123
6,992
1,167
(9,119)
274,607
2019
274,607
2,348
1,500
(553)
6,926
1,148
(10,145)
275,832
Thousands of
U.S. dollars
Year ended
March 31,
2019
2,476,837
21,177
13,529
(4,987)
62,469
10,354
(91,503)
2,487,886
(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,
2018
311,041
(274,607)
36,433
5,876
42,309
42,321
(11)
42,309
2019
323,311
(275,832)
47,478
6,020
53,498
53,498
-
53,498
Thousands of
U.S. dollars
March 31,
2019
2,916,126
(2,487,886)
428,231
54,297
482,529
482,529
-
482,529
98
(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.
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
Millions of yen
March 31,
2018
2019
Thousands of
U.S. dollars
March 31,
2019
17,338
4,543
3,306
3,924
3,592
32,705
30,827
57,927
111,373
41,297
475
241,902
14,528
2,978
3,573
3,588
3,628
28,297
25,662
57,714
120,224
43,440
493
247,535
131,036
26,860
32,226
32,362
32,723
255,226
231,460
520,555
1,084,369
391,810
4,446
2,232,659
(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.
99
(7) Matters Related to Actuarial Assumptions
The major item of actuarial assumptions was as follows:
%
March 31, 2018
March 31, 2019
Discount rate
1.0
0.9
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, 2019 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,
2019
(49,003)
57,236
Thousands of
U.S. dollars
March 31,
2019
(441,986)
516,244
The weighted-average duration of the defined benefit obligations at March 31, 2019 was 15.6 years.
(8) Defined Contribution Plans
Expenses for the defined contribution plans were ¥20,346 million and ¥20,518 million ($185,063 thousand) for the
years ended March 31, 2018 and 2019, respectively.
100
24. Equity and Other Equity Items
(1) Share Capital and Capital Surplus
(A) Shares Authorised
The number of authorised shares as of March 31, 2018 and 2019 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) Net decrease in the number of treasury shares during the year ended March 31, 2018 resulted from:
the delivery to beneficiaries of BIP trust
the purchase of odd shares
(6,472) shares
954 shares
(Note 2) Net decrease in the number of treasury shares during the year ended March 31, 2019 resulted from:
the delivery to beneficiaries of BIP trust
the purchase of odd shares
(8,930) shares
430 shares
(Note 3) The number of treasury shares as of March 31, 2018 included 173,528 shares held by BIP trust.
(Note 4) The number of treasury shares as of March 31, 2019 included 164,598 shares held by BIP trust.
101
Number of ordinaryshares issued(Note)Share capitalCapital surplusShare capitalCapital surplusAs of April 1, 2017399,634,77853,20484,321Increase (decrease)--43As of March 31, 2018399,634,77853,20484,364479,877760,927Increase (decrease)--62-559As of March 31, 2019399,634,77853,20484,427479,877761,495Thousands of U.S. dollarsMillions of yena shareThousands ofU.S. dollarsNumber oftreasury sharesAmountAmountAs of April 1, 2017 47,411,657 30,812Increase (decrease) (Note1) (5,518) (8)As of March 31, 2018 (Note3) 47,406,139 30,803 277,829Increase (decrease) (Note2) (8,500) (14) (126)As of March 31, 2019 (Note4) 47,397,639 30,788 277,694a 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 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 ¥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.
102
FY2017: Year ended March 31, 2018Millions of yenYen(Resolution)Total dividendsDividendsper share30March 31, 2017June 29, 2017Board of Directors Meeting(October 26, 2017)Ordinary shares(Note2) 10,572Annual Shareholders Meeting(June 28, 2017)Ordinary shares(Note1) 10,57230September 30,2017November 30,2017Class of sharesBasis dateEffective dateFY2018: Year ended March 31, 2019Millions of yenYen(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective dateBoard of Directors Meeting(October 30, 2018)Ordinary shares(Note2) 10,92431Annual Shareholders Meeting(June 27, 2018)Ordinary shares(Note1) 11,27632September 30,2018November 30,2018March 31, 2018June 28, 2018
(Note 1) The amount of dividends includes dividends of $45 thousand corresponding to the Company’s shares held
by BIP trust.
(Note 2) The amount of dividends includes dividends of $45 thousand corresponding to the Company’s shares held
by BIP trust.
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 $45 thousand corresponding to the Company’s shares held
by BIP trust.
103
FY2018: Year ended March 31, 2019Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective dateMarch 31, 2018June 28, 2018Board of Directors Meeting(October 30, 2018)Ordinary shares(Note2) 98,5290.27Annual Shareholders Meeting(June 27, 2018)Ordinary shares(Note1) 101,7040.28September 30,2018November 30,2018FY2017: Year ended March 31, 2018Millions of yenYen(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective dateAnnual Shareholders Meeting(June 27, 2018)March 31, 2018June 28, 2018Ordinary shares(Note) 11,27632FY2018: Year ended March 31, 2019Millions of yenYen(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective dateMarch 31, 2019June 27, 2019Annual Shareholders Meeting(June 26, 2019)Ordinary shares(Note) 10,92431FY2018: Year ended March 31, 2019Thousands of U.S.dollarsU.S. dollars(Resolution)Total dividendsDividendsper shareClass of sharesBasis dateEffective dateJune 27, 2019Annual Shareholders Meeting(June 26, 2019)Ordinary shares(Note) 98,5290.27March 31, 2019
26. Revenue
(1) Disaggregation of Revenue
The revenue of the reportable segments stated in “7. Segment Information” are disaggregated by each business. The
relationship between the disaggregated revenue and the reportable segments is as follows:
Printing Solutions Segment
Printers
Professional printing
Other
Inter-segment revenue
Visual Communications Segment
Wearable and Industrial Products Segment
Wearable products
Robotics solutions
Micro-devices, Other
Inter-segment revenue
Others (Note)
Total revenue from contracts with customers
Millions of yen
Year ended
March 31,
2019
723,679
505,958
198,057
19,772
(109)
203,309
163,410
49,862
22,678
96,686
(5,816)
(722)
1,089,676
Thousands of
U.S. dollars
Year ended
March 31,
2019
6,527,275
4,563,524
1,786,389
178,334
(983)
1,833,760
1,473,888
449,733
204,545
872,066
(52,457)
(6,512)
9,828,411
(Note) “Others” consisted of the intra-group services of ¥950 million ($8,568 thousand) and eliminations of (¥1,672)
million (($15,080) thousand).
Epson is mainly engaged in the manufacture and sale of products of Printing Solutions, Visual Communications, and
Wearable & Industrial Products. Usually Epson transfers control of a promised good and satisfies a performance
obligation at the time of delivery of the good. Therefore, Epson recognises revenue at the time of its delivery. Revenue
is measured at the amount of consideration promised in a contract with a customer taking into consideration the
effects of price discount, sales rebate, etc.
Epson provides the option related to maintenance services such as extended warranties at the time of sales. For
maintenance contracts related to maintenance services, since performance obligations are satisfied over time, the
amount of consideration promised in the contract with a customer is recognised as revenue evenly over the contract
period.
Contract liability is recognised until performance obligations are satisfied, in cases where Epson receives the
consideration for the transaction related to the sale of the product as an advanced payment before the good deliveries,
or Epson receives that related to maintenance contracts as a single advanced payment at the time of the contract, etc.
104
(2) Contract Balance
The breakdown of the balance of contract liabilities from contracts with customers was as follows:
Millions of yen
Thousands of
U.S. dollars
April 1, 2018 March 31, 2019
17,773
17,031
April 1, 2018 March 31, 2019
160,304
153,612
8,684
8,346
17,031
8,728
9,044
17,773
78,325
75,277
153,612
78,722
81,573
160,304
Contract liabilities
Current liabilities
Non-current liabilities
Total
Contract liabilities are included in “Other current liabilities” and “Other non-current liabilities” on the consolidated
statement of financial position. The balance of receivables from contracts with customers is stated in “9. Trade and
Other Receivables.”
Amount of revenue recognised in the reporting period from performance obligations satisfied (or partially satisfied)
in previous periods was not material.
(3) Transaction Price Allocated to the Remaining Performance Obligations
Epson uses the practical expedient of omitting the disclosure of information on the remaining performance
obligations because it has no significant transactions with expected contractual terms exceeding one year.
105
27. Selling, General and Administrative Expenses
The breakdown of “Selling, general and administrative expenses” was as follows:
Millions of yen
Year ended
March 31,
2018
(103,354)
(50,336)
(33,742)
(19,468)
(21,886)
(18,599)
(78,674)
(326,062)
2019
(107,148)
(58,260)
(37,050)
(20,826)
(20,467)
(17,912)
(80,449)
(342,113)
Thousands of
U.S. dollars
Year ended
March 31,
2019
(966,429)
(525,480)
(334,175)
(187,841)
(184,603)
(161,558)
(725,615)
(3,085,712)
Employee benefit expense
Research and development expense
Promotion expense
Service contract expense
Advertising expense
Transportation expense
Other
Total
28. Employee Benefit Expenses
The employee benefit expenses included in the consolidated statement of comprehensive income were as follows:
Salaries and wages
Legal welfare expense
Welfare expense
Expenses of post-employment benefits
Expense for defined contribution plans
Expense for defined benefit plans
Total
Millions of yen
Year ended
March 31,
2018
(216,443)
(20,617)
(11,160)
(20,346)
(5,726)
(274,294)
2019
(216,689)
(20,658)
(11,674)
(20,518)
(18,496)
(288,037)
29. Other Operating Income
The breakdown of “Other operating income” was as follows:
Gain on sales of property, plant and equipment,
intangible assets and investment property
Other
Total
Millions of yen
Year ended
March 31,
2018
2019
122
4,738
4,860
3,877
2,515
6,393
106
Thousands of
U.S. dollars
Year ended
March 31,
2019
(1,954,442)
(186,326)
(105,294)
(185,063)
(166,826)
(2,597,970)
Thousands of
U.S. dollars
Year ended
March 31,
2019
34,968
22,684
57,662
30. Other Operating Expense
The breakdown of “Other operating expense” was as follows:
Disaster loss
Foreign exchange loss
Impairment loss
Losses on the disposal of property, plant and
equipment and intangible assets
Other
Total
Millions of yen
Year ended
March 31,
2018
-
(6,182)
(2,091)
(902)
(5,466)
(14,643)
2019
(1,289)
(779)
(743)
(604)
(2,119)
(5,536)
31. Finance Income and Finance Costs
The breakdowns of “Finance income” and “Finance costs” were as follows:
Finance Income
Interest income
Dividend income
Foreign exchange gain (Note)
Other
Total
Finance Costs
Interest expense
Employee benefit expense
Foreign exchange loss (Note)
Other
Total
Millions of yen
Year ended
March 31,
2018
2019
947
327
-
2
1,277
1,391
621
436
-
2,450
Millions of yen
Year ended
March 31,
2018
2019
(1,243)
(768)
(1,662)
(17)
(3,691)
(1,081)
(775)
-
(8)
(1,865)
Thousands of
U.S. dollars
Year ended
March 31,
2019
(11,626)
(7,026)
(6,701)
(5,447)
(19,112)
(49,932)
Thousands of
U.S. dollars
Year ended
March 31,
2019
12,546
5,601
3,932
-
22,097
Thousands of
U.S. dollars
Year ended
March 31,
2019
(9,750)
(6,990)
-
(72)
(16,821)
(Note) The increase or decrease in the fair value of currency derivatives is included in the foreign exchange gain
(loss).
107
32. 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:
“Reclassification adjustments” shows the amounts of hedging instruments that are reclassified to profit or loss
when the transactions of the hedged items affect profit or loss. It is mainly treated as “Revenue” in the consolidated
statement of comprehensive income.
108
FY2017: 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 at FVTOCI(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 investments accounted forusing the equity method13- 13- 13 Total(4,398)4,47778(260)(182) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2018: Year ended March 31, 2019Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)(8,540)- (8,540)487(8,052)Net gain (loss) on revaluation of financial assets measured at FVTOCI(Note)(1,766)- (1,766)440(1,325)Exchange differences on translation of foreign operations5,082- 5,082- 5,082Net changes in fair value of cash flow hedges1,565(1,845)(280)85(195)Share of other comprehensive income of investments accounted forusing the equity method(10)- (10)- (10) Total(3,669)(1,845)(5,515)1,013(4,501) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeFY2018: Year ended March 31, 2019Amount arisingReclassificationadjustmentsBefore taxeffectsTax effectsNet oftax effectsRemeasurement of net defined benefit liabilities (assets)(77,027)- (77,027)4,392(72,625)Net gain (loss) on revaluation of financial assets measured at FVTOCI(Note)(15,928)- (15,928)3,968(11,950)Exchange differences on translation of foreign operations45,837- 45,837- 45,837Net changes in fair value of cash flow hedges14,115(16,641)(2,525)766(1,758)Share of other comprehensive income of investments accounted forusing the equity method(90)- (90)- (90) Total(33,092)(16,641)(49,742)9,136(40,597) (Note) FVTOCI: Fair Value Through Other Comprehensive IncomeMillions of yenMillions of yenThousands of U.S. dollars
33. Earnings per Share
(1) Basis of Calculating Basic Earnings per Share
Profit for the period attributable to owners
of the parent company
Profit for the period not attributable to
owners of the parent company
Profit used for calculation of basic
earnings per share
Weighted-average number of ordinary
shares outstanding (Thousands of Shares)
Millions of yen
Year ended
March 31,
2018
2019
Thousands of
U.S. dollars
Year ended
March 31,
2019
41,836
53,710
484,441
-
-
-
41,836
53,710
484,441
352,228
352,232
352,232
Basic earnings per share
(Yen) 118.78
(Yen) 152.49
($) 1.38
(2) Basis of Calculating Diluted Earnings per Share
Profit used for calculation of basic
earnings per share
Millions of yen
Year ended
March 31,
2018
2019
Thousands of
U.S. dollars
Year ended
March 31,
2019
41,836
53,710
484,441
Adjustments
-
-
-
Profit used for calculation of diluted
earnings per share
Weighted-average number of ordinary
shares outstanding (Thousands of Shares)
Effect of dilutive potential ordinary shares
BIP trust for eligible officers
(Thousands of Shares)
Weighted-average number of ordinary
shares diluted (Thousands of Shares)
41,836
53,710
484,441
352,228
352,232
352,232
69
108
108
352,297
352,340
352,340
Diluted earnings per share
(Yen) 118.75
(Yen) 152.44
($) 1.37
(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.
109
34. 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,
2018
42,808
¥2,313
2019
46,252
¥1,696
Year ended
March 31,
2019
-
$15
(3) Stock Compensation Expenses
The total expenses recognised from the performance-linked stock compensation plan were ¥54 million and ¥78
million ($703 thousand) for the years ended March 31, 2018 and 2019, respectively.
110
35. Financial Instruments
(1) Capital Management
Epson selects the most effective fund management method focusing on the preservation of funds in view of
safeness and flexibility. In addition, Epson obtains financing from bank loans and bonds issued. Epson has a policy
not to transact derivatives for speculation purposes, but for avoiding the risks stated below.
Epson manages net interest-bearing debt, where cash and cash equivalents are deducted from interest-bearing debt,
and capital (equity attributable to owners of the parent company). The amounts were as follows:
Interest-bearing debt
Cash and cash equivalents
Net interest-bearing debt
Capital (equity attributable to owners of the parent
company)
Millions of yen
March 31,
2018
166,565
(229,678)
(63,112)
2019
142,351
(175,238)
(32,887)
Thousands of
U.S. dollars
March 31,
2019
1,283,945
(1,580,571)
(296,626)
512,727
540,181
4,872,201
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 finance
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 equity securities and bonds receivable of customers and suppliers, mainly for the purpose of investing
surplus funds and strengthening relationships with them; those securities and bonds 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 finance 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.
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 finance
department of the Company regularly monitors the performances of these transactions and reports the results to the
Executive Committee of the Company.
The carrying amount of the financial asset presented in consolidated statement of financial position is the
maximum exposure related to the credit risk. Epson does not have an important exposure for a specific
counterparty and there is no over-concentrated credit risk with specific controls. There are no collateral or other
credit enhancements related to credit risk exposures.
For impairment of financial assets, Epson recognises a loss allowance for expected credit losses. Epson assesses
whether the credit risk on a financial instrument has increased significantly since initial recognition. Epson
111
determines whether the credit risk of financial instruments has increased significantly based on fluctuations in the
risk of default, taking into consideration internal credit ratings, the financial condition of counterparties, and the
existence of contractual breaches such as overdues.
The loss allowance for items such as trade receivables, which account for the majority of Epson’s financial assets,
is calculated by comprehensively measuring the lifetime expected credit losses based on historical experience rates.
However, when a counterparty is in serious financial difficulty, or when objective evidence such as bankruptcy or
extreme delinquency exists, Epson deems the financial assets to be credit-impaired and measures the expected
credit loss individually. Epson directly reduces the gross carrying amount of a financial asset when Epson has no
reasonable expectations of recovering a financial asset in its entirety or portion thereof.
The loss allowance for these financial assets is included in trade and other receivables or other financial assets in
the consolidated statement of financial position.
The schedule for the allowance account for credit losses of “Trade and other receivables” and “Other financial
assets” was as follows. There was no significant change in the total carrying amount in the previous or current
consolidated fiscal year that would affect changes in the loss allowance.
Balance as of April 1
Addition (Note)
Decrease (utilised)
Decrease (reversal)
Other
Balance as of March 31
Millions of yen
March 31,
2018
2019
1,485
602
(494)
(85)
(21)
1,486
1,486
481
(810)
(28)
22
1,151
Thousands of
U.S. dollars
March 31,
2019
13,403
4,338
(7,305)
(252)
198
10,381
112
(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 finance 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:
113
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-----FY2018: As of March 31, 2019CarryingamountContractualcash 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 payables144,399144,399144,399----- Borrowings61,63961,70411,20414,00050018,000-18,000 Bonds issued79,76780,00010,000-20,000-20,00030,000 Lease obligations9449891681431188663408 Other1,9571,9571102376151,829 Total288,708289,051165,77414,15420,64218,16220,07850,238Derivative financial liabilities Foreign exchange forward contract329329329----- Total329329329-----FY2018: As of March 31, 2019CarryingamountContractualcash 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 payables1,302,4171,302,4171,302,417----- Borrowings555,957556,543101,055126,2744,509162,352-162,352 Bonds issued719,464721,56590,195-180,391-180,391270,587 Lease obligations8,5148,9201,5151,2891,0647755683,679 Other17,65117,65199020768513516,496 Total2,604,0222,607,1161,495,210127,663186,182163,813181,094453,125Derivative financial liabilities Foreign exchange forward contract2,9672,9672,967----- Total2,9672,9672,967-----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 finance department of the
Company regularly reports the performances to the Executive Committee of the Company.
The breakdown of currency derivatives was as follows:
114
Derivative transactions to which hedge accounting is not appliedFY2017: As of March 31, 2018AssetsLiabilitiesForeign exchange forward contractBuying US Dollar (Yen selling)305-2-105.30JPY / USDSelling Euro (Yen buying)19,928-163-131.86JPY / EUR US Dollar (Yen buying)12,123-177-107.73JPY / USD Australian Dollar (Yen buying)3,020-140-85.33JPY / AUD Pound Sterling (Singapore Dollar buying)5-0-1.83SGD / GBPNon-Deliverable ForwardSelling Indian Rupee (US Doller buying)1,373--110.02USD / INR New Taiwan Dollar (US Doller buying)1,268--280.03USD / TWD Won (US Doller buying)703--310.00USD / KPW Total38,730-48371FY2018: As of March 31, 2019AssetsLiabilitiesAssetsLiabilitiesForeign exchange forward contractSelling Euro (Yen buying)12,631-374-128.36JPY / EUR113,9263,373- Australian Dollar (Yen buying)2,726-26-79.06JPY / AUD24,587234-Non-Deliverable ForwardSelling Indian Rupee (US Doller buying)2,878--1560.01USD / INR25,958-1,407 New Taiwan Dollar (US Doller buying)2,151-28-0.03USD / TWD19,401252- Won (US Doller buying)677-8-0.00USD / KPW6,10672- Total21,065-438156189,9973,9501,407ContractamountOver oneyearMillions of yenCarrying amountAvarage rateMillions of yenThousands of U.S. dollarsContractamountOver oneyearCarrying amountAvarage rateContractamountCarrying amount
(Note) Cash flow hedge is applied, and derivative transactions are measured at fair value and recognised in “Other
financial assets” or “Other financial liabilities” in the consolidated statement of financial position.
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, 2019 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.
Profit before tax
7,984
72,012
Millions of yen
March 31,
2019
Thousands of
U.S. dollars
March 31,
2019
115
Derivative transactions to which hedge accounting is appliedFY2017: As of March 31, 2018AssetsLiabilitiesForeign exchange forward contractSelling Euro (Yen buying)30,952-429-132.73JPY / EUR Australian Dollar (Yen buying)3,419-109-83.41JPY / AUDNon-Deliverable ForwardSelling Indian Rupee (US Doller buying)3,412--60.02USD / INR New Taiwan Dollar (US Doller buying)2,309--00.03USD / TWD Won (US Doller buying)2,077--350.00USD / KPW Total42,171-53842FY2018: As of March 31, 2019AssetsLiabilitiesAssetsLiabilitiesForeign exchange forward contractSelling Euro (Yen buying)30,634-278-125.76JPY / EUR276,3052,507- Australian Dollar (Yen buying)3,112-3-77.82JPY / AUD28,06827- Yuan Renminbi (US Doller buying)13,502-6-0.15USD / CNY121,78254-Non-Deliverable ForwardSelling Indian Rupee (US Doller buying)4,770--1060.01USD / INR43,023-956 New Taiwan Dollar (US Doller buying)2,294-14-0.03USD / TWD20,690126- Won (US Doller buying)2,279-17-0.00USD / KPW20,555153- Total56,596-321106510,4712,895956Over oneyearCarrying amountAvarage rateContractamountCarrying amountMillions of yenContractamountOver oneyearCarrying amountAvarage rateMillions of yenThousands of U.S. dollarsContractamount
(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, 2019 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,
2019
Thousands of
U.S. dollars
March 31,
2019
Profit before tax
507
4,572
(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. 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, 2019 was ¥577 million ($5,204 thousand) due to the changes in the fair value.
116
(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.
(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.
117
(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.
118
FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial liabilities measured at amortised cost Borrowings76,364-76,936-76,936 Bonds issued89,703-89,944-89,944Total166,067-166,880-166,880FY2018: As of March 31, 2019Level 1Level 2Level 3TotalFinancial liabilities measured at amortised cost Borrowings61,639-62,350-62,350 Bonds issued79,767-80,292-80,292Total141,407-142,642-142,642FY2018: As of March 31, 2019Level 1Level 2Level 3TotalFinancial liabilities measured at amortised cost Borrowings555,957-562,370-562,370 Bonds issued719,464-724,199-724,199Total1,275,430-1,286,569-1,286,569Millions 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.
119
FY2017: As of March 31, 2018Level 1Level 2Level 3TotalFinancial assets measured at fair value Derivative financial assets-1,080-1,080 Equity securities12,713-2,52815,242 Bonds receivable----Total12,7131,0802,52816,322Financial liabilities measured at fair valueDerivative financial liabilities-171-171Total-171-171FY2018: As of March 31, 2019Level 1Level 2Level 3TotalFinancial assets measured at fair value Derivative financial assets-826-826 Equity securities9,146-2,41011,557 Bonds receivable--690690Total9,1468263,10013,073Financial liabilities measured at fair valueDerivative financial liabilities-329-329Total-329-329FY2018: As of March 31, 2019Level 1Level 2Level 3TotalFinancial assets measured at fair value Derivative financial assets-7,450-7,450 Equity securities82,493-21,737104,239 Bonds receivable--6,2236,223Total82,4937,45027,960117,912Financial liabilities measured at fair valueDerivative financial liabilities-2,967-2,967Total-2,967-2,967Fair value Millions of yenFair value Millions of yenThousands of U.S. dollarsFair value
The movement of financial instruments categorised within Level 3 of the fair value hierarchy was as follows:
Millions of yen
Year ended
March 31,
2018
2,498
2019
2,528
29
-
(0)
2,528
(327)
900
-
3,100
Thousands of
U.S. dollars
Year ended
March 31,
2019
22,801
(2,949)
8,117
-
27,960
Balance as of April 1
Gains and losses
Other comprehensive income
Purchase
Sales
Balance as of March 31
36. Principal Subsidiaries
The content of principal subsidiaries is stated in “Additional Information 1. Principal subsidiaries and affiliates.”
37. Related Parties
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated in consolidation and are not disclosed in this note. There were no significant transactions between the
Company, its subsidiaries and other related parties.
The remuneration 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,
2018
2019
419
25
445
399
42
441
Thousands of
U.S. dollars
Year ended
March 31,
2019
3,598
378
3,977
(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.
38. 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,
2018
37,262
2,203
39,465
2019
20,931
2,249
23,181
Thousands of
U.S. dollars
March 31,
2019
188,788
20,285
209,082
120
39. Contingencies
Material litigation
In general, litigation has uncertainties and it is difficult to make a reliable estimate of financial effect of the
possibility of an outflow of resources embodying economic benefits.
Provisions are not recognised when either an outflow of resources embodying economic benefits is not probable or
an estimate of financial effect is not practicable.
Epson had the following material actions.
(1) The liquid crystal display price-fixing cartel
The investigation of the Company by a certain anti-monopoly-related authority regarding allegations of
involvement in a liquid crystal display price-fixing cartel has been completed.
(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.
40. Subsequent Events
(1) Share repurchase
The Company resolved at the meeting of its Board of Directors held on April 26, 2019 to repurchase its own shares
pursuant to Article 156 of the Companies Act as applied by replacing the relevant terms pursuant to Article 165,
Paragraph 3 of the Act.
(A) Reason for the repurchase
To optimize capital efficiency and to further enhance shareholder returns
(B) Class of shares to be repurchased
Ordinary shares
(C) Total number of repurchasable shares
7.5 million (maximum) (2.12% of the total number of issued shares (excluding treasury shares))
(D) Total repurchase cost
10 billion yen (maximum)
(E) Repurchase period
May 7, 2019 – September 20, 2019
(F) Repurchase method
Purchase on the Tokyo Stock Exchange (By securities company using discretionary method)
(2) Issuance of straight bonds by the Company
At the board of directors meeting held on June 4, 2019, the Company resolved comprehensively to issue unsecured
straight bonds up to ¥30 billion ($270,587 thousand) in order to secure funds necessary for business development.
The Company plans to issue the bonds through public offering in Japan and the purpose of funding is for
redemption of bonds, capital expenditures and operating capital.
41. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by Minoru Usui (President and Representative Director) and
Tatsuaki Seki (Director, Managing Executive Officer and General Administrative Manager, Management Control
Division) on June 26, 2019.
121
Report of Independent Auditors
122
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
100.0
100.0
Epson Atmix
Corporation
Hachinohe-shi,
Aomori
450
(million JPY)
Wearable & Industrial
products
100.0
U.S. Epson, Inc.
*
Long Beach,
U.S.A.
126,941
(thousand USD)
Holding company
100.0
Epson America, Inc.
*
Long Beach,
U.S.A.
40,000
(thousand USD)
Regional headquarters,
Printing solutions,
Visual
communications,
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
Manufacture and sales of
metal powders, synthetic
quartz crystal, etc.,
Financial assistance,
Rental and borrowing of
assets
Holding company in
Americas,
Interlocking directors
Regional headquarters in
Americas,
Sales of printers, 3LCD
projectors, factory
automation products, and
electronic devices, etc.,
Interlocking directors
Epson Portland Inc.
Portland,
U.S.A.
31,150
(thousand USD)
Printing solutions
100.0
(100.0)
Manufacture of printer
consumables, etc.
123
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
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
124
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, factory
automation products and
electronic devices, etc.,
Interlocking directors
Regional headquarters in
Southeast Asia,
Sales of printers, 3LCD
projectors and electronic
devices, etc.,
Interlocking directors
100.0
Sales of printers, 3LCD
projectors and factory
automation products, etc.
Company name
Location
Paid-in capital or
amount invested
Main business
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
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,
Financial assistance
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.
100.0
(100.0)
Manufacture of watches,
etc.
80.0
(80.0)
Manufacture of printer
consumables, etc.,
Interlocking directors
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)
PT. 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)
Epson Precision
(Hong Kong) Ltd.
*
Epson Engineering
(Shenzhen) Ltd.
*
Epson Precision
(Shenzhen) Ltd.
Orient Watch
(Shenzhen) Ltd.
Tianjin Epson Co., Ltd.
Hong Kong,
China
81,602
(thousand USD)
Shenzhen,
China
56,641
(thousand USD)
Shenzhen,
China
Shenzhen,
China
Tianjin,
China
25,000
(thousand USD)
Wearable & Industrial
products
37,748
(thousand CNY)
Wearable & Industrial
products
172,083
(thousand CNY)
Printing solutions
125
Company name
Location
Paid-in capital or
amount invested
Main business
Singapore Epson
Industrial Pte. Ltd.
Singapore
71,700
(thousand SGD)
Wearable & Industrial
products
7,000
(thousand USD)
Printing solutions
Ownership
percentage of
voting rights (%)
Relationship between parent
company and subsidiary
100.0
Manufacture of
semiconductors, and surface
finishing, etc.
100.0
(100.0)
Manufacture of printer
consumables, etc.,
Guaranty of liabilities
23,000
(thousand USD)
Printing solutions
100.0
Manufacture of printers,
Interlocking directors
Batam,
Indonesia
Bekasi,
Indonesia
PT. Epson Batam
PT. Indonesia Epson
Industry
*
Epson Precision
(Thailand) Ltd.
*
Epson Precision
(Philippines), Inc.
*
Chachoengsao,
Thailand
3,250,000
(thousand THB)
Wearable & Industrial
products
Lipa,
Philippines
157,533
(thousand USD)
Printing solutions,
Visual
communications
Epson Precision
Malaysia Sdn. Bhd.
Kuala Lumpur,
Malaysia
16,000
(thousand MYR)
Wearable & Industrial
products
Epson Precision
(Johor) Sdn. Bhd.
41 other companies
Johor,
Malaysia
–
22,800
(thousand MYR)
–
(Equity method affiliates)
Two companies
Wearable & Industrial
products
100.0
Manufacture of crystal
devices,
Interlocking directors
100.0
Manufacture of printers and
3LCD projectors
100.0
Manufacture of crystal
devices,
Interlocking directors
100.0
(100.0)
Manufacture of watch
components
–
–
–
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
Epson America, Inc.
183,472
308,658
2,824
1,451
2,225
16,800
72,816
1,370
51,638
136,044
Figures for Epson America, Inc. are included in consolidated business results.
126
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, 2019
Number of
shareholders
(Persons)
Number of
shares owned
(Units)
Percentage of
shares owned
(%)
–
84
33
417
554
25
46,820
47,933
–
–
1,480,624
212,258
558,629
603,655
114
1,139,875 3,995,155
119,278
–
37.07
5.31
13.98
15.11
0.00
28.53
100.00
–
Notes
1. 47,233,041 shares of treasury shares are included as 472,330 units under “Japanese individuals and others” and
41 shares under “Shares less than one unit.” Treasury shares do not include the Company’s shares (164,598
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.”
127
3. Major shareholders
Name
Address
Number of shares held (Shares)
Shareholding
ratio (%)
As of March 31, 2019
55,075,200
15.62
26,482,900
20,000,000
12,000,000
11,932,612
8,795,500
7.51
5.67
3.40
3.38
2.49
8,736,000
2.47
8,153,800
2.31
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
Harumi Island Triton Square
Office Tower Z, 8-12, Harumi
1-chome, Chuo-ku, Tokyo
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
Trust & Custody
Services Bank, Ltd.
(Securities investment
trust account)
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
Japan Trustee Services
Bank, Ltd. (Trust
account 5)
3-5, Owa 3-chome, Suwa-shi,
Nagano
7,274,643
2.06
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
4,876,400
1.38
Total
–
163,327,055
46.34
Notes
1. Although the Company holds 47,233,041 shares of treasury shares, 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 (164,598 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. Yasuo Hattori passed away on March 15, 2019. As the name change procedure has not been completed as of
March 31, 2019, the name on the shareholder register is presented.
128
4. Sumitomo Mitsui Trust Bank, Limited and its joint holders submitted a Report of Change to the Director of the
Kanto Local Finance Bureau as of December 20, 2018, claiming that they hold the Company’s shares as follows
as of December 14, 2018. However, we have not been able to confirm the number of shares they held at the
record date for voting. Therefore, they are not included in the above major shareholders.
Name
Address
Sumitomo Mitsui Trust
Asset Management Co.,
Ltd.
Nikko Asset Management
Co., Ltd.
1-1, Shibakoen 1-chome,
Minato-ku, Tokyo
7-1, Akasaka 9-chome,
Minato-ku, Tokyo
Total
–
Number of shares held
(Shares)
Shareholding ratio
(%)
8,011,700
13,744,500
21,756,200
2.00
3.44
5.44
5. Mitsubishi UFJ Financial Group, Inc. and its joint holders submitted a Report of Change to the Director of the
Kanto Local Finance Bureau as of January 21, 2019, claiming that they hold the Company’s shares as follows as
of January 14, 2019. However, we have not been able to confirm the number of shares they held at the record
date for voting. Therefore, they are not included in the above major shareholders.
Name
Address
Number of shares held
(Shares)
Shareholding ratio
(%)
Mitsubishi UFJ Trust and
Banking Corporation
Mitsubishi UFJ Kokusai
Asset Management Co.,
Ltd.
Mitsubishi UFJ Morgan
Stanley Securities Co.,
Ltd.
4-5, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
12-1, Yurakucho 1-chome,
Chiyoda-ku, Tokyo
5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo
10,453,900
7,842,500
1,723,721
2.62
1.96
0.43
Total
5.01
6. Nomura Securities Co., Ltd. and its joint holders submitted a Report of Change to the Director of the Kanto
Local Finance Bureau as of March 20, 2019, claiming that they hold the Company’s shares as follows as of
March 15, 2019. However, we have not been able to confirm the number of shares they held at the record date
for voting. Therefore, they are not included in the above major shareholders.
20,020,121
–
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
(%)
1,071,858
1,084,234
32,590,200
34,746,292
0.27
0.27
8.15
8.69
129
4. Officer and employee stock ownership plans
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