A Dynamic Commitment to Structural Transformation,
Globalization and Unique Value
Annual Report
2002
Year ended March 31, 2002
Profile
Through its broad range of business operations, Omron Corporation provides
innovative solutions for industry, society and daily life.
In May 2001, Omron unveiled Grand Design 2010 (GD2010), a long-term
management vision that outlines the ideal form of the Omron Group and the
basic guidelines for the management strategies to get it there. Since November
of the same year, Omron has also been implementing its Group Productivity
Improvement Reforms to accelerate the structural reforms in GD2010 in terms
of both quality and speed, and to respond to rapid changes in the business
environment.
Focusing on its core strengths in sensing and control technologies, Omron
will continue transforming itself into a global company that contributes to the
advancement of society.
Contents
Financial Highlights
To Our Shareholders
Interview with CEO Yoshio Tateisi
Review of Operations
Omron Corporate Citizenship Activities
Environmental Activities
Board of Directors, Corporate Auditors
and Executive Officers
Financial Section
Global Network
Investor Information
1
2
4
9
15
16
18
19
47
49
Statements in this annual report with respect to Omron’s plans, strategies and beliefs, as well as other statements that are
not historical facts, are forward-looking statements involving risks and uncertainties. Important factors that could cause
actual results to differ materially from such statements include, but are not limited to, general economic conditions in
Omron’s markets, which are primarily Japan, North America, Europe, Asia-Pacific and China; demand for, and competitive
pricing pressure on, Omron’s products and services in the marketplace; Omron’s ability to continue to win acceptance for
its products and services in these highly competitive markets; and movements of currency exchange rates.
Financial Highlights
Omron Corporation and Subsidiaries
Years ended March 31, 2002, 2001 and 2000
Millions of yen
(except per share data)
Thousands of
U.S. dollars (Note 2)
(except per share data)
2002
2001
2000
2002
For the Year:
Net Sales ..................................................................................................
¥533,964
¥594,259
¥555,358
$4,014,767
Income (Loss) before Income Taxes, Minority Interests
and Cumulative Effect of Accounting Change...................................
(25,373)
40,037
21,036
(190,774)
Income (Loss) before
Cumulative Effect of Accounting Change ..........................................
(16,157)
Net Income (Loss)....................................................................................
(15,773)
22,297
22,297
11,561
11,561
(121,481)
(118,594)
Per Share Data (yen and U.S. dollars):
Income (Loss) before
Cumulative Effect of Accounting Change
Basic ...........................................................................................
Diluted ........................................................................................
¥ (65.0)
(65.0)
¥ 87.4
85.3
¥ 45.0
44.5
$ (0.49)
(0.49)
Net Income (Loss)
Basic ...........................................................................................
Diluted ........................................................................................
(63.5)
(63.5)
Cash Dividends (Note 1) ..................................................................
13.0
87.4
85.3
13.0
45.0
44.5
13.0
(0.48)
(0.48)
0.10
Capital Expenditures (cash basis) ..........................................................
¥ 38,896
¥ 37,583
¥ 31,146
$ 292,451
Research and Development Expenses ..................................................
41,407
42,513
36,605
311,331
At Year End:
Total Assets..............................................................................................
¥549,366
¥593,144
¥579,489
$4,130,571
Total Shareholders’ Equity .....................................................................
298,234
325,958
336,062
2,242,361
Notes: 1. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year.
2. The U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate at March 31, 2002, of ¥133=$1.
Net Sales
Income (Loss) before Income
Taxes, Minority Interests
and Cumulative Effect of
Accounting Change
Net Income (Loss)
Net Income (Loss)
per Share (Diluted)
(Billions of Yen)
(Billions of Yen)
(Billions of Yen)
50
40
30
20
10
0
50
40
30
20
10
0
(Yen)
100
80
60
40
20
0
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
-25.4
-15.8
-63.5
Omron Corporation 1
800
700
600
500
400
300
200
100
0
A Dynamic Commitment to Structural Transformation,
Globalization and Unique Value
To Our
Shareholders
In May 2001, Omron unveiled Grand Design 2010 (GD2010), a long-term vision for
the first decade of the 21st century that expresses where we want the Omron
Group to be in the year 2010, and the basic guidelines for the management
strategies that will get us there. While accelerating the structural reforms of
GD2010 aimed at boosting quality and speed, in November 2001 we announced the
start of a new set of structural reforms for raising Group productivity in response
to the downturn in our results and the rapidly changing business environment. To
succeed in global competition, we are extending reforms to areas we have not
previously tackled, and intend to complete these by September 2003.
PERFORMANCE: SUBSTANTIAL DECLINE IN EARNINGS
For the year ended March 31, 2002, consolidated net sales declined
10.1 percent year-on-year to ¥534.0 billion. In addition to the drop in net
sales, Omron posted losses on impairment of nonperforming assets in
connection with business restructuring, and on impairment of securities.
As a result, the Company recorded a consolidated net loss before income
taxes, minority interests and cumulative effect of accounting change of
¥25.4 billion and a net loss of ¥15.8 billion.
This decline in earnings reflected the economic downturn due to the slump
in the information technology (IT) industry, notably in the United States,
which led to investment cutbacks in the semiconductor and IT-related
industries and a decline in earnings among electrical equipment and
electronics companies. These factors resulted in weaker demand for
industrial automation systems and electronic components, Omron’s main
products. In addition, restrained investment by financial institutions and
railway companies in Japan had a major impact on sales of banking systems
and automatic fare collection systems.
MANAGEMENT STRATEGY: BUILDING A CORPORATE STRUCTURE THAT
DOES NOT DEPEND ON GROWTH
In this challenging environment, our paramount task is restoring earnings
for the fiscal year ending March 2003 and beyond. To that end, we have
established the Value-Added Innovation Committee 21 (VIC21), made up of
2 Omron Corporation
managing officers, with me as chairman, to implement structural reforms
aimed at raising productivity throughout the Omron Group.
During the past fiscal year, we completed virtually all the work required to
draft specific measures to build the necessary operating structure for Omron;
close and consolidate operating bases, and reallocate the affected businesses
and personnel; accelerate the transfer of production to overseas plants,
particularly in China; exit low-profit and unprofitable businesses; and raise
employee productivity.
With the severe business environment projected to continue, we will make
strategic investments in future growth, primarily in our core Industrial
Automation and Electronic Components businesses. At the same time, we
will carry out the measures drawn up by VIC21 and accelerate structural
reforms to execute the urgent task of building a solid corporate structure that
does not depend on market recovery for its survival.
The current fiscal year will clearly be a crucial period for Omron’s
structural reforms. By moving ahead with each of these reforms without
turning back, we plan to quickly revitalize Group results as well as create a
sustainable profit base to maximize the company’s value over the long term,
one of the objectives of GD2010. Doing so will enable us to fulfill our
commitment to generating steady shareholder returns and justify your
continuing support.
YOSHIO TATEISI
Representative Director
and Chief Executive Officer
YOSHIO TATEISI
Representative Director
and Chief Executive Officer
Omron Corporation 3
A Dynamic Commitment to Structural Transformation,
Globalization and Unique Value
Chief Executive Officer
Yoshio Tateisi
Discusses Omron’s
Structural Reforms
Q: WHAT DOES THE LONG-TERM MANAGEMENT VISION ANNOUNCED
IN MAY 2001 ENTAIL?
A: The long-term management plan we began in May 2001, known as Grand
Design 2010, or GD2010, expresses where we want the Omron Group to be
after the first decade of the twenty-first century and the basic guidelines for
the management strategies to get us there. It aims to make Omron a globally
successful corporation that contributes to social development worldwide. The
first stage in implementing this vision for Omron will cover the period up to
March 2005, with the aim of maximizing the strength of our businesses by
building our competitiveness as a global company. We have set the medium-
term objective of raising return on equity (ROE) to 10 percent as a benchmark
for measuring progress in improving our ability to win globally.
Q: HOW DO THE STRUCTURAL REFORMS FOR GROUP PRODUCTIVITY
INITIATED IN NOVEMBER 2001 RELATE TO GD2010?
A: Major changes in our operating environment have been occurring
at an unprecedented rate. We recognize that the challenges we face are not
temporary, and that Omron must pursue global structural reform. Value-
Added Innovation Committee 21, or VIC21, was created to implement the
structural reforms for group productivity necessary to create the strong
businesses that can be global winners envisioned by GD2010 based on this
recognition.
In other words, VIC21 was created to accelerate the management policies
for raising quality and speed that were established as part of GD2010’s
program of maximizing the strength of our businesses. It will accelerate
quality initiatives by executing above and beyond the policies determined
under GD2010 for improving productivity. Greater speed will be achieved by
implementing GD2010 policies one year ahead of schedule. Under GD2010,
each Omron company was to have completed its respective company vision
by March 2005, but the target for completing various initiatives has been
4 Omron Corporation
STRUCTURAL REFORM PRIORITIES
Grand Design 2010
Grand Design 2010
Win Globally
Changes in
Operating
Environment
>
ROE 10%
Create Powerful
Businesses
Accelerate
GD Measures for
Quality & Speed
Group Productivity
Group Productivity
Improvement Reforms
Improvement Reforms
Re-examine every
management resource
to optimize productivity
Selection & Focus
Optimal Business Units
Cost Structure Reform
incl. Fixed Costs
moved ahead to March 2004 at the latest. Naturally, we will also consider
ways to implement measures even earlier, where it is necessary and possible.
Q: SO GROUP PRODUCTIVITY IMPROVEMENT REFORMS ARE MEASURES
TO ACHIEVE THE OBJECTIVES OF GD2010?
A: Exactly. Furthermore, we formulated the VIC21 measures to ensure that
we achieve the existing target of ROE of 10 percent by March 2005. Each
Omron company has the following three initiatives:
1. Achieve a high level of profitability through selection and focus.
2. Reform the operating and manufacturing structure to create the
optimal business management structure.
3. Restructure the fixed cost and expense structure to match the
optimum business structure.
Head office structure reform will complement the efforts of each company.
Q: ASIDE FROM THE GENERAL DIRECTION OF THE GROUP PRODUCTIVITY
IMPROVEMENT REFORMS, WHAT ARE SOME SPECIFIC OBJECTIVES?
A: When drafting VIC21, we started with the following three benchmarks for
structural reform measures:
1. Reduce Group fixed and variable costs by ¥30 billion.
2. Increase the proportion of overseas manufacturing by 50 percent.
3. Withdraw from underperforming and unprofitable businesses.
The head office and each company will implement various measures
to achieve these objectives.
Omron Corporation 5
A Dynamic Commitment to Structural Transformation,
Globalization and Unique Value
Q: PLEASE COVER THESE MEASURES IN GREATER DETAIL.
A: VIC21 will work to implement structural reforms in six areas: business
structure reform, manufacturing structure reform, purchasing process reform,
management productivity reform, Group head office structure reform, and
asset structure reform. There are other measures that are related or under
negotiation that would be premature to discuss at this point, but they will be
in keeping with the specific structural reforms we have discussed.
STRUCTURAL REFORM OBJECTIVES
Business
Structure
Reform
Optimize business strength through
1: selection & focus, 2: review of business processes,
3: switching to optimal business units
Examples of initiatives:
(cid:2) Withdraw from low profit/unprofitable businesses
(cid:2) Social Systems Business Company: Divide and restructure
(cid:2) Creative Service Company: Assess business independence
and review business strategy units
Create an optimum global manufacturing network
Manufacturing
Structure
Reform
Examples of initiatives:
(cid:2) Strengthen overseas production, mainly in China
(cid:2) Reduce Group production capacity in Japan and convert functions
of manufacturing divisions
Purchasing
Process
Reform
Pursue best prices by expanding centralized purchasing areas
Examples of initiatives:
(cid:2) Expand centralized purchasing areas
(cid:2) Strengthen purchasing and procurement in China
Management
Productivity
Reform
Improve human productivity to succeed in global competition
Examples of initiatives:
(cid:2) Impartial evaluation and compensation based on duties and performance
(cid:2) Right-size the organization at the managerial level
Group Head
Office Structure
Reform
Create a head office that represents and oversees the Omron Group
to prepare for holding company structure
Examples of initiatives:
(cid:2) Create organizational groups and examine/sharpen focus
on necessary functions
Reduce total assets, reallocate resources, reduce asset maintenance costs
Asset
Structure
Reform
Examples of initiatives:
(cid:2) Sell idle and underutilized assets
(cid:2) Sell closed or transferred facilities
6 Omron Corporation
Q: OMRON IS ALSO IMPLEMENTING AN EARLY RETIREMENT PROGRAM
FOR THE FIRST TIME.
A:
It is one component of progress in structural reform. The Omron Group’s
domestic operations will need to reassign approximately 2,000 employees.
Of this number, we project that approximately 500 will leave the company
through natural attrition. We will reassign the remaining employees as a
matter of basic policy, but even so, we project that approximately 1,000
employees will no longer be needed. We will work to keep as many jobs as
we can, but we will also implement an early retirement system for a limited
time so that we can right-size headcount by eliminating surplus positions
without causing hardship for the employees affected.
Q: WHAT IS THE TIME FRAME FOR IMPLEMENTING THE STRUCTURAL
REFORMS?
A:
Implementation will be completed by the end of September 2003. During
the current fiscal year, Omron is therefore placing the highest management
priority on executing the VIC21 measures in order to achieve our goal of
completing them in the 18 months from April 2002. Then, after putting the
final touches on our structural reforms during the year ending March 2004,
we plan to shift from reform to creation and put in place the structure
required to reorient operations toward growth strategies in the year to March
2005.
GROWTH AFTER STRUCTURAL REFORM
GD2010
GD2010
3/02
3/03
Medium-term Objectives
3/05
3/04
VIC21
VIC21
11/15/01:
Begin
evaluation
Accomplish Group
productivity
structural reform
Move from reform
to rebuilding
Establish a
structure for
growth
9/03: Complete
restructuring
3/04: Assessment
18 months
Evaluation
Implementation
Omron Corporation 7
A Dynamic Commitment to Structural Transformation,
Globalization and Unique Value
Q: WHAT ARE THE GROWTH SECTORS OF THE FUTURE?
A: The Group Productivity Improvement Reforms are designed to increase
the profitability of our existing assembly businesses. Concurrently, we will
shift human resources made available by structural reform to the growth
sectors of high-value-added modules and software, services and solutions. In
addition, we intend to develop and strengthen manufacturing capabilities in
China, a critical area for Omron. We will also bolster our development and
sales organization.
1. High-value-added module devices
Electronic Components Company:
Optical device business, MEMS business,
automotive components business, amusement equipment business
Social Systems Business Company:
Module business and others
2. Software, services and solutions
Industrial Automation Company:
High-value-added user business
Social Systems Business Company:
System solutions and service business
Healthcare Company:
Lifestyle improvement and support service business
Companywide:
Safety and security business, M2M business and others
Q: THUS STRUCTURAL REFORM WILL MAXIMIZE THE STRENGTH OF
OMRON’S BUSINESSES AND CREATE OPPORTUNITIES FOR GROWTH.
A: That’s the plan. Thank you, and we’re counting on the continued support
of our stakeholders.
8 Omron Corporation
Review of Operations
Omron at a Glance
Main Products
Industrial
Automation
Company
(IAB)
CONTROL EQUIPMENT (programmable logic controllers, industrial networking
equipment, programmable terminals, application software, etc.) MOTION CONTROLLERS
(inverters, servo motors, servo drives, etc.) SENSORS (photoelectric sensors, proximity
sensors, displacement sensors, safety light curtains, pressure sensors, ultrasound
sensors, measurement sensors, etc.) ADVANCED SENSORS (vision sensors, image
sensors, RFID, laser markers, 2-dimensional code readers, etc.) SWITCHES (limit
switches, basic switches, manual switches) RELAYS (solid-state relays, I/O relay
terminals, etc.) OTHER CONTROL DEVICES (timers, counters, temperature controllers,
level devices, protective devices, power supplies, digital panel meters, transmission
units, wireless units, energy-saving devices, safety-related devices, etc.) INSPECTION
SYSTEMS (printed circuit board solder inspection systems, sheet inspection systems,
solder paste printing inspection systems, other inspection systems, etc.)
Electronic
Components
Company
(ECB)
SWITCHES (basic switches, tactile switches, trigger switches, DIP switches, etc.), RELAYS
(general-purpose relays, printed circuit board relays) AUTOMOTIVE DEVICES (keyless
entry systems, power window switches, various automotive relays, electric power
steering controllers, detection switches, multiplex controllers, power seat switches,
buckle switches, laser radar devices, etc.) AMUSEMENT COMPONENTS, UNITS AND
SYSTEMS (sensors, keys, IC’s, game controllers) CONNECTORS, SENSORS FOR
CONSUMERS, MICRO LENS ARRAYS, COMPONENTS FOR PRINTERS AND
PHOTOCOPIERS (counterfeit detectors, etc.)
Social
Systems
Business
Company
(SSB)
ELECTRONIC FUND TRANSFER SYSTEMS (automated teller machines, cash dispensers,
automated bill changers, automated loan application machines, POS systems,
credit/debit card transaction terminals, etc.) PUBLIC TRANSPORTATION SYSTEMS
(automated ticket venders, automated passenger gates, automated fare adjustment
systems, commuter ticket issuing machines, etc.) TRAFFIC AND ROAD MANAGEMENT
SYSTEMS (traffic management systems, vehicle information and communication
systems, travel time measurement systems, public transportation priority systems, etc.)
PARKING SYSTEMS, TOTALIZATOR SYSTEMS, SECURITY-RELATED SYSTEMS,
MILLIMETER WAVE COMMUNICATION SYSTEMS, CONTENTS-DELIVERY TERMINALS
Healthcare
Company
(HCB)
HEALTHCARE EQUIPMENT (digital blood pressure monitors, digital thermometers,
electronic pulse massagers, chair massagers, pedometers, body fat analyzers, fitness
equipment, etc.) MEDICAL EQUIPMENT (nebulizers, professional digital blood pressure
monitors, etc.), HEALTH MANAGEMENT SERVICES (consultations, health promotion
programs, etc.)
Others
CREATIVE SERVICE COMPANY: OUTSOURCING SERVICE (consulting with the aim of
increasing the efficiency of the client company’s operations, and contract operations in
areas including personnel, accounting, and general affairs)
BUSINESS DEVELOPMENT GROUP: PERSONAL COMPUTER PERIPHERALS (terminal
adapters, ADSL modems, mobile phone modems, backup power supplies, scanners,
fingerprint authentication units) CARD READERS, ROOM ACCESS CONTROL SYSTEMS,
RF-ID TAGS, PHOTO-STICKER VENDING MACHINES, SPEECH RECOGNITION AND
VOICE AUTHENTICATION SYSTEMS
Note: On July 1, 2002 the Social Systems Business Company (SSB) was reorganized and separated into two companies, the Advanced Module
Business Company (AMB) and the Social Systems Solutions and Service Business Company (SSB).
% of Net Sales
¥186,984 million
35.0%
¥128,193 million
24.0%
¥124,627 million
23.4%
¥40,617 million
7.6%
¥53,543 million
10.0%
Omron Corporation 9
Net Sales
(Billions of Yen)
2001
2002
250
200
150
100
50
0
IAB
Industrial Automation Company
For the fiscal year ended March 31,
slowdown and a steep decline in
The Smart Sensor face
recognition system has
a revolutionary platform
structure that enables
easy selection of the
optimum sensor head.
This 60W block power
source offers extra
connections for additional
capacity, thus saving
space and promoting
standardization.
In addition to
transmitting data for
on/off control, Smart
Slave is the world’s first
slave that collects value-
added information to
improve the equipment
utilization rate.
10 Omron Corporation
2002, net sales of the Industrial
exports to the United States during the
Automation Company (IAB) were
second half of the period resulted in
¥187.0 billion, a decline of 17.9 percent
lackluster sales. In China, however, our
compared to the previous fiscal year,
efforts to build our business
as a result of restrained capital
infrastructure and strengthen sales
investment, which was affected by the
capabilities supported growth in sales.
global economic slowdown, the
IAB will increase its competitiveness
collapse of the IT bubble, and the
by enhancing its ability to respond to
terrorist attacks in the United States.
changes in the global market and
In the domestic market, sales were
implementing efficient measures to
down substantially, due to lower
improve relationships with customers.
demand from the electrical and
IAB will raise its profitability by
machinery industries in the midst of
taking the initiative in strengthening
sharp cutbacks in private capital
product competitiveness and
investment, especially among core
increasing productivity in every
customers such as IT and
process.
semiconductor-related companies.
Furthermore, IAB will establish a firm
Although signs of a rebound began to
basis for its growth by developing
appear during the second half,
high-value-added products and
manufacturers maintained a cautious
business models.
stance toward new capital investments.
As for overseas markets, the sales
decline in North America was
accelerated by the terrorist attacks in
addition to continued adjustments in
capital investment after the collapse of
the IT bubble. Sales in Europe were
solid despite reduced capital
investment, and were aided by the
decline in the value of the yen. In Asia,
the impact of the global economic
The F270 is an
advanced vision sensor
with top-of-class capture
speed.
Net Sales
(Billions of Yen)
2001
2002
150
120
90
60
30
0
This laser radar sensor
for automobiles
measures the speed and
distance of the vehicle
ahead, which are
essential data for
adaptive cruise control
(ACC). Detection
sensitivity is extremely
high, with significantly
improved detection
capability for dirty
vehicles or during
inclement weather.
The G6M is a super-slim
C&C relay that can be
precisely mounted in
industrial controllers.
It is the first in the
world to utilize fine
mechanical technology.
Made using high-
precision processing, the
XF2N FPC connector
has an exceptionally low
profile (height: 0.9mm)
and a narrow pitch of
0.3mm. It is used in IT
mobile devices and AV
equipment.
The B-MLA, an LED
back light developed
with a unique design
theory and MLA
technology for high
efficiency and
brightness, is
contributing
to new advances in
cellular phones.
Omron Corporation 11
Electronic Components Company
ECB
The Electronic Components Company
appliance manufacturers particularly
(ECB) posted net sales of ¥128.2 billion,
impacted. In China, sales were
a year-on-year decrease of 1.0 percent,
comparatively healthy, centered on
due to the global impact of the terrorist
electrical appliances. However, price
attacks during the economic slowdown
pressures due to competition from
in the United States.
local manufacturers and lower sales in
Domestic sales of equipment for
the communications sector led to an
consumer and commerce (C&C)
overall decrease in sales.
components such as relays and
In the automotive electronic
switches declined sharply because of a
component sector, a difficult
drop in capital investment, which
environment that included industry
reflected rapidly deteriorating
restructuring, coupled with concerns
conditions in IT-related industries such
about a downturn in automobile sales
as semiconductors and electronic
following the September terrorist
components. The introduction of new
attacks, resulted in challenging market
products such as an LED back light for
conditions. However, the decline in
mobile terminals was unable to revive
sales was less than anticipated due to
sales. Sales to the office automation
the success of zero-interest-rate
industry also showed a steep decline
financing and other factors.
due to factors such as accelerating
ECB plans to grow its overseas
overseas production by customers and
business by expanding its overseas
the trend toward digitalization.
sales network and will also expand
Outside Japan, in North America,
production at the new factory in
sales to the manufacturing, electrical
Shenzen, China. Other activities will
appliance and communications
include strengthening business
industries were down substantially. In
portfolio management, increasing
Europe, market conditions were
investment of management resources
severe, especially for communication
in growth fields and developing new
devices. In Asia, the ripple effects of
products by utilizing its own strengths
the U.S. economic downturn resulted
while also considering alliances with
in a continuation of challenging market
other companies.
conditions, with sales to electrical
Net Sales
(Billions of Yen)
2001
2002
150
120
90
60
30
0
SSB
Social Systems Business Company
Despite a rebound in overseas sales,
PassNet, a card system for multiple
the Social Systems Business
train lines, which fueled demand in
Company (SSB) posted net sales of
the prior year. Shipments of
¥124.6 billion, a year-on-year decrease
equipment to the Japan Railways
of 12.2 percent, due to factors
Group also declined. As a result, net
including the domestic recession and
sales in this sector fell sharply.
a dropoff in demand in the public
In the public works market of the
transportation systems sector
traffic control and road information
following large-scale orders in the
systems sector, sales declined
previous fiscal year.
sharply, as budgetary constraints by
In the electronic fund transfer
local governments severely impacted
systems sector, the business
their capital investment.
environment was extremely
We plan to redefine SSB into three
challenging due to reduced capital
businesses: the module business,
investment among customers,
which manufactures and markets core
increasing competition, and the
modules; the solutions business,
absence of demand for machines to
which provides equipment and
handle the new ¥2,000 note and the
system solutions; and the service
redesigned ¥500 coin, which boosted
business, which provides support
sales in the prior fiscal year. However,
services such as maintenance as well
vigorous marketing of ATMs for
as infrastructure services in future
convenience stores and new types of
growth areas. It will also be
ATMs and automated loan application
restructured into two companies, each
machines for the consumer loan
of which will have self-contained
business enabled us to maintain sales
operations.
close to the previous year’s level.
In the public transportation systems
sector, we worked to expand sales by
introducing new automated ticket
vending machines and automated
ticket gates, but overall demand was
down in reaction to the introduction of
The V7 is an automated
ticket vending machine
featuring a universal
design.
Face Key is a face ID
access control system
that employs biometrics
technology.
BTA-Twin is the world’s
first BluetoothTM
communication device
with omnidirectional
and directional
antennas in a single
unit.
12 Omron Corporation
HCB
Healthcare Company
Healthcare Company (HCB) sales
drop in prices and cooperation with a
increased 3.3 percent year-on-year to
major distributor in Germany.
¥40.6 billion, as firm demand overseas
Conditions were difficult in Asia as the
offset soft consumer spending in
downturn in the information
Japan.
technology industry adversely
In the domestic market, market
impacted consumer spending. Results
conditions continued to be challenging
were solid in China, as consumption
due to changes in consumption
increased strongly and the current
patterns and the distribution industry.
stage of inventory adjustments at
Omron launched several new products,
distributors was completed.
including the first thermometer in
HCB is raising cost competitiveness
Japan that measures body temperature
on a global basis and applying its
from the underarm in five seconds, a
development strengths in overseas
nebulizer that uses innovative
markets. The Company’s new business
technology, and a weight scale with a
model that integrates hardware and
body fat measurement monitor. Sales
service operations is expected to
were negatively impacted, however, by
support strong gains in sales.
weak consumer spending and
deflationary conditions. In the
healthcare services sector, Omron
worked to build a new business model
centered on the Kenko Tatsujin (Health
Master) series.
Outside Japan, steady consumption
in North America underpinned results,
as did successful sales policies tailored
to large customers. Results were also
firm in Europe, due to efforts to
minimize the effects of a short-term
Digital blood pressure
monitor HEM-637 is the
first wrist-type automatic
blood pressure monitor
in Japan that allows
users to view readings
obtained over a week in
graph form.
Net Sales
(Billions of Yen)
2001
2002
50
40
30
20
10
0
Digital thermometer
Ken-on-kun MC-610 is
the first thermometer in
Japan able to measure
body temperature from
the underarm in an
average of five seconds.
Employing a new
nebulizing method,
the portable,
battery-operated Mesh
Nebulizer NE-U22 is the
smallest and lightest in
the world.
Omron Corporation 13
Net Sales
(Billions of Yen)
2001
2002
60
50
40
30
20
10
0
Others
Others
Other businesses posted net sales of
¥53.5 billion, a decrease of 4.2 percent.
We will continue seeking ways to
Sales of the Creative Service Company
develop and cultivate new businesses
decreased, reflecting the challenging
in line with the strategies of the
market environment of the business
Omron Group, while strengthening
fields to which it provides consulting
and assessing businesses that can not
and outsourcing services. Orders for
be included in any of the core Omron
consulting on reform of administrative
companies.
divisions increased strongly, reflecting
the growing number of companies
implementing structural reforms.
Sales of the Business Development
Group remained essentially
unchanged from the previous fiscal
year. Store sales of ADSL
communications equipment, a PC
peripheral, fell short of projections.
Despite the entry of new competitors,
sales of commercial game machines
expanded due to an increase in the
number of installed units. We also
began sales in the “machine-to-
machine” business, with products
including a tank monitoring system
and a vehicle anti-theft system.
Sales of subsidiary Omron Alphatech
Corporation fell sharply due to the
effect of restrained investment.
Subsidiary Sanno Consulting Corporation
posted solid sales, led by consulting
to financial institutions for
construction of call centers.
The Shiny Shot
photo-sticker machine
The Tank Watcher
TW3100 is used in
clients’ inventory
control systems.
14 Omron Corporation
Omron Corporate Citizenship Activities
Omron revolutionized corporate Japan in 1956 when the company adopted a corporate philosophy
emphasizing a commitment to fulfilling public responsibilities. Since that time, Omron has worked
to contribute to society through its operations as well as its corporate citizenship activities.
EXAMPLES OF OMRON’S CORPORATE CITIZENSHIP ACTIVITIES
Omron’s corporate citizenship activities revolve around four main areas: science & technology, social welfare, arts & culture, and
the global environment.
1. Science & Technology
Striving to create greater harmony between people and machines
To help create a society in which people and machines can co-exist in
harmony, Omron provides assistance to researchers involved in the
development of advanced technologies and helps to publicize their findings.
Through the Tateisi Science and Technology Foundation, Omron supports
joint research and technological exchange not only in Japan but all over the
world.
In addition, Omron is using its sensing and control technology to contribute
to causes around the world such as landmine removal.
2. Social Welfare
Creating employment opportunities for the disabled
Omron is dedicated to helping physically challenged individuals find
employment opportunities and achieve independence. In 1972, Omron
established Omron Taiyo Co., Ltd. in Beppu, Oita Prefecture -- the first factory
in Japan run by physically challenged people. A similar factory, Omron Kyoto
Taiyo Co., Ltd., was built in Kyoto in 1985. In addition, Omron sponsors
events such as wheelchair marathon races, art festivals and other events for
disabled people.
Enriching society by developing arts and culture
Omron believes strongly in the importance of culture and the arts,
demonstrating its support by co-sponsoring the Omron Kyoto Cultural Forum
and organizing concerts and exhibitions of traditional performing arts.
3. Arts & Culture
4. Global Environment
Becoming one of the most environmentally conscious companies
of the 21st century
Omron’s environmental objectives include not only meeting the criteria for
ISO 14001 certification, but also minimizing the environmental impact of its
operations by developing environmentally friendly products utilizing the
company’s sensing and control technology, conserving energy and resources,
and reducing industrial waste. In addition, as a responsible corporate citizen,
Omron is involved in community service activities such as clean-ups, area
beautification projects and planting trees. Omron’s long-term, sustainable
approach towards both domestic and international environmental issues is
preparing us for the emerging “Optimization Society.”
1. Omron has joined the non-profit
organization Japan Alliance for
Humanitarian Demining Support,
and played a major role in the
development of the Mine Eye, an
innovative landmine detector that
uses electromagnetic waves to
detect both metal and non-metal
mines.
2. Every year, approximately 50
Omron employees participate as
volunteers at the Oita
International Wheelchair
Marathon, helping to set up for the
closing ceremony and passing out
beverages to athletes after the race.
3. Omron donated a pipe organ to
the Kyoto Concert Hall, which was
completed in the fall of 1995. The
company also co-sponsors concerts
to give residents the opportunity to
enjoy pipe organ music.
4. Omron supports conservation
activities such as the participation
of Japanese mountaineer Ken
Noguchi in the Qomolangma
Cleanup Expedition and the Mt.
Fuji Cleanup Expedition.
Omron Corporation 15
Environmental Activities
Using its sensing and control technologies, Omron contributes to environmental protection through
development of products and systems that reduce environmental impact. Major environmental activities
during the year ended March 31, 2002 were as follows:
THEME
RESULTS OF ACTIVITIES
Environmental education
(cid:2) Conducted environmental education for new
employees and internal auditor training (total of 4 times)
Promotion of environmental awareness
(cid:2) Held Environmental Conservation Month Seminar
Eco-Consciousness
Environmental accounting
system
Pollution control/
Environmental risk management
Eco-Management
(cid:2) Established and presented Eco Grand Prix Award to
one winner in each category of Eco-Products and
Environmental Contributions
(cid:2) Invited and awarded employee suggestions (1,434 entries
during Environmental Conservation Month in June 2001)
(cid:2) Published first Home-use Environmental Accounting
Books, distributed to all Omron Corporation employees
(cid:2) Implemented at 15 manufacturing sites
(cid:2) No cases of law infringement in year ended March 2002
ISO 14001 certification
(cid:2) Omron Kyoto-Ekimae office received ISO 14001
certification in March 2002; all 43 domestic and overseas
production facilities, offices and research laboratories
now certified.
LCA* system
(cid:2) Implemented LCA system for 7 products
Eco-Products
Development and marketing of
eco-products
Creation of products with less or no
hazardous chemical substances
Promotion of green procurement
(cid:2) Created 18 eco-products
(cid:2) Conducted technological evaluation of 42 lead-free products
(cid:2) Preliminary evaluations of suppliers were carried out
based on green procurement standards. Evaluations
have been completed for 543 suppliers.
Chemical substance control system
(cid:2) Completed development of chemical substance
control system
Promotion of CO2 emissions reduction
(cid:2) Reduced CO2 emissions from energy usage to 11,747 tons-C,
a 9.5% reduction from fiscal 1995.
Promotion of waste recycling
(cid:2) Waste recycling rate 92.0%, final disposal rate 4.9%
Promotion of green procurement
(cid:2) 74% green product purchase rate** at offices & laboratories
(cid:2) OMRON Iida Co., Ltd. achieved zero emissions
Eco-Factories/
Laboratories/
Offices
(indirect materials)
Eco-Logistics
CO2 emission reduction/resource
conservation for logistics operations
Promotion of environmental
communication
Eco-
Communication
(cid:2) Implemented green product purchase registration in Strategic
Linkage for Intelligent Procurement Management (SLIM) system
(cid:2) Reduced number of trucks through distribution reforms;
reduction of two 10-ton trucks, replaced one truck with
5-ton railroad container
(cid:2) Published environmental report (in Japanese and English)
(cid:2) Environmental report and site report included on Omron Web site
(cid:2) Site report published for Ayabe Office
(cid:2) Participated in external environmental exhibitions in Shiga,
Tokyo, Fukuoka, Kyoto and other cities
(cid:2) Conducted environmental education programs for
teachers and businesses
(cid:2) Carried out Omron Day activities at all sites. Performed
volunteer forest preservation activities at Kyoto Office
* LCA: Life Cycle Assessment. A methodology for identifying and quantifying resource/energy requirements and emissions for a product's entire lifespan
(from materials procurement to manufacture, distribution, usage, recycling and disposal) while objectively and quantitatively evaluating its impact
on the environment
** Green product purchase rate: Purchase price of green procurement items/purchase price of stationery and office supplies X 100
16 Omron Corporation
TOPICS
REDUCTION OF ENVIRONMENTAL IMPACT
Reduction of CO2 Emissions
Omron’s goal is to reduce carbon dioxide emissions 11
percent by 2010, compared with levels in the year ended
March 1996. The company also sets CO2 emission targets
for each fiscal year.
In the year ended March 2002, the target for the total
volume of CO2 emissions was 12,430 ton-C, a 4.3 percent
reduction compared with the year ended March 1996. The
actual result was 11,747 ton-C, a 9.5 percent reduction.
However, CO2 emissions per unit of production increased by
10 percent from the previous fiscal year due to lower
business volume.
Wastes and Recycling
In the year ended March 2002, Omron’s targets were a
recycling rate of 87.5 percent and a final disposal rate of 9.5
percent. Actual results were a recycling rate of 92.0 percent
and a final disposal rate of 4.9 percent, surpassing the
original targets for the year ending March 2006. Total
emission volume was 4,015 tons, a 22 percent decrease
from the previous fiscal year. In addition, OMRON Iida Co.,
Ltd. became the second site, after the Mishima Office, to
achieve zero emissions. Nine domestic manufacturing sites
are expected to achieve zero emissions by the end of the
current fiscal year.
REDUCTION OF HAZARDOUS CHEMICAL SUBSTANCES
Construction of Database for Regulated Chemical
Substances
To reduce hazardous chemical substances contained in
products, Omron constructed a system for gauging the
chemical substances in purchased components, materials
and other items.
Lead-Free Technology
Centered on lead-free technology projects, we have
achieved progress in establishing construction and mass-
production technologies for lead-free soldering and plating,
standardizing reliability assessments and optimizing our
production network. In the year ended March 2002, results
proving the validity of lead-free soldering and plating
technologies were confirmed for 42 products.
INTRODUCTION OF AN ENVIRONMENTAL ACCOUNTING
SYSTEM
An environmental accounting system is a tool that is
intended to monitor and survey the costs (investments and
expenses) associated with environmental activities and
resulting benefits. It serves as an important tool to support
management decision-making in the disclosure of
environmental information. Environmental accounting was
implemented in the Industrial Automation Company in the
previous fiscal year, and was extended to all internal
business companies in the year ended March 2002.
Evaluation of Environmental Indicators:
(cid:2) Return on Investment: 14% (Financial gain/
Environmental costs)
(cid:2) Percentage of Eco-Product Sales: 17%
(Eco-Product sales/Total new product sales)***
*** New products are newly developed or designed products that have
gone on sale within the last three years.
CREATION OF ECO-PRODUCTS
Omron has been promoting the creation of eco-products
since it established the ISO 14021-based “Eco-Product
Approval System” in 1998. In the year ended March 2002, 18
products were approved, bringing the total to 72 products
since 1998.
GREEN PROCUREMENT
Purchasing Green Parts and Materials
Using Omron’s green procurement standards, we
conducted preliminary evaluations of 543 suppliers. From
April 2003, we plan to give purchasing preference to
suppliers rated high in terms of environmental conservation
effort, in addition to such conventional criteria as quality,
price and delivery schedule.
Purchasing Green Indirect Materials
In addition to the procurement of green parts and
materials for use in products, Omron is promoting the
purchase of green indirect materials such as office supplies,
PCs and copy paper. The green product purchase rate** for
10 offices and laboratories reached 74 percent on a value
basis.
Environmental Performance
To reduce the environmental impact of its corporate
activities, Omron is committed to eco-friendly product
development, energy and resource conservation,
reduction of waste, and recycling.
Evaluating environmental
impact of a product during
the design stage.
Product
Assessment
Recycling
Procurement
Recycling of ATMs
and other products.
Marketing
&
Usage
Encouraging
the sale and use
of Eco-Products.
Purchasing green
parts/materials from
environmentally
conscious suppliers.
Manufacturing
Promoting energy
and resource
conservation along with
reduction of waste
and chemical emissions.
Products
Technologies
Distribution
Enhancing logistic efficiency.
Improving packaging
materials and containers.
Eco-Management
Implementing ecologically conscious management
practices through environmental commitment in
the corporate management system.
Omron Corporation 17
Board of Directors, Corporate Auditors and Executive Officers
Left to right: Tadao Tateisi, Akio Imaizumi, Norio Hirai, Nobuo Tateisi, Yoshio Tateisi, Tatsuro Ichihara, Shozo Hashimoto
Board of Directors
Corporate Auditors
Executive Vice Presidents
Managing Officers
Tsutomu Ozako
Motoki Tamura
Yoshio Nakano
Hidero Chimori
Soichi Koshio
Hideki Masuda
Senior Managing Officers
Yoshifumi Kajiya
Shingo Akechi
Hisao Sakuta
Fujio Tokita
Keiichiro Akahoshi
Akihiko Otani
Minoru Tamura
Tsukasa Yamashita
Yutaka Takigawa
Fumio Tateisi
Shinya Tozawa
Kazuo Nomura
Yasuhira Minagawa
Kuniyasu Kihira
Toshio Ochiai
Soichi Yukawa
Hiroki Toyama
Kojiro Tobita
Hideo Kawanaka
Tadahiko Otsuka
Yoshio Kushihashi
Susumu Yoshida
Keizo Kadono
Hiroyuki Nishimura
Kuninori Hamaguchi
(As of June 25, 2002)
Chairman and
Representative Director
Nobuo Tateisi
Representative Director and
Chief Executive Officer
Yoshio Tateisi
Vice President and Directors
Norio Hirai
Tatsuro Ichihara
Senior Managing Directors
Akio Imaizumi
Tadao Tateisi
Director (Non-executive)
Shozo Hashimoto
18 Omron Corporation
Financial
Contents
Section
20
21
26
28
29
30
31
32
46
Six–year Summary
Management’s Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors’ Report
Omron Corporation 19
Six-year Summary
Omron Corporation and Subsidiaries
Years ended March 31
2002
2001
2000
1999
1998
1997
Millions of yen (except per share data)
Net Sales (Notes 2 and 3):
Industrial Automation ......................................
Electronic Components ...................................
Social Systems Business ................................
Healthcare .......................................................
Open Systems .................................................
Control Components and Systems .................
Specialty Products ..........................................
Others ..............................................................
Costs and Expenses:
Cost of sales....................................................
Selling, general and administrative expenses...
Research and development expenses ............
Interest expenses, net .....................................
Foreign exchange loss, net .............................
Other expenses (income), net..........................
Income (Loss) before Income Taxes,
Minority Interests and Cumulative
Effect of Accounting Change....................
Income Taxes ....................................................
Minority Interests ..............................................
Income (Loss) before Cumulative
Effect of Accounting Change .......................
Net Income (Loss) .............................................
Per Share Data (yen):
Income (Loss) before Cumulative
Effect of Accounting Change
¥186,984
128,193
124,627
40,617
—
—
—
53,543
533,964
353,429
134,907
41,407
223
1,506
27,865
559,337
(25,373)
(9,348)
132
(16,157)
(15,773)
¥227,691
129,444
141,928
39,327
—
—
—
55,869
594,259
376,194
131,203
42,513
111
1,389
2,812
554,222
40,037
17,318
422
22,297
22,297
¥215,087
109,661
128,534
42,640
—
—
—
59,436
555,358
358,911
133,662
36,605
750
2,841
1,553
534,322
21,036
9,048
427
11,561
11,561
¥245,785
56,673
135,872
43,729
—
—
—
73,221
555,280
364,314
136,734
42,383
862
2,766
(28)
547,031
8,249
6,044
31
2,174
2,174
¥ —
—
138,203
40,793
50,131
313,642
47,263
21,763
611,795
387,445
138,404
39,914
682
4,419
(1,312)
569,552
42,243
23,371
168
18,704
18,704
¥ —
—
145,172
36,388
50,187
291,277
46,533
24,704
594,261
388,005
130,163
35,188
1,591
860
(794)
555,013
39,248
22,952
557
15,739
15,739
Basic ........................................................
Diluted .....................................................
¥ (65.0)
(65.0)
¥ 87.4
85.3
¥ 45.0
44.5
¥
8.3
8.3
¥
71.4
69.8
¥
60.1
58.8
Net Income (Loss)
Basic ........................................................
Diluted .....................................................
Cash Dividends (Note 1) ................................
Capital Expenditures (cash basis) ...................
Total Assets .......................................................
Total Shareholders’ Equity ...............................
Value indicators:
Gross profit margin (%) ...................................
Income (loss) before tax/Net sales (%)............
Return on sales (%) .........................................
Return on assets (%) .......................................
Return on equity (%)........................................
Inventory turnover (times) ................................
Price/earning ratio (times)................................
Assets turnover (times) ....................................
Debt/equity ratio (times) ..................................
Interest coverage ratio (times) .........................
(63.5)
(63.5)
13.0
¥ 38,896
549,366
298,234
87.4
85.3
13.0
¥ 37,583
593,144
325,958
45.0
44.5
13.0
¥ 31,146
579,489
336,062
8.3
8.3
13.0
¥ 36,696
580,586
321,258
71.4
69.8
13.0
¥ 35,896
593,129
343,066
60.1
58.8
13.0
¥ 29,956
610,930
333,102
33.8
(4.8)
(3.0)
(4.4)
(5.1)
4.25
—
0.93
0.842
4.36
36.7
6.7
3.8
6.8
6.7
4.44
23.6
1.01
0.820
26.83
35.4
3.8
2.1
3.6
3.5
4.56
64.9
0.96
0.724
14.64
34.4
1.5
0.4
1.4
0.7
4.18
175.0
0.95
0.807
5.56
36.7
6.9
3.1
7.0
5.5
4.28
28.3
1.02
0.729
20.05
34.7
6.6
2.6
6.4
4.8
4.66
36.6
0.97
0.834
12.27
Notes: 1. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year.
2. Certain reclassifications have been made to the net sales amounts previously reported for 2001 in order for them to conform to 2002 categories.
The amounts previously reported for 2001 were: Industrial Automation, ¥239,225 million; Electronic Components, ¥117,910 million.
These same reclassifications could not be made to net sales amounts previously reported for 2000 and 1999 because the necessary data is
not readily available.
3. Categories within net sales for 1998 and earlier reflect the categories at that time, which cannot be restated to conform to present categories following
reorganization.
20 Omron Corporation
Management’s Discussion and Analysis
Financial Strategy
Sales
The financial policies aimed at strengthening the earn-
Consolidated net sales decreased 10.1 percent year-on-
ings base of Omron Corporation and the Omron Group of
year to ¥534.0 billion. A major factor behind the sales
companies include improving asset efficiency, disciplined
decline was restrained capital investment in the semicon-
liquidity management and efforts to raise competitive-
ductor and IT industries and lower earnings in the electri-
ness. In addition, Omron invests capital according to spe-
cal machinery and electronics industries, which led to
cific plans and keeps capital expenditures within the
weaker demand for control components. Sales decreased
scope of cash flow, while focusing on high-profit busi-
both in Japan and overseas.
nesses to increase corporate value.
Cost of Sales, SGA Expenses and Income
General Overview
Cost of sales decreased ¥22.8 billion, or 6.1 percent, to
During the fiscal year ended March 31, 2002, continued
¥353.4 billion, reflecting the decline in net sales. As a
weakness in consumer spending and falling exports and
result, gross profit was ¥180.5 billion, a year-on-year
production output contributed to a large decline in corpo-
decrease of 17.2 percent. The gross profit margin was
rate earnings in Japan, prompting companies to sharply
33.8 percent, compared to 36.7 percent in the previous
curtail capital investment, particularly in the semiconduc-
fiscal year. Selling, general and administrative (SGA)
tor and information technology (IT) industries. The U.S.
expenses increased 2.8 percent to ¥134.9 billion, and
economy experienced a significant downturn due to the
increased to 25.3 percent of net sales, compared to 22.1
slump in IT industries, and recovery was delayed by the
percent in the previous fiscal year. Research and develop-
September 11 terrorist attacks. The impact of this down-
ment expenses decreased 2.6 percent to ¥41.4 billion,
turn was reflected in the economies of Asia and Europe,
representing 7.7 percent of net sales, up from 7.1 percent
where growth remained weak.
in the previous fiscal year. R&D is essential to the
In the markets where Omron conducts business,
Company’s future growth, and Omron’s policy is to main-
restrained capital investment in the semiconductor and
tain R&D expenses close to 7 percent of net sales each
IT-related industries and deteriorating results in the elec-
year.
trical machinery and electronics industries led to lower
demand for control system equipment. As a result, sales
of Omron’s core Industrial Automation Company and
Electronic Components Company declined substantially.
Restrained investment by domestic financial institutions
and railway companies had a substantial negative impact
on the Social Systems Business Company. Weak domes-
tic consumer spending limited the Healthcare Company
to a small increase in sales.
As a result of these factors, consolidated net sales
decreased 10.1 percent compared with the previous fiscal
year to ¥534.0 billion. Reflecting the decline in net sales,
Gross Profit Margin (%)
SGA Expenses/Net Sales
R&D Expenses/Net Sales (%)
(cid:2) SGA Expenses/Net Sales
(cid:3) (excluding R&D Expenses)
(cid:2) R&D Expenses/Net Sales
36.7
34.4
35.4
36.7
33.8
24.6
24.1
22.6
22.1
25.3
7.6
6.5
6.6
7.1
7.7
operating income, although remaining in the black,
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
declined 90.5 percent year-on-year to ¥4.2 billion. Omron
posted losses on impairment of nonperforming assets in
connection with business restructuring, and on impair-
ment of securities. As a result, the Company recorded a
net loss before income taxes, minority interests and
cumulative effect of accounting change of ¥25.4 billion
and a net loss of ¥15.8 billion.
Omron Corporation 21
Costs, Expenses and Income as Percentages of Net Sales
2002
2001
2000
Net sales ...................................
100.0% 100.0% 100.0%
Cost of sales .............................
Gross profit ..............................
Selling, general and
administrative expenses ........
Research and
development expenses ..........
Interest expenses, net .............
Income (loss) before income
taxes, minority interests and
cumulative effect of
accounting change .................
Income taxes ............................
Income (loss) before cumulative
effect of accounting change ......
Cumulative effect of
accounting change .................
Net income (loss).....................
66.2
33.8
63.3
36.7
64.6
35.4
25.3
22.1
24.1
7.7
0.0
(4.8)
(1.8)
7.1
0.0
6.7
2.9
(3.0)
3.8
0.0
(3.0)
—
3.8
6.6
0.1
3.8
1.6
2.1
—
2.1
Other expenses, net, amounted to ¥27.9 billion. The pri-
mary component of this total was a ¥17.2 billion loss on
impairment of investment securities and other assets. As
a result, loss before income taxes, minority interests and
cumulative effect of accounting change was ¥25.4 billion,
compared with income of ¥40.0 billion in the previous fis-
cal year. However, a deferred income tax benefit of ¥17.7
billion led to a net loss of ¥15.8 billion. The basic net loss
per share was ¥63.5, compared to net income per share
of ¥87.4 in the previous fiscal year.
Interest Expenses and
Interest Coverage
(Millions of Yen/Times)
(cid:3) Interest Expenses
(cid:2) Interest Coverage
2
1
4
,
2
8
1
5
,
2
7
9
8
,
1
1
3
7
,
1
1
9
2
,
1
26.83
20.05
Income (Loss) Before Income
Taxes, Minority Interests and
Cumulative Effect of
Accounting Change/Net
Sales and Net Income (Loss)/
Net Sales (%)
(cid:2) Income (Loss) Before Income
Taxes, Minority Interests and
Cumulative Effect of
Accounting Change/Net Sales
(cid:2) Net Income (Loss)/Net Sales
6.9
3.1
6.7
3.8
3.8
2.1
1.5
0.4
-3.0
-4.8
5.56
4.36
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
22 Omron Corporation
Earnings per Share and
Price/Earning Ratio (Yen/Times)
(cid:3) Earnings per Share
(cid:2) Price/Earning Ratio*
.
8
9
6
3
8
.
.
5
4
4
.
3
5
8
.
5
3
6
-
175.0
Net Income (Loss) per Employee
(Millions of Yen)
8
.
0
1
.
0
5
.
0
9
.
0
6
.
0
-
64.9
28.3
23.6
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
* Not calculated in 2002 due to net loss
Review of Operations by Company
Due to divisional restructuring in the year ended March
31, 2002, prior-year net sales of internal business compa-
nies have been restated in order to show a more realistic
comparison.
Composition of Net Sales
2002
2001
2000
Industrial Automation .............
35.0% 38.3% 38.7%
Electronic Components ...........
Social Systems Business ........
Healthcare ................................
Others .......................................
24.0
23.4
7.6
10.0
21.8
23.9
6.6
9.4
19.8
23.1
7.7
10.7
Note: The composition of net sales is based on the classifications reported in the
Six-year Summary.
Industrial Automation Company
Net sales for the Industrial Automation Company,
excluding intercompany transactions, declined 17.9 per-
cent year-on-year to ¥187.0 billion, and accounted for 35.0
percent of total net sales. In Japan, the decrease in sales
was mainly attributable to a sharp decline in private-sector
capital investment, especially in the semiconductor and IT-
related industries, which resulted in lower demand for
Omron’s control components and systems. Outside Japan,
sales declined because of reduced capital investment
among customer industries in North America and a large
industry. However, sales increased in Europe, due in part
to the favorable effect of exchange rate changes, and in
China, boosted by Omron’s efforts to strengthen its sales
capabilities and investment in business infrastructure.
14.64
drop in sales in Asia due to worsening conditions in the IT
Electronic Components Company
efforts and introduced innovative new products.
Net sales for the Electronic Components Company,
However, weak consumer spending and a deflationary
excluding intercompany transactions, declined 1.0 per-
trend resulted in a decrease in domestic sales. Overseas,
cent year-on-year to ¥128.2 billion, and accounted for 24.0
the depreciation of the yen had a positive effect, and
percent of net sales. In Japan, deterioration in IT indus-
sales were generally solid in Europe, North America and
tries resulted in lower demand for Omron’s consumer
Asia. In the healthcare services sector, a new business,
and commerce (C&C) components. This decline was par-
Omron worked to create a new business model centered
tially offset by growth in sales of amusement compo-
around the Kenko Tatsujin series.
nents and automotive electronic components. In North
America, the economic slowdown and the effects from
Others
the September 11 terrorist attacks resulted in a large
Net sales of other divisions decreased 4.2 percent year-
decline in sales to manufacturers as well as the electrical
on-year to ¥53.5 billion, and accounted for 10.0 percent of
appliance and telecommunications industries. In
total net sales. Demand for the consulting and outsourc-
Southeast Asia, the impact from the slowdown in the U.S.
ing businesses of the Creative Service Company benefit-
economy, intensifying price competition with manufac-
ed from structural reforms by corporations.
turers in China and lower sales to the telecommunica-
Sales of photo-sticker machines increased substantially,
tions industry resulted in an overall decline in sales.
while demand in the automated answering system busi-
ness expanded in areas such as call centers for financial
Social Systems Business Company
institutions. However, sales of PC peripheral equipment
Net sales for the Social Systems Business Company,
declined due to the market slump and falling prices, as
excluding intercompany transactions, declined 12.2 per-
well as lower-than-expected store sales of ADSL
cent year-on-year to ¥124.6 billion, and accounted for 23.4
modems.
percent of net sales. In the electronic fund transfer sys-
tems sector, the absence of special demand for equip-
Increase (Decrease) in Sales of Internal Business Companies
ment to handle a new currency note and coin, which con-
2002
2001
2000
tributed to sales in the previous fiscal year, resulted in a
Industrial Automation .............
(17.9)% 11.2% (0.9)%
decrease in equipment investment among customers,
Electronic Components ...........
(1.0)
particularly financial institutions. The bankruptcies of
Social Systems Business ........
(12.2)
major retailers also contributed to a challenging business
Healthcare ................................
environment. However, Omron maintained stable sales
Others .......................................
3.3
(4.2)
7.5
10.4
(7.8)
(6.0)
20.6
(5.4)
(2.5)
(1.3)
by meeting current market needs such as ATMs for con-
venience stores and conducting aggressive marketing for
Note: The increase or decrease in sales for 2000 and 2001 is based on the amounts
previously reported for the respective years, prior to the reclassifications made
in the following year.
new types of ATMs, automated loan application
machines and other products. In the public transportation
systems sector, sales of equipment to railway companies
declined substantially, reflecting the large-scale demand
in the previous year due to implementation of the
PassNet System in the Kanto region. Sales in the traffic
control and road information systems business decreased
because of budget tightening by local governments.
Healthcare Company
Net sales for the Healthcare Company, excluding inter-
company transactions, increased 3.3 percent year-on-year
to ¥40.6 billion, and accounted for 7.6 percent of net
sales. In Japan, Omron strengthened sales expansion
Review of Operations by Region
Japan
Japanese companies substantially reduced capital
expenditures following rapidly declining profits due to
slow growth in production and exports and weak person-
al consumption. Added to an increasingly difficult
employment situation, Japan’s economy remained mired
in recession.
In the markets where Omron conducts business,
demand for the Company’s products fell significantly, due
to restrained capital expenditures in the semiconductor
and IT-related industries, lower profits in the electrical
machinery and electronics industries and reduced spend-
Omron Corporation 23
ing by domestic financial institutions and railway compa-
nies. Sales of the Industrial Automation Company, the
Electronic Components Company and the Social Systems
Business Company decreased substantially. The weak
personal consumption also negatively impacted sales of
the Healthcare Company. Total sales to external cus-
tomers decreased 15.6 percent year-on-year to ¥357.9 bil-
lion.
North America
The economy of the United States, which had been a
driver of global economic growth until the previous fiscal
year, slowed considerably due to the slump in IT-related
industries. The terrorist attacks on September 11 served
to further delay economic recovery.
Amid these conditions, sales of the Industrial
Automation Company were sluggish, although the
Electronic Components Company and the Healthcare
Company both posted relatively strong growth. As a
result, factoring in the positive effect of the weaker yen
against the U.S. dollar, sales to external customers
increased 1.8 percent year-on-year to ¥65.6 billion.
Europe
The economies of Europe were weak throughout the
year, affected by the slowdown in the United States.
However, the Industrial Automation Company, the
Electronic Components Company and the Healthcare
Company all posted solid results. Total sales to external
customers increased 7.0 percent year-on-year to ¥65.3 bil-
lion.
Asia and Other
A ripple effect from the slowdown in the U.S. affected
most Asian economies, particularly in Southeast Asia,
although the Chinese economy continued to grow. In
South Korea and Southeast Asia, the slump in IT-related
markets affected the Industrial Automation Company,
although the Electronic Components Company and the
Healthcare Company both performed well. In China, sales
of the Industrial Automation Company and the Electronic
Components Company were solid, while high growth in
personal consumption supported strong growth in
Healthcare Company sales. As a result, total sales to
external customers were ¥45.2 billion, essentially
unchanged from the previous fiscal year.
24 Omron Corporation
Sales by Region (%)
(cid:3) Japan
(cid:3) North America
(cid:3) Europe
(cid:3) Asia and Other
1998
1999
2000
2001
2002
72.0
69.8
71.6
71.3
67.0
10.0
12.1
10.5
13.9
5.9
5.8
10.7
11.0
6.7
10.8
10.3
7.6
12.3
12.2
8.5
Assets, Liabilities and Shareholders’ Equity
As of March 31, 2002, total assets were ¥549.4 billion, a
decrease of ¥43.8 billion, or 7.4 percent, from March 31,
2001. Current assets decreased ¥51.4 billion, or 15.6 per-
cent, to ¥277.5 billion. This was mainly a result of signifi-
cant decreases in trade notes and accounts receivable
and inventories, which reflected the decline in net sales
and orders received. Trade notes and accounts receivable
decreased 14.1 percent to ¥114.9 billion. Inventories
decreased 18.5 percent to ¥74.6 billion. In addition, cash
and cash equivalents decreased 17.3 percent to ¥70.8 bil-
lion.
Net property, plant and equipment decreased ¥6.8 bil-
lion, or 4.3 percent, to ¥152.3 billion. Investments and
other assets increased ¥14.4 billion, or 13.7 percent, to
¥119.6 billion, as deferred income taxes increased ¥25.9
billion to ¥43.9 billion.
The total of current liabilities, long-term liabilities and
minority interests in subsidiaries decreased ¥16.1 billion,
or 6.0 percent, to ¥251.1 billion. Current liabilities
decreased ¥53.9 billion, or 29.4 percent, to ¥129.4 billion,
due to decreases in trade notes and accounts payable,
income taxes payable and the current portion of long-
term debt. Bank loans increased ¥5.8 billion to ¥14.7 bil-
lion. Working capital at the balance sheet date increased
¥2.6 billion to ¥148.1 billion, and the current ratio was 214
percent, compared to 179 percent a year earlier. Long-
term debt increased ¥10.8 billion, or 33.9 percent, to ¥42.8
billion, due to new long-term bank loans. As a result,
interest-bearing liabilities, defined as the sum of bank
loans, the current portion of long-term debt and long-
term debt, decreased ¥8.5 billion, or 12.6 percent, to ¥58.7
billion.
Shareholders’ equity decreased ¥27.7 billion, or 8.5 per-
cent, to ¥298.2 billion, mainly due to lower retained earn-
ings and an increase in accumulated other comprehen-
Net cash provided by operating activities decreased
sive loss, reflecting an increase in the minimum pension
33.7 percent to ¥33.7 billion, compared to ¥50.8 billion in
liability. The ratio of shareholders’ equity to total assets
the previous fiscal year. Although the Company posted a
was 54.3 percent, compared to 55.0 percent a year earlier.
net loss for the year, a large portion of this consisted of
The debt/equity ratio, defined as total liabilities divided by
losses that do not detract from cash flow, such as a ¥17.2
shareholders’ equity, was 0.842 times, compared to 0.820
billion loss on impairment of investment securities and
times a year earlier. Shareholders’ equity per share was
other assets. Decreases in trade notes and receivables
¥1,201.23, down from ¥1,311.12 a year earlier. Foreign
and inventories also contributed to cash flow.
currency translation adjustment was negative ¥7.4 billion,
Net cash used in investing activities increased 23.9 per-
compared to negative ¥13.7 billion a year earlier, due to
cent to ¥40.1 billion, compared to ¥32.4 billion in the pre-
the effect of the weakening of the yen. Net unrealized
vious fiscal year. The primary factor in this change was
gains on securities and derivative instruments was ¥3.3
lower proceeds from sales of short-term investments and
billion, compared to ¥3.6 billion a year earlier.
investment securities. Capital expenditures increased ¥1.3
Working Capital and Current
Ratio (Millions of Yen/%)
(cid:3) Working Capital
(cid:2) Current Ratio
9
9
7
,
2
5
1
0
1
6
,
4
6
1
7
9
7
,
9
6
1
9
8
4
,
5
4
1
3
5
0
,
8
4
1
Inventory Turnover
(Times)
4.56
215
204
186
179
214
4.28
4.18
4.44
4.25
billion, or 3.5 percent, to ¥38.9 billion, as expenditures for
the construction of the new Keihanna R&D Laboratory
were offset by restrained investment in other property,
plant and equipment.
Net cash used in financing activities decreased 51.0 per-
cent to ¥12.1 billion, absent ¥18.3 billion in share buyback
expenditure incurred in the previous fiscal year.
Repayments of long-term debt were ¥27.0 billion, while
proceeds from issuance of long-term debt totaled ¥13.1
billion.
Return on Assets (%)
Price/Book Value Ratio (Times)
1998 1999 2000 2001 2002
1998 1999 2000 2001 2002
Return on Tangible Fixed
Assets (%)
Return on Shareholders’
Equity (%)
7.0
6.8
2.23
14.1
11.0
5.5
7.2
1.3
6.7
3.5
0.7
-10.1
-5.1
1998 1999 2000 2001
2002
1998 1999 2000 2001
2002
Cash Flow
Cash and cash equivalents at March 31, 2002 decreased
¥14.8 billion from a year earlier to ¥70.8 billion. The effect
of exchange rate changes increased cash and cash equiv-
alents by ¥3.6 billion.
1.54
1.18
1.62
1.60
3.6
1.4
-4.4
1998 1999 2000 2001
2002
1998 1999 2000 2001
2002
Omron Corporation 25
Consolidated Balance Sheets
Omron Corporation and Subsidiaries
March 31, 2002 and 2001
ASSETS
Current Assets:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2002
2001
2002
Cash and cash equivalents............................................................................
¥ 70,779
¥ 85,621
$ 532,173
Notes and accounts receivable — trade .......................................................
114,906
133,798
Allowance for doubtful receivables................................................................
(2,755)
Inventories (Note 3)........................................................................................
Deferred income taxes (Note 10) ...................................................................
Other current assets ......................................................................................
74,617
13,001
6,950
(2,194)
91,593
12,186
7,875
863,955
(20,714)
561,030
97,752
52,255
Total Current Assets ................................................................................
277,498
328,879
2,086,451
Property, Plant and Equipment:
Land ...............................................................................................................
Buildings ........................................................................................................
Machinery and equipment .............................................................................
Construction in progress ...............................................................................
46,979
108,547
133,672
8,642
Total ...........................................................................................................
297,840
50,479
113,414
132,945
5,680
302,518
353,226
816,143
1,005,053
64,977
2,239,399
Accumulated depreciation.............................................................................
(145,546)
Net Property, Plant and Equipment........................................................
152,294
(143,399)
159,119
(1,094,331)
1,145,068
Investments and Other Assets:
Investments in and advances to associates..................................................
Investment securities (Note 4) .......................................................................
Leasehold deposits........................................................................................
Deferred income taxes (Note 10) ...................................................................
Other ..............................................................................................................
785
43,431
10,653
43,901
20,804
853
57,500
11,159
17,986
17,648
Total Investments and Other Assets ......................................................
119,574
105,146
5,902
326,549
80,098
330,082
156,421
899,052
Total ..................................................................................................................
¥ 549,366
¥ 593,144
$ 4,130,571
See notes to consolidated financial statements.
26 Omron Corporation
Millions of yen
Thousands of
U.S. dollars (Note 2)
LIABILITIES AND SHAREHOLDERS’ EQUITY
2002
2001
2002
Current Liabilities:
Bank loans (Note 5) .......................................................................................
¥ 14,723
¥ 8,916
$ 110,699
Notes and accounts payable — trade ...........................................................
Accrued expenses .........................................................................................
Income taxes payable....................................................................................
Other current liabilities (Note 10) ...................................................................
Current portion of long-term debt (Note 5)....................................................
60,000
22,748
3,832
26,950
1,192
82,225
24,484
14,797
26,628
26,340
Total Current Liabilities ...........................................................................
129,445
183,390
451,128
171,038
28,812
202,632
8,962
973,271
Long-Term Debt (Note 5).................................................................................
42,796
31,957
321,774
Deferred Income Taxes (Note 10) ...................................................................
436
23
3,278
Termination and Retirement Benefits (Note 7)..............................................
75,367
48,929
566,669
Other Long-Term Liabilities............................................................................
291
370
2,188
Minority Interests in Subsidiaries ..................................................................
2,797
2,517
21,030
Shareholders’ Equity (Note 8):
Common stock, no par value:
Authorized: 487,000,000 shares
Issued: 249,109,236 shares .......................................................................
Additional paid-in capital ...............................................................................
Legal reserve .................................................................................................
64,082
98,705
7,660
Retained earnings ..........................................................................................
155,069
Accumulated other comprehensive loss (Note 14)........................................
(25,363)
64,082
98,705
7,652
174,077
(17,346)
Treasury stock, at cost — 836,289 shares in 2002 and
498,000 shares in 2001 .......................................
(1,919)
(1,212)
Total Shareholders’ Equity ......................................................................
298,234
Total ..................................................................................................................
¥549,366
325,958
¥593,144
481,820
742,143
57,594
1,165,932
(190,699)
(14,429)
2,242,361
$4,130,571
See notes to consolidated financial statements.
Omron Corporation 27
Consolidated Statements of Operations
Omron Corporation and Subsidiaries
Years ended March 31, 2002, 2001 and 2000
Millions of yen
Thousands of
U.S. dollars (Note 2)
2002
2001
2000
2002
Net Sales .................................................................................................
¥533,964
¥594,259
¥555,358
$4,014,767
Costs and Expenses:
Cost of sales .........................................................................................
353,429
Selling, general and administrative expenses ......................................
134,907
Research and development expenses .................................................
41,407
Interest expense, net (Note 5)...............................................................
Foreign exchange loss, net...................................................................
223
1,506
Other expenses, net (Note 9) ................................................................
27,865
376,194
131,203
42,513
111
1,389
2,812
358,911
133,662
36,605
750
2,841
1,553
2,657,361
1,014,338
311,331
1,677
11,323
209,511
Total..................................................................................................
559,337
554,222
534,322
4,205,541
Income (Loss) before Income Taxes, Minority Interests and
Cumulative Effect of Accounting Change ........................................
(25,373)
Income Taxes (Note 10) ..........................................................................
(9,348)
40,037
17,318
21,036
9,048
(190,774)
(70,286)
Income (Loss) before Minority Interests and
Cumulative Effect of Accounting Change ........................................
(16,025)
22,719
11,988
(120,488)
Minority Interests ...................................................................................
132
422
427
993
Income (Loss) before Cumulative Effect of Accounting Change.......
(16,157)
22,297
11,561
(121,481)
Cumulative Effect of Accounting Change............................................
384
—
—
2,887
Net Income (Loss) ..................................................................................
¥ (15,773)
¥ 22,297
¥ 11,561
$ (118,594)
2002
Per Share Data (Note 12):
Income (Loss) before Cumulative Effect of Accounting Change
Basic.................................................................................................
¥(65.0)
Diluted ..............................................................................................
(65.0)
Net Income (Loss)
Basic.................................................................................................
Diluted ..............................................................................................
Cash Dividends.......................................................................................
(63.5)
(63.5)
13.0
See notes to consolidated financial statements.
Yen
2001
¥87.4
85.3
87.4
85.3
13.0
U.S. dollars (Note 2)
2000
2002
¥45.0
44.5
45.0
44.5
13.0
$(0.49)
(0.49)
(0.48)
(0.48)
0.10
28 Omron Corporation
Consolidated Statements of Comprehensive Income (Loss)
Omron Corporation and Subsidiaries
Years ended March 31, 2002, 2001 and 2000
Millions of yen
Thousands of
U.S. dollars (Note 2)
2002
2001
2000
2002
Net Income (Loss) ..................................................................................
¥(15,773)
¥ 22,297
¥11,561
$(118,594)
Other Comprehensive Income (Loss), Net of Tax (Note 14):
Foreign currency translation adjustments
arising during the year.......................................................................
6,310
Minimum pension liability adjustments.................................................
(13,973)
7,286
(7,251)
(9,044)
7,138
47,444
(105,061)
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during the year .................
(7,570)
(8,532)
9,050
(56,918)
Reclassification adjustment for losses on impairment
realized in net income (loss) ............................................................
8,030
Reclassification adjustment for net gains realized in net income (loss) ..
Net unrealized gains (losses).............................................................
(746)
(286)
391
(2,072)
(10,213)
1,202
(1,502)
8,750
Net gains (losses) on derivative instruments:
Net losses on derivative instruments designated as cash flow
hedges during the year..................................................................
(1,673)
Reclassification adjustment for net losses realized in net loss.........
1,605
Net losses ......................................................................................
(68)
—
—
—
—
—
—
Other Comprehensive Income (Loss)...................................................
(8,017)
(10,178)
6,844
60,376
(5,609)
(2,151)
(12,579)
12,068
(511)
(60,279)
Comprehensive Income (Loss) .............................................................
¥(23,790)
¥ 12,119
¥18,405
$(178,873)
See notes to consolidated financial statements.
Omron Corporation 29
Consolidated Statements of Shareholders’ Equity
Omron Corporation and Subsidiaries
Years ended March 31, 2002, 2001 and 2000
Number of
common shares
issued
Common
stock
Additional
paid-in
capital
Accumulated
other
Legal
reserve
Retained
earnings
comprehensive Treasury
income (loss)
stock
Millions of yen
Balance, April 1, 1999 ........................
257,107,214
¥64,079
¥98,702
¥6,811
¥166,020
¥(14,012)
¥ (342)
Net income.......................................
Cash dividends, ¥13 per share ..........
Transfer to legal reserve ..................
Other comprehensive income..........
Treasury stock .................................
Exercise of stock options.................
11,561
(3,338)
(439)
439
6,844
(288)
19
Conversion of convertible bonds .....
2,022
3
3
Balance, March 31, 2000 ...................
257,109,236
64,082
98,705
7,250
173,804
(7,168)
(611)
Net income.......................................
Cash dividends, ¥13 per share ........
Transfer to legal reserve ..................
Other comprehensive loss ...............
Treasury stock .................................
Exercise of stock options.................
22,297
(3,284)
(402)
402
(10,178)
(749)
148
Share buyback and retirement.........
(8,000,000)
(18,338)
Balance, March 31, 2001 ...................
249,109,236
64,082
98,705
7,652
174,077
(17,346)
(1,212)
Net loss ............................................
Cash dividends, ¥13 per share ........
Transfer to legal reserve ..................
Other comprehensive loss ...............
Treasury stock .................................
Exercise of stock options.................
(15,773)
(3,227)
(8)
8
(8,017)
(725)
18
Balance, March 31, 2002 ...................
249,109,236
¥64,082
¥98,705
¥7,660
¥155,069
¥(25,363)
¥(1,919)
Thousands of U.S. dollars (Note 2)
Common
stock
Additional
paid-in
capital
Legal
reserve
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock
Balance, March 31, 2001 ............................................
$481,820
$742,143
$57,534
$1,308,850
$(130,420) $ (9,113)
Net loss .....................................................................
Cash dividends, $0.10 per share...............................
Transfer to legal reserve............................................
Other comprehensive loss ........................................
Treasury stock...........................................................
Exercise of stock options ..........................................
(118,594)
(24,264)
60
(60)
(60,279)
(5,451)
135
Balance, March 31, 2002 ............................................
$481,820
$742,143
$57,594
$1,165,932
$(190,699) $(14,429)
See notes to consolidated financial statements.
30 Omron Corporation
Consolidated Statements of Cash Flows
Omron Corporation and Subsidiaries
Years ended March 31, 2002, 2001 and 2000
Operating Activities:
Net income (loss) .................................................................................... ¥(15,773)
Adjustments to reconcile net income (loss) to net
¥ 22,297
¥ 11,561
$(118,594)
Millions of yen
Thousands of
U.S. dollars (Note 2)
2002
2001
2000
2002
cash provided by operating activities:
Depreciation and amortization ............................................................
Net loss on sales and disposals of property, plant and equipment....
Loss on impairment of property, plant and equipment.......................
Net gain on sales of short-term investments
and investment securities .................................................................
Loss on impairment of investment securities and other assets..........
Bad debt expenses .............................................................................
Termination and retirement benefits ...................................................
Deferred income taxes ........................................................................
Minority interests.................................................................................
Cumulative effect of accounting change ............................................
Changes in assets and liabilities:
Notes and accounts receivable — trade, net ..................................
Inventories .......................................................................................
Other assets ....................................................................................
Notes and accounts payable — trade ............................................
Income taxes payable .....................................................................
Accrued expenses and other ..........................................................
Other, net ............................................................................................
Total adjustments ............................................................................
Net cash provided by operating activities ...................................
Investing Activities:
Proceeds from sales or maturities of short-term investments
and investment securities .....................................................................
Purchase of short-term investments and investment securities ............
Capital expenditures...............................................................................
Decrease (increase) in leasehold deposits .............................................
Proceeds from sales of property, plant and equipment .........................
Acquisition of minority interests .............................................................
Net cash used in investing activities............................................
Financing Activities:
33,569
1,314
6,815
(1,008)
17,199
520
2,616
(16,131)
132
(384)
19,402
17,403
2,279
(22,291)
(10,992)
(1,082)
99
49,460
33,687
3,111
(6,181)
(38,896)
506
1,450
(111)
(40,121)
32,217
760
—
(3,703)
2,460
3,810
4,990
(5,402)
422
—
(5,593)
(13,320)
875
3,620
3,438
4,140
(215)
28,499
50,796
9,746
(5,761)
(37,583)
(538)
1,953
(182)
(32,365)
5,786
Net borrowings (repayments) of short-term bank loans.........................
13,102
Proceeds from issuance of long-term debt ............................................
(26,970)
Repayments of long-term debt...............................................................
(3,267)
Dividends paid ........................................................................................
—
Share buyback........................................................................................
(725)
Treasury stock ........................................................................................
18
Exercise of stock options .......................................................................
(12,056)
Net cash used in financing activities ...........................................
3,648
Effect of Exchange Rate Changes on Cash and Cash Equivalents.....
(14,842)
Net Decrease in Cash and Cash Equivalents ........................................
Cash and Cash Equivalents at Beginning of the Year ..........................
85,621
Cash and Cash Equivalents at End of the Year ..................................... ¥ 70,779
(1,371)
715
(1,650)
(3,337)
(18,338)
(749)
148
(24,582)
3,102
(3,049)
88,670
¥ 85,621
See notes to consolidated financial statements.
31,445
412
—
(2,783)
2,072
5,638
5,778
(5,809)
427
—
2,507
(534)
(3,030)
10,062
2,633
(585)
132
48,365
59,926
32,289
(37,413)
(31,146)
1,456
1,081
(447)
(34,180)
(18,087)
775
(3,102)
(3,371)
—
—
—
(23,785)
(2,191)
(230)
88,900
¥ 88,670
252,398
9,880
51,241
(7,579)
129,316
3,910
19,669
(121,286)
993
(2,887)
145,880
130,850
17,135
(167,602)
(82,647)
(8,135)
744
371,880
253,286
23,391
(46,474)
(292,451)
3,805
10,902
(835)
(301,662)
43,504
98,511
(202,782)
(24,564)
—
(5,451)
135
(90,647)
27,429
(111,594)
643,767
$ 532,173
Omron Corporation 31
Notes to Consolidated Financial Statements
Omron Corporation and Subsidiaries
1. Summary of
Significant
Accounting
Policies
32 Omron Corporation
Nature of Operations
Omron Corporation (the “Company”) is a multinational manufacturer of automation components, equipment and
systems with advanced computer, communications and control technologies. The Company conducts business in
over 30 countries around the world and strategically manages its worldwide operations through 5 regional manage-
ment centers, Japan, North America, Europe, Asia-Pacific and China. Products, classified by type and market, are
organized into five internal companies and one business development group, as described below.
Industrial Automation manufactures and sells control components and systems including programmable logic
controllers, sensors and switches used in automatic systems in industries. In the global market, the company offers
many services, such as those involving laborsaving automation, environmental protection, safety improvement, and
inspection-automization solutions for highly developed production systems.
Electronic Components manufactures and sells electric and electronic components found in such consumer
goods as home appliances and automobiles as well as such business equipment as telephone systems, vending
machines, and office equipment.
Social Systems Business encompasses the production and sale of automated teller machines, card authoriza-
tion terminals and point of sales systems for both domestic and overseas markets. Passing gates and automated
ticket machines and electronic panels and terminal displays for traffic information and monitoring purposes are also
produced for the domestic market.
Healthcare sells blood pressure monitors, digital thermometers, body-fat monitors, nebulizers and infra-red ther-
apy devices aimed at both the consumer and institutional markets.
Creative Service provides such outsourcing services as distribution, advertising and public relations, personnel,
information systems, administration, employee benefit schemes and accounting.
Business Development Group consists of businesses with high growth potential. The group provides the
peripheral equipment loaded in office automation equipment, card readers, modems, terminal adapters, scanners
and uninterrupted power supplies.
Basis of Financial Statements
The accompanying consolidated financial statements, stated in Japanese yen, include certain adjustments, not
recorded on the books of account, to present these statements in accordance with accounting principles generally
accepted in the United States of America, except for the omission of segment information required by Statement of
Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related
Information.”
Certain reclassifications have been made to amounts previously reported in order to conform to 2002 classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries (together the
“Companies”). All significant intercompany accounts and transactions have been eliminated. Costs in excess of the
fair value of net assets acquired are amortized on a straight-line basis over five years.
The Companies’ investments in companies in which ownership is from 20% to 50% (associates) are stated at cost
plus equity in undistributed net income or loss.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those esti-
mates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less, including time
deposits, commercial paper, securities purchased with resale agreements and money market instruments.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is established in amounts considered to be appropriate based primarily upon
the Companies’ past credit loss experience and an evaluation of potential losses in the receivables outstanding.
Short-Term Investments and Investment Securities
The Companies classify all of their marketable debt and equity securities as available-for-sale. Available-for-sale
securities are carried at market value with the corresponding recognition of net unrealized holding gains and losses as
a separate component of accumulated other comprehensive income, net of related taxes, until recognized. Individual
securities classified as available-for-sale are reduced to net realizable value by a charge to income in the period in
which the decline is deemed to be other than temporary.
Other investments are stated at the lower of cost or estimated net realizable value. The cost of securities sold is deter-
mined on the average cost basis.
Inventories
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment has been computed
principally on a declining balance method based upon the estimated useful lives of the assets. The estimated useful
lives primarily range from 3 to 50 years for buildings and from 2 to 15 years for machinery and equipment.
Long-Lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (undis-
counted and without interest charges) expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
Advertising Costs
Advertising costs are charged to earnings as incurred. Advertising expense was ¥7,931 million ($59,632 thou-
sand), ¥8,796 million and ¥8,428 million for the years ended March 31, 2002, 2001 and 2000, respectively.
Termination and Retirement Benefits
Termination and retirement benefits are accounted for in accordance with SFAS No. 87, “Employers’ Accounting
for Pensions” and are disclosed in accordance with SFAS No. 132, “Employers’ Disclosures about Pensions and
Other Postretirement Benefits.” The provision for termination and retirement benefits includes those for directors
and corporate auditors of the Company.
Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts. Future tax benefits, such as net operating loss carryfor-
wards and tax credit carryforwards, are recognized to the extent that such benefits are more likely than not to be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the peri-
od that includes the enactment date.
Derivatives
On April 1, 2001 the Companies adopted SFAS No. 133 “Accounting for Derivative Instruments and Hedging
Activities” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an
amendment of FASB Statement No. 133.” Both standards establish accounting and reporting standards for deriva-
tive instruments and for hedging activities, and require that an entity recognize all derivatives as either assets or lia-
bilities in the balance sheet and measure those instruments at fair value.
For foreign exchange forward contracts and foreign currency options, on that date the derivative contract is
entered into, the Companies designate the derivative as a hedge of a forecasted transaction or the variability of
cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge or “foreign currency”
hedge). The Companies formally document all relationships between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. This process
includes linking all derivatives that are designated as cash flow or foreign currency hedges to specific assets and
liabilities on the consolidated balance sheet or to specific firm commitments or forecasted transactions. Based on
the Company policy, all foreign exchange forward contracts and foreign currency options entered into must be
highly effective in offsetting changes in cash flows of hedged items.
Changes in fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow or
foreign currency hedge are recorded in other comprehensive income (loss), until earnings are affected by the vari-
ability in cash flows of the designated hedged item.
The cumulative effect adjustment upon the adoption of SFAS No. 133 and No. 138, net of the related income tax
effect resulted in a decrease to net loss of approximately ¥384 million ($2,887 thousand).
Prior to the adoption of SFAS No. 133 and No. 138, derivative financial instruments that were designated and
effective as hedges of forecasted transactions for which there was no firm commitment were marked to market,
and gains and losses on such derivatives were recorded in Foreign exchange loss, as were the offsetting foreign
exchange losses and gains on the hedged items. Gains and losses on the derivative financial instruments that were
Omron Corporation 33
designated and effective as hedges of firm commitments were deferred and recognized in income upon maturity of
the hedged transaction. Amounts receivable or payable under derivative financial instruments used to manage
interest rate risks arising from financial assets and liabilities were recognized as a component of the interest income
or expense of such related underlying assets or liabilities.
Cash Dividends
Cash dividends are reflected in the consolidated financial statements at proposed amounts in the year to which
they are applicable, even though payment is not approved by shareholders until the annual general meeting of
shareholders held early in the following fiscal year. Resulting dividends payable are included in Other current liabili-
ties in the consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income (loss), foreign currency translation adjustments, minimum
pension liability adjustments, unrealized gains and losses on available-for-sale securities and net gains and losses
on derivative instruments, and is presented in the consolidated statements of comprehensive income (loss).
Revenue Recognition
The Companies recognize revenue when persuasive evidence of an arrangement including title transfer exists,
delivery has occurred, the sales price is fixed or determinable, and collectibility is probable. These criteria are met
when products are shipped or services are performed.
New Accounting Standards
On July 20, 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “Business
Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” The statements will change the account-
ing for business combinations and goodwill in two significant ways. SFAS No. 141 requires that the purchase method
of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interests
method will be prohibited. SFAS No. 142 changes the accounting for goodwill from an amortization method to an
impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations,
will cease upon adoption of that statement, which for the Companies, will be April 1, 2002. The Companies expect that
the adoption of SFAS No. 142 will not be material.
On August 16, 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligation,” which is effec-
tive for financial statements issued for fiscal years beginning after June 15, 2002. The pronouncement addresses the
recognition and remeasurement of obligations associated with the retirement of a tangible long-lived asset. On
October 3, 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”
which is effective for financial statements issued for fiscal years beginning after December 15, 2001. SFAS No. 144
applies to all long-lived assets (including discontinued operations) and it develops one accounting model for long-lived
assets that are to be disposed of by sale. The Companies are currently reviewing these statements to determine their
impact on future financial statements.
2. Translation into
United States
Dollars
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the
Company is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are
included solely for convenience of the readers and have been made at the rate of ¥133 to $1, the approximate free
rate of exchange at March 31, 2002. Such translations should not be construed as representations that the
Japanese yen amounts could be converted into U.S. dollars at the above or any other rate.
3. Inventories
Inventories at March 31 consisted of:
Finished products............................................................................................
Work-in-process..............................................................................................
Materials and supplies.....................................................................................
Total.............................................................................................................
Millions of yen
2002
¥39,772
14,923
19,922
¥74,617
2001
¥52,188
15,114
24,291
¥91,593
Thousands of
U.S. dollars
2002
$299,038
112,203
149,789
$561,030
34 Omron Corporation
4. Short-Term
Investments and
Investment
Securities
Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income
and reported in other comprehensive income (loss), net of tax.
Cost, gross unrealized holding gains and losses and fair value of securities, excluding equity securities with no
public market value, by major security type at March 31 were as follows:
2002
2001
Millions of yen
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Cost (*)
Cost (*)
Available-for-sale securities:
Debt securities ............... ¥ 33
31,185
Equity securities.............
¥ —
8,346
Total available- for-sale
¥ — ¥
(815)
33
38,716
¥ 20
43,392
¥ — ¥ — ¥ 20
51,416
(7,622)
15,646
securities......................... ¥31,218
¥8,346
¥(815) ¥38,749
¥43,412
¥15,646
¥(7,622) ¥51,436
Thousands of U.S. dollars
2002
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
Cost (*)
Available-for-sale securities:
Debt securities ........................................................................ $ 248
234,474
Equity securities ......................................................................
$ —
62,752
$ — $ 248
(6,128)
291,098
Total available-for-sale securities ............................................... $234,722
$62,752
$(6,128)
$291,346
*Cost represents amortized cost for debt securities and acquisition cost for equity securities.
Losses on impairment of available-for-sale securities recognized to reflect the decline in market value considered to
be other than temporary were ¥13,845 million ($104,098 thousand), ¥674 million and ¥2,072 million for the years
ended March 31, 2002, 2001 and 2000, respectively.
Net unrealized holding gains on available-for-sale securities, net of related taxes, decreased by ¥286 million ($2,151
thousand) and ¥10,213 million for the years ended March 31, 2002 and 2001, respectively. Debt securities classified as
available-for-sale investment securities mature in various amounts through 2004.
Proceeds from sales of available-for-sale securities were ¥2,750 million ($20,677 thousand), ¥9,372 million and
¥31,964 million for the years ended March 31, 2002, 2001 and 2000, respectively.
Gross realized gains on those sales were ¥1,608 million ($12,090 thousand), ¥3,579 million and ¥3,456 million for the
years ended March 31, 2002, 2001 and 2000, respectively.
Gross realized losses on those sales were ¥321 million ($2,413 thousand), ¥8 million and ¥867 million for the years
ended March 31, 2002, 2001 and 2000, respectively.
5. Bank Loans and
Long-Term Debt
The weighted average annual interest rates of short-term bank loans at March 31, 2002 and 2001 were 1.7% and
2.9%, respectively.
Long-term debt at March 31 consisted of the following:
Millions of yen
2002
2001
Thousands of
U.S. dollars
2002
Unsecured debt:
Convertible bonds at 1.7%, due in 2004.....................................................
¥29,735
¥29,735
$223,571
Loans from banks and other financial institutions,
generally at 0.5% to 4.2%, due serially through 2005 ............................
Other................................................................................................................
Total.............................................................................................................
Less portion due within one year ....................................................................
12,541
1,712
43,988
1,192
26,415
2,147
58,297
26,340
94,293
12,872
330,736
8,962
Long-term debt, less current portion ..............................................................
¥42,796
¥31,957
$321,774
Omron Corporation 35
The annual maturities of long-term debt outstanding at March 31, 2002 were as follows:
Years ending March 31
2003 ................................................................................................................................
2004 ................................................................................................................................
2005 ................................................................................................................................
2006 ................................................................................................................................
2007 ................................................................................................................................
Total ................................................................................................................................
Millions of yen
¥ 1,192
12,625
29,998
141
32
¥43,988
Thousands of
U.S. dollars
$ 8,962
94,925
225,549
1,060
240
$330,736
The convertible bonds may be purchased at any time by the Company or its subsidiaries principally at any price
in the open market or otherwise, and may be redeemed at the Company’s option prior to maturity. The convertible
bonds are redeemable, in whole or in part, beginning October 1997 at 106% of face value, decreasing 1% per year.
At March 31, 2002 the convertible bonds were redeemable, in whole or in part, at 102%.
The number of contingently issuable shares of common stock related to the convertible bonds as of March 31,
2002 was 10,026,639 shares. The conversion price per share at March 31, 2002 was ¥2,965 ($22.29), subject to
anti-dilutive provisions.
As is customary in Japan, additional security must be given if requested by a lending bank, and banks have the
right to offset cash deposited with them against any debt or obligation that becomes due and, in case of default
and certain other specified events, against all debt payable to the banks. The Companies have never received any
such requests.
As is customary in Japan, the Company and domestic subsidiaries maintain deposit balances with banks with
which they have short- or long-term borrowings. Such deposit balances are not legally or contractually restricted as
to withdrawal.
Total interest cost incurred and charged to expense for the years ended March 31, 2002, 2001 and 2000 amount-
ed to ¥1,291 million ($9,707 thousand), ¥1,731 million and ¥1,897 million, respectively.
6. Leases
The Companies have operating lease agreements primarily involving offices and equipment for varying periods.
Leases that expire generally are expected to be renewed or replaced by other leases. At March 31, 2002, future
minimum rental payments applicable to non-cancelable leases having initial or remaining non-cancelable lease
terms in excess of one year were as follows:
Years ending March 31
2003 ................................................................................................................................
2004 ................................................................................................................................
2005 ................................................................................................................................
2006 ................................................................................................................................
2007 ................................................................................................................................
2008 and thereafter ........................................................................................................
Total ................................................................................................................................
Millions of yen
¥ 2,635
2,449
2,235
2,093
2,050
19,071
¥30,533
Thousands of
U.S. dollars
$ 19,812
18,413
16,804
15,737
15,414
143,391
$229,571
Rental expense amounted to ¥11,322 million ($85,128 thousand), ¥11,232 million and ¥11,120 million for the
years ended March 31, 2002, 2001 and 2000, respectively.
The Company has a contract with an outside service organization for outsourcing computer services. The con-
tract requires an annual service fee of ¥4,922 million ($37,008 thousand) for the year ending March 31, 2003. The
annual service fee will gradually decrease each year during the contract term to ¥4,518 million ($ 33,970 thousand)
for 2008. The contract is cancelable subject to a penalty of 15% of aggregate service fees payable for the remain-
ing term of the contract.
The Company and its domestic subsidiaries sponsor termination and retirement benefit plans which cover sub-
stantially all domestic employees. Benefits are based on the employee’s years of service, with some plans consid-
ering compensation and certain other factors. If the termination is involuntary, the employee is usually entitled to
greater payments than in the case of voluntary termination.
The Company and its domestic subsidiaries fund a portion of the obligations under these plans. The general
funding policy is to contribute amounts computed in accordance with actuarial methods acceptable under
Japanese tax law. The Company and substantially all domestic subsidiaries have a contributory termination and
retirement plan which is interrelated with the Japanese government social welfare program and consists of a basic
portion requiring employee and employer contributions plus an additional portion established by the employers.
Periodic pension benefits required under the basic portion are prescribed by the Japanese Ministry of Health,
Labour and Welfare, commence at age 65 and continue until the death of the surviving spouse. Benefits under the
additional portion are usually paid in a lump sum at the earlier of termination or retirement although periodic pay-
ments are available under certain conditions.
7. Termination and
Retirement
Benefits
36 Omron Corporation
The following table is the reconciliation of beginning and ending balances of the benefit obligations and the fair
value of the plan assets at March 31:
Millions of yen
2002
2001
Thousands of
U.S. dollars
2002
Change in benefit obligation:
Benefit obligation at beginning of year........................................................
Service cost, less employees’ contributions ...............................................
Interest cost.................................................................................................
Employees’ contributions ............................................................................
Plan amendments........................................................................................
Actuarial losses............................................................................................
Benefits paid (including benefits paid by the Companies) ..........................
¥205,907
8,401
6,042
1,053
(4,504)
20,138
(4,859)
Benefit obligation at end of year..............................................................
¥232,178
¥189,263 $1,548,173
63,165
45,429
7,917
(33,865)
151,414
(36,534)
¥205,907 $1,745,699
8,846
6,624
1,010
—
4,022
(3,858)
Change in plan assets:
Fair value of plan assets at beginning of year .............................................
Actual return on plan assets ........................................................................
Employers’ contributions.............................................................................
Employees’ contributions ............................................................................
Benefits paid................................................................................................
121,875
(7,974)
6,922
1,053
(2,389)
Fair value of plan assets at end of year ...................................................
¥119,487
Funded status..................................................................................................
Unrecognized net actuarial loss ......................................................................
Unrecognized prior service credit ...................................................................
Unrecognized transition obligation..................................................................
(112,691)
81,051
(4,204)
538
Net amount recognized ...........................................................................
¥ (35,306)
129,137
(12,879)
6,528
1,010
(1,921)
916,353
(59,955)
52,045
7,917
(17,962)
¥121,875 $ 898,398
(84,032)
49,639
—
808
(847,301)
609,406
(31,609)
4,045
¥ (33,585) $ (265,459)
Amounts recognized in the consolidated balance sheets:
Accrued liability ...........................................................................................
Intangible assets..........................................................................................
Accumulated other comprehensive loss (gross of tax) ...............................
Net amount recognized ...........................................................................
¥ (71,899)
—
36,593
¥ (35,306)
¥ (46,895) $ (540,594)
—
275,135
¥ (33,585) $ (265,459)
808
12,502
Accumulated benefit obligation at end of year...........................................
¥191,386
¥168,769 $1,438,992
The provisions of SFAS No. 87, “Employers’ Accounting for Pensions,” require the recognition of an additional
minimum pension liability for each defined benefit plan to the extent that a plan’s accumulated benefit obligation
exceeds the fair value of plan assets and accrued pension liabilities. The net change in the minimum pension liabili-
ty is reflected as other comprehensive income, net of related tax effect. The unrecognized transition obligation, the
unrecognized net actuarial loss and the prior service credit are being amortized over 15 years.
Key assumptions utilized in calculating the actuarial present value of benefit obligations are as follows:
Discount rate ................................................................................................................ 2.5%
Compensation increase rate ........................................................................................ 3.0
Expected long-term rate of return on plan assets ....................................................... 4.0
2002
2001
3.0%
3.0
4.0
2000
3.5%
3.6
4.0
The expense recorded for the contributory termination and retirement plans included the following components
for the years ended March 31:
Service cost, less employees’ contributions ...................................................
Interest cost on projected benefit obligation...................................................
Expected return on plan assets.......................................................................
Amortization ....................................................................................................
Net expense.................................................................................................
Millions of yen
2002
¥ 8,401
6,042
(5,010)
1,681
¥11,114
2001
¥ 8,846
6,624
(4,451)
2,215
¥13,234
Thousands of
U.S. dollars
2002
$ 63,165
45,429
(37,669)
12,639
$ 83,564
The Companies also have unfunded noncontributory termination plans administered by the Companies. These
plans provide lump-sum termination benefits and are paid at the earlier of the employee’s termination or mandatory
Omron Corporation 37
8. Shareholders’
Equity
retirement age, except for payments to directors and corporate auditors which require approval by the shareholders
before payment. The Companies record provisions for termination benefits sufficient to state the liability equal to the
plans’ vested benefits, which exceed the plans’ accumulated benefit obligations.
The consolidated liability for the noncontributory termination plans as of March 31, 2002 and 2001 was ¥3,468 mil-
lion ($26,075 thousand) and ¥2,034 million, respectively. The consolidated expense for the noncontributory termination
and retirement plans for the years ended March 31, 2002, 2001 and 2000 was ¥2,385 million ($17,932 thousand),
¥1,015 million and ¥1,041 million, respectively.
In June 2001, the Japanese Government issued a new law that regulates retirement benefit plans. Under the new
law, effective April 1, 2002, the Company can transfer the obligation for the basic portion and corresponding plan
assets to the social welfare plan subject to approval by the government. The Company has not yet decided if they will
apply for the transfer of the basic portion but if such an application is made and accepted, it may result in a settlement
or curtailment under SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Plans
and for Termination Benefits.” The Company has also not determined the amount of any gain or loss that would result
under such circumstances.
Japanese companies are subject to the Japanese Commercial Code (the “Code”) to which certain amendments
became effective as from October 1, 2001. Prior to October 1, 2001, the Code required at least 50% of the issue price
of new shares, with a minimum of the par value thereof, to be designated as stated capital as determined by resolution
of the Board of Directors. Proceeds in excess of amounts designated as stated capital were credited to additional
paid-in capital. Effective October 1, 2001, the Code was revised and common stock par values were eliminated result-
ing in all shares being recorded with no par value.
Prior to October 1, 2001, the Code also provided that an amount at least equal to 10% of the aggregate amount of
cash dividends and certain other cash payments which are made as an appropriation of retained earnings applicable
to each fiscal period shall be appropriated and set aside as a legal reserve until such reserve equals 25% of stated
capital. Effective October 1, 2001, the revised Code allows for such appropriations to be set aside as a legal reserve
until the total additional paid-in capital and legal reserve equals 25% of stated capital. The amount of total additional
paid-in capital and legal reserve which exceeds 25% of stated capital can be transferred to retained earnings by reso-
lution of the shareholders, which may be available for dividends.
Under the Code, companies may issue new common shares to existing shareholders without consideration as a
stock split pursuant to a resolution of the Board of Directors. Prior to October 1, 2001, the amount calculated by divid-
ing the total amount of shareholders’ equity by the number of outstanding shares after the stock split could not be less
than ¥50. The revised Code eliminated this restriction.
Prior to October 1, 2001, the Code imposed certain restrictions on the repurchase and use of treasury stock.
Effective October 1, 2001, the Code eliminated these restrictions allowing companies to repurchase treasury stock by
a resolution of the shareholders at the general shareholders’ meeting and dispose of such treasury stock by resolution
of the Board of Directors after March 31, 2002. The repurchased amount of treasury stock cannot exceed the amount
available for future dividend plus amount of stated capital, additional paid-in capital or legal reserve to be reduced in
the case where such reduction was resolved at the general shareholders’ meeting.
The Code permits companies to transfer a portion of additional paid-in capital and legal reserve to stated capital by
resolution of the Board of Directors. The Code also permits companies to transfer a portion of unappropriated retained
earnings, available for dividends, to stated capital by resolution of the shareholders.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends
are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of Directors, subject to
certain limitations imposed by the Code.
Under the Code, the amount legally available for dividends is based on retained earnings as recorded in the books
of the Company for Japanese financial reporting purposes. At March 31, 2002, retained earnings amounting to
¥62,621 million ($470,835 thousand) were available for future dividends subject to legal reserve requirements.
Stock Options
In June 1998, the Company introduced stock-based compensation plans. Stock options are granted to directors
and certain officers to purchase shares of common stock at a price not less than market price at the date of grant.
Options are granted with vesting periods of 1-2 years. As of March 31, 2002, options outstanding are summarized as follows:
Grant date
June 25, 1998
Authorized and
granted shares
158,000
Option
exercise price
¥2,162
June 25, 1999
158,000
¥1,839
July 1, 1999 -
June 30, 2001
July 1, 2001 -
June 30, 2004
Exercisable
term
Exercised and
(forfeited or expired) shares
73,000
(85,000)
10,000
(5,000)
—
—
June 27, 2000
June 26, 2001
260,000
292,000
¥2,936
¥2,306
July 1, 2002 - June 30, 2005
July 1, 2003 - June 30, 2006
38 Omron Corporation
9. Other
Expenses, net
Pursuant to SFAS No.123, “Accounting for Stock-Based Compensation,” the Company has elected to account
for its stock option plan under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, no
compensation cost has been recognized for this plan. Compensation cost for the plan determined based on the fair
value of the options at the grant date consistent with SFAS No.123 would have been insignificant.
Other expenses (income), net for the years ended March 31, 2002, 2001 and 2000 consisted of the following:
2002
Millions of yen
2001
2000
Thousands of
U.S. dollars
2002
Loss on relocation ...........................................................
¥ —
¥ 2,312
¥ —
$ —
Loss on impairment of investment
securities and other assets..........................................
17,199
2,460
2,072
129,316
Net loss (gain) on sales and disposals of
property, plant and equipment,
excluding loss on relocation ........................................
Loss on impairment of property, plant and equipment ...
Net gain on sales of short-term investments
and investment securities ............................................
Other, net.........................................................................
1,314
6,815
(1,008)
3,545
(43)
—
(3,703)
1,786
412
—
(2,783)
1,852
9,880
51,241
(7,579)
26,653
Total .............................................................................
¥27,865
¥ 2,812
¥ 1,553
$209,511
During the year ended March 31, 2001 the Company recognized a net loss of ¥2,312 million ($17,383 thousand)
as a result of an office relocation plan, primarily consisting of the relocation of the headquarters within Kyoto,
Japan.
In 2002, the Companies assessed the potential impairment of certain long-lived assets in consideration of future
alternate uses, including potential disposal. As a result, certain land and buildings, principally dormitories for
employees were deemed to be impaired and written down to fair value because the assets are not expected to
recover their entire carrying value through future cash flows. The estimated fair value of these assets was primarily
determined by independent real estate appraisals of land and buildings. The resulting loss on impairment of land
and buildings was ¥6,815 million ($51,241 thousand) for the year ended March 31, 2002. There were no such losses
for the years ended March 31, 2001 and 2000.
10. Income Taxes
The provision for income taxes for the years ended March 31, 2002, 2001 and 2000 consisted of the following:
2002
Millions of yen
2001
2000
Thousands of
U.S. dollars
2002
Current income tax expense ...........................................
¥ 6,783
¥22,720
¥14,857
$ 51,000
Deferred income tax benefit,
exclusive of the following ..............................................
(17,679)
(5,367)
(5,809)
(132,925)
Change in the beginning of the year balance of
the valuation allowance for deferred tax assets ............
1,548
(35)
—
11,639
Total .............................................................................
¥ (9,348)
¥17,318
¥ 9,048
$ (70,286)
The effective income tax rates of the Companies differ from the normal Japanese statutory rates as follows for
the years ended March 31:
2002
2001
2000
Normal Japanese statutory rates .............................................................................
42.0%
42.0%
42.0%
Increase (decrease) in taxes resulting from:
Permanently non-deductible items ......................................................................
Losses of subsidiaries for which no tax benefit was provided.............................
Difference in subsidiaries’ tax rates......................................................................
Change in the beginning of the year balance of
the valuation allowance for deferred tax assets ...............................................
Other, net..............................................................................................................
(1.9)
(3.3)
1.3
(0.4)
(0.9)
2.4
2.6
(2.5)
(0.1)
(1.1)
2.8
2.9
(3.0)
—
(1.7)
Effective tax rates .............................................................................................
36.8%
43.3%
43.0%
Omron Corporation 39
The Company and its domestic subsidiaries are subject to a number of taxes based on income, which in the
aggregate resulted in a normal tax rate of approximately 42.0% in 2002, 2001 and 2000.
The approximate effect of temporary differences and tax credit and loss carryforwards that gave rise to deferred
tax balances at March 31, 2002 and 2001 were as follows:
Millions of yen
2002
2001
Thousands of U.S. dollars
2002
Inventory valuation ............................................
Accrued bonuses and vacations .......................
Termination and retirement benefits..................
Enterprise taxes.................................................
Intercompany profits .........................................
Marketable securities ........................................
Property, plant and equipment..........................
Allowance for doubtful receivables ...................
Bad debt expenses ...........................................
Gain on sale of land...........................................
Minimum pension liability adjustment ...............
Other temporary differences .............................
Tax credit carryforwards....................................
Operating loss carryforwards ............................
Subtotal
...........................................................
Valuation allowance...........................................
Total ...........................................................
Deferred
tax
assets
¥ 3,521
3,492
12,912
164
2,540
—
2,789
2,711
—
—
15,369
11,871
3,689
12,961
72,019
(9,574)
¥62,445
Deferred
Deferred
tax
tax
liabilities
assets
¥ — ¥ 1,882
—
4,067
— 10,809
—
1,094
—
2,270
3,164
—
—
—
180
611
—
4,118
1,311
—
—
5,251
1,639
8,596
—
3,473
—
4,415
6,294
46,586
—
(7,795)
¥6,294
¥38,791
3,370
— 26,254
— 97,082
1,230
—
— 19,097
Deferred
Deferred
Deferred
tax
tax
tax
liabilities
assets
liabilities
¥ — $ 26,470 $ —
—
—
—
—
— 23,786
—
1,357
—
9,857
—
12,321
—
—
47,321
—
$47,321
— 20,971
20,383
—
—
— 115,558
89,259
— 27,738
— 97,449
541,491
— (71,983)
¥9,221 $469,508
116
—
1,311
9,221
4,424
The total valuation allowance increased by ¥1,779 million ($13,376 thousand), ¥1,310 million and ¥1,681 million in
2002, 2001 and 2000, respectively.
As of March 31, 2002, the Company and certain subsidiaries had operating loss carryforwards approximating
¥30,566 million ($229,820 thousand) available for reduction of future taxable income, the majority of which expire in
2007.
The Company has not provided for Japanese income taxes on unremitted earnings of subsidiaries to the extent
that they are believed to be indefinitely reinvested. The unremitted earnings of the foreign subsidiaries which are
considered to be indefinitely reinvested and for which Japanese income taxes have not been provided were
¥53,928 million ($405,474 thousand) and ¥50,052 million at March 31, 2002 and 2001, respectively. It is not practi-
cable to estimate the amount of unrecognized deferred Japanese income taxes on these unremitted earnings.
Dividends received from domestic subsidiaries are expected to be substantially free of tax.
Net sales and total assets of foreign subsidiaries for the years ended March 31, 2002, 2001 and 2000 were as follows:
2002
Net sales ............................................................................ ¥176,096
Total assets ........................................................................ ¥146,734
Millions of yen
2001
¥170,434
¥141,966
2000
¥158,122
¥115,532
Thousands of
U.S. dollars
2002
$1,324,030
$1,103,263
The Company accounts for its earnings per share in accordance with SFAS No. 128, “Earnings per Share.” Basic
net income (loss) per share has been computed by dividing net income (loss) available to common shareholders by
the weighted-average number of common shares outstanding during each year. Diluted net income (loss) per share
reflects the potential dilution of convertible bonds and stock options, and has been computed by the if-converted
method for convertible bonds and by the treasury stock method for stock options.
A reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computa-
tions is as follows:
2002
Millions of yen
2001
2000
Thousands of
U.S. dollars
2002
Income (loss) before cumulative
effect of accounting change........................................... ¥(16,157)
¥22,297
¥11,561
$(121,481)
Effect of dilutive securities:
Convertible bonds, due 2004 .....................................
—
Diluted net income (loss).................................................... ¥(16,157)
325
¥22,622
325
¥11,886
—
$(121,481)
11. Foreign
Operations
12. Per Share Data
40 Omron Corporation
13. Supplemental
Information for
Cash Flows
14. Other
Comprehensive
Income (Loss)
Net income (loss)................................................................ ¥(15,773)
Effect of dilutive securities:
2002
Millions of yen
2001
¥22,297
2000
¥11,561
Thousands of
U.S. dollars
2002
$(118,594)
Convertible bonds, due 2004 .....................................
—
Diluted net income (loss).................................................... ¥(15,773)
325
¥22,622
325
¥11,886
—
$(118,594)
Weighted average common shares outstanding ................. 248,401,803
Dilutive effect of:
Convertible bonds, due 2004 .......................................
Stock options................................................................
—
—
Diluted common shares outstanding ................................... 248,401,803
2002
Number of shares
2001
255,031,698
10,026,639
62,449
265,120,786
2000
256,841,987
10,028,349
28,106
266,898,442
For the year ended March 31, 2002, the assumed conversion of convertible bonds, giving effect to the incremen-
tal shares and the adjustment to reduce interest expenses, was anti-dilutive and has, therefore, been excluded from
the computation.
For the year ended March 31, 2002, the assumed exercise of stock options, giving effect to the incremental
shares, was anti-dilutive and has been excluded from the computation.
Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid
after the end of the year.
Supplemental cash flow information for the years ended March 31, 2002, 2001 and 2000 was as follows:
Interest paid .......................................................................
Income taxes paid..............................................................
Non-cash investing and financing activities:
2002
¥ 1,264
17,748
Millions of yen
2001
¥ 1,765
19,257
2000
¥ 1,980
12,543
Thousands of
U.S. dollars
2002
$ 9,504
133,444
Liabilities assumed in connection with capital expenditures ....
1,516
1,803
3,467
11,398
The change in each component of accumulated other comprehensive income (loss) for the years ended March
31, 2002, 2001 and 2000 was as follows:
2002
Millions of yen
2001
2000
Thousands of
U.S. dollars
2002
Foreign currency translation adjustments:
Beginning balance.......................................................... ¥(13,712)
6,310
Change for the year........................................................
(7,402)
Ending balance...............................................................
¥(20,998)
7,286
(13,712)
¥(11,954)
(9,044)
(20,998)
$(103,098)
47,444
(55,654)
Minimum pension liability adjustments:
Beginning balance..........................................................
Change for the year........................................................
Ending balance...............................................................
(7,251)
(13,973)
(21,224)
Unrealized gains on available-for-sale securities:
Beginning balance..........................................................
Change for the year........................................................
Ending balance...............................................................
Net gains (losses) on derivative instruments:
Beginning balance..........................................................
Change for the year........................................................
Ending balance...............................................................
Total accumulated other comprehensive income (loss):
3,617
(286)
3,331
—
(68)
(68)
—
(7,251)
(7,251)
13,830
(10,213)
3,617
—
—
—
(7,138)
7,138
—
5,080
8,750
13,830
—
—
—
(54,518)
(105,061)
(159,579)
27,196
(2,151)
25,045
—
(511)
(511)
(17,346)
Beginning balance..........................................................
(8,017)
Change for the year........................................................
Ending balance............................................................... ¥(25,363)
(7,168)
(10,178)
¥(17,346)
(14,012)
6,844
¥ (7,168)
(130,420)
(60,279)
$(190,699)
Omron Corporation 41
Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments for the years ended March
31, 2002, 2001 and 2000 were as follows:
2002
Tax
Millions of yen
2001
Tax
2000
Tax
Before-tax
amount
(expense) Net-of-tax
benefit
amount
Before-tax
amount
(expense) Net-of-tax
benefit
amount
Before-tax
amount
(expense) Net-of-tax
benefit
amount
Foreign currency translation adjustments
arising during the year ............................................ ¥ 6,310 ¥
Minimum pension liability adjustments ....................
Unrealized gains (losses) on available-for-sale securities:
(24,091)
— ¥ 6,310 ¥ 7,286 ¥ — ¥ 7,286 ¥ (9,044)¥ — ¥(9,044)
7,138
13,891 (6,753)
(12,502)
(7,251)
5,251
10,118 (13,973)
Unrealized holding gains (losses) arising during period...
(13,052)
5,482
(7,570)
(14,711)
6,179
(8,532)
15,604 (6,554)
9,050
Reclassification adjustment for losses on
impairment realized in net income (loss) ...............
13,845
(5,815)
8,030
674
(283)
391
2,072
(870)
1,202
Reclassification adjustment for net gains realized
in net income (loss)................................................
(1,287)
Net unrealized gains (losses).....................................
(494)
541
208
(746)
(3,571)
1,499
(2,072)
(2,589) 1,087
(1,502)
(286)
(17,608)
7,395 (10,213)
15,087 (6,337)
8,750
Net gains (losses) on derivative instruments:
Net losses on derivative instruments
designated as cash flow hedges during the year..
(2,884)
1,211
(1,673)
Reclassification adjustment for net losses
realized in net loss.................................................
2,767
(1,162)
1,605
—
—
—
—
—
—
—
—
—
—
—
—
Net losses..................................................................
—
Other comprehensive income (loss) .................. ¥(18,392) ¥10,375 ¥ (8,017)¥(22,824) ¥12,646 ¥(10,178) ¥19,934¥(13,090) ¥ 6,844
(117)
(68)
49
—
—
—
—
—
Foreign currency translation adjustments arising during the year .................................................
Minimum pension liability adjustments...............................................................................................
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during period......................................................................
Reclassification adjustment for losses on impairment realized in net income (loss) .........................
Reclassification adjustment for net gains realized in net income (loss) ............................................
Net unrealized gains (losses) ...............................................................................................................
Net gains (losses) on derivative instruments:
Net losses on derivative instruments designated as cash flow hedges during the year ...................
Reclassification adjustment for net losses realized in net loss..........................................................
Net losses ............................................................................................................................................
Thousands of U.S. dollars
2002
Before-tax
amount
$ 47,444
(181,143)
Tax (expense)
benefit
$ —
76,082
Net-of-tax
amount
$ 47,444
(105,061)
(98,135)
104,098
(9,677)
(3,714)
(21,684)
20,805
(879)
41,217
(43,722)
4,068
1,563
9,105
(8,737)
368
(56,918)
60,376
(5,609)
(2,151)
(12,579)
12,068
(511)
Other comprehensive income (loss)................................................................................................
$(138,292)
$ 78,013
$ (60,279)
42 Omron Corporation
15. Financial
Financial Instruments
Instruments
and Risk
Management
The following table presents the carrying amounts and estimated fair values as of March 31, 2002 and 2001, of
the Companies’ financial instruments.
Millions of yen
2002
2001
Thousands of
U.S. dollars
2002
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Carrying
amount
Fair
value
Nonderivatives:
Long-term debt, including current portion .... ¥(43,988) ¥(46,307)
¥(58,297)
¥(62,460) $(330,736) $(348,173)
Derivatives:
Included in Other current liabilities:
Forward exchange contracts .............
Foreign currency options ...................
Interest rate swaps.............................
(540)
(65)
(15)
(540)
(65)
(15)
(377)
(334)
—
(377)
(334)
(49)
(4,060)
(489)
(113)
(4,060)
(489)
(113)
The following methods and assumptions were used to estimate the fair values of each class of financial instru-
ments for which it is practicable to estimate that value:
Nonderivatives
(1) Cash and cash equivalents, notes and accounts receivable, bank loans and notes and accounts payable:
The carrying amounts approximate fair values.
(2) Short-term investments and investment securities (see Note 4):
The fair values are estimated based on quoted market prices or dealer quotes for marketable securities or simi-
lar instruments. Certain equity securities included in investments have no public market value, and it is not prac-
ticable to estimate their fair values.
(3) Long-term debt:
For convertible bonds, the fair values are estimated based on quoted market prices. For other, the fair values
are estimated using present value of discounted future cash flow analysis, based on the Companies’ current
incremental issuing rates for similar types of arrangements.
Derivatives
The fair value of derivatives generally reflects the estimated amounts that the Companies would receive or pay to
terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of
open contracts. Dealer quotes are available for most of the Companies’ derivatives; otherwise, pricing or valuation
models are applied to current market information to estimate fair value. The Companies do not use derivatives for
trading purposes.
Changes in the fair value of foreign exchange forward contracts and foreign currency options designated and
qualifying as cash flow hedges are reported in accumulated other comprehensive income (loss). These amounts are
subsequently reclassified into earnings through Foreign exchange loss, net in the same period as the hedged items
affect earnings. Substantially all of the accumulated other comprehensive income (loss) in relation to foreign
exchange forward contracts and foreign currency options at March 31, 2002 is expected to be reclassified into
earnings within twelve months.
The effective portions of changes in the fair value of foreign exchange forward contracts and foreign currency
options designated as cash flow hedges and reported in accumulated other comprehensive income (loss), net of
the related tax effect, are losses of ¥1,673 million ($12,579 thousand) for the year ended March 31, 2002. The
amounts, which were reclassified out of accumulated other comprehensive income (loss) into Foreign exchange
loss, net or Interest expense, net, depending on their nature, net of the related tax effect, are net losses of ¥1,605
million ($12,068 thousand) for the year ended March 31, 2002. The amount of the hedging ineffectiveness is not
material for the year ended March 31, 2002.
The Companies enter into interest rate swap agreements, which do not meet the hedging criteria of SFAS
No. 133. These interest rate swap agreements are recorded at fair value in the consolidated balance sheets. The
changes in fair values are recorded in current period earnings.
(1)
Interest rate swap contracts:
The Companies enter into interest rate swap agreements to manage exposure to fluctuations in interest rates.
These agreements involve the exchange of interest obligations on fixed and floating interest rate debt without
exchange of the underlying principal amounts. The agreements generally mature at the time the related debt
matures. The differential paid or received on interest rate swap agreements is recognized as an adjustment to
interest expense. Notional amounts are used to express the volume of interest rate swap agreements. The
notional amounts do not represent cash flows and are not subject to risk of loss. In the unlikely event the coun-
terparty fails to meet the terms of an interest rate swap agreement, the Companies’ exposure is limited to the
Omron Corporation 43
interest rate differential. Management considers the exposure to credit risk to be minimal since the counterpar-
ties are major financial institutions.
At March 31, 2002 and 2001, the notional amounts on which the Companies had interest rate swap agreements
outstanding aggregated ¥2,500 million ($18,797 thousand) and ¥4,500 million, respectively. The estimated fair
values of interest rate swap contracts are based on present value of discounted future cash flow analysis.
(2) Foreign exchange forward contracts and foreign currency options:
The Companies enter into foreign exchange forward contracts and combined purchased and written foreign
currency option contracts to hedge foreign currency transactions (primarily the U.S. dollar and the EURO) on a
continuing basis for periods consistent with their committed exposure. The terms of the currency derivatives are
rarely more than 10 months. The credit exposure of foreign exchange contracts are represented by the fair value
of the contracts at the reporting date. Management considers the exposure to credit risk to be minimal since the
counterparties are major financial institutions.
The notional amounts of contracts to exchange foreign currency (forward contracts) outstanding at March 31,
2002 and 2001 were as follows:
Forward exchange contracts ...................................................................
Foreign currency options .........................................................................
Millions of yen
2002
¥16,328
8,049
2001
¥17,130
10,445
Thousands of
U.S. dollars
2002
$122,767
60,519
The notional amounts do not represent the amounts exchanged by the parties to derivatives and are not a
measure of the Companies’ exposure through its use of derivatives. The amounts exchanged are determined
by reference to the notional amounts and the other terms of the derivatives.
The Companies hedge certain exposures to fluctuations in foreign currency exchange rates that occur prior
to conversion of foreign currency denominated monetary assets and liabilities into the functional currency.
Prior to conversion to the functional currency, these assets and liabilities are translated at spot rates in
effect on the balance sheet date. The effects of changes in spot rates are reported in earnings and included in
Foreign exchange loss, net in the consolidated statements of operations. Currency forward contracts and
options designated as hedges of the monetary assets and liabilities are also marked to spot rates with the
resulting gains and losses reported in the consolidated statements of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Companies to concentrations of credit risk consist principally of
short-term cash investments and trade receivables. The Companies place their short-term cash investments with
high-credit-quality financial institutions. Concentrations of credit risk with respect to trade receivables, as approxi-
mately 75% of total sales are concentrated in Japan, are limited due to the large number of well-established cus-
tomers and their dispersion across many industries. The Company normally requires customers to deposit with
them funds to serve as security for ongoing credit sales.
In August 2000, the Company entered into an operating lease agreement for a new head office, including land
and a building, with a company owned by the family of the Company’s founder, including the Company’s chairman
and representative director, representative director and chief executive officer, and certain managing officers at that
time. This lease agreement has an initial non-cancelable lease term of 20 years and requires a monthly rental pay-
ment of ¥106 million ($797 thousand) and a security deposit of ¥2,600 million ($19,549 thousand) which is refund-
able when the agreement expires. During the years ended March 31, 2002 and 2001, the Company paid ¥1,272 mil-
lion ($9,564 thousand) and ¥954 million, respectively, for monthly rentals and the balance of the security deposit at
March 31, 2002 and 2001 was ¥2,600 million ($19,549 thousand).
16. Related Party
Transaction
17. Commitments
and Contingent
Liabilities
The Company has commitments at March 31, 2002 of approximately ¥6,170 million ($46,391 thousand) related to
contracts for the construction of a new research and development laboratory building in Kyoto.
The Company and certain of its subsidiaries are defendants in several pending lawsuits. However, based upon
the information currently available to both the Company and its legal counsel, the Company management believes
that damages from such lawsuits, if any, would not have a material effect on the consolidated financial statements.
Guarantees
Contingent liabilities at March 31, 2002 with respect to loans guaranteed were ¥1,912 million ($14,376 thousand),
of which ¥1,099 million ($8,263 thousand) were jointly and severally guaranteed with six other unrelated companies.
According to an agreement between the seven companies, any losses on these guarantees are to be equally borne
among the companies.
44 Omron Corporation
18. Subsequent
Events
On May 8, 2002 the Company management declared a plan to purchase the Company’s shares, subject to
approval at the general meeting of shareholders. The execution of the plan is at the Company’s discretion with a
maximum limit of ¥10,000 million ($75,188 thousand), or 5,000,000 shares, for the period up to the date of the June
2003 general meeting of shareholders.
On May 29, 2002 the Company management authorized a voluntary early retirement program to all employees
between the ages 30 and 59, with over ten years employment at the Company. This program is entirely optional
and will be available to those employees from July 1, 2002 through August 30, 2002. Employees accepting this
offer will receive an additional lump sum payment, along with their already earned pension benefits, determined by
such factors as age, years of employment and salary. Due to the voluntary nature of the program the Company has
not recorded a liability for this additional lump sum payment.
Omron Corporation 45
Independent Auditors’ Report
To the Board of Directors and Shareholders of Omron Corporation
We have audited the accompanying consolidated balance sheets of Omron Corporation and subsidiaries as of March 31,
2002 and 2001, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity,
and cash flows for each of the three years in the period ended March 31, 2002, all expressed in Japanese yen. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
Certain information required by Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an
Enterprise and Related Information,” has not been presented in the accompanying consolidated financial statements. In our
opinion, presentation concerning operating segments and other information is required for a complete presentation of the
Company’s consolidated financial statements.
In our opinion, except for the omission of segment information as discussed in the third paragraph, the consolidated finan-
cial statements referred to above present fairly, in all material respects, the financial position of Omron Corporation and sub-
sidiaries as of March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in
the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America.
Our audits also comprehended the translation of Japanese yen amounts into United States dollar amounts and, in our opin-
ion, such translation has been made in conformity with the basis stated in Note 2 to the consolidated financial statements.
Such United States dollar amounts are presented solely for convenience.
Osaka, Japan
June 17, 2002
46 Omron Corporation
Global Network
EUROPE
Regional Headquarters
OMRON Europe B.V. (The Netherlands)
Phone: 31-23-5681300 Fax: 31-23-5681391
[Industrial Automation Company]
OMRON Electronics Ges.m.b.H. (Austria)
Phone: 43-1-80190-0 Fax: 43-1-804-48-46
OMRON Electronics N.V./S.A. (Belgium)
Phone: 32-2-4662480 Fax: 32-2-4660687
OMRON Electronics AG (Switzerland)
Phone: 41-41-748-13-13 Fax: 41-41-748-13-45
OMRON Electronics, Spol. S.r.o. (Czech Rep.)
Phone: 420-2-6731-1254 Fax: 420-2-7173-5613
OMRON Electronics G.m.b.H. (Germany)
Phone: 49-2173-6800-0 Fax: 49-2173-6800-400
OMRON Fabrikautomation G.m.b.H. (Germany)
Phone: 49-2103-203-3 Fax: 49-2103-203-400
OMRON Electronics A.S. (Denmark)
Phone: 45-4344-0011 Fax: 45-4344-0211
OMRON Electronics S.A. (Spain)
Phone: 34-91-37-77-9-00 Fax: 34-91-37-77-9-56
OMRON Electronics S.a.r.l. (France)
Phone: 33-1-49747000 Fax: 33-1-48760930
THE AMERICAS
Regional Headquarters
OMRON Management Center of America, Inc. (U.S.A.)
Phone: 1-847-884-0322 Fax: 1-847-884-1866
— Information Technology Center (U.S.A.)
Phone: 1-408-919-2828 Fax: 1-408-919-2829
[Industrial Automation Company]
OMRON Electronics Llc. (U.S.A.)
Phone: 1-847-843-7900 Fax: 1-847-843-7787
OMRON Manufacturing of America, Inc. (U.S.A.)
Phone: 1-630-513-0400 Fax: 1-630-513-1027
OMRON Canada Inc. (Canada)
Phone: 1-416-286-6465 Fax: 1-416-286-6648
OMRON IDM Controls, Inc. (U.S.A.)
Phone: 1-713-849-1900 Fax: 1-713-849-4666
OMRON Eletrõnica do Brasil Ltda. (Brazil)
Phone: 55-11-5564-6488 Fax: 55-11-5564-7751
ASIA–PACIFIC
Regional Headquarters
OMRON Asiapacific Pte. Ltd. (Singapore)
Phone: 65-835-3011 Fax: 65-835-2711
[Industrial Automation Company]
OMRON Electronics Pte. Ltd. (Singapore)
Phone: 65-835-3011 Fax: 65-835-2711
OMRON Electronics Sdn. Bhd. (Malaysia)
Phone: 603-79547323 Fax: 603-79546618
OMRON Electronics Pty. Ltd. (Australia)
Phone: 61-2-9878-6377 Fax: 61-2-9878-6981
OMRON Electronics Ltd. (New Zealand)
Phone: 64-9-358-4400 Fax: 64-9-358-4411
OMRON Electronics Co., Ltd. (Thailand)
Phone: 66-2-937-0500 Fax: 66-2-937-0501
OMRON Korea Co., Ltd. (Korea)
Phone: 82-2-549-2766 Fax: 82-2-517-9033
OMRON Electronics O.Y. (Finland)
Phone: 358-9-5495-800 Fax: 358-9-5495-8150
OMRON Electronics Manufacturing
of Germany G.m.b.H. (Germany)
OMRON Electronics KFT (Hungary)
Phone: 36-1-399-3050 Fax: 36-1-399-3060
OMRON Electronics S.r.l. (Italy)
Phone: 39-02-32681 Fax: 39-02-325154
OMRON Immobiliare S.r.l. (Italy)
Phone: 39-02-32681 Fax: 39-02-325154
OMRON Electronics Norway A.S. (Norway)
Phone: 47-22-657500 Fax: 47-22-658300
OMRON Electronics B.V. (The Netherlands)
Phone: 31-23-5681100 Fax: 31-23-5681188
OMRON Electronics Lda. (Portugal)
Phone: 351-21-942-9400 Fax: 351-21-941-7899
OMRON Administracao de Imoveis Ltda. (Portugal)
Phone: 351-1-941-7599 Fax: 351-1-941-7899
OMRON Electronics Sp. Z.o.o. (Poland)
Phone: 48-22-645-7860 Fax: 48-22-645-7863
OMRON Electronics A.B. (Sweden)
Phone: 46-8-632-3500 Fax: 46-8-632-3510
OMRON Electronics Ltd. (Turkey)
Phone: 90-216-326-2980 Fax: 90-216-326-2979
OMRON Electronics Ltd. (U.K.)
Phone: 44-20-8450-4646 Fax: 44-20-8450-8087
Phone: 49-7032-811-111 Fax: 49-7032-811-199
OMRON Manufacturing of The Netherlands B.V.
(The Netherlands)
Phone: 31-73-6481811 Fax: 31-73-6420195
[Electronic Components Company]
OMRON Electronic Components Ltd. (U.K.)
Phone: 44-1384-405500 Fax: 44-1384-405508
OMRON Electronic Components Europe B.V.
(The Netherlands)
Phone: 31-23-5681200 Fax: 31-23-5681212
[Healthcare Company]
OMRON Medizintechnik
Handelsgesellschaft G.m.b.H.
Phone: 49-621-83348-8 Fax: 49-621-8334820
(Germany)
OMRON Healthcare Europe B.V. (The Netherlands)
Phone: 31-20-354-8200 Fax: 31-20-354-8201
OMRON Healthcare UK Ltd. (U.K.)
Phone: 44-1-273-495033 Fax: 44-1-273-495123
[Electronic Components Company]
OMRON Automotive Electronics, Inc. (U.S.A.)
Phone: 1-248-893-0200 Fax: 1-248-488-5430
[Healthcare Company]
OMRON Healthcare, Inc. (U.S.A.)
Phone: 1-847-680-6200 Fax: 1-847-680-6269
OMRON Dualtec Automotive Electronics Inc.
(Canada)
Phone: 1-905-829-0136 Fax: 1-905-829-0432
[Social Systems Business Company]
OMRON Systems Llc. (U.S.A.)
Phone: 1-847-843-0515 Fax: 1-847-843-7686
OMRON Transaction Systems, Inc. (U.S.A.)
Phone: 1-847-843-0515 Fax: 1-847-843-7686
OMRON Business Systemas Eletrônicos
da América Latina Ltda. (Brazil)
Phone: 55-11-251-0073 Fax: 55-11-251-1053
[Other]
OMRON Finance Canada, Inc. (Canada)
Phone: 1-416-286-6465 Fax: 1-416-286-6648
OMRON Advanced Systems, Inc. (U.S.A.)
Phone: 1-408-727-6644 Fax: 1-408-727-5540
OMRON Logistics of America, Inc. (U.S.A.)
Phone: 1-630-513-6750 Fax: 1-630-513-1382
[Electronic Components Company]
OMRON Malaysia Sdn. Bhd. (Malaysia)
Phone: 603-7876-1411 Fax: 603-7876-1954
P.T. OMRON Manufacturing of Indonesia
(Indonesia)
Phone: 62-21-8970111 Fax: 62-21-8970120
OMRON Electronic Components Pte. Ltd.
(Singapore)
Phone: 65-244-3939 Fax: 65-244-3938
OMRON Electronic Components Co., Ltd.
(Thailand)
Phone: 66-2-619-0292 Fax: 66-2-619-0624
OMRON Automotive Electronics Korea, Co., Ltd.
(Korea)
Phone: 82-2-850-5700 Fax: 82-2-859-1687
[Social Systems Business Company]
OMRON Business Systems Singapore (Pte.) Ltd.
(Singapore)
Phone: 65-736-3900 Fax: 65-736-2736
OMRON Business Systems
(Malaysia) Sdn. Bhd. (Malaysia)
Phone: 603-7880-9119 Fax: 603-7880-9559
OMRON Mechatronics of The Philippines Corp.
(Philippines)
Phone: 63-47-252-1490 Fax: 63-47-252-1491
[Healthcare Company]
OMRON Healthcare Singapore Pte. Ltd.
(Singapore)
Phone: 65-0736-2345 Fax: 65-0736-2500
Omron Corporation 47
CHINESE ECONOMIC AREA
Regional Headquarters
OMRON (China) Group Co., Ltd. (Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
OMRON (China) Co., Ltd. (China)
Phone: 86-10-8391-3005 Fax: 86-10-8391-3688
— Shanghai Office
Phone: 86-21-5037-2222 Fax: 86-21-5037-2200
[Industrial Automation Company]
OMRON Electronics Asia Ltd. (Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
OMRON Trading (Shenzhen) Co., Ltd. (China)
Phone: 86-755-359-9028 Fax: 86-755-359-9628
OTE Engineering Inc. (Taiwan)
Phone: 886-3-352-4442 Fax: 886-3-352-4239
OMRON Taiwan Electronics Inc. (Taiwan)
Phone: 886-2-2715-3331 Fax: 886-2-2712-6712
Shanghai OMRON Automation System Co., Ltd. (China)
Phone: 86-21-5854-2080 Fax: 86-21-5854-2658
OMRON (Shanghai) Co., Ltd. (China)
Phone: 86-21-5854-0055 Fax: 86-21-5854-0614
OMRON Trading (Tianjin) Co., Ltd. (China)
Phone: 86-22-2576-0295 Fax: 86-22-2576-3032
OMRON Taiwan System Inc. (Taiwan)
Phone: 886-2-2375-2200 Fax: 886-2-2375-2233
[Electronic Components Company]
Shanghai OMRON Control Components Co., Ltd.
(China)
Phone: 86-21-5854-0012 Fax: 86-21-5854-8413
OMRON Electronic Components (Hong Kong) Ltd.
(Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
OMRON Electronic Components (Shenzhen) Ltd. (China)
Phone: 86-755-462-0000 Fax: 86-755-462-1111
[Healthcare Company]
OMRON Dalian Co., Ltd. (China)
Phone: 86-411-761-4222 Fax: 86-411-761-6602
OMRON Industry & Trade (Dalian) Co., Ltd. (China)
Phone: 86-411-7317201 Fax: 86-411-7317191
[Other]
OMRON Shanghai Computer Corp. (China)
Phone: 86-21-6468-9626 Fax: 86-21-6468-9489
OMRON Trading (Shanghai) Co., Ltd. (China)
Phone: 86-21-5037-2222 Fax: 86-21-5037-2200
Nanjing Southeast-OMRON Traffic Information
Systems Co., Ltd. (China)
Phone: 86-25-469-1665 Fax: 86-25-469-1650
JAPAN
Manufacturing
Mishima Systems Factory
Phone: 81-559-77-9000 Fax: 81-559-77-9198
Kusatsu Plant
Phone: 81-77-563-2181 Fax: 81-77-565-5588
Ayabe Office
Phone: 81-773-42-6611 Fax: 81-773-43-0661
Minakuchi Factory
Phone: 81-748-62-6851 Fax: 81-748-62-6854
Marketing
Osaki Office
Phone: 81-3-5435-2000 Fax: 81-3-5435-2030
Nagoya Office
Phone: 81-52-571-6461 Fax: 81-52-565-1910
Osaka Office
Phone: 81-6-6282-2511 Fax: 81-6-6282-2782
Fukuoka Office
Phone: 81-92-414-3200 Fax: 81-92-414-3220
Research and Development
Kyoto R&D Laboratory
Phone: 81-75-951-5111 Fax: 81-75-955-0156
Tsukuba R&D Laboratory
Phone: 81-298-64-4100 Fax: 81-298-64-4105
Kumamoto R&D Laboratory
Phone: 81-96-289-2222 Fax: 81-96-289-2234
Okayama R&D Laboratory
Phone: 81-86-276-8778 Fax: 81-86-276-8779
[Industrial Automation Company]
OMRON Okayama Co., Ltd.
Phone: 81-86-277-6111 Fax: 81-86-276-6013
OMRON Izumo Co., Ltd.
Phone: 81-853-22-2212 Fax: 81-853-22-2396
OMRON Takeo Co., Ltd.
Phone: 81-954-23-4151 Fax: 81-954-23-4159
OMRON Aso Co., Ltd.
Phone: 81-967-22-1311 Fax: 81-967-22-3526
Settsu Denki
Phone: 81-6-6443-8008 Fax: 81-6-6443-5233
48 Omron Corporation
Gyoden Corporation
Phone: 81-29-302-1211 Fax: 81-29-302-1222
OMRON Kyoto Taiyo Co., Ltd.
Phone: 81-75-672-0911 Fax: 81-75-681-4700
OMRON Technocult Co., Ltd.
Phone: 81-45-321-0471 Fax: 81-45-321-0473
OMRON Two Four Service Co., Ltd.
Phone: 81-3-3253-9241 Fax: 81-3-3253-9247
[Electronic Components Company]
OMRON Iida Co., Ltd.
Phone: 81-265-26-6000 Fax: 81-265-26-6030
OMRON Kurayoshi Co., Ltd.
Phone: 81-858-23-2121 Fax: 81-858-22-1355
OMRON Ichinomiya Co., Ltd.
Phone: 81-586-62-7211 Fax: 81-586-62-7291
OMRON Sanyo Co., Ltd.
Phone: 81-8695-5-1355 Fax: 81-8695-5-1359
OMRON Kumamoto Co., Ltd.
Phone: 81-968-44-4101 Fax: 81-968-44-4161
OMRON Taiyo Co., Ltd.
Phone: 81-977-66-4447 Fax: 81-977-67-5112
[Social Systems Business Company]
OMRON Nohgata Co., Ltd.
Phone: 81-949-22-2811 Fax: 81-949-28-3046
OMRON Field Engineering Co., Ltd.
Phone: 81-3-3448-8111 Fax: 81-3-3448-8485
OMRON Software Co., Ltd.
Phone: 81-75-352-7400 Fax: 81-75-352-7210
OMRON Systems Kyushu Co., Ltd.
Phone: 81-92-452-2123 Fax: 81-92-452-2124
[Healthcare Company]
OMRON Matsusaka Co., Ltd.
Phone: 81-598-29-2715 Fax: 81-598-29-1207
OMRON Institute of Life Science Co., Ltd.
Phone: 81-75-344-7178 Fax: 81-75-344-7134
[Other]
OMRON Finance Co., Ltd.
Phone: 81-3-3436-7160 Fax: 81-3-3436-7165
OMRON Network Applications Co., Ltd.
Phone: 81-75-361-2160 Fax: 81-75-361-7329
Shiga Creative Delica Co., Ltd.
Phone: 81-77-569-1271 Fax: 81-77-561-7160
F&E Service Co., Ltd.
Phone: 81-75-344-7148 Fax: 81-75-344-7962
E-Koto Co., Ltd.
Phone: 81-75-254-6777 Fax: 81-75-211-0974
OMRON Creative Marketing Co., Ltd.
Phone: 81-75-341-5587 Fax: 81-75-361-2768
OMRON Logistic Create Co., Ltd.
Phone: 81-6-6282-2530 Fax: 81-6-6282-2786
Gyoden Service Incorporation
Phone: 81-48-431-0897 Fax: 81-48-431-0924
OMRON Credit Service Co., Ltd.
Phone: 81-75-344-7796 Fax: 81-75-344-7783
OMRON General Service Co., Ltd.
Phone: 81-75-344-7359 Fax: 81-75-344-7265
Human Renaissance Institute Co., Ltd.
Phone: 81-3-3438-0920 Fax: 81-3-3438-0921
OMRON Creative Facilities Co., Ltd.
Phone: 81-75-344-7193 Fax: 81-75-344-7962
OMRON Creative Delica Co., Ltd.
Phone: 81-75-344-7883 Fax: 81-75-353-9026
OMRON Alphatec Corporation
Phone: 81-3-3438-3611 Fax: 81-3-3438-0037
OMRON Personnel Creative Service Co., Ltd.
Phone: 81-75-344-0901 Fax: 81-75-344-0902
Sanno Consulting Corp.
Phone: 81-3-5350-9291 Fax: 81-3-5350-9283
OMRON Cellport Telematics Incorporated
Phone: 81-3-3438-9821 Fax: 81-3-3438-9824
Investor Information
Head Office
Shiokoji Horikawa, Shimogyo-ku,
Kyoto 600-8530, Japan
Phone: 81-75-344-7000
Fax: 81-75-344-7001
Tokyo Head Office
3-4-10, Toranomon, Minato-ku,
Tokyo 105-0001, Japan
Phone: 81-3-3436-7170
Fax: 81-3-3436-7180
Osaka Office
Osaka Center Bldg., 4-1-3, Kyutaro-cho,
Chuo-ku, Osaka 541-0056, Japan
Phone: 81-6-6282-2511
Fax: 81-6-6282-2782
Kyoto R&D Laboratory
20, Igadera, Shimo-kaiinji,
Nagaokakyo-shi, Kyoto 617-8510, Japan
Phone: 81-75-951-5111
Fax: 81-75-957-9846
Date of Establishment
May 10, 1933
Industrial Property Rights
Number of patents:
2,313 (Japan)
1,481 (Overseas)
Number of patents pending:
6,138 (Japan)
809 (Overseas)
Number of Employees
25,395
Paid–in Capital
¥64,082 million
Common Stock
Authorized: 487,000,000 shares
Issued: 249,109,236 shares
Number of shareholders: 25,610
Stock Price Range/Trading Volume
(Osaka Securities Exchange)
Monthly Stock Price Range (¥)
Stock Listings
Osaka Securities Exchange
Tokyo Stock Exchange
Nagoya Stock Exchange
Frankfurt Stock Exchange
Ticker Symbol Number
6645
Transfer Agent
The Mitsubishi Trust and Banking
Corporation
2-11-1, Nagatacho, Chiyoda-ku,
Tokyo 100-8212, Japan
(As of March 31, 2002)
High price=¥2,560
Low price=¥1,390
Monthly Trading Volume (shares)
4/01
5
6
7
8
9
10
11
12
1/02
2
3
Month
Omron Corporation 49
3,000
2,500
2,000
1,500
1,000
500
0
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
This annual report is printed on recycled paper.
Printed in Japan
Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan
Phone: 81-75-344-7000 Fax: 81-75-344-7001
Home page: http://www.omron.co.jp (Japanese)
http://www.omron.com (English)