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Annual Report 2004
Year ended March 31, 2004
100% Recycled-content level
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)
PROFILE
The Omron Group has developed its business in a global setting, aiming to
provide innovative devices and solutions that meet the requirements of
industry and society, and that help to improve the quality of life.
In fiscal 2003, ended March 31, 2004, the Group achieved its highest-ever
profits and attained the ROE target of 10% one year ahead of the schedule
laid out in Grand Design 2010, the Group’s long-term management plan in
effect through fiscal 2010. Now is the time to prepare the ground for the next
surge of growth. To this end, we presently are focusing on implementing the
second phase of Grand Design 2010, dubbed GD 2010 New Phase 2, which
covers the period from fiscal 2004 to fiscal 2007.
Leveraging our core sensing & control technology competencies in combi-
nation with our decades of accumulated business experience, we will contin-
ue to pursue our goal of becoming the leading company in the global indus-
try as we steadily fulfill our mission to contribute meaningfully to the devel-
opment of society.
CONTENTS
Financial Highlights
Corporate Philosophy —Corporate Public Responsibility—
To Our Shareholders, Customers, and All Other Stakeholders
Special Feature:
FY2004 - 2007 Medium-Term Management Plan “GD2010 New Phase 2”
Business Lineup
Industrial Automation Business (IAB)
Electronic Components Business (ECB)
Automotive Electronic Components Business (AEC)
Social Systems Business (SSB)
Healthcare Business (HCB)
Other Businesses
Research & Development
Corporate Social Responsibility
Corporate Governance and Compliance
Directors, Corporate Auditors and Corporate Officers
Financial Section
Global Network
Stock Information
1
2
4
7
10
12
14
16
18
20
22
23
24
27
28
29
67
69
A Caution Concerning Forward-Looking Statements
Statements in this annual report with respect to Omron’s plans, strategies and benefits, 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.
Definition of Terms
All references to “Omron” and “the Company” herein are to Omron Corporation; references to “the Omron Group” and “the Group” refer to
Omron Corporation and consolidated subsidiaries and affiliates.
FINANCIAL HIGHLIGHTS (U.S. GAAP)
Omron Corporation and Consolidated Subsidiaries
Years ended March 31, 2004, 2003 and 2002
Millions of yen
(unless otherwise specified)
Thousands of
U.S. dollars
(Note 2)
(unless otherwise specified)
2004/3
2003/3
2002/3
2004/3
For the Year:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥584,889
¥535,073
¥533,964
$5,517,821
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
240,054
207,660
180,535
2,264,661
Selling, general and administrative expenses
(Except research and development expenses) . . . . . . . . . . . . . . .
142,157
135,112
134,907
1,341,104
Research and development expenses . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,494
51,403
26,811
At Year-End:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
592,273
Total interest-bearing liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56,687
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274,710
Ratios:
Gross profit margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on shareholders’ equity (ROE) . . . . . . . . . . . . . . . . . . . . . . .
Ratio of shareholders’ equity to total assets . . . . . . . . . . . . . . . . . .
Per Share Data (yen and U.S. dollars):
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41.0%
8.8%
10.2%
46.4%
110.7
107.5
Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1148.3
Cash dividends (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.0
40,235
32,313
511
567,399
71,260
251,610
38.8%
6.0%
0.2%
44.3%
2.1
2.1
1036.0
10.0
41,407
4,221
(15,773)
549,366
58,711
298,234
33.8%
0.8%
(5.1%)
54.3%
(63.5)
(63.5)
1201.2
13.0
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 on March 31, 2004, of ¥106=$1.
438,623
484,934
252,934
5,587,481
534,782
2,591,604
1.04
1.01
10.83
0.19
Net Sales &
Operating Income Margin
Net Income (Loss) & ROE
Shareholders’ Equity & Ratio of
Shareholders’ Equity to Total Assets
Cash Dividends per Share
(Billions of yen)
30
(Billions of yen)
600
500
400
300
200
100
0
00/3
01/3
02/3
03/3
04/3
(%)
12
10
8
6
4
2
0
20
10
0
-10
-20
(%)
15
10
5
0
-5
(Billions of yen)
400
300
200
100
(%)
60
50
40
30
20
(Yen)
20
15
10
5
0
01/3
01/3
02/3
03/3
04/3
00/3
01/3
02/3
03/3
04/3
-10
0
01/3
01/3
02/3
03/3
04/3
Net sales [left axis]
Net income (loss) [left axis]
Shareholders’ equity [left axis]
Cash dividends per share
Operating income margin [right axis]
ROE [right axis]
Ratio of shareholders’ equity
to total assets [right axis]
1
CORPORATE PHILOSOPHY
—CORPORATE PUBLIC RESPONSIBILITY—
We at the Omron Group are proud of and confident in our
approach to Corporate Public Responsibility, introduced at an
early stage in our history. As a global company, we are dedicated
to exploring potential social needs and creating new markets to
materialize the Optimization Society. To this end, we are upgrad-
ing a system of corporate governance capable of responding
quickly to changes in the business environment.
Yoshio Tateisi
Chairman of the BOD
PRIDE AND CONFIDENCE IN OUR CORPORATE PUBLIC RESPONSIBILITY
Stakeholders are increasingly attentive to the quality of companies’ efforts towards corporate social responsi-
bility. Omron’s founder, Kazuma Tateisi, established the Group’s corporate motto—“At work for a better life,
a better world for all”—in 1959. Since then, we have tried to live up to this guiding philosophy by contributing
to society on two fronts: through our business activities and through our corporate citizenship activities. We
are proud of and confident in this approach adopted nearly half a century ago, and we will continue to fulfill
our Corporate Public Responsibility in these two ways, always bearing in mind the perspectives of our stake-
holders.
EXPLORING SOCIAL NEEDS TO MATERIALIZE THE OPTIMIZATION SOCIETY
In 1970, founder Kazuma Tateisi presented a theory—the SINIC (Seed-Innovation to Need-Impetus Cyclic
Evolution) Theory—for predicting future social and business trends to the International Future Research
Conference. Serving as a compass guiding the Group’s management for over 30 years, this theory predicts a
shift from industrialized society to an “Optimization Society” starting from 2005.
Rather than merely providing the material prosperity achieved by industrialized society, the new
Optimization Society will emphasize spiritual richness and more holistic human life. This new society will
achieve an optimally balanced fusion between the contradictory concepts and values embodied in such duali-
ties as individual/society, culture/nature, and human/machine. Issues neglected by industrialized society, such
as industrial pollution and its effects on the environment, natural resource depletion, safety, peace of mind, and
2
equal access to health care, education, and other fundamental human rights, will thus be addressed. A con-
crete example might be automobiles capable of sensing potentially hazardous conditions in the surrounding
environment that automatically avoid accidents. The SINIC Theory posits that machines will conform to the
requirements of humans, not vice versa, in the Optimization Society. In the coming Optimization Society, there-
fore, the Omron Group’s mission will be to contribute to satisfying social needs centered on peace of mind,
safety, and environmental conservation by leveraging our sensing and control technology strengths to achieve
a “best match” between human requirements and machine capabilities.
TOWARD WELL-ESTABLISHED CORPORATE GOVERNANCE
The Company’s introduction of an internal company system and a managing officer system in 1999 was aimed
at separating the roles of corporate management and actual business operations. In an effort to reinforce the
management oversight function, Omron increased the number of outside directors and outside corporate
auditors as well as established within the Board of Directors the Compensation Advisory Committee, which is
chaired by an outside director, as is the Personnel Advisory Committee. At the same time, in order to provide
greater disclosure of information to stakeholders we began making quarterly presentations of our financial
results.
Responding to stakeholders’ expectations in my role as Chairman of the Board of Directors, I place the
highest emphasis on three specific elements of corporate governance: fulfilling management accountability,
achieving management transparency and strengthening disclosure, and pursuing high business ethics. To fur-
ther strengthen the Group’s competitiveness in the global business environment and thereby achieve our man-
agement goal of maximizing long-term corporate value, we are committed to enhance our corporate gover-
nance system to enables us to respond quickly to changes in the business environment.
July 2004
Yoshio Tateisi
Chairman of the BOD
3
TO OUR SHAREHOLDERS, CUSTOMERS,
AND ALL OTHER STAKEHOLDERS
Our mission—to contribute meaningfully to the development of
society—is more than just an empty dream. That’s because we
have adopted a realistic approach to carrying out this mission,
effectively utilizing our accumulated managerial resources.
Hisao Sakuta
President and CEO
RETROSPECTIVE ON FISCAL 2003
1. Operating Environment
Momentum fueled by domestic private-sector capital
investment and continued growth in China
and increasingly sophisticated requirements, which in turn guided
our development and market launch of technology-driven products
and provision of solutions to help our customers attain greater pro-
ductivity and improved quality. Specifically, we actively undertook
The subtle signs of recovery in the Japanese economy, which
proposal-based sales and marketing activities focusing on the
began to emerge during the fiscal year ended March 31, 2003,
semiconductor and flat panel display (FPD) industries, and suc-
grew increasingly apparent over the course of fiscal 2003, ended
ceeded in substantially expanding sales of such products as base
March 31, 2004. The biggest difference compared to past recov-
inspection systems, displacement sensors, and high-precision
ery cycles is that the present upturn is not solely reliant on exports
control devices. In addition, sales of backlights used in cellular
but rather is grounded in solid domestic demand. In particular,
phones doubled by differentiating our products in respect of lower
movement is being felt in the new growth industry of digital con-
energy consumption and increased brightness.
sumer electronics, even as long-depressed private-sector capital
Geographically, sales rose 11.0% year-on-year in Japan and
investment has shown impressive double-digit year-on-year growth
6.8% overseas. Sales in China, in particular, showed strong growth
for the fiscal year under review.
of approximately 30%, including direct exports from Japan, which is
At the same time, overseas expansion is picking up, centered on
clearly one of the most important factors of the year under review.
China, where the Omron Group has prioritized business development
for some time. Currently making a transformation from the “world’s
factory” to the largest consumer market on earth, China achieved
Structural improvements and increased net sales yield
record profits
strong real GDP growth of 9.1% during the year under review.
Operating income jumped 59.1% year-on-year to ¥51.403 billion,
while net income soared by a factor of over 52.5 to ¥26.811 billion,
2. Operating Results of the Omron Group
both record highs. These figures exceeded our initial targets by
High-value-added technology and marketing, com-
bined with aggressive overseas business development
Overall sales for fiscal 2003 outpaced our initial target by 4.4%, ris-
19.5% and 41.1%, respectively.
Our proactive stance for strengthening our technological edge
and new market development resulted in increase in expense by
ing to ¥584.889 billion, a 9.3% increase over the previous year.
¥13.4 billion during the year. Nevertheless, this was more than off-
Our Automotive Electronic Components Business (AEC) receded
set by the positive effects of an increase in net sales (¥22.2 billion)
because of production cutbacks by North American automakers.
and productivity gains (¥10.2 billion). Productivity gains were the
Moreover, sales in the Other Businesses segment declined due to
fruits of our Value-added Innovation Committee 21 (VIC21) struc-
exclusion of a number of previously consolidated subsidiaries from
tural reforms, launched in fiscal 2001, which served to accelerate
the period’s consolidated results owing to structural reforms imple-
reductions in variable costs and fixed manufacturing costs.
mented prior to September 2003. Nevertheless, we could achieve
Return on shareholder’s equity (ROE) jumped from 0.2% to
the better-than-expected results, thanks largely to strong perform-
10.2%, thus reaching a year ahead of schedule the 10% target set
ances by our core business segments. In addition to positive con-
out in VIC21. In short, I would summarize the year’s achievements
ditions in the macro business environment, I believe the expansion
by noting that we succeeded in establishing a solid platform for the
in sales was driven by our solid grasp of customers’ diversifying
next stage of growth.
4
Results of VIC21 Structural Reforms
Period of implementation: April 2002 to September 2003
Item
Target
Actual
Reduction in groupwide
fixed and variable expenses . . . . . .
¥30.0 billion
¥32.4 billion
Expansion of overseas
production ratio
(compared with March 2001) . . . . .
50% increase in ratio
52% increase in ratio
Absorption or sale of low-profit
or unprofitable businesses . . . . . . .
2 businesses, 5 subsidiaries
8 businesses, 11 subsidiaries
Review of GD2010 Phase 1
(ROE: %)
15
10% ROE achieved
1 year ahead of schedule
10
5
0
-5
-10
7.5
8.4
6.7
10.2
10.0
9.3
0.2
-5.1
FY00
FY03
FY04
Structural Reforms
(VIC21)
FY02
Initial ROE target
Actual ROE
FY01
OUR GROWTH STRATEGY: SOLIDIFYING PAST INITIATIVES
reforms stipulated in VIC21. Under VIC21, we carried out several
FOR THE FUTURE
significant reforms. Specifically, an early retirement program led to a
1. The Essence and Inevitability of Strategy
reduction in domestic employment of about 1,460 people.
Strengthening profitability, growth potential, and
stability to maximize corporate value
Furthermore, we closed three plants or partially transferred functions
overseas, and sold or absorbed eight businesses and 11 sub-
It is my conviction that a CEO’s primary responsibility is to respond
sidiaries. At the same time, we achieved cost reductions by under-
to stakeholders’ expectations by maximizing corporate value.
taking sweeping re-evaluations of our production processes and
Accordingly, in 2001 the Omron Group formulated Grand Design
materials procurement. As a result, we achieved all of VIC21’s
2010 (GD2010), a long-term management plan expressing the
numerical targets, including overseas production ratios and busi-
desired direction for the Group over the coming decade, with the
ness portfolio revision as well as reductions in fixed and variable
priority goal of maximizing corporate value over the long term.
expenses (¥32.4 billion actual vs. ¥30.0 billion target). This prepared
I believe that corporate value is composed of three major ele-
the ground for the dramatic earnings recovery we enjoyed during
ments. The first of these is profitability. Only by producing profits
the year under review.
that exceed current investment costs can an enterprise begin to
achieve value, and high profitability demonstrates high-added-value
3. Issues for the Future
business development based on technology that distinguishes a
company from its competitors. In GD2010, we established 10% of
Offensive-defensive strategic balance for progress in
the next stage of growth
ROE as a profitability benchmark for our medium-term management
By bringing our profitability targets (ROE) one year forward, I feel
objectives. The second element is growth prospects. Needless to
that we are now at a stage where we can work on improving our
say, the market places a premium, thus respects the bland value,
growth and stability. This does not mean, however, that our mission
only on companies demonstrating growth potential. The third ele-
to raise profitability has ended. Despite our gradual strengthening of
ment is stability. It is vital that a Company establish a solid earnings
our earnings base, it is not yet solid enough to enable us to maintain
base capable of withstanding volatility in the external environment. In
superior international competitiveness. Bearing this in mind, we have
order to increase profitability and stability, it is necessary to reinforce
divided the remaining seven years of GD2010 into two parts. During
both financial and production systems. To raise growth potential,
the first four years, from fiscal 2004 to fiscal 2007, dubbed GD2010
meanwhile, technology and marketing must be organically integrat-
New Phase 2, we will implement a strategy of offensive/defensive
ed. These principles are the essence of GD2010.
balance with an eye to increasing the prospects for growth and sta-
bility, all the while paying keen attention to profitability.
2. Verification of the Past
Strengthening our earnings base
—turning the negative into the positive
Shortly after the launch of GD2010, the Omron Group was hit by a
major downturn in the economy, pushing us off the path of growth
that we had envisioned. In response, from fiscal 2002 we focused
on increasing profitability at an accelerated pace via structural
5
Doubling Total Business Value
GD2010 Long-Term Management Goal
Maximizing long-term corporate value
New Medium-Term Management Goal
Doubling total business value
Enhancing brand value
Business C
ＰＶ*
Corporate expenses
Brand value
Corporate value
Business B
ＰＶ*
Total business value
Business A
ＰＶ*
* PV＝Present Value
Strategy Overview for GD2010 New Phase 2
—Improving production and sales efficiency, and
expanding growth-oriented regions and business
domains
while also speeding up decision-making, with management moni-
toring provided by the corporate auditors. Furthermore, thorough a
proactive IR strategy and an open shareholders’ meeting, manage-
ment receives valuable opinions and critiques from investors and
To raise profitability, we are focusing on two major initiatives. First,
analysts. We will continue to further enhance and reinforce our cor-
we are increasing the efficiency of our marketing system by
porate governance.
strengthening and integrating our authorized distributors. Second,
we are rationalizing our production processes and materials pro-
A RETURN FOR ALL OF OUR STAKEHOLDERS
curement. Through these two measures, we aim to lower the
We are committed to rewarding shareholders for their support
aggregate ratio of selling, general and administrative (SG&A)
through both expanded corporate value and dividends. On the
expenses and fixed manufacturing expenses to total sales by sev-
other hand, as we enter a new stage of growth we will be required
eral percentage points during GD2010 New Phase 2.
to expand advance investments in future growth for the time being,
We will achieve higher earnings stability and growth potential,
necessitating higher levels of retained earnings.
meanwhile, by carrying out the following two measures. First, we
That much said, we take our dividend policy quite seriously. In
will further develop high-growth markets, particularly China.
fact, in the year under review we doubled the dividend to ¥20 per
Second, we will expand new technology-driven business domains
share, including a 70th anniversary commemorative dividend of ¥7
with high-value-added technologies, namely, our four core tech-
per share. For the future we are targeting a dividend payout rate of
nologies of microreplication processing, light wave control,
about 20% of consolidated current net income. To our customers,
vision/optical/radio wave sensing, and artificial intelligence informa-
we will contribute to greater productivity and profitability by provid-
tion control. Through these measures, we will reach the final goal
ing high-value-added products and services. To society at large,
of GD 2010 New Phase 2, which is a doubling of the aggregate
we will contribute to the maintenance of a sound society and envi-
business value, i.e., the total current net value of future cash flows,
ronment through our business activities and through a variety of
generated by each of our business segments.
volunteer activities. With the unwavering trust and support of all our
*For more details of our New Phase 2 strategy, please refer to the section entitled
“FY2004-2007 Medium-Term Management Plan (GD2010 New Phase 2).”
stakeholders, the Omron Group will continue to strive to maximize
corporate value.
CORPORATE GOVERNANCE
Strong corporate governance systems are required for the maxi-
mization of corporate value, two essential facets of which are (1)
committed execution of strategy and (2) incorporation of valuable
opinions and critiques from outside the company. The Company’s
management is centered on the Board of Directors, Executive
Meeting, and Board of Corporate Auditors. The managing officer
system and internal company system serve to promote the separa-
tion of the roles of corporate management and business execution,
July 2004
Hisao Sakuta
President and CEO
6
SPECIAL FEATURE:
FY2004 - 2007 MEDIUM-TERM MANAGEMENT PLAN “GD2010 NEW PHASE 2”
—Strategy of Balancing Growth and Earnings—
Maximizing Long-Term Corporate Value
Phase 1
Establish a profit
structure
New Phase 2
Build a growth
structure
Phase 3
Achieve a growth
structure
FY2001
FY2004
FY2007
FY2010
Target
ROE 10%
Double total business value
PROLOGUE
OPERATING STRUCTURE REFORM
—AIMING AT DOUBLING TOTAL BUSINESS VALUE
—FURTHER REINFORCEMENT OF PLATFORM FOR
Due principally to a substantial worsening of the eco-
PROFITABILITY
nomic climate immediately following launch of our long-
1. Basic Recognition:
term growth vision, Grand Design 2010 (GD2010), the
We are far from satisfied with the current situation
performance of the Omron Group deviated considerably
Although ROE and other indicators of profitability
from the growth path initially laid out. With subsequent
exceeded initial projections following implementation of
steady implementation of the productivity improvement
VIC21, we are fully aware that the current situation does
structural reforms, Value-added Innovation Committee
not allow us to rest on our laurels. All we have accom-
21 (VIC 21), however, we were finally able during fiscal
plished thus far is to improve slightly the structural
2003 to improve our profitability to where it surpassed
weaknesses we identified. It is important, in particular,
the goals we set in GD2010. With that as a turning
to promote still further our ability to cope with changes
point, we will now move forward steadily toward maxi-
in the external environment and our international com-
mizing the Omron Group’s corporate value, the original
petitiveness.
aim of GD2010.
Maximizing corporate value, however, is not a goal
2. Concrete Strategies and Objectives:
that can be accomplished overnight. During the first half
Further reductions in SG&A and fixed manufactur-
of the remaining seven years of GD2010, therefore, we
ing cost ratios
will be seeking a balance between growth and earnings,
As a goal for further reinforcing our earnings structure,
with the aim of doubling the total present value of the
we are aiming to increase our operating income from
future cash flows anticipated from our various business
the current 8.8% to more than 10% by fiscal 2007. The
segments.
specific ways in which we will accomplish that goal are
to accelerate shifting production to China to reduce our
fixed manufacturing cost ratio while promoting efficien-
cy in our sales and related support structures and fur-
ther reductions in SG&A expenses for a lower SG&A
ratio. The combination of lower fixed manufacturing
costs and SG&A ratio is expected to result in a 2-3 per-
centage points drop making it possible to realize oper-
ating income margins of over 10%.
7
Full-Fledged Growth in China
Fiscal 2001 Actual
Fiscal 2004 Plan
Net sales:
¥25.0 billion
¥50.0 billion
Investment:
¥8.5 billion
(FY2001–2003)
Fiscal 2003 Actual
Fiscal 2007 Plan
Net sales:
¥38.8 billion
¥150.0 billion
Investment:
¥30.0 billion
(FY2004–2007)
Sales in the China Region
(Billions of yen)
150
120
90
60
30
0
e s in 4 y e ars
4 ti m
¥150.0 billion
FY01
FY02
FY03
FY04
FY05
FY06
FY07
GD2010 New Phase 2
BUSINESS DOMAIN STRUCTURAL REFORMS
1) Further development in high growth regions
—ESTABLISHMENT OF NEW PLATFORMS FOR
—Emphasis on China
GROWTH
1. Basic Recognition:
The Omron Group places China at the top of the list of
regional markets to be developed. Although business
Essential to raise the level of potential growth in
contraction is anticipated in the short term in China due
each business domain
to government tightening to bring economic overheating
We define business value as the present value of future
under control, growth potential remains strong in the
cash flows anticipated from the Group’s various busi-
medium to long term as China continues to serve as the
ness domains. In order to realize increased business
“world’s factory” while also emerging as one of the
value it is essential to improve the profitability of existing
world’s great consumer market. The Group chalked up
businesses (operational structure reforms) and to
¥38.8 billion in sales during fiscal 2003 in the Chinese
increase our sales in growth domains.
market, and has already achieved a correspondingly
2. Basic Strategy:
well-recognized presence there. By fiscal 2007, the
Group aims to roughly quadruple its sales in China to
Further development of high growth regions and
¥150.0 billion.
of value-added fields utilizing our technological
At the center of our strategy in China are our
edge
Industrial Automation Business (IAB), Electronic
Two main focuses mark our approach to raising the top
Components Business (ECB), and Healthcare Business
line. The first focus is to prioritize the development of
(HCB). Major manufacturers from Japan, Europe and
geographic regions (markets) with high growth potential.
North America are expanding their output in China, and
That means placing primary emphasis on the Chinese
more sophisticated automation is being required along-
market. The second focus is to fully leverage and then
side expanding demand for leading-edge devices such
further strengthen our technological edges in order to
as micro lens arrays (MLAs). In addition, as the living
advance into new, high value-added business domains.
standard in China continues to climb rapidly, the growth
Through the second focus, in particular, we are confi-
potential is increasing for various healthcare products.
dent that we can achieve top line growth even in mature
Factors such as the spread of private car ownership
markets such as those in Japan, Europe and North
and development of the transportation infrastructure,
America.
moreover, are expected to result in expanded needs
that positively affect the demand felt by the Automotive
Electronic Components Business (AEC) and the Social
8
Technology-Centered Growth
Growth structure of four core technologies and two fields
Core technologies
Product fields
Product examples
• Micro-replication processing
• Master/Electrotyping
• Reproduction/Materials
• MEMS
• Lightwave control
Fields where light
nano-technology
is a strength
Optical display devices
MLA, etc.
Optical communication
devices
SPICA, etc.
• Vision sensing
• Lightwave sensing
• Radio wave sensing
• Artificial intelligence
information control
(Fuzzy/AI)
Fields where
sensing is a
strength
Sensing technology
Control technology
MEMS components
3-axis acceleration sensors, etc.
Quality lifecycle manage-
ment (QLM)
Waveform analysis and
diagnostics solutions
(SIGNARC, etc.)
Car Safety
HDRC etc.
Systems Business (SSB).
business is particularly high. Our MLAs offer double to
The Omron Group will, therefore, continue to shift
triple the brightness of existing devices, with only a third
production to China as a means of improving its interna-
to half of the power consumption. Many cellular phone
tional competitiveness. Greater levels of capital invest-
manufacturers have already recognized the superiority
ment are essential in order to aggressively pursue these
of our MLAs and have adopted them in their products.
efforts in terms of both sales and manufacturing. We
Products with high growth potential are also appear-
plan to expand total investment in China to ¥30.0 billion
ing from the combination of vision, optical, and radio
during next four years to fiscal 2007, which is 3.5 times
wave sensing technology with knowledge and informa-
the ¥8.5 billion invested over the preceding three years
tion control technology (artificial intelligence and fuzzy
by fiscal 2003.
technology). Examples include waveform analysis diag-
nosis solutions and in-vehicle high dynamic range
2) Further development in new technological
CMOS (HDRCs). Waveform analysis diagnosis solutions
domains
incorporate the abilities and knowledge of skilled work-
From the perspective of the Omron Group, the most
ers on production and shipment lines into algorithms,
powerful driver for realizing growth is technology
enhancing the quality of production equipment. HDRCs
designed to differentiate the Group from competitors.
are capable of substantial contributions to driver sup-
During our more than 70 years of history we have suc-
port functions, an area in which automobile manufactur-
cessfully developed four core differentiated technolo-
ers are actively competing to differentiate themselves
gies: 1) ultra-precision 3D fabrication and replication
from their competitors.
technology, 2) lightwave control technology, 3) vision,
Our strategy based on the domains integrating these
optical, and radio wave sensing, and 4) knowledge and
core technologies, i.e., a) ultra-precision 3D fabrication
information control. Various combinations of these four
and replication technology with lightwave control tech-
technologies give rise to cultivation of a wide range of
nology, and b) vision, optical, and radio wave sensing
high value-added products.
technology with knowledge and information control
The application of ultra-precision 3D fabrication and
technology, aims for a six-fold increase in sales to
replication technology and lightwave control technology,
¥60.0 billion by fiscal 2007, from the current ¥10.0 bil-
for example, has resulted in the development of MLAs
lion.
for cellular phones, as well as discoveries such as repli-
cated polymer optical waveguide (SPICA) for optical
communication devices. Growth potential in the MLA
9
BUSINESS LINEUP
% of Net Sales
(FY2003 Actual)
Net Sales and Operating Income
IAB
INDUSTRIAL
AUTOMATION
BUSINESS
ECB
Manufacture and sale of
control components for
factory automation, etc.
ELECTRONIC
COMPONENTS
BUSINESS
Manufacture and sale of
electronic components
for consumer electron-
ics, communication
equipment, etc.
AEC
AUTOMOTIVE
ELECTRONIC
COMPONENTS
BUSINESS
SSB
SOCIAL
SYSTEMS
BUSINESS
HCB
HEALTHCARE
BUSINESS
Other
OTHER
BUSINESSES
Manufacture and sale of
electronic components
for automobiles
Provision of equipment,
modules, services, and
solutions in financial, sta-
tion management and
transportation areas
Manufacture and sale of
medical devices
Exploration of new busi-
ness, business not
included in above
Notes: All the sales described herein are on the basis of segment classification effective in 2003.
10
39.3%
15.2%
10.1%
23.3%
8.0%
4.2%
FY01
12.1
FY02
FY03
24.1
34.2
(Billions of yen)
184.2
202.5
229.6
Net Sales
Operating Income
FY01
7.9*
FY02
FY03
10.3
14.6
(Billions of yen)
81.1
79.4
89.0
Net Sales
Operating Income
*Operating income for fiscal 2001 includes the figures for
Automotive Electronic Components Business.
FY01
*
FY02
4.3
FY03
1.0
(Billions of yen)
50.8
59.5
58.8
Net Sales
Operating Income
*Operating income for fiscal 2001 is included in the figures
for Electronic Components Business.
FY01
-3.0
FY02
FY03
1.2
10.4
(Billions of yen)
128.1
116.7
136.0
Net Sales
Operating Income
FY01
1.6
FY02
3.8
FY03
7.2
(Billions of yen)
40.6
42.3
47.0
Net Sales
Operating Income
(Billions of yen)
49.2
FY01
2.6
FY02
FY03
4.5
3.8
34.7
24.5
Net Sales
Operating Income
Sales Breakdown, by Product and
Service (FY2003 Actual)
Main Products and Services
–Industrial equipment
–System equipment
–Sensors
41%
32%
27%
–Consumer electronic
components
–Semiconductors
–Amusement equipment
–Other
–Automotive relays
–Switches
–Electric control equipment
–Other
–Financial
–Train station management
–Transportation
–Other
–Blood pressure monitors
–Thermometers
–Nebulizers
–Chair massagers
–Body composition monitor
with scale
–Other
66%
12%
16%
6%
19%
26%
42%
13%
35%
17%
12%
37%
54%
11%
8%
5%
6%
16%
• Control Relays (Relays, Timers, Counters etc.)
• Control Switches (Limit Switches, Micro Switches, Manipulate Switches etc.)
• Control Devices (Temperature Controllers, Power Supplies, Level Controllers, Protective Devices, Digital
Power Meters, Transmission Units, Wireless Units, Energy-Saving Devices, etc.)
• Sequence Control Equipment (PLCs, Industrial Networking Equipment, Programmable Terminals,
Application Software, etc.)
• Motion Controllers (Inverters, Servo Motors, etc.)
• Sensors (Photoelectric Sensors, Proximity Sensors, Displacement Sensors, Pressure Sensors, Ultrasound
Sensors, Measurement Sensors, Vision Sensors, Visual Components, Information Sensing Equipment, etc.)
• Inspection Systems (PCB Inspection Systems, Sheet Inspection Systems, etc.)
• Safety-Related Devices (Safety Relays, Door Switches, Safety Controller, Area Sensors, Safety Mats, etc.)
• Switches (Micro Switches, Tactile Switches, Trigger Switches, etc.)
• Relays (General-Purpose Relays, PCB Relays, relays for telecommunications equipment, etc.)
• Amusement Components, Units and Systems (Sensors, Keys, IC’s, IC Coin Systems, etc.)
• Connectors, Sensors for Consumer, Micro Lens Alleys
• Components for Printers and Photocopiers (Toner Sensors, Face Recognition Systems Software
Components, etc.)
• Components for Mobile Equipment (Backlights and Flash Lights for Mobile Phones, etc.)
• Various Automotive Relays, Switches, Keyless Entry Systems, Power Window Switches, Electric
Power Steering Controllers, Various Controller, Laser Radar Devices, etc.
• Electronic Fund Transfer Systems and Modules (Automated Teller Machines, Cash Dispensers, Automated
Bill Changers, Automated Loan Application Machines, Credit/Debit Card Transaction Terminals, etc.)
• Public Transportation Systems and Modules (Automated Ticket Venders, Automated Passenger Gates,
Automated Fare Adjustment Systems, Commuter Ticket Issuing Machines, Ticket Window Machines etc.)
• Traffic and Road Management Systems (Traffic Management Systems, Vehicle Information and
Communication Systems, Travel Time Measurement Systems, Public Transportation Priority Systems, etc.)
• Room Access Control Systems, Face Recognition Systems, Card Reader/Writer
• Circulatory System Device and Bio-Chemistry System Device (Blood pressure monitor for home
use, Blood pressure monitor for professional use)
• Obesity Solution Device (Body composition monitor, pedometer)
• Lifestyle Improvement Programs (“Kenko Tastujin”, “Kenko partner”)
• Other Medical and Healthcare Device (Thermometer, Massager, Nebulizer)
• Personal Computer Peripherals (ADSL Modems, Broadband Routers, Uninterruptible Power
Supplies, etc.)
• RFID Systems (IC Tags, Reader/Writer, Antenna, etc.)
• Remote Supervisory Systems, Vehicle Disturbance Surveillance Devices
• Commercial Game Machines (Photo Sticker Machine)
11
IAB
INDUSTRIAL
AUTOMATION
BUSINESS
IAB Results and Projections
The IAB segment is our Group’s core business, accounting for 39.3% of consol-
idated net sales. We are Japan’s foremost manufacturer of control equipment
for factory automation (FA), providing high precision sensing and control equip-
ment that contributes considerably to improving the productivity and profitabili-
ty of manufacturers in a wide range of industries.
FY2004 Projected
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the US dollar, and ¥125 to the euro.
¥ 239.0
123.5
115.5
20.2
61.0
9.5
20.7
4.1
37.6
15.7%
10.2
Billions of yen (unless otherwise specified)
FY2003
¥ 229.6
117.1
112.5
19.6
60.7
13.6
18.4
0.3
34.2
14.9%
7.3
FY2002
FY2001
¥ 202.5
¥ 184.2
102.2
100.3
19.9
53.0
12.1
15.0
0.3
24.1
11.9%
8.0
95.5
88.7
18.5
47.9
10.2
12.0
0.2
12.1
6.6%
4.5
Sales Breakdown, by Product
(Fiscal 2003 Actual)
STRENGTHS AND POSITIONING IN
Group’s share of that domestic market is
THE INDUSTRY
about 20%. PLCs allow sophisticated pro-
27%
41%
ing technology, one of the Group’s core
ponents, such as sensors, timers, temper-
High precision sensors are based on sens-
cessing of data from various control com-
competences. They are used for inspecting
ature regulators, and switches, and the
and measuring products in a wide range of
efficient control of machines and equip-
manufacturing processes, and our Group
ment. In effect, they serve as the “brains”
32%
boasts of nearly a 60% share of the
at production jobsites.
Industrial Equipment: Power supplies,
Temperature controllers, Control relays,
Timers, Switches etc.
System Equipment: PLCs, Inverters,
Motion controllers etc.
Sensors: Application sensors,
Photoelectric sensors, Proximity sensors etc.
domestic market for these sensors.
Another of the core competences of the
Group is control technology used in pro-
grammable logic controllers (PLCs). The
Note: Market share figures are based on the statistics
taken by Nippon Electric Control Equipment
Industries Association (NECA)
Major IAB Products
Auto Sensory Inspection
System “Signarc”
Signarc is a solution services busi-
ness aimed at improving product
quality, using Omron’s proprietary
Waveform Analysis Diagnosis
technology. It assesses the prod-
ucts’ condition and identifies caus-
es of product malfunctions based
on the sounds and vibrations ema-
nating from products equipped
with motors or other drive parts.
12
Solution Service Business for
SMT Process Improvement
This solution service promotes
minimization of losses caused by
mounting errors and introduction
of lead-free technology in SMT
process through providing the
customers with printed circuit
board inspection systems, and
software for defective analysis
and/or lead-free introduction, as
well as consulting services.
OPERATING RESULTS IN FISCAL 2003
such as base inspection systems, dis-
FUTURE OUTLOOK AND STRATEGY
A look at operating results for fiscal 2003
placement sensors, vision sensors, motion
Bullish capital investment is expected to
shows that machinery orders, a leading
controllers, and safety-related devices.
continue during fiscal 2004. Efforts in the
indicator of private-sector capital invest-
In overseas markets, the Group rein-
domestic market will include more efficient
ment, increased 8.2% year-on-year in the
forced its direct marketing aimed at cus-
utilization of the system of authorized dis-
domestic market, the first increase in three
tomers, expanded and improved its sales
tributors and an expansion of our solutions
years. In China, meanwhile, a priority over-
channels, and made solid efforts in pro-
business. In overseas markets, since China
seas business region where the Group is
moting products for social infrastructure,
will continue to be a priority business
making special sales efforts, industrial out-
resulting in increased sales in China and
region we will reinforce our supply network
put increased an impressive 16.3%. In that
other countries in Asia. Sales in China were
for general-use products there, introduce a
business environment, domestic sales for
especially notable, up 23.1% year-on-year
sufficiently competitive cost structure in the
IAB increased 14.6% year-on-year to
to ¥18.4 billion, the second consecutive
context of the Chinese market, and
¥117.1 billion and overseas sales
year of runaway growth in excess of 20%.
enhance our sales and marketing capabili-
increased 12.1% year-on-year to ¥112.5
In North America, meanwhile, despite
ties. At the same time, we will energetically
billion. Total sales thus reached ¥229.6 bil-
increased capital investment (up 2.8%
promote an expansion of new businesses
lion, up 13.4% year-on-year.
year-on-year) and although demand was
focused on new requirements in manufac-
As recovery in capital investment con-
generally buoyant, the appreciated yen
turing industries related to quality, safety,
tinued to strengthen in the domestic mar-
brought about a 1.7% decline in sales
and the environment. Based on an outlook
ket, the Group has energetically pursued
(sales increased 6.2% on local currency
for global development and new business
solution-based sales for resolving problems
basis) to ¥19.6 billion. In Europe, although
growth, sales for the IAB Group for fiscal
related to quality improvement and IT inte-
the local business environment was severe
2004 are expected to increase 4.1% year-
gration at the factory floor level for semi-
due to the appreciated euro and sluggish
on-year to reach ¥239.0 billion.
conductors, flat panel displays, electronic
capital investment, aggressive sales and
components, automobiles, food products,
marketing efforts resulted in a sales
machine tools, transportation equipment,
increase of 14.4% (sales increased 4.8%
and packaging equipment. As a result,
on local currency basis) year-on-year to
sales increased substantially for products
reach ¥60.7 billion.
F3SX Safety Controller
A safety circuit is already built in
the controller. The product
thereby contributes to higher
level of safety at worksites with-
out making any special designs
for the safety.
D4N Small Safety Limit Switch
This switch is completely free of
RoHS (Restriction of Hazardous
Substances) designated haz-
ardous chemicals such as cad-
mium and lead.
13
ECB
ELECTRONIC
COMPONENTS
BUSINESS
ECB Results and Projections
The ECB segment accounts for 15.2% of consolidated net sales, concentrated on
electronic components such as relays, switches, and connectors for consumer
appliances, telecommunications equipment, and industrial equipment applica-
tions. In recent years, we have placed a special focus on the development of new
growth areas that take advantage of our proprietary technology, allowing us to
establish a strong presence in optical devices like backlight-micro lens arrays (B-
MLAs) for cellular phones.
Billions of yen (unless otherwise specified)
FY2004 Projected
FY2003
FY2002*
FY2001*
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the US dollar, and ¥125 to the euro.
*In April 2003, AEC business was separated from ECB segment. For easier comparison under the new organization, sales for FY2002 and FY2001 are recomputed on the new segment
basis. However, adjustment for operating income, operating income margin, and capital expenditure are only made for FY2002.
¥ 107.0
57.0
50.0
9.8
11.1
4.7
11.0
13.4
16.2
15.1%
9.9
¥ 81.1
44.9
36.2
12.5
9.3
4.2
7.7
2.5
7.9
6.0%
12.0
¥ 89.0
47.5
41.5
10.5
10.4
5.0
9.1
6.6
14.6
16.4%
7.1
¥ 79.4
43.1
36.3
11.6
9.3
4.7
7.5
3.1
10.3
13.0%
6.9
Sales Breakdown, by Product
(Fiscal 2003 Actual)
6%
16%
12%
STRENGTHS AND POSITIONING IN
wave control, as well as product develop-
THE INDUSTRY
ment capabilities for integrating these tech-
Since we started working on the develop-
nologies. Backlights for cellular phones are
ment of pressure sensors and acceleration
an example of this success. Since the
sensors using MEMS* technology about 15
arrival of these products on the market in
66%
years ago, we have been expanding our
fiscal 2001, our superiority in terms of
presence in the area of “Sensing &
brightness and low energy consumption
Control,” pushing forward with technology
has led to the adoption of the backlights by
to set the company apart from competi-
many cellular phone manufacturers around
Consumer Electronic Components: Connectors,
Switches, Relays, Built-in sensors
tors. Important strengths for the Group
the world.
Semiconductors: B-MLA
Amusement equipment: IC coin systems
Other: Mobile equipment (LED backlight,
transducer), Toner sensors for office
automation equipment
include a number of proprietary and
advanced technologies in the area of light-
*MEMS (microelectro mechanical systems), also known
as micro machines, are micro three-dimensional struc-
tures produced using semiconductor manufacturing
process. Two-dimensional structures such as large-scale
Major ECB Products
LCD backlight
A backlight for LCD use, which
enhances brightness and reduces
power consumption of mobile
equipment such as cellular
phones. We are working on con-
tinuous upgrade of the product in
response to the increasing needs
for sophistication and downsizing
of cellular phones and other LCD
equipment.
14
Optical Switch
A small, low-power consumption,
low-cost optical switch based on
our proprietary MLA and fine
mechanical technology. It con-
tributes to accelerate the spread of
home-based optical communica-
tion devices that are increasingly in
demand on the back of ongoing
diffusion of digital broadcasting.
integrated (LSI) chips are limited to the integration of
electronic circuits, but the realization of three-dimension-
al structures has enabled the extreme miniaturization of
various sensing functions and actuators, which can be
applied in a wide variety of fields.
released in fiscal 2001 expanding to reach
scale backlights used in televisions and
sales of ¥7.5 billion, or double the figure for
monitors. With this end in view, we
the previous year. Narrow pitch flexible
acquired the backlight business of KOA
printed circuit (FPC) connectors and LED
Corporation in June 2004. Due primarily to
OPERATING RESULTS IN FISCAL 2003
light modules for cellular phones, produced
the expansion in the new growth area, we
Although the business climate surrounding
using ultra-precision 3D fabrication and
expect the segment’s sales to achieve
the ECB segment has been positively
replication technology, also showed con-
20.2% year-on-year growth in fiscal 2004,
impacted by steadily rising demand for
sistent sales growth. In addition, sales of
to ¥107.0 billion.
consumer appliances, telecommunications
signal relays for base station grew substan-
infrastructure, and the mobile device indus-
tially due to rapid expansion in the
try, profitability has been pressured by fac-
telecommunications infrastructures in
tors such as the strong yen and the price
China and Europe.
erosion by competition and customers’
requests.
FUTURE OUTLOOK AND STRATEGY
Domestic sales for the fiscal year under
For fiscal 2004, we expect that severe
review were up 10.2% compared to the
price competition will continue although
previous fiscal year, to ¥47.5 billion, while
the demand for digital consumer appli-
overseas sales were up 14.3%, to ¥41.5
ances and cellular telephony is still on the
billion, for a total increase of 12.1% to
rise. The Omron Group will accordingly
¥89.0 billion. Despite the trends toward a
move to develop new growth areas, and
stronger yen and price erosion, however,
will focus on the combination of ultra-pre-
growth led by technology designed to set
cision 3D fabrication and replication and
us apart from competitors succeeded in
lightwave control technologies for applica-
boosting operating profits by 41.6%.
tion in optical display devices, optical
Reviewing products, high value-added
communications devices, and MEMS. In
products for cellular phones showed espe-
the area of optical display devices, in par-
cially strong growth, with the backlights
ticular, we are actively pursuing large-
MEMS Flow Sensor
This sensor is able to measure
gas velocity and direction at
extremely low flow rates, using
newly developed MEMS
device. With this sensor, it is
possible to detect even such
slight movements as butterfly’s
flutter.
DC Power Relay
This DC power relay allows
quickly-interrupting high voltage
current loads safely and silently,
thus contributes to the diffusion
of clean energy vehicles such
as hybrid cars and fuel cell
vehicles.
15
AEC
AUTOMOTIVE
ELECTRONIC
COMPONENTS
BUSINESS
AEC Results and Projections
The AEC segment, which accounts for 10.1% of consolidated net sales, is specializ-
ing in automotive electronics industry, and carrying out operations with a focus on
providing components built into automobiles, such as controllers, sensors, switch-
es, and relays. Priority requirements in the fast-evolving automotive electronics
market are for safety, comfort, and environmental friendliness, and the Omron
Group is actively developing new products such as safety control systems for win-
dow opening/closing and sensors for measuring the distance between vehicles.
Billions of yen (unless otherwise specified)
FY2004 Projected
FY2003
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the U.S. dollar, and ¥125 to the euro.
*Operating income and capital expenditures for fiscal 2001 are included in the figures for ECB.
¥ 62.5
27.5
35.0
21.6
3.7
9.7
—
—
2.9
4.6%
9.4
¥ 58.8
24.8
34.0
20.9
4.0
8.8
—
0.3
1.0
1.7%
9.0
FY2002
¥ 59.5
23.6
35.9
23.4
3.7
8.6
—
0.2
4.3
7.2%
6.2
FY2001
¥ 50.8
20.8
30.0
21.2
1.8
7.0
—
—
*
*
*
Sales Breakdown, by Product
(Fiscal 2003 Actual)
13%
19%
STRENGTHS AND POSITIONING IN
between vehicles. We are also conducting
THE INDUSTRY
R&D works on miniaturized mounting tech-
Applying the Omron Group’s core compe-
nology for controllers and products that
tence in Sensing & Control technology, we
comply with environmental regulations.
are pushing forward with new develop-
Innovations are constantly being intro-
42%
ments in the market for automotive elec-
duced in the automotive electronics indus-
26%
tronics. Some examples are power win-
try, and the Group is working hard to satis-
Automotive Relays: PCB relays, Power relays
Switches: Power window switches, Power
seat switches etc.
Electric Control Equipment: Keyless
remote controllers etc.
Other: Laser radar devices, Sensors etc.
dow switches integrating motor control
fy the needs of customers and the industry
technology for safer window opening and
with advanced technological development
closing, keyless remote entry systems
capabilities for product excellence in minia-
using wireless communications technolo-
turization, performance, sensitivity, and
gy, and laser radar incorporating sensor
functionality.
technology for measuring the distance
Major AEC Products
Automotive Laser Radar
This radar measures the dis-
tance of vehicle ahead by sen-
sitive, wide-field laser for traffic
control purpose. People and
bicycles are also detectable.
Power Window Switch
This switch with anti-pinch con-
trol function automatically stops
the upward movement of a
power window when it comes
in contact with an obstruction.
The application of this function
is extending to side doors and
sunroofs.
16
OPERATING RESULTS IN FISCAL 2003
tory adjustments centered on the Big
distance between vehicles, various door
Production in the domestic automobile
Three. In Europe, on the other hand, a
lock control technology (anti-pinching
industry was flat on a unit basis. On the
strong sales performance by on-board
function), wireless technology for applica-
other hand, production showed a 3%
relays for electric components manufactur-
tion with security devices, and tire pres-
year-on-year decline in North America,
ers resulted in a 9.4% increase to ¥4.0 bil-
sure monitoring systems (TPMS). In terms
which is one of our major markets
lion (0.3% increase based on local curren-
of the development of environmentally
accounting for 36% of the segment sales.
cy basis) versus the previous year. In the
friendly products, we are focusing mainly
The appreciation of the Japanese yen and
countries of Asia, despite strikes at the
on electric power steering systems with
the Canadian dollar against the U.S. dollar,
facilities of our major client in Korea,
improved fuel consumption. Based on
and intensified price competition, also neg-
growth of 1.9% (8.2% increase based on a
these efforts, we expect a 6.2% increase
atively affected the business environment
local currency basis) was recorded.
year-on-year to ¥62.5 billion in sales for
surrounding the business segment.
the segment during fiscal 2004.
Given that context, domestic sales for
FUTURE OUTLOOK AND STRATEGY
the AEC segment were up 5.4%, to ¥24.8
For fiscal 2004, we anticipate a slight
billion, with overseas sales down 5.4% ver-
increase in unit sales of domestic automo-
sus the previous year, to ¥34.0 billion,
biles and a recovery in unit sales in the
resulting in an overall decline of 1.1% to
North American automobile market.
¥58.8 billion.
Corresponding this background, the AEC
Domestically, in addition to electric
segment will be aggressively working on
power steering controllers, expansion in
the sales and marketing activities in
new safety related products, such as laser
response to launching of new car models
radars and door lock controllers, con-
both domestically and overseas, as well as
tributed to the sales growth.
promoting development of products
Overseas, however, sales in North
focused on safety and environmental
America dropped 10.8% (3.7% decrease
friendliness. In the area of safety, the
on local currency basis) compared to the
Omron Group will be devoting particular
previous year due to production and inven-
efforts to laser sensors for measuring the
Keyless Entry System
This system is to lock or unlock
doors by remote control in con-
junction with hazard lamp. The
maximum distance between
transmitter and receiver is
expanding, and the sensitivity
of the sensor is increasing.
Automotive Relay
High reliability and longevity are
the important aspects required
for automotive relays.
Especially the demand for auto-
motive PBC relay is rapidly
increasing for the use of motor
control.
17
SSB
SOCIAL
SYSTEMS
BUSINESS
SSB Results and Projections
The SSB accounts for 23.3% of consolidated net sales, operating mainly in the markets
associated with financial service (equipment such as ATMs and automated bill chang-
ers), train station management (equipment such as automated passenger gates and
automated ticket venders), and traffic and road management. This business includes the
Social Systems Solutions and Service Business Company (SSB), which operates the
solutions and service businesses, and the Advanced Modules Business Company
(AMB),which is involved in the modules business. The segment is concentrating on
development not only domestically, but also in China and other countries in Asia where
the development of social infrastructure is proceeding rapidly.
FY2004 Projected
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the US dollar, and ¥125 to the euro.
¥ 125.0
113.5
11.5
0.6
1.0
—
—
9.9
4.7
3.8%
3.5
Billions of yen (unless otherwise specified)
FY2003
¥ 136.0
126.4
9.6
0.2
0.9
—
0.4
8.0
10.4
7.6%
3.2
FY2002
FY2001
¥ 116.7
¥ 128.1
104.8
11.9
0.3
—
0.1
0.3
11.2
1.2
1.0%
4.5
116.2
11.8
0.7
—
0.3
0.8
10.1
(3.0)
(2.3%)
4.1
Sales Breakdown, by Product
(Fiscal 2003 Actual)
STRENGTHS AND POSITIONING IN
leading position in business areas essential
THE INDUSTRY
to modern life, such as traffic management
37%
35%
12%
17%
Financial: Sales of equipment and solutions
such as automated teller machines and cash dispensers
Train Station Management: Sales of equipment and
solutions such as automated passenger gates,
automated ticket venders
Transportation: Traffic management systems,
Traffic light control equipment
Other: Installation and maintenance of equipment,
Software development
We developed the world’s first unmanned
systems and card reader modules. Across
train station system in 1967, based on our
diverse fields that include train station man-
original automation and laborsaving tech-
agement, financial service, traffic control,
nology. Another milestone was achieved in
and retail, the Group is steadily addressing
1969 with development of the world’s first
further expanding social requirements in
cash dispenser using a magnetic card,
terms of cashless payment systems,
marking Omron’s entrance into the infor-
automation, IT integration, and safety.
mation equipment business, including
Besides providing products in those areas,
financial terminals. Today, based on tech-
we are also putting to good use our exten-
nological expertise accumulated over 30
sive solutions-based experience for overall
years, the Omron Group has assumed a
development of our business.
Major SSB Products
Automated Teller Machine
Latest model ATM, adapted
user-friendly universal design
as well as sophisticated sens-
ing technology for note/coin
identification.
Automatic Gate
Most updated automatic gate
developed through the
advanced software technology
that enables rapid-conveying
and simultaneous processing of
multiple tickets.
18
OPERATING RESULTS IN FISCAL 2003
and conversion to handle IC cards and the
ness in China, where the financial infra-
Domestically, demand related to electronic
new yen notes. However, demand for
structure is being rapidly developed; and
fund transfer systems, including the
electronic fund transfer systems is likely to
(3) in the currency recycling processing
replacement and conversion of equipment
decrease as a reaction to the considerable
module business in global scale.
such as ATMs and automated bill chang-
expansion recorded in fiscal 2003. In the
ers, expanded rapidly in advance of the
area of traffic and road management sys-
planned introduction of new yen notes in
tems, we also expect a challenging busi-
the second half of fiscal 2004. Demand
ness environment due to constrained pub-
associated with public transportation sys-
lic investment. As a result, we anticipate
tems also increased, in order to improve
that SSB will experience an 8.1% drop in
passenger services such as the accept-
sales to ¥125 billion.
ance of IC cards. At the same time, the
As a strategy for sales expansion in the
demand for traffic and road management
global market over the medium and long
systems was relatively strong due to large-
term, the Group will become more aggres-
scale projects centered on an urban
sive in seeking collaboration with other
expressway.
equipment manufacturers. A joint venture
Overseas, meanwhile, sales were gen-
company in the information equipment
erally stagnant due to intensified competi-
business is planned for October 2004 with
tion in the Korean market and delayed
Hitachi, Ltd., with whom we have been
launch of the ATM business in the Chinese
jointly developing next-generation ATMs
market.
since 2000. Related to that move, we will
The SSB segment was thus generally
transfer its information equipment business
propelled by large domestic demand, with
currently handled by SSB and AMB to the
sales rising 16.6% to ¥136.0 billion.
new joint venture. Based on collaboration
between Omron and Hitachi, the new com-
FUTURE OUTLOOK AND STRATEGY
pany will aim to reach the number one
For fiscal 2004, we anticipate growth in the
position in three business areas: (1) the
area of public transportation systems in
domestic financial terminal machine busi-
Japan’s Kansai region tied to replacement
ness; (2) the currency recycling ATM busi-
Banknote Recycler Unit
Integrated into ATMs, financial
services kiosk and other net-
works. This unit recycles
deposited banknote for with-
drawals. Quick and accurate
processing of counting, sorting
and conveying banknotes is
possible.
19
Card Reader/Writer Module
Applicable in ATMs, financial
services kiosk and other net-
works. This next generation of
card reader/writer incorporates
the needs of both contact and
Contact-Less IC cards, and is
able to fit various IC card stan-
dards by modifying the pro-
gram.
HCB
HEALTHCARE
BUSINESS
HCB Results and Projections
The HCB segment accounts for 8.0% of consolidated net sales. Based on propri-
etary bio-information sensing technology, the segment’s core products include
digital blood pressure monitors and digital thermometers, with a wide range of
other healthcare and medical equipment, including pedometers and chair mas-
sagers. In this segment, we also promote various services such as health man-
agement systems in which we recommend programs for prevention and alleviation
of lifestyle-related diseases.
FY2004 Projected
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 49.5
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the US dollar, and ¥125 to the euro.
23.0
26.5
13.8
8.2
1.1
3.3
0.1
8.4
17.0%
2.0
Billions of yen (unless otherwise specified)
FY2003
¥ 47.0
FY2002
¥ 42.3
FY2001
¥ 40.6
21.3
25.7
13.3
8.3
1.2
2.7
0.1
7.2
15.3%
1.9
18.9
23.4
12.7
7.5
1.2
2.0
0.1
3.8
9.0%
1.9
18.9
21.7
12.6
6.4
1.1
1.6
0.0
1.6
3.9%
1.5
Sales Breakdown, by Product
(Fiscal 2003 Actual)
STRENGTHS AND POSITIONING IN
other burdens to users, we are currently
THE INDUSTRY
working on the further evolution of bio-
6%
5%
8%
16%
11%
Blood pressure monitors
Thermometers
Nebulizers
Chair massagers
Body composition monitor with scale
Other
Major HCB Products
HEM-780
Digital Blood Pressure Monitor
As demonstrated by our 65% global mar-
information sensing technology for appli-
ket share of digital blood pressure moni-
cations in areas such as circulatory sys-
tors for home use, personal healthcare
tems, bio-chemical systems, body com-
54%
equipment is an area in which our brand
position, and metabolic systems. At the
strength is visible around the world. The
same time, we are pursuing a strategy to
Omron Group’s technological excellence
set the Group apart from competitors in
in bio-information sensing, or the meas-
the fields of bio-information management
urement of various types of physiological
and disease prevention, involving linkage
signals, is what stands behind the brand.
with treatment programs aimed at
With an eye to develop measuring equip-
lifestyle-related diseases.
ment that does not cause any pain or
Body Composition Monitor
with Scale, “Karada Scan”
This monitor is able to show
diet effectiveness at a glance,
measuring body fat percentage,
muscle mass, and basal meta-
bolic rate (BMR). Total body
scanning via both hands and
both feet makes more accurate
measurement possible.
With the ComFitTM Cuff that easily
wraps around the arm, this auto-
matic digital blood pressure moni-
tor makes the measurement pro-
cedure easier. The optimal meas-
urement technology through per-
sonalized inflation for each person
enables accurate measurement in
a short time.
20
OPERATING RESULTS IN FISCAL 2003
In the domestic market, greater numbers
demand through expansion of sales and
Lifestyle-related diseases are becoming an
of patients with high blood pressure and
service locations together with investment in
increasingly serious issue in the U.S.,
accelerated popularization of blood-pres-
advertising and promotion taking advantage
Europe, and Japan. In the circumstances,
sure taking at home spurred the sales
of brand strength.
the needs of home medical care are also
growth of digital monitors, and the introduc-
growing rapidly. Such care effectively pre-
tion of new products and aggressive adver-
FUTURE OUTLOOK AND STRATEGY
vents and manages lifestyle-related dis-
tising investment resulted in rapid expansion
As health consciousness increases both
eases when doctors promptly utilize vital
in market share for body composition moni-
domestically and overseas, continued
health readings monitored at home on a
tors. In addition, the satisfaction of user
expansion is expected for digital blood
daily basis. With living standards improving
requirements for greater compactness in
pressure monitors, body composition
in urban areas in China and other Asian
chair massagers helped drive sales of that
monitors, and nebulizers. Domestically,
countries, self-care awareness is gradually
product line as well.
growth is also expected from an enhanced
taking hold. Thus, the Omron Group’s
Overseas, sales were up in all product
lineup of chair massagers. In China,
healthcare business is set for expansion in
areas, against a background of greater
emphasis will be placed on expanding the
an increasingly wide arena.
numbers of people with high blood pres-
market in urban areas for healthcare and
As a result of growing social needs with
sure. Particularly in the U.S., the sales of
medical equipment. These strategies will
respect to lifestyle-related diseases, domes-
nebulizers for patients experiencing chronic
serve to further reinforce the HCB operat-
tic sales rose 12.7% year-on-year to ¥21.3
obstructive pulmonary disease (COPD) as
ing structure. Given this environment and
billion, and overseas sales increased 9.5%
well as the sales of digital blood pressure
strategy, sales for fiscal 2004 in the HCB
to ¥25.7 billion. Sales for the segment as a
monitors increased. In China as well, mar-
segment are anticipated to rise 5.4%, to
whole grew 10.9% to ¥47.0 billion.
ket development was achieved by spurring
¥49.5 billion.
Transformation of Healthcare Business from Internal Company to Wholly Owned Subsidiary
In July 2003, the internal Health Care Business Company (overseeing planning and sales) was combined with OMRON Institute of Life
Science Co., Ltd. (overseeing development), to form a wholly owned subsidiary known as Omron Healthcare Co., Ltd. Health care
related operations were thus spun off into a separate entity. This new subsidiary, which encompasses the growth domain of lifestyle-
related disease monitoring, required independent structures, decision-making systems, and employment systems so as to flexibly and
speedily direct resources toward this domain. As a specialist manufacturer in the healthcare and medical field, this subsidiary will oper-
ate autonomously to encourage business development in the four home medical care areas of circulatory systems measurement, bio-
chemical systems measurement, obesity solutions, and lifestyle improvement programs. The objective will be continued progress
toward the maximization of corporate value.
Chair Massager
Pisu Style HM-411
This chair massager incorpo-
rates a full-fledged massage
function while achieving a low
price. Available in six different
colors, and Good Design
Award-winning.
Mesh Nebulizer Model NE-U22
World’s smallest, lightest nebu-
lizer operates with two “AA”
batteries, for convenient use at
work, school, or when traveling.
21
Other
OTHER
BUSINESSES
This segment, comprised of businesses and products in “other” categories, accounts for
4.2% of consolidated net sales. The primary components of this segment consist of the
initial development of new businesses, and the fostering and reinforcement of businesses
not covered by existing internal companies, undertaken by the Business Development
Group. Products in this segment include commercial game machines (such as photo-
sticker machines), PC peripherals (e.g., uninterruptible power supplies and broadband
routers), RF-ID tag systems, vehicle disturbance surveillance devices, remote supervisory
systems, and contents distribution services for cellular phones.
Other Businesses Results and Projections
FY2004 Projected
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 27.0
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note: Exchange rates for projections are ¥105 to the US dollar, and ¥125 to the euro.
26.5
0.5
—
—
—
0.5
—
4.0
14.8%
6.0
Billions of yen (unless otherwise specified)
FY2003
¥ 24.5
24.0
0.5
0.1
—
—
0.4
—
3.8
FY2002
¥ 34.7
32.8
1.9
—
—
—
1.6
0.2
4.5
15.5%
9.5
13.0%
7.1
FY2001
¥ 49.2
48.5
0.8
—
—
—
0.5
0.3
2.6
5.3%
16.5
OPERATING RESULTS IN FISCAL 2003
Net sales for the segment fell 29.5%
AND FUTURE OUTLOOK
compared to the previous fiscal year, to
With stagnation of the domestic market for
¥24.5 billion, due to factors such as
business computers, the PC peripherals
excluding Omron Alphatec Corporation
business faced a downturn. At the same
(¥5.4 billion) from Omron Group’s consoli-
time, competition was intensified in the
dated results.
area of commercial game machines, mak-
In fiscal 2004, demand for telecommu-
ing for a difficult business climate. We
nications equipment is expected to rise
continued to make efforts to develop and
with the expanding number of broadband
foster new businesses, as market viability
users, contributing to an anticipated
is assessed in “machine-to-machine” busi-
10.3% rise in sales year-on-year, to ¥27.0
ness domains such as remote supervisory
billion.
systems and vehicle anti-theft systems.
Major Products of Other Businesses
Photo Sticker Machine
“Hyakka Kenran”
With sophisticated image pro-
cessing technology and high-
definition computer graphics,
this entertainment photo
machine allows you to make
composite pictures using vari-
ous images of scene.
BN50XS
Uninterruptible Power Supply
This power supply backs up
power supply at the time of
server down due to power-
associated trouble such as
blackout, in order to prevent
servers and computers from
losing data.
22
RESEARCH & DEVELOPMENT
The principal theme of GD2010 New Phase 2 is construction of a platform for growth. The Omron Group
will continue the efforts needed to ensure that its core technologies are ever more advanced, centered
on “Sensing & Control.” In collaboration with partners, moreover, the Group will energetically promote
the creation of new technological value, i.e., R&D based on collaborative innovation, as it aims to estab-
lish “creative technology” for winning out among 21st century competition.
R&D INVESTMENT
guides (SPICA) for realizing outstanding cost
nanotechnology, controlling the structures
R&D investment was ¥46.5 billion in fiscal
reductions in optical communications
and functions of materials at the nano level,
2003, representing a 0.4% rise over the
devices, and lightwave control devices such
with biotechnology and IT.
previous year to 7.9% in the percentage of
as Double Reflection-LEDs and flat type
The Group’s main contributions in the
R&D. R&D is the most important factor for
LEDs.
boosting our growth potential, and we will
R&D sector consist of proprietary visual
sensing technology such as face recogni-
continue active investment in R&D. The
APPROACH TO R&D BASED ON
tion technology, and nano level ultra-preci-
total investment for fiscal 2004 is expected
COLLABORATIVE INNOVATION
sion 3D fabrication and replication technol-
to reach ¥49.0 billion (8% level in terms of
The Omron Group is taking part in a joint
ogy developed through research on light-
percentage of R&D expenses to net sales).
project with participants from industry, aca-
wave control devices. R&D in this field
demia, and government involving the fusion
requires integration of extensive areas of
INVESTMENT IN PROPRIETARY
of nanotechnology, biotechnology, and IT.
science and technology ranging from basic
TECHNOLOGICAL DOMAINS
The project seeks to enhance industrial
science to applied industrial technology.
Proprietary technological domains that the
capabilities centered on medical applica-
Against that backdrop, we will be actively
Group is designating for ongoing attention
tions by developing materials and products
promoting collaborative innovation to com-
include ultra-precision 3D fabrication and
to substitute for or supplement human
mercialize new technologies in this field
replication technology and MEMS; lightwave
physical functions, such as ergonomic
with participating partners that possess a
control; vision, optical, and radio wave sens-
materials and sensors that replicate the five
high level of specialized knowledge in each
ing; and knowledge and information control.
human senses. This approach combines
field.
Lightwave control technology, for exam-
ple, is based on the miniaturization and
increased integration of various optical ele-
ments for greater accuracy in the control of
lightwaves. The Omron Group is currently
developing micro lens arrays (MLAs) for dra-
matically improving the brightness of liquid
crystal used for projectors and cellular
phones, replicated polymer optical wave-
Point Light Source High Efficiency Backlight
Wins Invention Award
Omron researchers won the 2004 Ministry of Education, Culture,
Sports, Science and Technology Prize for invention of a high effi-
ciency backlight to be used for point light source used for LCD
lighting devices in mobile equipment applications. The new back-
light is already starting to be used widely around the world
together with the increased use of color displays for cellular
phones. We will apply the product to general lighting in the future
with the aim of contributing to greater energy conservation.
R&D expenses
(Billions of yen)
R&D expenses ratio (%)
R&D staff (persons)
Number of patents (cases)
FY2004 Projected
FY2003
FY2002
FY2001
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ECB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other businesses (Business Development
Group and other segments) . . . . . . . . . . . . . .
Total
Total
Total applications . . . . . . . . . . . . . . . . . . . . . . . . .
Patents obtained . . . . . . . . . . . . . . . . . . . . . . . . .
Number of patents . . . . . . . . . . . . . . . . . . . . . . . .
49.0
15.7
8.0
5.8
6.5
2.9
10.1
8.0%
168.0
1,190
610
—
46.5
14.5
6.7
5.2
7.6
2.7
9.8
7.9%
159.4
1,170
580
4,154
40.2
13.4
6.0
4.0
5.4
2.5
8.9
7.5%
137.8
1,141
543
4,068
41.4
14.7
9.2
*
7.4
2.9
7.2
7.8%
141.0
1,134
437
3,794
* R&D expenses of AEC were included in ECB in fiscal 2001.
23
CORPORATE SOCIAL RESPONSIBILITY
The Omron Group holds that corporate social responsibility should be manifested in our business in the
first place. Indeed, the products and services we have developed based on technologies differentiating
the Group from competitors comprise the greatest means at our disposal for contributing to increased
social prosperity and efficiency, and to environmental preservation. Our commitment time is, however,
not merely to business expansion. Apart from our business, we energetically involve ourselves in socie-
ty and the environment through volunteer activities, contributing substantially toward maintaining a
healthy society and healthy environment and thus helping to ensure sustainable growth.
CORPORATE CITIZENSHIP ACTIVITIES
The Omron Group embedded the concept of Corporate Public Responsibility in its corporate motto in 1959. This motto is expressive of its
corporate philosophy as, “At work for a better life, a better world for all.” Based on this philosophy, Omron also released a corporate citi-
zenship declaration in 1998.
Corporate Citizenship Declaration
—As a responsible member of society, we pledge to promote corporate citizenship activities toward the goal of creating a better society.—
MAJOR CORPORATE CITIZENSHIP ACTIVITIES
We at the Omron Group promote a wide variety of corporate citizenship activities in six main categories: science & technology, social wel-
fare, international exchange, arts & culture, global environment, and community support.
1) Science & Technology
2) Social Welfare
3) International Exchange
Centered on the Tateisi Science and
Technology Foundation, we support research
projects and international exchange that pro-
motes harmony between man and machines
in the fields of electronics and information
engineering. For fiscal 2003, some 20 themes
were selected for research funding and five for
support of international exchange. In addition,
joint work was undertaken with NPOs using
our proprietary sensing technology to develop
new anti-personnel landmine detectors and to
support landmine removal operations.
In 1972, the Omron Group built Japan’s first
production plant designed with a work-friendly
environment for physically challenged people.
Omron Taiyo Co., Ltd., operates the plant in
Oita Prefecture. This same approach was bol-
stered for use in construction of Omron Kyoto
Taiyo Co., Ltd., in 1986. The Group also sup-
ports wheelchair marathons, art festivals, and
other events for the physically challenged.
Our employees participate in various volunteer
activities to encourage international exchange,
such as the activities in Foster Plan and a pro-
gram for charity sweater knitting. We also
support foster children by topping up the
amount of money commensurate with the
contributions corresponding to the amounts
employees spend using their Omron Volunteer
Cards*.
* Combination employee ID and credit cards; 0.3% of the
credit card amount used is used for donation.
4) Arts & Culture
5) Global Environment
6) Community Support
The Omron Group contributes toward devel-
oping and spreading the arts and culture fur-
ther through sponsorship of various presenta-
tions and performances, such as the Kyoto
Culture Forum and pipe organ concerts.
Besides moving to reduce the burden on the
environment through its business activities, the
Omron Group is also involved in environmental
conservation activities in Japan and overseas,
including clean-up and streetscape activities,
and tree-planting and reforestation. Many
employees also participate in volunteer activi-
ties to support conservation of the natural
environment, such as selective thinning for
sustainable forest management.
The Omron Group supports various efforts to
improve social welfare and the general living
environment, centered on Kyoto, home of
Omron’s Group Headquarters. Also, each
year on the Founder’s Day, what we call
Omron Day, employees at all Omron Group
facilities make personal efforts to express their
appreciation to the local communities through
activities such as clean-up activities, visits to
community institutions, blood donations, and
computer training.
24
ENVIRONMENTAL ACTIVITIES
ENVIRONMENTAL ACCOUNTING
GREEN PROCUREMENT
The Omron Group views environmental
The Omron Group is tackling implementa-
After the RoHS Directive*1 and WEEE
issues as important management tasks,
tion of efficient environmental accounting in
Directive*2 came into effect in Europe in
and promotes environmental management
order to quantify its environment-related
February 2003, the Group was presented
practices that enhance both economy and
investments and expenses and to confirm
with stronger requirements from cus-
ecology. Green Omron 21, an environ-
their effectiveness for promoting efficient
tomers not to use hazardous chemical
mental vision released in May 2002,
environmental management.
substances in its products. As a result,
expresses our direction, plans, and goals
We introduced environmental account-
Omron moved from fiscal 2003 to offer
for environmental management. It is
ing at our Japanese production sites from
environmentally guaranteed products.
aimed at long-term maximization of corpo-
fiscal 2001, and expanded it the following
With this change of policy, we revised
rate value and contributing to a recycle-
year to cover our Japanese non-produc-
our certification standards for suppliers
based sustainable society.
tion sites. In the future we will also include
and imposed several conditions on them.
Efforts during fiscal 2003 included (1)
our Japanese non-production affiliates,
These conditions include: the provision of
the promotion of zero emissions through
and our overseas production sites.
information on regulated substances con-
100% recycling and reuse of waste prod-
In fiscal 2003 we began to examine
tained in supplied materials and ensuring
ucts generated in our business activities; (2)
what we call internal environmental
the accuracy of said information, as well
evaluation of the environmental manage-
accounting indicators in order to allocate
as the acquisition of ISO 14001 certifica-
ment systems of suppliers, and investiga-
environmental costs so as to best achieve
tion or other third-party environmental
tion of chemical substances subject to reg-
environmental benefits.
management certificates by the end of
ulated use in purchased parts and materi-
als; and (3) provisional implementation of an
Scope:
environmental management assessment
15 Japanese production sites, and
7 Japanese non-production sites.
system, aimed at promoting prioritization of
Environmental costs:
environmental concerns throughout the
Omron Group, as well as accelerating envi-
ronment-related efforts. During fiscal 2004,
we plan to formulate a long-term environ-
mental vision extending through 2010.
¥1.84 billion (investments: ¥0.3 billion;
expenses: ¥1.54 billion).
Economic benefits due to reduced
expenses:
¥74.4 million (effects in real terms versus the
previous fiscal year only)
March 2006.
Going forward, we continue to go on
with the certification of suppliers based on
the revised standards, and from April
2006 we will procure materials only from
“green suppliers” who satisfy our supplier
certification standards.
*1 RoHS Directive: Restriction of Hazardous Substances
in Electrical and Electronic Equipment Directive (pro-
hibiting the use of six specified hazardous sub-
stances)
*2 WEEE Directive: Waste Electrical and Electronic
Equipment Directive (requiring collection and recycling
of affected products at the end of their life cycle)
New System for Reduction of Hazardous Chemical Substances
Recent years have seen the reinforcement of laws and regulations in Europe, the United States, and China for regulating the used of
hazardous chemicals. As a result, corporate policy on the management and handling of such substances is increasingly being
questioned.
We set up a Rechs system, a survey support system for chemicals contained in materials, and in October 2003 we started to
collect information on regulated chemicals contained in materials provided from suppliers. We also established an E-Warps system,
a support system for the design of environmentally-guaranteed products, for the use of product design and information disclosure
on products.
These systems began functioning in part from April 2004, and are now being used for abolishing totally the use of hazardous
chemicals designated by RoHS Directive. The Omron Group will introduce improvements in those two systems in the future with a
view to smoother collection of information on the environmental responsiveness of products, business improvement associated with
the development of environmentally guaranteed products, and compatibility with overseas requirements. By the end of March
2006, we plan to provide environmental guaranty for all our products around the world.
25
ACTIVITIES FOR REDUCING
ENVIRONMENTAL IMPACT
DEVELOPMENT OF ECO-PRODUCTS
We recognize that one of our major roles,
CO2: The Omron Group has set a goal of
Waste: The Omron Group defines “zero
as a manufacturer is to minimize the bur-
cutting the amount of CO2 emissions from
emissions” as 100% recycling and reusing
den on the environment through product
our Japanese production sites in fiscal 2010
of all waste materials produced through
development. We thus began from 1998
by 11% from the 1995 level, to 42,540 tons,
our business activities without incinerating
to promote Eco-Products, environmentally
taking our cue from the CO2 emissions
or burying any of it.
friendly products as defined by the Eco-
reduction target for Japan set at the Third
Omron achieved zero emissions at 14
Product Approval System.
Conference of Parties to the U.N. Framework
out of 15 Japanese production sites during
At eco-product planning and develop-
Convention on Climate Change held in Kyoto.
fiscal 2003. The remaining site is sched-
ment stages, we carry out prior assess-
Due to substantial production increases,
uled to achieve zero emissions during fis-
ments on the environmental impacts of our
CO2 emissions at Omron’s Japanese pro-
cal 2004.
products in order to minimize the burden
duction sites during fiscal 2003 were up by
Although the total volume of emissions
on the environment at all stages of our
2,156 tons compared to the previous fiscal
was 220 tons greater than for fiscal 2002,
production activities: manufacturing, distri-
year. Compared to fiscal 1995, however,
our 97.2% recycling rate surpassed the
bution, use, maintenance, collection,
CO2 emissions were cut 6.2% to 44,642
goal of 96%.
waste, and recycling.
tons-CO2, thus achieving the quantified goal
The Omron Group aims to reach a
During fiscal 2003, the Group achieved
for the year of no more than 44,902 tons-
recycling rate of 100% also at Japanese
an Eco-Product rate of 69% for new prod-
CO2. Omron also realized a 4.0% improve-
non-production sites and overseas pro-
ucts compared with its 50% goal. That
ment per output unit during the fiscal year
duction sites by fiscal 2006, and is working
success covered 65 products (23 Eco-
under review compared to last year. During
toward zero emissions at all sites by
label products, and 42 Eco-Products).
fiscal 2004, we will establish emissions
establishing annual goals.
During the three years from 2001 to
2003, the effects of energy savings associ-
ated with Eco-label products totaled
approximately 36.26 million kWh (equiva-
lent to 13,417 tons of CO2 emission). In
addition, some 100 tons of metals and
451 tons of resin were subject to resource
conservation.
(%)
100
reduction targets for our Japanese non-
production sites covering the period to
March 2010, as has already been done for
our production sites.
Total CO2 Emissions from Japanese
Production Sites
Waste Disposal from Japanese
Production Sites
(t-CO2)
50,000
46,000
42,000
38,000
34,000
30,000
FY95
FY99 FY00 FY01
FY02
FY03
(%)
0
-10
-20
-30
-40
-50
(ton)
6,000
4,800
3,600
2,400
1,200
0
Target [left axis]
Actual [left axis]
Unit CO2 emission [right axis]
(=Total CO2 emissions ÷ Production outpu
80
60
40
20
0
FY95
FY02
FY99 FY00 FY01
Total volume of waste [left axis]
Total volume of final disposal [left axis]
Recycling rate [right axis]
FY03
Total CO2 Emissions from Japanese
Non-production Sites
(t-CO2)
12,000
Waste Disposal from Japanese
Non-production Sites
(ton)
400
1,0000
8,000
6,000
4,000
2,000
0
FY01
FY02
FY03
300
200
100
0
FY01
FY02
FY03
(%)
80
60
40
20
0
Total volume of waste [left axis]
Total volume of final disposal [left axis]
Recycling rate [right axis]
26
* Note: Details on activities related to corporate social
responsibility, including environmental activities,
are presented in the Sustainability Report 2004.
CORPORATE GOVERNANCE AND COMPLIANCE
In order to reinforce our competitiveness as a global company and to maximize an Omron Group’s cor-
porate value over the long term, as is incorporated in our “Grand Design 2010” (GD2010) long-term man-
agement vision, it will be essential to reorganize our corporate governance structure and implement
enhanced functions for rapid execution of business operations and management monitoring in response
to changes in the business environment. It will also be important to undertake thoroughgoing risk man-
agement and compliance, so as to maintain the unwavering trust of our stakeholders.
OMRON’S STANCE AND POLICIES TO
management and of business operations.
shareholders and investors, establishing
CORPORATE GOVERNANCE
The roles of the Board of Directors and
two-way communications for manage-
Our universal mission is to contribute to the
Board of Corporate Auditors have also
ment.
development of society while maintaining a
been strengthened in order to achieve
strong sense of Corporate Public
greater accountability. We have also rein-
Responsibility (the philosophy behind our
forced operational aspect of our gover-
company motto). With this company
nance system by setting up the Personnel
motto philosophy as the cornerstone of our
Advisory Committee and the
values, we are committed to corporate
Compensation Advisory Committee, both
value-focused management aimed at maxi-
of which work for increasing fairness and
mizing the Group’s value on a long-term
objectivity in terms of the decisions on the
basis in capital markets for improved value
compensation and appraisals affecting all
to shareholders. This goal is consistent
of our Directors.
with the expectations of all our stakehold-
ers including customers, shareholders,
employees, and society at large.
Pursuit of Ethicalness
Corporate ethics are at the heart of our
management philosophy and goals, while
Omron also sees risk management as an
effective vehicle for greater competitive-
ness. This stance has allowed us to inte-
grate corporate ethics and risk manage-
ment with the formation of the Corporate
Ethics & Business Conduct Committee.
From the perspective of prioritizing compli-
Realization of Management
ance, Omron has also established the
Characterized by Disclosure and
Compliance Special Committee. And
Superior Transparency
based on the results of risk analysis across
THE THREE ASPECTS OF
We are working for accurate and timely
the Omron Group as a whole, the
CORPORATE GOVERNANCE
disclosure, using fair, unbiased, and appro-
Earthquake Risk Special Committee and
Implementation of Accountability
priate means with respect to essential
Information Risk Special Committee have
Since Omron introduced the Managing
information such as financial status, busi-
been formed to respond to risks character-
Officers System and the Internal Company
ness results, and governance issues. In
ized by substantial urgency and impor-
System in 1999, we have been promoting
addition to information disclosure, Omron
tance by proposing and fully implementing
the separation of the roles of corporate
actively listens to valuable input from
appropriate countermeasures.
Major Efforts to Enhance Corporate Governance
during Fiscal 2003
– Increase in the number of outside directors from one
to two
– Increase in the number of outside auditors from two
to three
– Separation of the Chairman of the Board and CEO
functions
– Formation of the Compensation Advisory Committee
with an outside director as chairman
– Formation of the Corporate Ethics & Business
Conduct Committee
Management System
Shareholders’ Meeting
Board of Corporate
Auditors
Corporate Auditor
Staff Group
Auditing firm
Executive Body
President & CEO
Corporate Ethics &
Conduct Committee
Execution Meetings
(Chaired by: President and CEO)
Corporate Division
(Managing Officers)
27
Board of Directors
(Chaired by: Chairman and Representative Director)
Personnel Advisory
Committee
Compensation Advisory
Committee
Corporate Auditing
Division
DIRECTORS, CORPORATE AUDITORS
AND CORPORATE OFFICERS
(As of March 31, 2004)
3
4
5
6
7
1
2
1. Yoshio Tateisi
Chairman of the BOD
2. Hisao Sakuta
President and CEO
3. Shozo Hashimoto
Director (external)
4. Tatsuro Ichihara
Director and Executive Vice President
5. Shingo Akechi
Director and Executive Vice President
6. Tadao Tateisi
Director and Executive Vice President
7. Noriyuki Inoue
Director (external)
Executive Officers
Yukio Kobayashi
Yoshinobu Morishita
Takuji Yamamoto
Yoshinori Suzuki
Akio Sakumiya
Hiroshi Fujiwara
Kazunobu Amemiya
Hideo Higuchi
Directors
Chairman of the BOD
Yoshio Tateisi
President and CEO
Hisao Sakuta
Directors and Executive
Vice Presidents
Tatsuro Ichihara
Shingo Akechi
Tadao Tateisi
Directors (external)
Shozo Hashimoto
Noriyuki Inoue
Corporate Auditors
Tsutomu Ozako
Yoshisaburo Mogi (external)
Yoshio Nakano (external)
Hidero Chimori (external)
Corporate Officers
Executive Vice President
Fumio Tateisi
Senior Managing Officers
Fujio Tokita
Akihiko Otani
Soichi Yukawa
Tsukasa Yamashita
Yutaka Takigawa
Managing Officers
Minoru Tamura
Yasuhira Minagawa
Kuniyasu Kihira
Toshio Ochiai
Hiroki Toyama
Kojiro Tobita
Keizo Kadono
Kuninori Hamaguchi
28
FINANCIAL SECTION
CONTENTS
30
31
32
38
40
41
42
43
44
66
67
69
Six–Year Financial Summary
Eight–Quarter Financial Summary
Fiscal 2003 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
Global Network
Corporate and Stock Information
SIX–YEAR FINANCIAL SUMMARY (U.S. GAAP)
OMRON Corporation and Subsidiaries
Years ended March 31
2004
2003
2002
2001
2000
1999
Millions of Yen (unless otherwise specified)
¥584,889
229,638
88,988
58,824
135,997
46,962
24,480
344,835
240,054
142,157
46,494
51,403
79,065
26,811
80,687
(34,484)
46,203
(28,119)
95,059
592,273
131,678
56,687
274,710
110.7
107.5
1,148.3
20.0
41.0%
8.8%
13.5%
24.3%
7.9%
8.3%
10.2%
4.73
1.01
46.4%
171.4%
1.16
43.27
¥535,073
202,518
79,365
59,480
116,652
42,331
34,727
327,413
207,660
135,112
40,235
32,313
61,989
511
41,854
(30,633)
11,221
(1,996)
79,919
567,399
143,536
71,260
251,610
2.1
2.1
1,036.0
10.0
38.8%
6.0%
11.6%
25.3%
7.5%
0.8%
0.2%
4.36
0.96
44.3%
194.7%
1.26
23.59
¥533,964
184,185
81,062
50,800
128,057
40,617
49,243
353,429
180,535
134,907
41,407
4,221
37,790
(15,773)
33,687
(40,121)
(6,434)
(12,056)
70,779
549,366
148,053
58,711
298,234
(63.5)
(63.5)
1,201.2
13.0
33.8%
0.8%
7.1%
25.3%
7.8%
(4.4%)
(5.1%)
4.25
0.93
54.3%
214.4%
0.84
4.36
¥594,259
227,691
129,444
—
141,928
39,327
55,869
376,194
218,065
131,203
42,513
44,349
76,566
22,297
50,796
(32,365)
18,431
(24,582)
85,621
593,144
145,489
67,213
325,958
87.4
85.3
1,311.1
13.0
36.7%
7.5%
12.9%
22.1%
7.2%
6.8%
6.7%
4.44
1.01
55.0%
179.3%
0.82
26.83
¥555,358
215,087
109,661
—
128,534
42,640
59,436
358,911
196,447
133,662
36,605
26,180
57,625
11,561
59,926
(34,180)
25,746
(23,785)
88,670
579,489
169,797
69,472
336,062
45.0
44.5
1,308.6
13.0
35.4%
4.7%
10.4%
24.1%
6.6%
3.6%
3.5%
4.56
0.96
58.0%
215.1%
0.72
14.64
¥555,280
245,785
56,673
—
135,872
43,729
73,221
364,314
190,966
136,734
42,383
11,849
43,245
2,174
29,583
(29,011)
572
21,629
88,900
580,586
164,610
86,723
321,258
8.3
8.3
1,250.3
13.0
34.4%
2.1%
7.8%
24.6%
7.6%
1.4%
0.7%
4.18
0.95
55.3%
204.4%
0.81
5.56
Operating Results:
Net sales (Note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial Automation Business . . . . . . . . . . . . . . . . .
Electronic Components Business . . . . . . . . . . . . . . .
Automotive Electronic Components Business . . . . .
Social Systems Business . . . . . . . . . . . . . . . . . . . . .
Healthcare Business . . . . . . . . . . . . . . . . . . . . . . . . .
Other Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SG&A expenses (excluding R&D expenses) . . . . . . . . .
R&D expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows:
Net cash provided by operating activities . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . .
Free cash flow (Note 3). . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . .
Cash and cash equivalents at end of the year. . . . . . . .
Financial Position (At Year-End):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . .
Per Share Data (Yen):
Net income (loss):
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends (Note 4) . . . . . . . . . . . . . . . . . . . . . . . .
Ratios:
Gross profit margin . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income margin . . . . . . . . . . . . . . . . . . . . . . .
EBITDA margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SG&A expenses (excluding R&D expenses)/Net sales .
R&D expenses/Net sales . . . . . . . . . . . . . . . . . . . . . . .
Return on assets (ROA) (Note 5). . . . . . . . . . . . . . . . . .
Return on shareholders’ equity (ROE) . . . . . . . . . . . . . .
Inventory turnover (times) . . . . . . . . . . . . . . . . . . . . . . .
Assets turnover (times) . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio of shareholders’ equity to total assets . . . . . . . . .
Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt/equity ratio (times) . . . . . . . . . . . . . . . . . . . . . . . .
Interest coverage ratio (times). . . . . . . . . . . . . . . . . . . .
Other Financial Data:
Capital expenditures (cash basis) . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Employees (persons) . . . . . . . . . . . . . . . . . . . . . . . . . .
36,696
31,396
23,742
Note: 1. Certain reclassifications have been made to the net sales amounts previously reported for the year ended March 2002 in order for them to conform to the categories of the year ended March 2003.
The amounts previously reported for the year ended March 2002 were: Industrial Automation, ¥186,984 million; Electronic Components, ¥128,193 million; Social Systems, ¥124,627 million.
These same reclassifications could not be made to net sales amounts previously reported for the year ended March 2001 and earlier because the necessary data is not readily available.
31,146
31,445
24,821
37,583
32,217
24,997
38,115
27,662
24,324
38,896
33,569
25,124
34,454
29,676
23,476
2. EBITDA = Operating income + Depreciation and amortization
EBITDA margin = EBITDA/Net sales x 100
3. Free cash flow = Net cash provided by operating activities – Net cash used in investing activities
4. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year.
5. Return on assets (ROA)=Income (loss) before income taxes, minority interests and cumulative effect of accounting change/Total assets x 100
Total assets are based on the simple average of beginning and end of each fiscal year.
30
EIGHT–QUARTER FINANCIAL SUMMARY (U.S. GAAP)
OMRON Corporation and Subsidiaries
Years ended March 31
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
For the year
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
Millions of Yen
Operating Results:
Net sales . . . . . . . . . . . . . . . . . . . . .
134,382
116,909
135,810
129,981
146,645
131,226
168,052
156,957
584,889
535,073
Industrial Automation Business. . .
54,477
46,940
56,128
51,293
57,934
50,990
61,099
53,295
229,638
202,518
Electronic Components Business .
22,341
19,718
21,201
19,186
23,360
19,803
22,086
20,658
88,988
79,365
Automotive Electronic
Components Business . . . . . . .
14,593
13,738
13,631
14,637
14,995
15,274
15,605
15,831
58,824
59,480
Social Systems Business . . . . . . .
25,648
17,859
28,010
23,944
30,795
25,609
51,544
49,240
135,997
116,652
Healthcare Business. . . . . . . . . . .
11,693
10,108
11,119
10,259
13,328
11,574
10,822
10,390
46,962
42,331
Other Businesses . . . . . . . . . . . . .
5,630
8,546
5,721
10,662
6,233
7,976
6,896
7,543
24,480
34,727
Operating income (loss) . . . . . . . . . .
9,886
(252)
11,654
11,708
15,793
9,913
14,070
10,944
51,403
32,313
Cash Flows:
Net cash provided by
operating activities . . . . . . . . . . . .
14,192
12,690
21,353
2,356
9,984
2,802
35,158
24,006
80,687
41,854
Net cash used in
investing activities. . . . . . . . . . . . .
(6,059)
(4,910)
(9,492)
(7,917)
(5,053)
(6,692)
(13,880)
(11,114)
(34,484)
(30,633)
Net cash provided by (used in)
financing activities . . . . . . . . . . . .
(3,403)
10,198
(14,538)
514
(1,506)
9,519
(8,672)
(22,227)
(28,119)
(1,996)
Cash and cash equivalents
at end of the year . . . . . . . . . . . . .
84,378
85,677
79,259
83,240
81,401
87,417
95,059
79,919
95,059
79,919
31
FISCAL 2003 MANAGEMENT’S DISCUSSION AND ANALYSIS
THE MACROECONOMIC ENVIRONMENT
1. Japan
GENERAL OVERVIEW OF FISCAL 2003 RESULTS
The Japanese economy began showing signs of recovery from fiscal
Although consolidated net sales increased 9.3 percent compared to
2002, with the pace of recovery accelerating in fiscal 2003, ended
fiscal 2002, operating income rose 59.1 percent and net income was
March 2004. Structural dependence on the U.S. decreased as China
up by a factor of 52, with both figures setting new all-time highs. An
emerged as another engine of growth in the world economy, and
increase in SG&A expenses of ¥13.3 billion, including our aggressive
exports continued to expand despite the appreciation of the Japanese
investments in Research & Development (R&D) to achieve future
yen. One characteristic of the economic recovery in fiscal 2003 was
growth, was more than covered by the combination of an increase in
that domestic demand, after a long period of stagnation, showed
revenue (¥22.2 billion) and effects of structural reforms such as reduc-
signs of recovery, reinforcing the expansionary undertone. In particu-
tions in fixed manufacturing costs (¥10.2 billion). As a result, return on
lar, private-sector capital investment began showing double-digit
equity (ROE) jumped to 10.2 percent, up from 0.2 percent in fiscal
growth from the second half of the fiscal year. New growth industries,
2002, allowing the Omron Group to reach its goal of 10 percent ROE
where Japan can fully demonstrate its originality and competitiveness,
one year earlier than planned. Accordingly, a substantial improvement
such as digital home electronics emerged for the first time in many
was achieved in terms of free cash flow, and the ratio of shareholders’
years, accompanying a substantial improvement in the corporate men-
equity to total assets advanced from 44.3 percent to 46.4 percent.
tality concerning forward-looking capital investment. In the fourth
quarter, this wave of recovery also began rippling across consumption
REVIEW AND ANALYSIS OF THE INCOME STATEMENT
and employment.
2. Overseas
Sales
Consolidated net sales were up 9.3 percent year-on-year to ¥584,889
million. Higher sales were recorded for all regions except North
Despite elements of uncertainty such as concerns over terrorism and
America, and for all business segments except Automotive Electronic
the federal deficit, real GDP in the U.S. showed a 3.1 percent year-on-
Components Business (AEC) and Other Businesses.
year growth in fiscal 2003, up from 2.2 percent in the previous year.
Tax cuts contributed especially to strength in housing investments and
Cost of Sales and SG&A Expenses
consumption. Recovery in Europe was softer, as the strong euro
Along with the increase in sales, the cost of sales and SG&A expenses
restrained exports and personal consumption did not fully overcome
rose, by 5.3 and 5.2 percent year-on-year, respectively. Partly thanks
the continuing stagnation. A bright spot, however, was seen in corpo-
to our restructuring efforts through the implementation of the Group’s
rate profits resulting from structural reforms. The greatest economic
Productivity Improvement Reforms (VIC21), however, the cost of sales
expansion was seen in Asia, as real GDP growth during 2003 exceed-
and the SG&A expenses ratio declined by 2.2 and 1.0 percent points,
ed three percent in Hong Kong, Taiwan, and Korea, and hit nine per-
respectively. R&D expenses were up by ¥6,259 million year-on-year,
cent in China. Besides dynamism in IT industries, domestic demand
to ¥46,494 million, rising from 7.5 percent to 7.9 percent as a percent-
in China remained strong due to ongoing preparations for the 2008
age to total net sales. This only reflects the fact that the Omron Group
Olympic Games. This strength was spreading to neighboring coun-
has promoted R&D investment as a key component of its growth
tries as well.
strategy. The Group plans to maintain future R&D expenses at
approximately eight percent of net sales.
Net Sales & Operating Income
(Billions of yen)
600
SG&A Expenses Ratio &
R&D Expenses Ratio
(%)
30
Net Income (Loss) & ROE
(Billions of yen)
30
500
400
300
200
100
0
FY99
FY00 FY01
FY02
FY03
Net sales
Operating income
20
10
0
FY99
FY00 FY01
FY02
FY03
SG&A expenses ratio
R&D expenses ratio
32
20
10
0
-10
-20
FY99
FY00
FY01
FY02
FY03
Net income (loss) [left axis]
ROE [right axis]
(%)
15
10
5
0
-5
-10
Non-operating Profit and Loss
moted the introduction of IT in manufacturing industry and the provi-
Net non-operating loss came to ¥3,419 million, for a substantial
sion of total solutions to enable customers to improve the quality of
¥24,162 million improvement over the loss recorded in the previous
their products. As a result, sales rose substantially for base inspection
year. The main factor was elimination of the fiscal 2002 one-time loss-
systems, displacement sensors, vision sensors, motion controllers,
es, i.e., structure restructuring expenses such as for the early retire-
and safety-related products.
ment program.
Overseas, sales were generally strong in North America, while we
managed to increase sales in Europe amid the challenging business
Net Income before Income Taxes and Net Income
environment of euro strength and stagnant capital investment by rein-
As a result of the foregoing, net income before income taxes, minority
forcing our marketing efforts. Sales expanded substantially in
interests, and the cumulative effect of accounting change, increased
Southeast Asia and China as well, due to expanded direct marketing,
to ¥47,984 million, up from ¥4,732 million for the previous year.
enhancement of sales channels, and stronger efforts on social infra-
Similarly, net income rose to ¥26,811 million, up from ¥511 million.
structure.
Net income per share (basic) was ¥110.7, a huge leap from ¥2.1 of
the previous fiscal year. Based on its profit distribution policy, the
• Electronic Components Business (ECB)
Omron Group increased its fiscal 2003 ordinary cash dividend to
Sales of ECB rose 12.1 percent year-on-year in fiscal 2003, to
¥13.0 in consideration of the current and previous fiscal year results,
¥88,988 million, accounting for 15.2 percent of consolidated net sales.
and declared a ¥7.0 special cash dividend to commemorate its 70th
Despite negative factors such as intensified price competition and
anniversary, for a total dividend of ¥20.0 for the fiscal year under
lower retail prices, we expanded sales centered on consumer elec-
review.
SEGMENT INFORMATION
tronics and products for the telecommunications industry by offering
value-added products utilized our technological edges. In particular,
sales of backlights for cellular phones, originally introduced in fiscal
1. Review of Operations by Business Segment
2001, doubled compared to the previous fiscal year. Narrow pitch
From fiscal 2003, the Automotive Electronic Components Business
flexible print circle (FPC) connectors for cellular phones, produced
(AEC) was classified separately from the Electronic Components
using ultra-precision 3D fabrication and replication technology, also
Business (ECB). The following year-on-year changes in segment sales
showed consistent sales growth, as did cellular phone LED light mod-
have been calculated, using the figures after the reclassification.
ules. Sales of base station relays also increased substantially, due to
Sales Breakdown, by Business Segment
FY2003
FY2002
Note that from fiscal 2003, ECB transferred its electrical and elec-
rapid expansion of the telecommunications infrastructure markets in
China and Europe.
IAB . . . . . . . . . . . . . . . . . . . . . . . .
ECB . . . . . . . . . . . . . . . . . . . . . . .
AEC . . . . . . . . . . . . . . . . . . . . . . .
SSB . . . . . . . . . . . . . . . . . . . . . . .
HCB . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
39.3%
15.2%
10.1%
23.3%
8.0%
4.2%
37.8%
14.8%
11.1%
21.8%
7.9%
6.5%
tronic parts for the automobile business to AEC.
• Automotive Electronics Business (AEC)
Sales of AEC fell by 1.1 percent year-on-year to ¥58,824 million, and
accounted for 10.1 percent of consolidate net sales in the year under
review. Although production in the domestic auto industry was flat on
a unit basis, AEC increased its sales through launching of new prod-
• Industrial Automation Business (IAB)
ucts such as laser radars, electronic power steering controllers, and
Sales of IAB for the fiscal year under review rose 13.4 percent year-
door lock controllers. These new products are now positioned to fuel
on-year against a background of global economic recovery, reaching
future sales growth. In North America, output reductions centered on
¥229,638 million and accounting for 39.3 percent of consolidated net
the Big Three were compounded by the weakness of the U.S. dollar
sales. Various types of control equipment, especially for the semicon-
as well as severe price competition in areas such as on-board relays,
ductor and flat panel display (FPD) industries, experienced significant
resulting in a difficult market environment. The markets in Europe,
growth, and demand from the automotive industry was also relatively
Korea, and Asia, however, recorded relatively solid performance.
strong. In terms of applications, sales related to equipment quality,
Sales of on-board relays to European electronic component manufac-
safety, and the environment registered major increases.
turers showed especially significant gains.
Domestically, IAB reinforced its marketing efforts in industries manu-
facturing products such as semiconductors, FPDs, electronic compo-
• Social Systems Business (SSB)
nents, and automobiles, seeking to maintain a firm grip on the demand
Sales of SSB rose 16.6 percent year-on-year to ¥135,997 million,
for digital consumer appliances. At the same time, IAB actively pro-
accounting for 23.3 percent of consolidated net sales. Domestically,
33
demand related to electronic funds transfer systems, including the
2. Review of Operations by Region
modification and replacement of equipment such as ATMs and auto-
As of April 1, 2003, AEC was separated from ECB. Therefore, prior-
mated bill changers, expanded in advance of the planned introduction
year comparisons of the sales for each segment below are calculated
of new paper currency in the second half of fiscal 2004. Overseas
using the reclassified figures.
demand was also generally firm.
Demand from the train station systems sector also increased,
• Japan
thanks to the demand for upgrading main equipments to conform to
Sales increases were recorded for all business segments with the
an improvement in passenger services such as the acceptance of IC
exception of Other Businesses, which was negatively affected by
cards. In traffic control and road management system fields, on the
transfer of the operations of Omron Alphatec Corporation as part of
other hand, demands for urban highways-related were robust in the
operational restructuring. Sales to external customers totaled
year under review.
¥376,349 million, for a 10.5 percent increase over the previous year.
• Health Care Business (HCB)
• North America
Sales of HCB were up 10.9 percent year-on-year to ¥46,962 million,
HCB registered a solid performance, but declines were experienced in
accounting for 8.0 percent of consolidated net sales. Both domesti-
IAB, the ECB, and AEC. This was partly due to the appreciated
cally and overseas, sales growth stemmed from restraints on public
Japanese yen and Canadian dollar, as well as reduced unit output by
healthcare spending and increased health-related demands. In the
automakers that affected AEC. Sales to external customers totaled
domestic market, greater numbers of patients with high blood pres-
¥64,613 million, marking a 4.8 percent decline from the previous year.
sure and the increased public awareness of the effectiveness of blood-
pressure taking at home spurred the sales growth of digital blood
• Europe
pressure monitors. Also, the introduction of new products and
The appreciated euro was a positive factor despite a difficult business
aggressive investments in advertising resulted in a rapid expansion of
climate, and sales gains were achieved by IAB, ECB, AEC, and HCB.
the market share for body composition analyzers. In addition, satisfy-
Sales to external customers reached ¥84,286 million, increasing 14.7
ing the needs of customers for greater compactness helped to pro-
percent from the previous year.
mote the sales of chair massagers. Overseas, sales were up in all
markets, against a background of greater numbers of people with high
• Asia and Other
blood pressure. In the U.S., in particular, sales of nebulizers for
IAB, ECB, and HCB chalked up strong performances in Asia and other
patients experiencing chronic obstructive pulmonary disease (COPD)
regions, and AEC also performed relatively well. Sales to external cus-
as well as those of digital blood pressure monitors substantially
tomers totaled ¥59,641 million, increasing 12.3 percent from the previ-
increased. In China as well, HCB increased sales by expanding the
ous year.
number of marketing and service centers and promoting demand
through aggressive investments in advertising and sales promotion.
• Other Businesses
Sales of Other Businesses, were down 29.5 percent percentage year-
on-year to ¥24,480 million (accounting for 4.2 percent of consolidated
net sales), due to factors such as exclusion of Omron Alphatec
Corporation from consolidation since the second half of the previous
fiscal year. The primary components of this business field consist of
Sales Breakdown, by Region
the Business Development Group’s exploration and nurturing of new
businesses, and the fostering and strengthening businesses not cov-
ered by a specific internal company. In terms of exploring new busi-
nesses, market viability was assessed in machine-to-machine busi-
ness domains such as remote supervisory systems. In existing busi-
ness lines, the market prices for PC peripherals continued to decline,
and in the entertainment area commercial game machines faced inten-
sified competition.
FY99
FY00
FY01
FY02
FY03
71.5%
10.7%
11.0%
6.7%
71.3%
10.8%
10.3%
7.6%
67.0%
12.3%
12.2%
8.5%
63.7%
12.7%
13.7%
9.9%
64.3%
11.0%
14.4%
10.2%
Japan
North America
Europe
Asia and Other
34
EXPLANATION OF BALANCE SHEETS
Assets, Liabilities and Shareholders’ Equity
foreign currency translation adjustments, minimum pension liability
adjustments, net unrealized gain (loss) on securities, and net unreal-
Total assets as of March 31, 2004, stood at ¥592,273 million, up by
ized loss on derivatives. As a result, the ratio of shareholders’ equity
¥24,874 million (4.4 percent) compared to the end of the previous
to total assets improved to 46.4 percent from the 44.3 percent at the
year. Most of this increase was in the form of current assets (up by
end of the previous year, and the debt/equity ratio, defined as total lia-
¥21,113 million year-on-year). Cash and cash equivalents rose by
bilities divided by shareholders’ equity, improved from 1.26 times to
¥15,140 million (18.9 percent) accompanying increased free cash flow,
1.16 times. Shareholder’s equity per share based on the number of
while notes and accounts receivable-trade rose by ¥11,296 million (9.9
shares outstanding at the end of the year was ¥1,148.33, compared
percent) due mainly to increased orders. Property, plant, and equip-
to ¥1,036.01 a year earlier.
ment grew only slightly, expanding by ¥1,678 million (1.1 percent).
Investments and other assets also rose only slightly, increasing by
CASH FLOW
¥2,083 million (1.7 percent), due to the increased value of investment
Cash and cash equivalents as of the end of fiscal 2003 were up by
securities accompanying higher stock prices.
¥15,140 million (18.9 percent) compared to the previous year, rising to
Current liabilities, long-term debt, and minority interests in sub-
¥95,059 million. The effects of exchange rate fluctuations during the
sidiaries rose by ¥1,774 million (0.6 percent) compared to the end of
fiscal year were minimal.
the previous fiscal year, reaching ¥317,563 million. Countering the
Cash flow provided by operating activities for the year totaled
aforementioned increase in notes and accounts receivables-trade,
¥80,687 million in inflow, up by ¥38,833 million from the previous year.
notes and accounts payable-trade rose by ¥11,572 million (17.0 per-
The main factor responsible for this was the sharp increase in net
cent). Also, in conjunction with a bond redemption scheduled for
income for the year.
September 2004, the current portion of long-term debt (repayment
Net cash used in investing activities totaled ¥34,484 million in out-
within one year) increased by ¥18,039 million, to ¥30,036 million. The
flow, an increase of ¥3,851 million. The main factor responsible was
current ratio thus moved from 195 percent at the end of the previous
¥3,661 million increase in capital investment (for a total of ¥38,115 mil-
year to 171 percent. Due to accelerated repayments and the conver-
lion) accompanying Omron’s growth strategy.
sion to short-term debt of the bond redemption amount, long-term
Net cash used in financing activities was ¥28,119 million in outflow,
debt declined by ¥29,108 million, to ¥11,207 million. As a result, total
compared to outflow of ¥1,996 million in the previous fiscal year. The
interest-bearing liabilities fell by ¥14,573 million (20.5 percent), to
main factor responsible was accelerating the repayment of net bor-
¥56,687 million. Termination and retirement benefits decreased by
rowings of short-term bank loans and long-term debt. The Omron
¥992 million (0.8 percent), to ¥119,738 million.
Group paid dividends of ¥2,942 million, with ¥8,411 million expended
Shareholders’ equity increased by ¥22,162 million in terms of
on share repurchases, for a total use of funds of ¥11,353 million.
“other” surplus funds resulting from increased net income for fiscal
2003, as well as increasing by ¥11,803 million due to net unrealized
gains on securities resulting from the increased value of investment
securities. Omron also repurchased ¥8,411 million worth of its own
shares, and total shareholders’ equity rose accordingly, by ¥23,100
million (9.2 percent) compared to the end of the previous fiscal year, to
¥274,710 million. Accumulated other comprehensive losses include
Working Capital & Current Ratio
(Billions of yen)
200
160
120
80
40
0
FY99
FY00
FY01
FY02
FY03
Working capital [left axis]
Current ratio [right axis]
(%)
250
200
150
100
50
0
Outstanding Interest-Bearing Liabilities
& Debt/Equity Ratio
(Billions of yen)
(Times)
2.0
Free Cash Flow
(Billions of yen)
50
80
60
40
20
0
1.5
1.0
0.5
0.0
40
30
20
10
0
-10
FY99
FY00
FY01
FY02
FY03
FY99
FY00
FY01
FY02
FY03
Outstanding interest-bearing liabilities [left axis]
Free cash flow
Debt/equity ratio [right axis]
35
RISK AND RISK MANAGEMENT
38.3 percent and 39.2 percent, respectively, and we expect further
With respect to items related to the Omron Group’s business and
increases in the overseas operations ratio due to factors such as pro-
accounting, the following risks may influence the Omron Group’s man-
duction shifts. The Omron Group seeks to hedge against exchange
agement results and financial condition (including share price), and we
rate risk in such ways as balancing imports and exports denominated
believe that these items may substantially affect investor decisions.
in foreign currencies. Exchange rate fluctuations, however, could have
Note that items referring to the future reflect the Omron Group’s fore-
a negative impact on our operating results and financial condition.
casts and/or assumptions as of June 25, 2004.
4. Protection of Intellectual Property, including Imitation
1. Economic Conditions
Products in China
The primary business of the Omron Group is electronic components
The Omron Group has accumulated technology and expertise allowing
used in the manufacture of control system equipment and other elec-
us to differentiate our products from those of our competitors. But it is
trical/electronic equipment by the manufacturing sector and in capital
impossible to completely protect all of our intellectual property consist-
investment related areas. Accordingly, demand for Omron Group
ing of proprietary technology and expertise, due to legal restrictions in
products is affected by economic conditions pertaining to these mar-
specific regions, including China, and/or conditions that allow only lim-
kets. Also, the Omron Group procures raw materials and semi-fin-
ited protection. At present, the Omron Group is working on intellectu-
ished products in a wide variety of forms, and rapid increases in
al property protection against imitation products, through such meas-
demand could result in supply shortages and/or sudden increases in
ures as the placement of full-time personnel in China. However, it is
prices that could halt production and/or cause sudden increases in
possible that we will not be able to effectively prevent third parties
costs.
from using our intellectual property in the manufacture of imitation
Both in Japan and overseas, therefore, market forces affecting sup-
products. It is also possible that future Omron Group products and/or
pliers to, and purchasers from, the Omron Group can result in the
technology may be cited as infringing upon the intellectual property
contraction of demand for our products, thereby possibly having a
rights of competitors. Such events could impact negatively on our
negative impact on our operating results and financial condition.
operating results and financial condition.
2. Risks Accompanying Overseas Business Activities
5. Product Defects
The Omron Group is actively undertaking business activities such as
The Omron Group is committed to the management philosophy; maxi-
production and sales in overseas markets. This imposes risks related
mization of customer satisfaction, and implement the philosophy by
to possible social unrest in the countries where we do business, due
providing the best quality products and services based on our motto
to factors such as differences in culture or religion, differences in busi-
of “quality first.” We have strict quality control standards in place, and
ness customs, economic circumstances such as specific legal and tax
we develop and manufacture our products accordingly. The
systems, and terrorisms, wars, or other political circumstances. In
Corporate General Affairs Division of the parent company conducts
particular, the Omron Group continues to expand the scale of produc-
quality audits, and a Group-wide quality check system is in place for
tion and components procurement in China, which has been growing
the ongoing improvement of the quality of our entire line of products
rapidly in recent years. It is therefore possible that problems could
and services.
arise in the management of our production equipment and the per-
Nevertheless, there is no assurance that all our products are without
formance of other businesses due to sudden changes in the Chinese
defects, and that recalls will not occur in the future. Large-scale
political or legal environment, the surfacing of problems related to envi-
recalls and/or product defects resulting in liability-related damages
ronmental issues or delayed response to social infrastructure needs
could impose huge costs, could severely influence evaluations of the
such as electrical power generation, or other unpredictable events
Omron Group, and could result in reduced sales. Such events could
within China, including changes in the economic situation.
impact negatively on our operating results and financial condition.
These factors may have a negative impact on the Omron Group’s
operating results and financial condition.
6. Regulated Chemical Substances
3. Exchange Rate Fluctuation
The Omron Group currently manufactures products with materials
containing regulated chemical substances such as lead and cadmium
The Omron Group has 90 overseas affiliated companies and continues
that will be banned from use in the EU from July 2006. A regulated
to reinforce its business operations in overseas markets, such as
chemical substance investigation project has been launched within the
China for which major market growth is anticipated in the future. The
Omron Group, and we are working with our suppliers to review the
percentages of consolidated net sales accounted for by overseas
status of regulated chemical substances in all of the components and
sales during the fiscal years ended March 2003 and March 2004 were
materials we use. Efforts are also being made to switch to substitute
36
components and materials that do not contain regulated chemical
substances. Although we are thus proceeding with a project to make
Omron Group products throughout the world “environmentally war-
ranted products” by the end of March 2006, delays in the switchover
due to shortages of substitute parts and materials could impact nega-
tively on our operating results and financial condition.
7. Information Leakage
All aspects of the operations of the Omron Group depend on personal
computers and an IT environment, including production, R&D, sales,
and management, with external data exchange being conducted in the
course of sales and procurement activities. With recent rapid
advances in the Internet and large-capacity media, moreover, there is
an increasing possibility that important internal information such as
customer information could be leaked to the outside of the Group.
The Omron Group is strengthening its security measures to prevent
external entry into its internal information systems, and a special com-
mittee has been established centering on the Corporate General
Affairs Division. Steps are accordingly being taken to reinforce control
over the information we handle, and to further improve employees’
information literacy.
Unanticipated leakage of internal information, however, due for
example to invasion of internal information systems using technology
exceeding implemented security levels, could impact negatively on our
operating results and financial condition.
8. R&D Activities
The Omron Group is actively investing in R&D activities while proceed-
ing its business operation centered on technology, based on a man-
agement policy of securing a balance between growth and profits. As
a result, R&D expenditures as a percentage of sales rose from 7.5 per-
cent for fiscal 2002 to 7.9 percent for fiscal 2003. The Omron Group
concentrates its R&D efforts on specific technological domains and
market objectives, and consistently seeks improvement in its contribu-
tion rate of new products. A decline in the contribution rate of new
products, however, due to factors such as R&D delays and insufficient
applicability, could impact negatively on our operating results and
financial condition.
9. Natural Disasters
The Omron Group established a special committee within the
Corporate General Affairs Division for minimizing the risk from natural
disasters such as earthquakes and from events such as power out-
ages, and seeks to define risks and implement corresponding counter-
measures. It is impossible, however, to avoid all risk pertaining to nat-
ural disasters, and the occurrence of natural disasters could impair our
production capacity and/or temporarily disrupt our sales channels.
Such events could impact negatively on our operating results and
financial condition.
37
CONSOLIDATED BALANCE SHEETS
OMRON Corporation and Subsidiaries
March 31, 2004 and 2003
ASSETS
Current Assets:
Millions of yen
Thousands of
U.S. dollars
(Note 2)
2004
2003
2004
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 95,059
Notes and accounts receivable – trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
124,891
Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,823)
70,341
18,458
10,300
¥079,919
113,595
$ 896,783
1,178,217
(3,484)
75,446
20,139
9,498
(26,632)
663,594
174,132
97,170
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
316,226
295,113
2,983,264
Property, Plant and Equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45,583
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107,852
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
141,932
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,760
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
299,127
46,094
99,455
137,710
11,313
294,572
430,028
1,017,472
1,338,981
35,472
2,821,953
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(148,404)
Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,723
(145,527)
149,045
(1,400,038)
1,421,915
Investments and Other Assets:
Investments in and advances to associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,245
50,331
8,777
47,301
17,670
Total Investments and Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,324
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥592,273
1,187
30,861
9,173
64,305
17,715
11,745
474,821
82,802
446,236
166,698
123,241
¥567,399
1,182,302
$5,587,481
See notes to consolidated financial statements.
38
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Millions of yen
Thousands of
U.S. dollars
(Note 2)
2004
2003
2004
Bank loans (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 15,444
¥018,948
$ 145,698
Notes and accounts payable – trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses (Note 18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
79,345
26,146
10,114
23,463
30,036
67,773
24,394
4,095
24,370
11,997
748,538
246,660
95,415
221,349
283,358
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
184,548
151,577
1,741,018
Long-Term Debt (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,207
40,315
105,726
Deferred Income Taxes (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
483
643
4,557
Termination and Retirement Benefits (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119,738
120,730
1,129,604
Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140
52
1,321
Minority Interests in Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,447
2,472
13,651
Shareholders’ Equity (Note 9):
Common stock, no par value:
Authorized: 487,000,000 shares
lssued:
249,109,236 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,082
98,705
7,450
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
175,296
Accumulated other comprehensive loss (Note 15) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(50,559)
Treasury stock, at cost — 9,884,413 shares in 2004 and
Total Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
274,710
6,245,053 shares in 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(20,264)
64,082
98,705
7,619
153,134
(59,909)
(12,021)
251,610
604,547
931,179
70,283
1,653,736
(476,971)
(191,170)
2,591,604
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥592,273
¥567,399
$5,587,481
See notes to consolidated financial statements.
39
CONSOLIDATED STATEMENTS OF OPERATIONS
OMRON Corporation and Subsidiaries
Years ended March 31, 2004, 2003 and 2002
Millions of yen
Thousands of
U.S. dollars
(Note 2)
2004
2003
2002
2004
Net Sales
Costs and Expenses: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥584,889
¥535,073
¥533,964
$5,517,821
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
344,835
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . .
142,157
Research and development expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46,494
Interest expense, net (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses, net (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317
1,254
1,848
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
536,905
Income (Loss) before Income Taxes, Minority Interests and
Cumulative Effect of Accounting Change . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,984
20,762
Income (Loss) before Minority Interests and
Cumulative Effect of Accounting Change . . . . . . . . . . . . . . . . . . . . . . . .
27,222
Minority Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
411
Income (Loss) before Cumulative Effect of Accounting Change . . . . . . . .
26,811
Cumulative Effect of Accounting Change . . . . . . . . . . . . . . . . . . . . . . . . . .
—
327,413
135,112
40,235
348
575
26,658
530,341
4,732
3,936
796
285
511
—
353,429
134,907
41,407
223
1,506
27,865
559,337
(25,373)
(9,348)
(16,025)
132
(16,157)
384
3,253,160
1,341,104
438,623
2,991
11,830
17,434
5,065,142
452,679
195,868
256,811
3,877
252,934
—
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 26,811
¥,000511
¥,(15,773)
$ 252,934
2004
Per Share Data (Note 13):
Income (Loss) before Cumulative
Effect of Accounting Change
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥110.7
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
107.5
Net Income (Loss)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110.7
107.5
See notes to consolidated financial statements
Yen
2003
¥2.1
2.1
2.1
2.1
2002
¥(65.0)
(65.0)
(63.5)
(63.5)
U.S. dollars
(Note 2)
2004
$1.04
1.01
1.04
1.01
40
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
OMRON Corporation and Subsidiaries
Years ended March 31, 2004, 2003 and 2002
Millions of yen
Thousands of
U.S. dollars
(Note 2)
2004
2003
2002
2004
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥26,811
¥
511
¥(15,773)
$252,934
Other Comprehensive Income (Loss), Net of Tax (Note 15):
Foreign currency translation adjustments:
Foreign currency translation adjustments arising during the year . . . . . . . .
(6,680)
Reclassification adjustment for the portion realized in net income . . . . . . .
Net change in foreign currency translation adjustments during the year . .
Minimum pension liability adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
462
(6,218)
3,470
(2,227)
222
(2,005)
(27,484)
6,310
—
6,310
(13,973)
(63,018)
4,358
(58,660)
32,736
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during the year . . . . . . . . . . . . . .
11,916
(6,400)
(7,570)
112,415
Reclassification adjustment for losses on impairment realized
in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
500
692
8,030
4,717
Reclassification adjustment for net losses (gains)
on sales realized in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
(613)
Net unrealized gains (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,803
661
(5,047)
(746)
(286)
(5,783)
111,349
Net gains (losses) on derivative instruments:
Net gains (losses) on derivative instruments designated as cash
flow hedges during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
639
(788)
(1,673)
6,028
Reclassification adjustment for net losses (gains) realized
in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(344)
295
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,350
Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥36,161
778
(10)
(34,546)
¥(34,035)
1,605
(68)
(8,017)
(3,245)
2,783
88,208
¥(23,790)
$341,142
See notes to consolidated financial statements
41
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
OMRON Corporation and Subsidiaries
Years ended March 31, 2004, 2003 and 2002
Number of
common shares
issued
Common
stock
Additional
paid-in
capital
Legal
reserve
Retained
earnings
Accumulated
other compre-
hensive
income (loss)
Treasury
stock
Millions of yen
Balance, April 1, 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 . . . . . . . . . . . .
Acquisition of 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)
Net income . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends, ¥10 per share . . . . . . . .
Reversal of legal reserve . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . .
Reissuance of treasury stock (Note 9) . . .
(41)
511
(2,455)
41
(32)
(34,546)
(10,218)
116
Balance, March 31, 2003 . . . . . . . . . . . . .
249,109,236
64,082
98,705
7,619
153,134
(59,909)
(12,021)
Net income . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends, ¥20 per share . . . . . . . .
Reversal of legal reserve . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . .
Exercise of stock options. . . . . . . . . . . . .
(169)
26,811
(4,808)
169
(10)
9,350
(8,411)
168
Balance, March 31, 2004 . . . . . . . . . . . . .
249,109,236
¥64,082
¥98,705
¥7,450
¥175,296
¥(50,559)
¥(20,264)
Thousands of U.S. dollars (Note 2)
Common
stock
Additional
paid-in
capital
Legal
reserve
Retained
earnings
Accumulated
other compre-
hensive
income (loss)
Treasury
stock
Balance, March 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . .
$604,547
$931,179
$71,877
$1,444,660
$(565,179)
$(113,406)
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends, $0.19 per share . . . . . . . . . . . . . . . . . . . .
Reversal of legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock. . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,594)
252,934
(45,358)
1,594
(94)
88,208
(79,349)
1,585
Balance, March 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . .
$604,547
$931,179
$70,283
$1,653,736
$(476,971)
$(191,170)
See notes to consolidated financial statements.
42
CONSOLIDATED STATEMENTS OF CASH FLOWS
OMRON Corporation and Subsidiaries
Years ended March 31, 2004, 2003 and 2002
Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net
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 loss (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 . . . . . . . . . . . . . . . . . . . . . . .
Net loss (gain) on sales of business entities . . . . . . . . . . . . . . . . . . . . .
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 current liabilities . . . . . . . . . . . . . . . . .
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 in leasehold deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of property, plant and equipment . . . . . . . . . . . . . . . .
Acquisition of minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of business entities, net . . . . . . . . . . . . . . . . . . . . . . . .
Payment for acquisition of business entities, net . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities:
Net borrowings (repayments) of short-term bank loans . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . .
Effect of Exchange Rate Changes on Cash and Cash Equivalents . . . . .
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . .
Cash and Cash Equivalents at Beginning of the Year . . . . . . . . . . . . . . . .
Cash and Cash Equivalents at End of the Year . . . . . . . . . . . . . . . . . . . . .
See notes to consolidated financial statements.
43
Millions of yen
Thousands of
U.S. dollars
(Note 2)
2004
2003
2002
2004
¥ 26,811
¥ 511
¥(15,773)
$252,934
27,662
479
41
(1,039)
2,413
0
5,016
7,235
411
—
494
(10,853)
4,105
891
10,976
6,015
(52)
82
53,876
80,687
1,894
(1,617)
(38,115)
312
4,808
(1,738)
(365)
337
(34,484)
(4,842)
1,011
(13,093)
(2,792)
(150)
(8,411)
158
(28,119)
(2,944)
15,140
79,919
¥ 95,059
29,676
11
4,231
1,221
2,269
465
(1,087)
(3,915)
285
—
(1,550)
1,363
(1,918)
214
9,770
232
130
(54)
41,343
41,854
1,388
(739)
(34,454)
592
1,641
(101)
1,450
(410)
(30,633)
2,909
10,358
(1,960)
(2,855)
(230)
(10,218)
—
(1,996)
(85)
9,140
70,779
¥79,919
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)
5,786
13,102
(26,970)
(3,230)
(37)
(725)
18
(12,056)
3,648
(14,842)
85,621
¥ 70,779
260,962
4,519
387
(9,802)
22,764
0
47,321
68,255
3,877
—
4,660
(102,387)
38,726
8,406
103,547
56,745
(491)
774
508,263
761,197
17,868
(15,255)
(359,575)
2,943
45,358
(16,396)
(3,443)
3,179
(325,321)
(45,679)
9,538
(123,519)
(26,340)
(1,415)
(79,349)
1,491
(265,273)
(27,773)
142,830
753,953
$896,783
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OMRON Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 management centers in Japan, North America, Europe,
Asia-Pacific and China. Products, classified by type and market, are organized into six internal companies and one business develop-
ment 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 industry. In the global market, the Company offers many services, such as those involving
labor-saving 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 appli-
ances as well as such business equipment as telephone systems, vending machines, and office equipment.
Automotive Electronic Components Business develops and produces automotive electronic components and other components for
automobiles and automotive electronic components manufacturers throughout the world.
Social Systems Solutions Business encompasses the sale of automated teller machines, card authorization terminals and point of
sales systems mainly for the domestic markets. Passing gates and automated ticket machines and electronic panels and terminal dis-
plays for traffic information and monitoring purposes are also supplied for the domestic market.
Advanced Modules Business manufactures products for the Social Systems Solutions Business, and also sells products for certain
domestic customers and overseas markets.
Healthcare sells blood pressure monitors, digital thermometers, body-fat monitors, nebulizers and infra-red therapy devices aimed at
both the consumer and institutional markets.
Business Development Group consists of businesses with high growth potential. The group provides the peripheral equipment used
in office automation equipment, 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 2004 classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries (together the “Companies”). All signifi-
cant intercompany accounts and transactions have been eliminated.
Investments in which the Companies have a 20% to 50% interest (associates) are accounted for using the equity method.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclo-
sure 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 estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less, including time deposits, commer-
cial paper, securities purchased with resale agreements and money market instruments.
44
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 accumulat-
ed other comprehensive income, net of related taxes, until recognized. If necessary, individual securities classified as available-for-sale
are reduced to fair value by a charge to income in the period in which the decline is deemed to be other than temporary. Other invest-
ments are stated at the lower of cost or estimated net realizable value.The cost of securities sold is determined 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.
Goodwill and Other Intangible Assets
The Company accounts for its goodwill and other intangible assets in accordance with SFAS No.142, "Goodwill and Other Intangible
Assets,” which requires that goodwill no longer be amortized, but instead tested for impairment at least annually. SFAS No.142 also
requires recognized intangible assets be amortized over their respective estimated useful lives and reviewed for impairment. Any rec-
ognized intangible asset determined to have an indefinite useful life is not to be amortized, but instead tested for impairment until its life
is determined to no longer be indefinite.
Long-Lived Assets
Long-lived assets 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 undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impair-
ment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value. Assets to be dis-
posed of other than by sale are considered held and used until disposed of. Assets to be disposed of by sale 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 ¥8,391 million ($79,160 thousand), ¥7,196 million and
¥7,931 million for the years ended March 31, 2004, 2003 and 2002, respectively.
Shipping and Handling Charges
Shipping and handling charges were ¥8,061 million ($76,047 thousand), ¥7,300 million and ¥7,342 million for the years ended March
31, 2004, 2003 and 2002, respectively, and are included in selling, general and administrative expenses in the consolidated state-
ments of operations.
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 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement
Benefits.” The provision for termination and retirement benefits includes amounts for directors and corporate auditors of the Company.
45
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 carry forwards and tax credit carry forwards, are rec-
ognized 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 period that includes the enactment date.
Product Warranties
A liability for the estimated warranty related cost is established at the time revenue is recognized and is included in other current liabili-
ties. The liability is established using historical information including the nature, frequency, and average cost of warranty claims.
Derivatives
Derivative instruments and hedging activities are accounted for in accordance with SFAS No.133, “Accounting for Derivative
Instruments and Hedging Activities,” SFAS No.138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an
amendment of FASB Statement No.133,” and SFAS No.149, “Amendment of Statement 133 on Derivative Instruments and Hedging
Activities.” These standards establish accounting and reporting standards for derivative instruments and for hedging activities, and
require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.
For foreign exchange forward contracts and foreign currency options, on the 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 Companies’
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 variability in cash flows of the designated
hedged item.
The cumulative effect adjustment upon the adoption SFAS No.133 and No.138, net of the related income tax effect, resulted in a
decrease to net loss of approximately ¥ 384 million at the date of adoption. The adoption of SFAS No.149 had no impact on the con-
solidated financial statements.
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 liabilities in the consolidated balance sheets.
Revenue Recognition
The Companies recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss
has transferred, the sales price is fixed or determinable, and collectibility is probable. These criteria are met when products are received
by customers or services are performed.
Stock-Based Compensation
The Companies account for stock-based awards to employees using the intrinsic value method in accordance with APB Opinion
No.25, “Accounting for Stock Issued to Employees,” including related interpretations, and follow the disclosure only provision of SFAS
No.123, “Accounting for Stock Based Compensation.”
At March 31, 2004, the Company had a stock-based employee compensation plan, which is described more fully in Note 9. No
stock-based employee compensation cost is reflected in the results of operations, as all options granted under those plans had an
exercise price exceeding the market value of the underlying common stock on the date of grant. The following table illustrates the effect
on net income (loss) and net income (loss) per share if the Company had applied the fair value recognition provisions of SFAS No.123,
to stock-based employee compensation.
46
Net income (loss), as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduct:
Total stock-based employee compensation
expense determined under fair value based
Millions of yen
(except per share data)
Thousands of
U.S. dollars
(except per share data)
2004
¥26,811
2003
¥511
2002
2004
¥(15,773)
$252,934
method for all awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106
Pro forma net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥26,705
91
¥420
100
1,000
¥(15,873)
$251,934
Net income (loss) per share (yen and U.S. dollars):
Basic – as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic – pro forma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted – as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted – pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 110.7
110.2
107.5
107.1
¥ 2.1
¥ (63.5)
$ 1.04
1.7
2.1
1.7
(63.9)
(63.5)
(63.9)
1.04
1.01
1.01
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 translation of Japanese yen amounts into U.S. dollar amounts is included solely for convenience of the readers outside of
Japan and has been made at the rate of ¥106 to $1, the approximate rate of exchange at March 31, 2004. Such translation 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
4. SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES
Millions of yen
2004
¥34,983
15,725
19,633
¥70,341
2003
¥39,264
16,608
19,574
¥75,446
Thousands of
U.S. dollars
2004
$330,028
148,349
185,217
$663,594
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 readily determinable
public market value, by major security type at March 31 were as follows:
2004
2003
Millions of yen
Cost ( * )
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
Cost ( * )
Gross
unrealized
gains
Gross
unrealized
losses
Fair value
Available-for-sale securities:
Debt securities . . . . . . . . . . . . .
¥ 62
¥ —
Equity securities . . . . . . . . . . . .
26,949
18,915
Total available-for-sale securities .
¥27,011
¥18,915
¥ —
(81)
¥(81)
¥ 62
¥ 000,44
¥(000—
¥(000—
¥,000,44
45,783
¥45,845
27,947
¥27,991
4,000
¥4,000
(5,171)
26,776
¥(5,171)
¥26,820
(*) Cost represents amortized cost for debt securities and acquisition cost for equity securities.
47
Thousands of U.S. dollars
2004
Cost ( * )
Gross
unrealized gains
Gross
unrealized
losses
Fair value
Available-for-sale securities:
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 585
$ —
$ —
$ 585
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
254,236
178,443
Total available-for-sale securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$254,821
$178,443
(764)
$(764)
431,915
$432,500
(*) Cost represents amortized cost for debt securities and acquisition cost for equity securities.
Gross unrealized holding losses and fair value of certain available-for-sale, equity securities, aggregated by length of time that such
securities have been in a continuous unrealized loss position, at March 31, 2004, were as follows:
Millions of yen
Thousands of U.S. dollars
Less than 12 months
Fair value
Gross
Unrealized
Holding
losses
Fair value
Gross
Unrealized
Holding
losses
Available-for-sale securities:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥404
¥(81)
$3,811
$(764)
There were no securities which have been in a continuous unrealized loss position over 12 months at March 31, 2004.
Losses on impairment of available-for-sale securities recognized to reflect the decline in market value considered to be other than
temporary were ¥847 million ($7,991 thousand), ¥1,194 million and ¥13,845 million for the years ended March 31, 2004, 2003 and
2002, respectively.
Net unrealized holding gains (losses) on available-for-sale securities, net of related taxes, increased by ¥11,803 million ($ 111,349
thousand) and decreased by ¥5,047 million for the years ended March 31, 2004 and 2003, respectively. Debt securities classified as
available-for-sale investment securities mature in various amounts through 2006.
Proceeds from sales of available-for-sale securities were ¥1,833 million ($17,292 thousand), ¥1,240 million and ¥2,750 million for the
years ended March 31, 2004, 2003 and 2002, respectively. Gross realized gains on sales were ¥1,120 million ($10,566 thousand), ¥78
million and ¥1,608 million for the years ended March 31, 2004, 2003 and 2002, respectively. Gross realized losses on sales were ¥82
million ($774 thousand), ¥1,218 million and ¥321 million for the years ended March 31, 2004, 2003 and 2002, respectively.
5. GOODWILL AND OTHER INTANGIBLE ASSETS
The components of acquired intangible assets excluding goodwill at March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003
Gross Amount
Accumulated
Amortization
Gross Amount
Accumulated
Amortization
Intangible assets subject to amortization:
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥24,531
4,001
¥28,532
¥14,392
2,952
¥17,344
¥21,780
3,842
¥25,622
¥10,268
2,838
¥13,106
48
Thousands of U.S. dollars
2004
Gross Amount
Accumulated
Amortization
Intangible assets subject to amortization:
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$231,425
$135,774
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,745
27,849
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$269,170
$163,623
Intangible assets not subject to amortization at March 31, 2004 and 2003 were immaterial.
Aggregate amortization expense related to intangible assets was ¥4,625 million ($43,632 thousand) and ¥4,544 million for the years
ended March 31, 2004 and 2003, respectively.
Estimated amortization expense for the next five years ending March 31 is as follows:
Years ending March 31
Millions of yen
Thousands of
U.S. dollars
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥3,440
$33,453
2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,274
2,337
1,504
479
30,887
22,047
14,189
4,519
The carrying amount of goodwill at March 31, 2004 and 2003 and changes in its carrying amount for the years ended March
31,2004 and 2003 were immaterial.
6. BANK LOANS AND LONG-TERM DEBT
The weighted average annual interest rates of short-term bank loans at March 31, 2004 and 2003 were 1.2% and 1.2%, respectively.
Long-term debt at March 31 consisted of the following:
Millions of yen
Thousands of
U.S. dollars
2004
2003
2004
Unsecured debt:
Convertible bonds at 1.7%, due in September 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥29,735
¥29,735
$280,519
Loans from banks and other financial institutions,
generally at 0.4% to 3.8%, due on various dates through the years ended March 31,2006 . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less portion due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,986
522
41,243
30,036
21,802
775
52,312
11,997
103,641
4,924
389,084
283,358
Long-term debt, less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥11,207
¥40,315
$105,726
49
The annual maturities of long-term debt outstanding at March 31, 2004 were as follows:
Years ending March 31
Millions of yen
Thousands of
U.S. dollars
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥30,036
10,404
89
69
—
645
¥41,243
$283,358
98,150
840
651
—
6,085
$389,084
The convertible bonds may be redeemed at the Company’s option prior to maturity at any time by the Company or its subsidiaries.
At March 31, 2004, the convertible bonds were redeemable, in whole or in part, at 100% of face value.
The number of contingently issuable shares of common stock related to the convertible bonds as of March 31, 2004 was
10,026,639 shares. The conversion price per share at March 31, 2004 was ¥2,965 ($27.98), 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, 2004, 2003 and 2002 amounted to ¥1,217 mil-
lion ($11,481 thousand), ¥1,430 million and ¥1,291 million, respectively.
7. LEASES
The Companies have operating lease agreements primarily involving offices and equipment for varying periods. Leases that expire gen-
erally are expected to be renewed or replaced by other leases. At March 31, 2004, 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
Millions of yen
Thousands of
U.S. dollars
2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 2,590
2,386
2,206
1,975
1,546
15,649
¥26,352
$ 24,434
22,509
20,811
18,632
14,585
147,632
$248,603
Rental expense amounted to ¥11,059 million ($104,330 thousand), ¥12,818 million and ¥11,322 million for the years ended March
31, 2004, 2003 and 2002, respectively.
8. TERMINATION AND RETIREMENT BENEFITS
The Company and its domestic subsidiaries sponsor termination and retirement benefit plans which cover substantially all domestic
employees. Benefits are based on the employee’s years of service, with some plans considering compensation and certain other fac-
tors. 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 con-
tribute 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 substitutional potion requiring employee and employer contributions plus an additional portion estab-
lished by the employers.
50
Periodic pension benefits required under the substitutional 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 payments are available under certain conditions.
In January 2003, Emerging Issues Task Force ("EITF") reached a final consensus on Issue 03-2, “Accounting for the Transfer to the
Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities.” EITF Issue 03-2 addresses accounting for a
transfer to the Japanese government of a substitutional portion of an Employees’ Pension Fund plan.
The process of separating the substitutional portion from the corporate portion occurs in four phases. EITF Issue 03-2 requires that
the separation process should be accounted for upon completion of the transfer to the government of the substitutional portion of the
benefit obligation and related plan assets as the culmination of a series of steps in a single settlement transaction. Under the consensus
reached, at the time the assets are transferred to the government in an amount sufficient to complete the separation process, the
transaction is considered to be complete and the elimination of the entire substitutional portion of the benefit obligation would be
accounted for as a settlement at that time. The difference between the obligation settled and the assets transferred to the government
should be accounted for as a subsidy from the government.
On April 26, 2004, the Company received the Japanese government’s approval of exemption from the obligation for benefits related
to future employee service under the substitutional portion of its pension plan. The effect on the consolidated financial statements of the
future transfer of the assets and liabilities related to the substitutional portion of its pension plan has not yet been determined
Obligations and Funded status
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
Thousands of
U.S. dollars
2004
2003
2004
Change in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 248,378
¥(232,178
$ 2,343,189
Service cost, less employees’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,981
4,968
931
2,813
(4,443)
(981)
9,611
5,804
942
13,340
(8,829)
(4,668)
75,292
46,868
8,783
26,538
(41,915)
(9,255)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 259,647
¥(248,378
$ 2,449,500
Change in plan assets:
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
105,311
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employers’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employees’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,368
5,789
931
(3,228)
119,487
(17,608)
6,233
942
(3,743)
993,500
78,943
54,613
8,783
(30,453)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 117,171
¥,105,311
$ 1,105,386
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(142,476)
108,395
(3,603)
—
(143,067)
113,301
(3,904)
268
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (37,684)
¥1(33,402)
(1,344,114)
1,022,594
(33,991)
—
$ (355,511)
Amounts recognized in the consolidated balance sheets:
Accrued liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss (gross of tax) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amount recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(115,784)
78,100
¥ (37,684)
¥ 232,955
¥(117,382)
$(1,092,302)
83,980
736,792
¥0(33,402)
$ (355,510)
¥,222,693
$ 2,197,689
51
Components of Net Periodic Benefit Cost
The expense recorded for the contributory termination and retirement plans included the following components for the years ended
March 31:
Millions of yen
Thousands of
U.S. dollars
2004
2003
2004
Service cost, less employees’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 7,981
¥19,611
$ 75,292
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,968
(4,210)
3,530
5,804
(4,072)
2,742
46,868
(39,717)
33,302
Net expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥12,269
¥14,085
$115,745
The provisions of SFAS No. 87, “Employers’ Accounting for Pensions,” require the recognition of an additional minimum pension lia-
bility 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 liability is reflected as other comprehensive income, net of related
tax effect. The unrecognized net actuarial loss and the prior service credit are being amortized over 15 years.
Measurement Date
The Company and certain of its domestic subsidiaries use a December 31measurement date for the majority of their plans. Subsequent
to the measurement date, in February 2004, the Company amended its plan to establish a new formula for determining pension bene-
fits. The effect of this amendment was a decrease of ¥15,546 million($146,660 thousand) in the projected benefit obligation and will be
recorded in the year ending March 31, 2005.
Assumptions
Weighted-average assumptions used to determine benefit obligations at March 31, 2004 and 2003 are as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation increase rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
2.0%
2.0
2003
2.0%
2.0
Weighted-average assumptions used to determine net periodic benefit cost for the years ended March 31,2004, 2003 and 2002 are
as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation increase rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
2.0%
2.0
3.0
2003
2.5%
3.0
4.0
2002
3.0%
3.0
4.0
The expected return on plan assets is determined by estimating the future rate of return on each category of plan assets considering
actual historical returns and current economic trends and conditions.
52
Plan assets
The Company’s pension plan weighted-average asset allocation by asset category is as follows:
Asset Category
2004
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.4%
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance company general accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25.0
43.5
10.8
6.3
2003
—%
60.6
27.1
11.9
0.4
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
100.0%
The Company investment policies are designed to ensure adequate plan assets are available to provide future payments of pension
benefits to eligible participants. Taking into account the expected long-term rate of return on plan assets, the Company formulates a
model portfolio comprised of the optimal combination of equity and debt securities in order to produce a total return that will match the
expected return on a mid-term to long-term basis.
The Company evaluates the gap between expected return and actual return of invested plan assets on an annual basis to determine
if such differences necessitate a revision in the model portfolio. The Company revises the model portfolio when and to the extent con-
sidered necessary to achieve the expected long-term rate of return on plan assets.
Equity securities include common stock of the Company in the amounts of ¥53 million ($500 thousand)(0.04% of total domestic plan
assets) and ¥111 million (0.11% of total domestic plan assets) at December 31,2003 and 2002, respectively.
Cash Flows
The Company expects to contribute ¥5,712 million ($53,887 thousand) to its domestic termination and retirement benefit plans in the
year ending March 31, 2005.
Certain employees of European subsidiaries are covered by a defined benefit pension plan. The projected benefit obligation for the
plan and related fair value of plan assets were ¥1,285 million ($12,123 thousand) and ¥1,125 million ($10,613 thousand), respectively,
at March 31, 2004 and ¥1,315 million and ¥887 million, respectively, at March 31, 2003.
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 retirement age, except for payments to
directors and corporate auditors which require approval by the shareholders before payment. The Companies record provisions for ter-
mination benefits sufficient to state the liability equal to the plans’ vested benefits, which exceed the plans’ accumulated benefit obliga-
tions.
The aggregate liability for the termination plans excluding the funded contributory termination and retirement plan in Japan, as of
March 31, 2004 and 2003 was ¥3,954 million ($37,302 thousand) and ¥3,348 million, respectively. The aggregate net periodic benefit
cost for such plans for the years ended March 31, 2004, 2003 and 2002 was ¥1,688 million ($15,925 thousand), ¥890 million and
¥2,385 million, respectively.
9. SHAREHOLDERS’ EQUITY
Japanese companies are subject to the Japanese Commercial Code (the "Code") to which various amendments have become effective
since October 1, 2001.
The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no par value and
at least 50% of the issue price of new shares is required to be recorded as common stock and the remaining net proceeds as addition-
al paid-in capital, which is included in capital surplus. The Code permits Japanese companies, upon approval of the Board of Directors,
to issue shares to existing shareholders without consideration as a stock split. Such issuance of shares generally does not give rise to
changes within the shareholders’ accounts.
The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other
appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated as a legal reserve (a
53
component of retained earnings) until such reserve and capital surplus equals 25% of common stock. The amount of total capital sur-
plus and legal reserve that exceeds 25% of the common stock may be available for dividends by resolution of the shareholders.
In addition, the Code permits the transfer of a portion of capital surplus and legal reserve to the common stock by resolution of the
Board of Directors.
The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies to repurchase
treasury stock by a resolution of the shareholders at the general shareholders meeting or by resolution of the Board of Directors provid-
ed it is stipulated in an article of incorporation and dispose of such treasury stock by resolution of the Board of Directors. The repur-
chased amount of treasury stock cannot exceed the amount available for future dividend plus amount of common stock, capital sur-
plus 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, 2004, retained earnings amounting to ¥31,086 million ($293,264 thousand)
were available for future dividends subject to legal reserve requirements.
In 2003, the Company acquired the minority interests of certain domestic subsidiaries in exchange for the Company’s common stock
previously held in its treasury. The Company reissued 52,275 shares of treasury stock to acquire minority interests with book values
and fair values equal to ¥84 million. These transactions resulted in a combined loss on reissuance of treasury stock of ¥32 million, rep-
resenting the aggregate difference between the cost of shares repurchased and the fair value of shares reissued on the effective date
of acquisition. The loss was charged directly to retained earnings.
Stock Options
The Company has authorized the grant of options to purchase common stock of the Company to certain directors and officers of the
Company under a fixed stock option plan. All of the authorized shares available for grant have been granted.
Under the above plan, the exercise price of each option exceeded the market price of the Company’s common stock on the date of
grant and the options expire 5 years after the date of the grant. Generally, options become fully vested and exercisable after 3 years. A
summary of the Company’s fixed stock option plan activity and related information is as follows:
Fixed options
Yen
Shares
Weighted-
average exercise
price
Weighted-
average fair value
of options
granted during
the year
Options outstanding at April 1, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
498,000
¥2,467
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
292,000
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10,000)
(85,000)
Options outstanding at March 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
695,000
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
276,000
Options outstanding at March 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
971,000
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
204,000
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(86,000)
2,306
1,839
2,161
2,446
1,913
2,294
2,435
1,839
Options outstanding at March 31, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,089,000
¥2,357
325
285
736
54
U.S. dollars
Weighted-
average exercise
price
Weighted-
average fair value
of options
granted during
the year
Options outstanding at March 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21.64
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22.97
17.34
$6.94
Options outstanding at March 31, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$22.24
Options exercisable at March 31, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
143,000
Options exercisable at March 31, 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
403,000
Options exercisable at March 31, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
609,000
Shares
Shares
Yen
Weighted-
average exercise
price
¥1,839
¥2,547
¥2,531
U.S. dollars
Weighted-
average exercise
price
Options exercisable at March 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
609,000
$23.88
The following summarizes information about fixed stock options at March 31, 2004:
Options outstanding
Options exercisable
Yen
Range of exercise prices
Shares
Weighted-average
remaining
contractual life
Yen
Weighted-average
exercise price
¥1,839
2,936
2,306
1,913
2,435
57,000
260,000
292,000
276,000
204,000
¥1,839 to ¥2,936
1,089,000
0.25 years
1.25 years
2.25 years
3.25 years
4.25 years
2.54 years
¥1,839
2,936
2,306
1,913
2,435
¥2,357
Shares
57,000
260,000
292,000
—
—
Yen
Weighted-average
exercise price
¥1,839
2,936
2,306
—
—
609,000
¥2,531
Options outstanding
Options exercisable
U.S. dollars
Range of exercise prices
Shares
Weighted-average
remaining
contractual life
U.S. dollars
Weighted-average
exercise price
$17.35
27.70
21.75
18.05
22.97
57,000
260,000
292,000
276,000
204,000
$17.35 to $27.70
1,089,000
0.25 years
1.25 years
2.25 years
3.25 years
4.25 years
2.54 years
$17.35
27.70
21.75
18.05
22.97
$22.24
Shares
57,000
260,000
292,000
—
—
609,000
U.S. dollars
Weighted-average
exercise price
$17.35
27.70
21.75
—
—
$23.88
55
The fair value of each option grant was estimated as of the grant date using the Black-Scholes option-pricing model with the follow-
ing assumptions:
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
2003
2002
0.738%
45.0
0.857
3.5 years
0.271%
0.560%
25.0
0.559
20.0
0.576
3.5 years
3.5 years
The Black-Scholes option valuation model used by the Company was developed for use in estimating the fair value of fully tradable
options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly sub-
jective assumptions including the expected stock price volatility. It is management’s opinion that the Company’s stock options have
characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materi-
ally affect the fair value estimate, the existing models do not necessarily provide a reliable single measure of the fair value of its stock
options.
10. OTHER EXPENSES, NET
Other expenses (income), net for the years ended March 31, 2004, 2003 and 2002 consisted of the following:
Loss on impairment of investment securities and other assets . . . . . . . . . . . .
Net loss on sales and disposals of property, plant and equipment . . . . . . . . .
Loss on impairment of property, plant and equipment . . . . . . . . . . . . . . . . . .
Net loss (gain) on sales of short-term investments and investment securities .
Net loss (gain) on sales of business entities . . . . . . . . . . . . . . . . . . . . . . . . . .
Voluntary early retirement program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
¥ 2,413
479
41
(1,039)
494
—
(540)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 1,848
¥26,658
Millions of yen
Thousands of
U.S. dollars
2003
2002
2004
¥2,269
¥17,199
$22,764
11
4,231
1,221
(1,550)
18,968
1,508
1,314
6,815
(1,008)
—
—
3,545
¥27,865
4,519
387
(9,802)
4,660
—
(5,094)
$17,434
The Companies assessed the potential impairment of certain long-lived assets in consideration of future alternate uses, including dis-
posal by sale. As a result, certain land and buildings, principally dormitories in 2004 and 2002, and laboratories in 2003, were deemed
to be impaired and written down to fair value. The estimated fair value of these assets was primarily determined by independent real
estate appraisals of land and buildings.
During the year ended March 31, 2003 the Company and most domestic subsidiaries implemented a voluntary early retirement pro-
gram to all employees fulfilling certain conditions such as age and duration of employment. Employees accepting this offer received an
additional lump sum payment, along with their previously earned retirement benefits.
56
11. INCOME TAXES
The provision for income taxes for the years ended March 31, 2004, 2003 and 2002 consisted of the following:
Current income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense (benefit) ,exclusive of the following . . . . . . . . . .
Change in the beginning of the year balance of
Millions of yen
2003
¥ 7,851
(5,600)
Thousands of
U.S. dollars
2002
2004
¥006,783
$127,613
(17,679)
67,311
2004
¥13,527
7,135
the valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . . . . .
(27)
136
1,548
(254)
Adjustments of deferred tax assets and liabilities
for enacted changes in tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127
¥20,762
1,549
¥ 3,936
—
1,198
¥ 1(9,348)
$195,868
The effective income tax rates of the Companies differ from the normal Japanese statutory rates as follows for the years ended
March 31:
Normal Japanese statutory rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in taxes resulting from:
2004
42.0%
2003
42.0%
2002
(42.0)%
Permanently non-deductible items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Losses of subsidiaries for which no tax benefit was provided . . . . . . . . . . . . . . . . . . . . . . . . .
Tax loss on sale of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference in subsidiaries’ tax rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in the beginning of the year balance of
the valuation allowance for deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of enacted change in tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.0
1.0
—
(0.6)
(0.1)
0.3
(0.3)
7.7
38.7
(33.0)
(14.9)
2.9
32.7
7.1
1.9
3.3
—
(1.3)
0.4
—
0.9
Effective tax rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43.3%
83.2%
(36.8)%
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 2004, 2003 and 2002.
An amendment to Japanese tax regulations was enacted into law on March 31, 2003. As a result of this amendment, the normal
income tax rate was reduced from 42.0% to 41.0% effective April 1, 2004. Deferred income tax assets and liabilities as of March 31,
2003 were measured at both tax rates considering the period the deferred tax asset or liability would be realized. The effect was an
increase in the provision for income taxes of ¥127 million ($ 1,198 thousand) and ¥1,549 million increase for the year ended March 31,
2004 and 2003,respectively.
57
The approximate effect of temporary differences and tax credit and loss carry forwards that gave rise to deferred tax balances at
March 31, 2004 and 2003 were as follows:
Millions of yen
2004
2003
Deferred tax
assets
Deferred tax
liabilities
Deferred tax
assets
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 3,215
¥ —
Accrued bonuses and vacations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination and retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enterprise taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carry forwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,432
14,942
676
2,349
—
1,683
1,249
—
32,020
10,641
4,205
6,185
82,597
(7,118)
—
—
—
—
7,721
—
47
—
—
2,578
—
—
10,346
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥75,479
¥10,346
¥03,761
4,682
12,319
150
2,547
480
2,369
2,531
—
34,431
10,827
4,124
16,226
94,447
(8,348)
¥86,099
Deferred tax
liabilities
¥00,—
—
—
—
—
—
—
99
1,050
—
1,792
—
—
2,941
—
¥2,941
Thousands of U.S. dollars
2004
Deferred tax
assets
Deferred tax
liabilities
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,330
$ —
Accrued bonuses and vacations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Termination and retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Enterprise taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intercompany profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,245
140,962
6,377
22,160
—
—
—
—
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
72,840
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating loss carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,877
11,783
302,075
100,387
39,670
58,349
779,215
(67,151)
—
443
—
24,321
—
—
97,604
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$712,064
$ 97,604
The total valuation allowance decreased by ¥1,230 million ($11,604 thousand) in 2004 and increased by ¥1,226 million and ¥1,779
million in 2003 and 2002, respectively.
As of March 31, 2004, the Company and certain subsidiaries had operating loss carry forwards approximating ¥16,063 million
($151,534 thousand) available for reduction of future taxable income, the majority of which expire in 2009.
The Company has not provided for Japanese income taxes on unremitted earnings of certain 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 rein-
58
vested and for which Japanese income taxes have not been provided were ¥47,638 million ($449,415 thousand) and ¥62,094 million
at March 31, 2004 and 2003, respectively. Dividends received from domestic subsidiaries are expected to be substantially free of tax.
12. FOREIGN OPERATIONS
Net sales and total assets of foreign subsidiaries for the years ended March 31, 2004, 2003 and 2002 were as follows:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥208,540
¥162,630
¥194,498
¥158,300
¥176,096
¥146,734
$1,967,358
$1,534,245
Millions of yen
Thousands of
U.S. dollars
2004
2003
2002
2004
13. PER SHARE DATA
The Company accounts for its net income (loss) 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 computations is as follows:
Income (loss) before cumulative effect of accounting change . . . . . . . . . . . . . .
¥26,811
Effect of dilutive securities:
Convertible bonds, due 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted income (loss) before cumulative effect of accounting change . . . . . .
327
¥27,138
2004
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥26,811
Effect of dilutive securities:
Convertible bonds, due 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
327
¥27,138
2004
Millions of yen
2003
¥511
—
¥511
Millions of yen
2003
¥511
—
¥511
Thousands of
U.S. dollars
2002
2004
¥(16,157)
$252,934
—
3,085
¥(16,157)
$256,019
Thousands of
U.S. dollars
2002
2004
¥(15,773)
$252,934
—
3,085
¥(15,773)
$256,019
Number of shares
2004
2003
2002
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
242,296,332
247,336,015
248,401,803
Dilutive effect of:
Convertible bonds, due 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,026,639
53,053
—
—
—
—
Diluted common shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
252,376,024
247,336,015
248,401,803
59
For the years ended March 31, 2003 and 2002, the assumed conversion of convertible bonds, giving effect to the incremental shares
and the adjustment to reduce interest expenses, was anti-dilutive and has, therefore, been excluded from the computation.
For the years ended March 31, 2003 and 2002, the assumed exercise of stock options, giving effect to the incremental shares, was
anti-dilutive and has been excluded from the computation.
14. SUPPLEMENTAL INFORMATION FOR CASH FLOWS
Supplemental cash flow information for the years ended March 31, 2004, 2003 and 2002 was as follows:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash investing and financing activities:
2004
¥1,217
7,508
Liabilities assumed in connection with capital expenditures . . . . . . . . . . . . . .
3,848
Fair value of minority interests acquired by the reissuance of treasury stock .
—
Millions of yen
2003
¥1,431
7,588
1,320
84
2002
¥ 1,264
17,748
1,516
—
Thousands of
U.S. dollars
2004
$11,481
70,830
36,302
—
15. OTHER COMPREHENSIVE INCOME (LOSS)
The change in each component of accumulated other comprehensive income (loss) for the years ended March 31, 2004, 2003 and
2002 was as follows:
Millions of yen
Thousands of
U.S. dollars
2004
2003
2002
2004
Foreign currency translation adjustments:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ (9,407)
(6,218)
(15,625)
Minimum pension liability adjustments:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(48,708)
Change for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,470
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(45,238)
Unrealized gains (losses) on available-for-sale securities:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net losses on derivative instruments:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accumulated other comprehensive loss:
(1,716)
11,803
10,087
(78)
295
217
¥0(7,402)
¥(13,712)
$ (88,745)
(2,005)
(9,407)
(21,224)
(27,484)
(48,708)
3,331
(5,047)
(1,716)
(68)
(10)
(78)
6,310
(7,402)
(7,251)
(13,973)
(21,224)
3,617
(286)
3,331
—
(68)
(68)
(58,660)
(147,405)
(459,509)
32,736
(426,773)
(16,189)
111,349
95,160
(736)
2,783
2,047
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(59,909)
Change for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,350
(25,363)
(34,546)
(17,346)
(8,017)
(565,179)
88,208
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(50,559)
¥(59,909)
¥(25,363)
$(476,971)
60
Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments for the years ended
March 31, 2004, 2003 and 2002 were as follows:
2004
Tax
(expense)
benefit
Before-tax
amount
Net-of-tax
amount
Before-tax
amount
Millions of yen
2003
Tax
(expense)
benefit
Net-of-tax
amount
Before-tax
amount
2002
Tax
(expense)
benefit
Net-of-tax
amount
Foreign currency translation adjustments:
Foreign currency translation adjustments
arising during the year . . . . . . . . . . . . . . . . .
¥ (6,875)
¥ 195
¥(6,680)
¥ (2,227)
¥(000,—
¥0(2,227)
¥0(6,310
¥0000,—
¥ (6,310
Reclassification adjustment for the portion
realized in net income (loss) . . . . . . . . . . . . .
462
—
462
222
—
222
—
—
—
Net change in foreign currency translation
adjustments during the year . . . . . . . . . . . .
(6,413)
195
(6,218)
(2,005)
—
(2,005)
6,310
—
6,310
Minimum pension liability adjustments . . . . .
5,880
(2,410)
3,470
(47,387)
19,903
(27,484)
(24,091)
10,118
(13,973)
Unrealized gains (losses) on
available-for-sale securities:
Unrealized holding gains (losses)
arising during the year . . . . . . . . . . . . . . . .
20,196
(8,280)
11,916
(11,036)
4,636
(6,400)
(13,052)
5,482
(7,570)
Reclassification adjustment for losses on
impairment realized in net income (loss) . . .
847
(347)
500
1,194
(502)
692
13,845
(5,815)
8,030
Reclassification adjustment for net losses
(gains) on sales realized
in net income (loss) . . . . . . . . . . . . . . . . . . .
(1,038)
425
(613)
1,140
(479)
661
(1,287)
Net unrealized gains (losses). . . . . . . . . . . . . .
20,005
(8,202)
11,803
(8,702)
3,655
(5,047)
(494)
541
208
(746)
(286)
Net gains (losses) on derivative instruments:
Net gains (losses) on derivative instruments
designated as cash flow hedges
during the year . . . . . . . . . . . . . . . . . . . . . .
1,095
(456)
639
(1,358)
570
(788)
(2,884)
1,211
(1,673)
Reclassification adjustment for net losses
(gains) realized in net income (loss) . . . . . . .
Net gains (losses) on derivative instruments . .
(592)
503
248
(208)
(344)
295
1,340
(18)
(562)
8
778
(10)
2,767
(1,162)
1,605
(117)
49
(68)
Other comprehensive income (loss) . . . . . . . .
¥19,975
¥(10,625)
¥ 9,350
¥(58,112)
¥23,566
¥(34,546)
¥(18,392)
¥10,375
¥ (8,017)
61
Thousands of U.S. dollars
Before-tax
amount
2004
Tax
(expense)
benefit
Net-of-tax
amount
Foreign currency translation adjustments:
Foreign currency translation adjustments
arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(64,858)
$ 1,840
$(63,018)
Reclassification adjustment for the portion
realized in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,358
—
4,358
Net change in foreign currency translation
adjustments during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(60,500)
55,472
1,840
(22,736)
(58,660)
32,736
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
190,528
(78,113)
112,415
Reclassification adjustment for losses on
impairment realized in net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,991
(3,274)
4,717
Reclassification adjustment for net losses (gains)
on sales realized in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9,792)
4,009
(5,783)
Net unrealized gains (losses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
188,727
(77,378)
111,349
Net gains (losses) on derivative instruments:
Net gains (losses) on derivative instruments
designated as cash flow hedges during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,330
(4,302)
6,028
Reclassification adjustment for net losses (gains)
realized in net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gains (losses) on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,585)
4,745
2,340
(1,962)
(3,245)
2,783
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$188,444
$(100,236)
$ 88,208
16. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial Instruments
The following table presents the carrying amounts and estimated fair values as of March 31, 2004 and 2003, of the Companies’ finan-
cial instruments.
Millions of yen
2004
2003
Carrying
amount
Fair value
Carrying
amount
Fair value
Nonderivatives:
Long-term debt, including current portion . . . . . . . . . . . . . . . . . . . . . . . . . .
¥(41,243)
¥(42,707)
¥(52,312)
¥(53,669)
Derivatives:
Included in Other current assets (liabilities):
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
613
613
(198)
(198)
62
Thousands of U.S. dollars
2004
Carrying
amount
Fair value
Nonderivatives:
Long-term debt, including current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(389,084)
$(402,896)
Derivatives:
Included in Other current assets:
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,783
5,783
The following methods and assumptions were used to estimate the fair values of each class of financial instruments 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 similar instruments. Certain equity securities included in investments have no readily deter-
minable public market value, and it is not practicable to estimate their fair values.
(3) Long-term debt:
For convertible bonds, the fair values are estimated based on quoted market prices. For other debt, 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 con-
tracts 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 at March 31, 2004 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 gains of ¥639 mil-
lion ($6,028 thousand ) and losses of ¥788 million for the years ended March 31, 2004 and 2003, respectively. The amounts, which
were reclassified out of accumulated other comprehensive income (loss) into Foreign exchange loss, net depending on their nature, net
of the related tax effect, are net gains of ¥344 million ($3,245 thousand ) and net losses of ¥778 million for the years ended March 31,
2004 and 2003, respectively. The amount of the hedging ineffectiveness is not material for the years ended March 31, 2004 and 2003.
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.
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
63
be minimal since the counterparties are major financial institutions.
The notional amounts of contracts to exchange foreign currency (forward contracts) outstanding at March 31, 2004 and 2003 were
as follows:
Millions of yen
Thousands of
U.S. dollars
2004
2003
2004
Forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥35,597
¥24,326
$335,821
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 currency exchange rates in effect on the balance sheet date. The effects of changes in currency
exchange 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 market rates
with the resulting gains and losses reported in the consolidated statements of operations.
17. RELATED PARTY TRANSACTION
The Company has an operating lease agreement for its head office, including land and a building, with a company owned by the family
of the Company’s founder, which includes the Company’s chairman and representative director, a director, and certain managing offi-
cers. This lease agreement has an initial non-cancelable lease term to 2020 and requires a monthly rental payment of ¥106 million
($1,000 thousand) and a security deposit of 2,600 million ($24,528 thousand) which is refundable when the agreement expires. During
the years ended March 31, 2004, 2003 and 2002, the Company paid ¥1,272 million ($12,000 thousand), in rental expense and the
security deposit at March 31, 2004 and 2003 was ¥2,600 million ($ 24,528 thousand).
18. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has commitments at March 31, 2004 of approximately ¥18,549 million ($174,991 thousand) related to contracts for out-
sourcing computer services through 2008. The contracts require an annual service fee of ¥4,764 million ($44,943 thousand) for the
year ending March 31, 2005. The annual service fee will gradually decrease each year during the contract term to ¥ 4,518 million
($42,623 thousand) for 2008. The contract is cancelable at any time subject to a penalty of 15% of aggregate service fees payable for
the remaining term of the contract.
The Company and certain of its subsidiaries are defendants in several pending lawsuits. However, based upon the information cur-
rently available to both the Company and its legal counsel, management of the Company believes that damages from such lawsuits, if
any, would not have a material effect on the consolidated financial statements.
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 institu-
tions. Concentrations of credit risk with respect to trade receivables, as approximately 75% of total sales are concentrated in Japan,
are limited due to the large number of well-established customers and their dispersion across many industries. The Company normally
requires customers to deposit funds to serve as security for ongoing credit sales.
64
Guarantees
The Company provides guarantees to third parties of bank loans of associates and other companies. The guarantees for the associates
and other companies are made to ensure that those companies operate with less finance costs. The maximum payments in the event
of default is ¥1,527 million ($14,406 thousand) at March 31, 2004. The carrying amounts of the liabilities recognized under those guar-
antees at March 31, 2004 were immaterial.
Bank loans of ¥889 million ($8,387 thousand) of an unaffiliated company were jointly and severally guaranteed by the Company and
six other unaffiliated companies. According to an agreement between the seven companies, any loss on these guarantees are to be
borne equally among the companies.
Product Warranties
The Companies issue contractual product warranties under which they generally guarantee the performance of products delivered and
services rendered for a certain period or term. Changes in accrued product warranty cost for the year ended March 31, 2004 and 2003
are summarized as follows:
Balance at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Millions of yen
2004
¥ 2,752
4,188
(3,787)
¥ 3,153
2003
¥ 1,890
3,493
(2,631)
¥ 2,752
Thousands of
U.S. dollars
2004
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,962
Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39,509
Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(35,726)
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,745
19. SUBSEQUENT EVENTS
On May 6, 2004, management of the Company resolved to propose the following for approval of the shareholders at the meeting to be
held on June 24, 2004.
(1) A plan to repurchase the Company’s outstanding shares at the Company’s discretion with a maximum limit of ¥5,000 million
($47,170 thousand), or 2,000,000 shares, for the period up to the date of the June 2005 general meeting of shareholders.
(2) Amendment of the Company’s articles of incorporation enabling the repurchase of the Company’s outstanding shares upon
resolution by the Board of Directors.
On May 11, 2004, the Company entered into a joint venture agreement with Hitachi, Ltd. In connection with the joint venture agree-
ment, a corporate separation agreement was approved by the Board of directors, allowing for the transfer of Automated Teller
Machines and other information equipment businesses to the joint venture. The agreement is subject to approval of the shareholders at
the meeting to be held on June 24, 2004. The new company, if approved, will start operations on October 1, 2004, and will be called
Hitachi-Omron Terminal Solutions Corp. ("HOTS"). HOTS will strive for a globally competitive position in the information equipment mar-
ket. The Company will be given a 45% interest in exchange for transferring certain assets and liabilities. The assets and liabilities to be
transferred recorded on the Company’s book of account at March 31,2004 were ¥27,203 million ($256,632 thousand) and ¥3,058 mil-
lion ($28,849 thousand), respectively.
65
Deloitte Touche Tohmatsu
Osaka Kokusai Building
2-3-13, Azuchi–machi
Chuo–ku, Osaka 541-0052
Japan
Tel: +81 (6) 6261 1381
Fax: +81 (6) 6261 1238
www.deloitte.com/jp
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, 2004 and 2003, 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, 2004, all expressed in Japanese yen.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opin-
ion 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 disclosures 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 preceding paragraph, the consolidated
financial statements referred to above present fairly, in all material respects, the financial position of OMRON Corporation
and subsidiaries as of March 31, 2004 and 2003, and the results of their operations and their cash flows for each of the
three years in the period ended March 31, 2004 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
opinion, such translation has been made in conformity with the basis stated in Note 2 to the consolidated financial state-
ments. Such United States dollar amounts are presented solely for the convenience of readers outside Japan.
June 4, 2004
66
GLOBAL NETWORK
EUROPE
Regional Headquarters
OMRON Europe B.V. (The Netherlands)
Phone: 31-23-5681300 Fax: 31-23-5681388
Industrial Automation Business
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: 420-2-3460-2602 Fax: 420-2-3460-2607
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
OMRON Electronics O.Y. (Finland)
Phone: 358-9-5495-800 Fax: 358-9-5495-8150
THE AMERICAS
OMRON Electronics KFT (Hungary)
Phone: 36-1-399-3050 Fax: 36-1-399-3060
OMRON Electronics SpA. (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 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: 90-216-474-0040 Fax: 90-216-474-0047
OMRON Electronics Ltd. (U.K.)
Phone: 44-19-0825-8258 Fax: 44-19-0825-8158
OMRON Electronics Manufacturing of Germany
G.m.b.H. (Germany)
Phone: 49-7032-811-0 Fax: 49-7032-811-199
OMRON Manufacturing of The Netherlands B.V.
(The Netherlands)
Phone: 31-73-6481811 Fax: 31-73-6420195
OMRON Yasukawa Motion Control B.V.
(The Netherlands)
Phone: 31-23-5681400 Fax: 31-23-5681388
Electronic Components Business
OMRON Electronic Components Europe B.V.
(The Netherlands)
Phone: 31-23-5681300 Fax: 31-23-5681212
Automotive Electronic Components Business
OMRON Automotive Electronics UK Ltd. (U.K.)
Phone: 44-1384-405500 Fax: 44-1384-405508
IMS Vision G.m.b.H. (Germany)
Phone: 49-711-686876-0 Fax: 49-711-686876-70
Healthcare Business
OMRON Medizintechnik Handelsgesellschaft G.m.b.H.
(Germany)
Phone: 49-621-83348-20 Fax: 49-621-834-820
OMRON Healthcare Europe B.V. (The Netherlands)
Phone: 31-20-354-8200 Fax: 31-20-354-8201
OMRON Healthcare UK Ltd. (U.K.)
Phone: 44-1-273-497912 Fax: 44-1-273-495123
Regional Headquarters
OMRON Management Center of America, Inc. (U.S.A.)
Phone: 1-847-884-0322 Fax: 1-847-884-1866
Electronic Components Business
OMRON Electronic Components LLC. (U.S.A.)
Phone: 1-847-882-2288 Fax: 1-847-992-2192
OMRON Business Systemas Eletro˜ icos
da America Latina Ltda. (Brazil)
Phone: 55-11-251-0073 Fax: 55-11-251-1053
Industrial Automation Business
OMRON Electronics LLC. (U.S.A.)
Phone: 1-847-843-7900 Fax: 1-847-843-7787
Automotive Electronic Components Business
OMRON Automotive Electronics, Inc. (U.S.A.)
Phone: 1-630-443-6800 Fax: 1-630-443-6898
Healthcare Business
OMRON Healthcare, Inc. (U.S.A.)
Phone: 1-847-680-6200 Fax: 1-847-680-6269
OMRON Manufacturing of America, Inc. (U.S.A.)
Phone: 1-630-513-0400 Fax: 1-630-513-1027
OMRON Dualtec Automotive Electronics Inc. (Canada)
Phone: 1-905-829-0136 Fax: 1-905-829-0432
OMRON Canada Inc. (Canada)
Phone: 1-416-286-6465 Fax: 1-416-286-6648
OMRON Electronica Automotiva Do Brasil LTDA (Brazil)
Phone: 55-11-5563-4465 Fax: 55-11-5564-7751
OMRON IDM Controls, Inc. (U.S.A.)
Phone: 1-713-849-1900 Fax: 1-713-849-4666
OMRON Eletro˜ ica do Brasil Ltda. (Brazil)
Phone: 55-11-5564-6488 Fax: 55-11-5564-7751
Social Systems Business (Advanced Modules)
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
Other
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
ASIA–PACIFIC
Regional Headquarters
OMRON Asia Pacific Pte. Ltd. (Singapore)
Phone: 65-6835-3011 Fax: 65-6835-2711
Industrial Automation Business
OMRON Electronics Pte. Ltd. (Singapore)
Phone: 65-6547-6789 Fax: 65-6547-6766
OMRON Electronics Sdn. Bhd. (Malaysia)
Phone: 603-7628-8388 Fax: 603-7628-8333
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
P.T. OMRON Electronics (Indonesia)
Phone: 62-21-8370-9555 Fax: 62-21-8370-9550
Electronic Components Business
OMRON Malaysia Sdn. Bhd. (Malaysia)
Phone: 603-7620-0036 Fax: 603-7620-0049
P.T. OMRON Manufacturing of Indonesia
(Indonesia)
Phone: 62-21-897-5108 Fax: 62-21-897-5160
OMRON Electronic Components Pte. Ltd.
(Singapore)
Phone: 65-6848-8800 Fax: 65-6848-8811
OMRON Electronic Components Co., Ltd. (Thailand)
Phone: 66-2-619-0292 Fax: 66-2-619-0624
Automotive Electronic Components Business
OMRON Automotive Electronics Korea, Co., Ltd.
(Korea)
Phone: 82-2-850-5700 Fax: 82-2-859-1687
67
OMRON Automotive Electronics Co., Ltd. (Thailand)
Phone: 66-35-227-169 Fax: 66-35-227-167
Social Systems Business (Advanced Modules)
OMRON Mechatronics of The Philippines Corp.
(Philippines)
Phone: 63-47-252-5236 Fax: 63-47-252-1491
OMRON Technical Service Malaysia Sdn. Bhd.
(Malaysia)
Phone: 603-7954-3119 Fax: 603-7954-1559
Healthcare Business
OMRON Healthcare Singapore Pte. Ltd. (Singapore)
Phone: 65-6736-2345 Fax: 65-6736-2500
CHINESE ECONOMIC AREA
Regional Headquarters
OMRON China Headquarters (China)
Phone: 86-21-6841-2588 Fax: 86-21-6841-2788
OMRON (China) Group Co.,Ltd. (Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
OMRON Corporation Beijing Office (China)
Phone: 86-10-6515-5788 Fax: 86-10-6515-5799
OMRON China Centtalised Procurement Center
(China)
Phone: 86-755-8348-1108 Fax: 86-755-8348-0578
Industrial Automation Business
OMRON (China) Co., Ltd. (China)
Phone: 86-10-8391-3005 Fax: 86-10-8391-3688
OMRON (China) Co., Ltd., Shanghai Office (China)
Tel:86-21-5037-2222 Fax:86-21-5037-2200
OMRON Electronics (Guangzhou) Ltd. (China)
Tel:86-20-8732-0508 Fax:86-20-8732-1750
OMRON Electronics (Hong Kong) Ltd. (Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
OMRON Taiwan Electronics Inc. (Taiwan)
Phone: 886-2-2715-3331 Fax: 886-2-2712-6712
OMRON Taiwan System Inc. (Taiwan)
Phone: 886-2-2375-2200 Fax: 886-2-2375-2233
JAPAN
Manufacturing
Mishima Systems Factory
Phone: 81-55-977-9000 Fax: 81-55-977-9080
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: 81-6-6347-5800 Fax: 81-6-6347-5900
Fukuoka Office
Phone: 81-92-414-3200 Fax: 81-92-414-3201
Research and Development
Keihanna Technology Innovation Center
Phone: 81-774-74-2000 Fax: 81-774-74-2001
Industrial Automation Business
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
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
OTE Engineering Inc. (Taiwan)
Phone: 886-3-352-4442 Fax: 886-3-352-4239
OMRON Trading (Shanghai) Co., Ltd. (China)
Phone: 86-21-5046-0660 Fax: 86-21-5046-0998
OMRON Trading (Tianjin) Co., Ltd. (China)
Phone: 86-22-2420-7209 Fax: 86-22-2420-7217
OMRON Trading (Shenzhen) Co., Ltd. (China)
Phone: 86-755-8359-9028 Fax: 86-755-8359-9628
Shanghai OMRON Automation System Co., Ltd.
(China)
Phone: 86-21-5050-4535 Fax: 86-21-5854-2658
OMRON (Shanghai) Co., Ltd.
Phone: 86-21-5854-0055 Fax: 86-21-5854-0614
OMRON (Shanghai) Control System Engineering
Co., Ltd. (China)
Phone: 86-21-5131-9030 Fax: 86-21-5131-9040
Electronic Components Business
OMRON Electronic Components (H.K.) Ltd.
(Hong Kong)
Phone: 852-2375-3827 Fax: 852-2375-1475
Shanghai OMRON Control Components Co., Ltd.
(China)
Phone: 86-21-5854-0012 Fax: 86-21-5854-8413
OMRON Electronic Components (Shenzhen) Ltd.
(China)
Phone: 86-755-8462-0000 Fax: 86-755-8462-1111
Social Systems Business
OMRON Corporation Beijing Office, Social Systems
Business (China)
Phone:86-10-6515-5783 Fax:86-10-6515-5797
Healthcare Business
OMRON(China) Co., Ltd. Shanghai Branch
(Healthcare Business) (China)
Phone:86-21-6351-9588 Fax:86-21-6351-6300
OMRON Industry & Trade (Dalian) Co., Ltd. (China)
Phone: 86-411-8731-7201 Fax: 86-411-8731-7191
OMRON Dalian Co., Ltd. (China)
Phone: 86-411-8761-4222 Fax: 86-411-8762-8494
OMRON(Dalian) Co., Ltd. Research & Development
Center (China)
Phone:86-411-8476-8080 Fax:86-411-8476-7299
OMRON Technocult Co., Ltd.
Phone: 81-45-321-0471 Fax: 81-45-321-0473
OMRON Software Hokkaido Co., Ltd.
Phone: 81-11-898-6711 Fax: 81-11-898-6710
OMRON Two Four Service Co., Ltd.
Phone: 81-3-5825-2320 Fax: 81-3-5825-2330
FA Techno Corporation
Phone: 81-3-5297-5223 Fax: 81-3-5297-5224
Electronic Components Business
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 Relay & Devices Corporation
Phone: 81-968-44-4101 Fax: 81-968-44-4161
Social Systems Business (Advanced Modules)
OMRON Nohgata Co., Ltd.
Phone: 81-949-22-2811 Fax: 81-949-28-3046
Healthcare Business
OMRON Healthcare, Co., Ltd.
Phone: 81-75-322-9300 Fax: 81-75-322-9301
OMRON Matsusaka Co., Ltd.
Phone: 81-598-29-2715 Fax: 81-598-29-1207
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
OMRON Taiyo Co., Ltd.
Phone: 81-977-66-4447 Fax: 81-977-67-5112
OMRON Marketing Co., Ltd.
Phone: 81-75-344-7048 Fax: 81-75-344-7059
OMRON Logistic Create Co., Ltd.
Phone: 81-6-6347-5891 Fax: 81-6-6347-5991
OMRON Credit Service Co., Ltd.
Phone: 81-75-241-2475 Fax: 81-75-256-6532
Human Renaissance Institute Co., Ltd.
Phone: 81-3-3438-0920 Fax: 81-3-3438-0921
Sanno Consulting Corp.
Phone: 81-3-5350-9291 Fax: 81-3-5350-9283
OMRON Personnel Service Co., Ltd.
Phone: 81-75-344-0901 Fax: 81-75-344-0902
OMRON Business Associates Co., Ltd.
Phone: 81-75-344-7359 Fax: 81-75-344-7265
OMRON Entertainment Co., Ltd.
Phone: 81-3-5728-1761 Fax: 81-3-5489-9310
Automotive Electronic Components Business
OMRON Iida Co., Ltd.
Phone: 81-265-26-6000 Fax: 81-265-26-6030
Social Systems Business
OMRON Field Engineering Co., Ltd.
Phone: 81-3-3448-8111 Fax: 81-3-3442-2269
OMRON Software Co., Ltd.
Phone: 81-75-352-7400 Fax: 81-75-352-7210
NishiNihon Field Engineering Co., Ltd.
Phone: 81-6-6348-1270 Fax: 81-6-6349-1923
OMRON Field Engineering Kyushu Co., Ltd.
Phone: 81-92-451-6748 Fax: 81-92-472-5136
OMRON Field Engineering Hokkaido Co., Ltd.
Phone: 81-11-281-5121 Fax: 81-11-281-0917
OMRON T.A.S. Co., Ltd.
Phone: 81-3-5420-6611 Fax: 81-3-5420-6615
OMRON Software Kyushu Co., Ltd.
Phone: 81-96-352-8671 Fax: 81-96-352-8677
68
CORPORATE AND STOCK INFORMATION
(As of March 31, 2004)
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
16F Dojima AVANZA, 1-6-20 Dojima,
Kita-ku, Osaka 530-0003, Japan
Phone: 81-6-6347-5800
Fax: 81-6-6347-5900
Keihanna Technology Innovation Center
9-1, Kizugawadai, Kizu-cho, Soraku-gun,
Kyoto 619-0283, Japan
Phone: 81-774-74-2000
Fax: 81-774-74-2001
Date of Establishment
May 10, 1933
Number of Employees
24,324
Paid-in Capital
¥64,082 million
Common Stock
Authorized: 487,000,000 shares
Issued: 249,109,236 shares
Number of shareholders: 27,020
Stock Listings
Osaka Securities Exchange
Tokyo Stock Exchange
Nagoya Stock Exchange
Frankfurt Stock Exchange
Ticker Symbol Number
6645
Common Stock Price Range/ Trading Volume (Osaka Securities Exchange)
Transfer Agent
The Mitsubishi Trust and Banking
Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan
Depositary and Transfer Agent for
American Depositary Receipts
JPMorgan Chase Bank
270 Park Avenue, New York, NY
10017-2070, U. S. A.
ADR Holder Contact:
JPMorgan Service Center
P. O. Box 43013
Providence, RI 02940-3013
Phone : 781-575-5328
Fax : 781-575-4082
General E-mail: adr@jpmorgan.com
Homepage
http://www.omron.co.jp (Japanese)
http://www.omron.com (English)
(Yen)
4,000
3,000
2,000
1,000
0
(Shares)
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
1Q
2Q
3Q 4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
1Q
2Q
3Q 4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
Price range of
common tock
[left axis]
Adjusted average
for Nikkei 225 stocks
[right axis]
(Yen)
40,000
30,000
20,000
10,000
0
Trading volume
Yearly High and Low Prices
Yen
FY1994
FY1995
FY1996
FY1997
FY1998
FY1999
FY2000
FY2001
FY2002
FY2003
High . . . . . . . . . . . .
¥ 1,910
¥ 2,710
¥ 2,400
¥ 2,900
¥ 2,230
¥ 3,450
¥ 3,200
¥ 2,560
¥ 2,080
Low . . . . . . . . . . . .
1,450
1,500
1,690
1,760
1,059
1,500
1,702
1,390
1,341
¥ 2,740
1,685
69
Printed in Japan
O
M
R
O
N
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o
r
p
o
r
a
t
i
o
n
A
n
n
u
a
l
R
e
p
o
r
t
2
0
0
4
Annual Report 2004
Year ended March 31, 2004
100% Recycled-content level
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)