Omron Corporation Annual Report 2016

Plain-text annual report

Integrated Report 2016 Year ended March 31, 2016 The Omron Value Creation Story Omron is guided by the Omron Principles. We reﬂect these principles in how we create numerous products and services that anticipate the needs of society, solving a variety of social issues. Omron will continue to improve lives and contribute to a better society through our businesses, generating sustainable corporate value. Automated Train Station System ▶ Reducing congestion at stations Blood Pressure Monitors ▶ Better health through blood pressure monitoring at home Sensing and Control Equipment ▶ Improved manufacturing productivity and quality Electronic Power Steering Controllers ▶ Improved gas mileage Image Sensing ▶ Secure, safe living Safety Equipment ▶ Production floor safety PV Inverters ▶ Renewable energy 1933 Established 1948 Incorporated FY 1960 1970 1980 1973　Developed Digital Blood Pressure Monitor 1972 Developed “SYSMAC” Programmable Sequence Controller 1970　Announced the SINIC Theory 1967　Developed World’s First Automated Train Station System 1964　Developed World’s First Automated Traffic Signal 1960　Developed World’s First Non-Contact Switch 1959　Established Corporate Motto 1990 1988 Mass Produced Electronic Power Steering Controller 1987　 Developed World’s First Ultra-High-Speed Fuzzy Logic Controller G'90s 2000 2010 2020 GD2010 VG2020 1996　Developed “VT-WIN” Printed Circuit 　　　 Board Inspection System 1995　Developed “OKAO® Vision” Image Sensing Technology 1990　Changed Corporate Name to Omron Corporation 2015　Revised Omron Principles 2011　Introduced “Sysmac NJ” Integrated Machine Automation Controller 2011　Introduced PV Inverters with “AICOT®” Technology Long-Term Management Strategy 2007　Wide-Scale Rollout of Production Floor Safety Business 1983　Introduced Digital Thermometer s e u s s i a l I S o l v i n g S o c Technology Supporting Technology Supporting Healthy Living Healthy Living Technology Contributing Technology Contributing to the Prevention of to the Prevention of Global Warming Global Warming Technology Revolutionizing Technology Revolutionizing Manufacturing Manufacturing Technology Assuring Safety Technology Assuring Safety Target Net sales ¥1 trillion ¥500 billion Omron Principles Automated Train Station System ▶ Reducing congestion at stations Blood Pressure Monitors ▶ Better health through blood pressure monitoring at home Sensing and Control Equipment ▶ Improved manufacturing productivity and quality Safety Equipment ▶ Production floor safety PV Inverters ▶ Renewable energy Electronic Power Steering Controllers ▶ Improved gas mileage Image Sensing ▶ Secure, safe living 1933 Established 1948 Incorporated FY 1960 1970 1980 1973　Developed Digital Blood Pressure Monitor 1972 Developed “SYSMAC” Programmable Sequence Controller 1970　Announced the SINIC Theory 1967　Developed World’s First Automated Train Station System 1964　Developed World’s First Automated Traffic Signal 1990 1988 Mass Produced Electronic Power Steering Controller 1987　 Developed World’s First Ultra-High-Speed Fuzzy Logic Controller 1960　Developed World’s First Non-Contact Switch 1959　Established Corporate Motto 1983　Introduced Digital Thermometer S o l v i n g S o c s e u s s i a l I Technology Contributing Technology Contributing to the Prevention of to the Prevention of Global Warming Global Warming Technology Supporting Technology Supporting Healthy Living Healthy Living Technology Revolutionizing Technology Revolutionizing Manufacturing Manufacturing Technology Assuring Safety Technology Assuring Safety Target G'90s 2000 GD2010 2010 VG2020 2020 Net sales ¥1 trillion ¥500 billion Long-Term Management Strategy 1996　Developed “VT-WIN” Printed Circuit 　　　 Board Inspection System 1995　Developed “OKAO® Vision” Image Sensing Technology 1990　Changed Corporate Name to Omron Corporation 2015　Revised Omron Principles 2011　Introduced “Sysmac NJ” Integrated Machine Automation Controller 2011　Introduced PV Inverters with “AICOT®” Technology 2007　Wide-Scale Rollout of Production Floor Safety Business Integrated Report 2016 1 Contents 1 The Omron Value Creation Story 4 Message from the CEO 11 Material Management Issues and Major Initiatives 12 Message from the CFO About the Cover We are all charged with the task of ensuring the sustainability of our precious planet. Our cover concept this year imagines the Earth as a complex puzzle. Each puzzle piece is a solution to a social need. Team Omron is committed to innovation driven by social needs and to meeting all challenges with passion and courage. About Omron Where We’re Headed Corporate Value Initiatives Corporate Value Foundation 16 Board of Directors and Auditors 18 Making the World Smaller through Sensing and Control + Think Technologies 20 Business Model 22 Omron Products (Market Share and Sales by Product) 26 The Year in Review 28 Financial Highlights 30 Non-Financial Highlights 32 11-Year Financial and Non-Financial Highlights 34 Special Feature: 1 Evolution of Our Technology CTO Message 42 Factory Tour 56 Management Compass: The SINIC Theory Healthcare Business Matsusaka Factory 58 Sustainability Management 44 At a Glance 46 Industrial Automation Business (IAB) 48 Electronic and Mechanical Components 60 　　　 TOPICS 　　Integrated Risk Management 37 Intellectual Property Strategy Business (EMC) 38 Special Feature: 2 Manufacturing Capability Editorial Policy The scope of this report covers the 185 companies of the Omron Group, consisting of 168 consolidated subsidiaries and 17 nonconsolidated subsidiaries and affiliates accounted for under the equity method (as of March 31, 2016). Omron Corporation contributes to the creation of a sustainable society by offering solutions Caution Concerning Forward-Looking Statements Statements in this integrated report with respect to Omron’s plans and strategies 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 to social issues through our business and by engaging in responsible environmental, social, conditions in Omron’s markets, which are primarily Japan, the Americas, Europe, and governance (ESG) initiatives. Greater China, and Asia Pacific; demand for and competitive pricing pressure on 　We voluntarily disclose the details of our business and ESG activities to our stakeholders. Omron’s products and services in the marketplace; Omron’s ability to continue to win This integrated report conforms to the integrated reporting frameworks recommended by acceptance for its products and services in these highly competitive markets; and the International Integrated Reporting Council and the World Intellectual Capital Initiative. ESG-related disclosures have been written with reference to the G4 Sustainability Reporting Guidelines (core). See our CSR website for a comparative table. http://www.omron.com/about/sustainability/guide_line/ movements of currency exchange rates. 2 49 Automotive Electronic Components Business (AEC) 50 Social Systems, Solutions and Service Business (SSB) 51 Healthcare Business (HCB) 52 Other Businesses Environmental Solutions Business, Backlights Business, Electronic Systems & Equipment Business, and Micro Devices Business 53 Sustainability Topics 64 Human Resources Management 68 TOPICS Driving Business Growth with Information Technology 70 Corporate Governance 76 Cultivating Strong Relationships through Responsible Engagement 78 Directors, Audit & Supervisory Board Members, Honorary Chairman, and Executive Officers Financial Section 82 Financial Section (U.S. GAAP) Corporate Information/ Other Information OMRON Corporation 1 The Omron Value Creation Story 4 Message from the CEO 11 Material Management Issues and Major Initiatives 12 Message from the CFO About the Cover We are all charged with the task of ensuring the sustainability of our precious planet. Our cover concept this year imagines the Earth as a complex puzzle. Each puzzle piece is a solution to a social need. Team Omron is committed to innovation driven by social needs and to meeting all challenges with passion and courage. About Omron Where We’re Headed Corporate Value Initiatives Corporate Value Foundation 16 Board of Directors and Auditors 34 Special Feature: 1 18 Making the World Smaller through Sensing and Control + Think Technologies 20 Business Model 22 Omron Products Evolution of Our Technology CTO Message (Market Share and Sales by Product) 37 Intellectual Property Strategy 26 The Year in Review 28 Financial Highlights 30 Non-Financial Highlights 32 11-Year Financial and Non-Financial Highlights 38 Special Feature: 2 Manufacturing Capability Editorial Policy Caution Concerning Forward-Looking Statements The scope of this report covers the 185 companies of the Omron Group, consisting of 168 Statements in this integrated report with respect to Omron’s plans and strategies as consolidated subsidiaries and 17 nonconsolidated subsidiaries and affiliates accounted for well as other statements that are not historical facts, are forward-looking statements under the equity method (as of March 31, 2016). involving risks and uncertainties. Important factors that could cause actual results to Omron Corporation contributes to the creation of a sustainable society by offering solutions differ materially from such statements include, but are not limited to, general economic to social issues through our business and by engaging in responsible environmental, social, conditions in Omron’s markets, which are primarily Japan, the Americas, Europe, and governance (ESG) initiatives. Greater China, and Asia Pacific; demand for and competitive pricing pressure on 　We voluntarily disclose the details of our business and ESG activities to our stakeholders. Omron’s products and services in the marketplace; Omron’s ability to continue to win This integrated report conforms to the integrated reporting frameworks recommended by acceptance for its products and services in these highly competitive markets; and the International Integrated Reporting Council and the World Intellectual Capital Initiative. movements of currency exchange rates. ESG-related disclosures have been written with reference to the G4 Sustainability Reporting Guidelines (core). See our CSR website for a comparative table. http://www.omron.com/about/sustainability/guide_line/ 42 Factory Tour Healthcare Business Matsusaka Factory 56 Management Compass: The SINIC Theory 58 Sustainability Management 44 At a Glance 46 Industrial Automation Business (IAB) 48 Electronic and Mechanical Components Business (EMC) 49 Automotive Electronic Components Business (AEC) 50 Social Systems, Solutions and Service Business (SSB) 51 Healthcare Business (HCB) 52 Other Businesses Environmental Solutions Business, Backlights Business, Electronic Systems & Equipment Business, and Micro Devices Business 53 Sustainability Topics TOPICS 60 　　　　　Integrated Risk Management 64 Human Resources Management TOPICS 68 Driving Business Growth with Information Technology 70 Corporate Governance 76 Cultivating Strong Relationships through Responsible Engagement 78 Directors, Audit & Supervisory Board Members, Honorary Chairman, and Executive Officers Financial Section 82 Financial Section (U.S. GAAP) Corporate Information/ Other Information 3 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Message from the CEO 4 OMRON Corporation Achieving growth through a stronger earnings structure. Solving social issues through new technologies and innovative concepts. Yoshihito Yamada President and CEO July 2016 Integrated Report 2016 5 Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section1. Fiscal 2015 Review and Issues For fiscal 2015, Omron Corporation recorded net sales of ¥833. 6 billion, operating income of ¥62. 3 billion, net income of ¥47. 3 billion, and operating income margin of 7.5%. This marked the first time in seven years that Omron Corporation reported year-over-year declines in revenues and profit, owing mainly to a slowing Chinese economy, a drop in oil prices, and other factors beyond what we anticipated. We saw a particularly sharp decrease in revenues for our Backlights Business and our PV Inverter Business, overseen by our Other Businesses segment. Declines in these and other businesses particularly sensitive to ■ Fiscal 2014 / 2015 Earnings and Fiscal 2016 Plans Net Sales Gross Proﬁt (Gross Proﬁt Margin) Operating Income (Operating Income Margin) Net Income Attributable to Shareholders USD Rate (¥) EUR Rate (¥) ■ Management Indicators Gross Proﬁt Margin Operating Income Margin ROIC ROE EPS (¥) ■ Dividends Payout Ratio (Dividends per Share (¥)) 6 FY2014 847.3 332.6 (39.3%) 86.6 (10.2%) 62.2 110.0 138.7 FY2014 39.3％ 10.2％ 13.4％ 13.5％ 283.9 FY2014 25.0％（71.0） changes in the external environment had an overall negative impact on corporate earnings. During the second half of the year, we reviewed our fixed costs and investments, while also taking other actions to improve our earnings structure for these business lines. We are aware that we could not anticipate the changes in the external environment on time. 　Meanwhile, we made two acquisitions in our Industrial Automation Business (IAB), securing advanced robotics and motion control technologies. We believe these acquisitions will provide an even stronger foundation for growth in our IAB. FY2015 833.6 320.8 (38.5%) 62.3 (7.5%) 47.3 120.2 132.2 FY2015 38.5％ 7.5％ 9.7％ 10.1％ 219.0 FY2015 31.1％（68.0） (Billions of yen) FY2016 plan 820.0 322.0 (39.3%) 63.0 (7.7%) 47.5 110.0 125.0 FY2016 plan 39.3％ 7.7％ 10％ 10％ 222.2 FY2016 plan 30.6％（68.0） OMRON Corporation2. Fiscal 2016 Policies and Plans Given the projected slowdown in the Chinese economy, Britain’s exit from the EU, and a strong Japanese yen, the global economy for fiscal 2016 does not inspire an overly optimistic outlook. We have set fiscal 2016 goals of ¥820 billion in net sales, ¥63 billion in operating income, and ¥47.5 billion in net income (assuming exchange rates of ¥110 to the U.S. dollar and ¥125 to the Euro). For fiscal 2015, our dividend payout ratio rose to 30%. We intend to maintain this level for fiscal 2016 as well. 　Our corporate focus for fiscal 2016 is to rebuild our earnings structure and create an engine for self-driven growth. Learning from the lessons of last year, we will keep a close watch on the external environment, preparing for risks, while investing in growth for the future. 　First, we will create a complete structure to strengthen our earnings ability. We are also determined to increase profits through organization-wide initiatives to revise our fixed cost structure and improve gross profit margins. In addition to company-wide cost-saving initiatives, we plan to grow sales in our high-profit businesses and related products. Further, we will embark on rebuilding our operating structure, which will include reorganizing smaller subsidiaries and locations. 　At present, we are reviewing our business portfolio based on ROIC indicators. In May, we sold all shares of Omron Oilfield & Marine, Inc. (North American subsidiary providing control systems for oil excavation equipment) to Schlumberger Limited, a global leader in oil field services. We recently announced a business tie-up with Fukuda Denshi Co., Ltd., a leading manufacturer of medical equipment in Japan, in the fields of home- use healthcare and nursing care products*1. In conjunction with this tie-up, we decided to sell all shares in Omron Colin Co., Ltd. (Healthcare Business subsidiary dealing in medical equipment) to Fukuda Denshi. 　As we rebuild our earnings structure through improved gross profit margins, restructured operations, and a review of our business portfolio, we will create new resources. With these new resources, we will reinvest in future growth. Despite challenges in the external environment, we plan to continue concentrated investment in our Industrial Automation and Healthcare Businesses, where we expect to see future growth. Investment in these businesses and leading-edge technology development will help create an engine for self-driven growth. *1 Signed a concurrent business tie-up agreement to build a cooperative structure for product development, manufacturing, sales, and maintenance. The companies will establish a mutually beneﬁcial relationship moving forward. 7 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section3. Medium- and Long-Term Growth The advent of the Internet of Things (IoT)*2 is changing manufacturing in a major way. As represented in the concepts underlying Industry 4.0, the manufacturing line is becoming more computerized, more networked, and more roboticized. The manufacturing industry itself is changing and evolving. These changes represent an enormous opportunity for our Industrial Automation Business. Having added computer functions necessary for all devices, we have set our sights on computerizing the manufacturing line itself, working to create new value that responds to these changes. We are facilitating innovative manufacturing through new, unique automation technology that integrates robots and machine control. We call this concept innovative-Automation. 　Under innovative-Automation, we are moving the manufacturing industry forward in the following three areas. ❶ Evolution in control: Simple automation of ultra-high-precision processing, ultra-high- precision assembly, and ultra-high-speed delivery. ❷ Intelligence developed through ITC: Sensors located throughout the manufacturing ﬂoor collect and analyze an enormous volume of data. The results lead to new ideas and expertise in productivity and quality not obvious to even the most experienced production engineers. ❸ New harmonization between humans and machines: Side-by-side interaction between humans and robots to foster ﬂexibility and productivity. 　Further technology innovation is required to make this evolution possible. One such example is the need for advancement in biological information sensing technology on the manufacturing ﬂoor. Biological information sensing is technology that captures the health and activity status of human beings. This is truly critical technology for humans and robots to work together safely. In the course of growing our Healthcare Business, we have developed a number of biological information sensing technologies. Today, we are working to prevent diseases that affect the brain and cardiovascular system. We have made progress and continue to innovate in beat-by-beat blood pressure monitoring technology*3 for use in wearable blood pressure monitors. We are devising ways to use this technology on the manufacturing ﬂoor and in a number of other ﬁelds. In this way, we are expanding across a number of markets, combining different technologies and expertise in a way few companies can. In these and other core technologies, we will strive for advancement in Sensing & Control + Think*4, enhancing our ability to compete. *2 Adding communications functions not only to computers and information devices, but also in all manner of objects, creating two-way communication via the Internet for recognition, automation, remote measurements, etc. *3 First-of-its kind wearable technology allowing continuous measurement of blood pressure for each heartbeat, taken from the wrist. *4 Deﬁnition of the evolution in Omron core technologies adding “Think” (human intelligence) to Sensing & Control technologies. ■ Innovating Manufacturing Sites Through the Three “I”s Concept innovative-Automation Innovating manufacturing through solutions unique to Omron Evolution in control Direction of Evolution Intelligence developed through ITC New harmonization between humans and machines integrated intelligent interactive 8 OMRON CorporationTesting blood pressures at a health center Employees from the Healthcare Business (Philippines) sharing their experience at the TOGA Global Conference 4. Practicing Our Principles The Omron Principles bind us together and serve as the driving force behind our growth. To strengthen our global implementation of these principles, we continue to hold The Omron Global Awards (TOGA). Through TOGA, we share examples of the Omron Principles put into action by our employees worldwide, celebrating our victories over daunting challenges. This year, employees from around the world submitted a total of 38,100 entries to TOGA (16% increase over last year), with 4,173 different entry categories (14% increase). The cumulative number of participants now numbers close to our total employee workforce, and each year the entries are more impressive than ever. In May, we held the global TOGA conference in Kyoto to highlight the best cases, selected from around the world. Allow me to share one example here today. This example comes out of Healthcare Business in the Philippines. 　As a nation, the Philippines struggles with high mortality rates associated with high blood pressure. As digital blood pressure monitors are not popular, citizens have few opportunities or facilities for checking blood pressure, and awareness of high blood pressure is low. Our employees in the Philippines have been engaged in activities to educate the nation through free blood pressure testing at temporary clinics held in 300 communities so far. The government of the Philippines has recognized our efforts, which has resulted in Omron becoming a trusted 9 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Sectionpartner in health policies for the nation, and we have had the opportunity to bid on Department of Health projects. As of this writing, we have installed 126,000 digital blood pressure monitors in nearly 44,000 health centers across the country. In many regions, citizens can now test their own blood pressure. This has raised awareness of high blood pressure and health in the Philippines, helping put the nation on a path toward solving this health issue. 　This is just one example of how practicing the Omron Principles in our business leads to new solutions that improve lives and contribute to a better society. 5. Building Greater Corporate Value Omron Corporation is committed to fulﬁlling our duties in corporate governance, balancing management integrity and sustainable growth. In particular, we intend to practice ROIC management over the upcoming year to put Omron back on a path to growth, rebuilding our earnings structure while also making the investments required for future growth. The Omron Principles serve as the starting point of our management. I believe that putting these principles into practice will help to solve social issues, to grow our business, and to overcome the challenges that lie ahead. We will work for long-term growth, with each Omron employee taking positive action on their own initiative. I will take the lead myself, taking on new challenges, while at the same time determined to engage in improving corporate value. 　Look forward to a brighter future, as Omron improves lives and contributes to a better society. Thank you for your continued support. 10 OMRON CorporationMaterial Management Issues and Major Initiatives ▶Materiality Identiﬁcation Process In light of our long-term strategies, and after considerable discussion at board meetings and other venues, we determine our most pressing issues with respect to our Growth Power, Earning Power, and Power to Deal with Change. More speciﬁcally, we identify materiality in terms of everything from the Omron Principles, corporate governance, globally integrated risk management, long-term vision, and technology *1 Convocation Notice for the 79th Ordinary General Meeting of Shareholders http://www.omron.com/about/ir/shareholder/pdfs/convocation_notice_79th.pdf strategy to medium- and long-term business plans and investor returns. We value the feedback we receive from shareholders, investors, and other stakeholders, communicating this information throughout our company. Every year we conduct an internal review of important matters, disclosing our results*1 to the public. ▶Awareness of Current Situation In 2011, Omron published Value Generation 2020 (VG2020), a plan that outlined a 10-year vision for our company. VG2020 put us on the path toward becoming a company that delivers global value in terms of both volume and quality. Under this plan, we set a quantitative goal and deﬁned speciﬁc activities to achieve net sales of ￥1 trillion with an operating income margin of 15% for ﬁscal 2020. 　At the same time, we are well aware that we have not yet achieved our EARTH-1 STAGE goal of establishing a self-driven structure to grow in any operating environment. The digital revolution embodied in AI*2, IoT, and other developments drives technological innovation that will change the current structure of manufacturing. This change is a major opportunity for Omron. At present, we are creating our medium- term management plan for ﬁscal 2017 and beyond anticipating that these changes will occur in future. *2 Artificial intelligence ▶Issues and Initiatives Issues Initiatives ① Rebuild our earnings structure (1) Initiatives to improve gross proﬁt margin (2) Initiatives to improve productivity in back-ofﬁce departments Improve Three Powers: Growth Power, Earning Power, Power to Deal with Change ② Create an engine for self-driven growth Engage in concentrated investment in the Industrial Automation and Healthcare businesses, which represent our future growth drivers. This includes investment in businesses and innovations at headquarters technology departments that accelerate growth in Industrial Automation and Healthcare. 11 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial SectionMessage from the CFO Portfolio Management: Evolution and Execution Yoshinori Suzuki Executive Vice President and CFO July 2016 12 OMRON Corporation 1. Advancing Portfolio Management 1.1. Evolution Omron has divided its organization into approximately 90 business units, each subject to a portfolio management system that assesses the economic value of the unit according to (1) ROIC and (2) sales growth rate. In this way, Omron management can make proper and timely decisions related to new business entry, growth acceleration, restructuring, or divestiture to drive improvements in Omron Group value. 　We recognize that both economic value and market value of a business must be considered if we are to allocate limited resources in an optimal manner. As such, we incorporate a market value assessment according to our strength as a company (market share) and market attractiveness (market growth rate) as supplementary considerations in portfolio management. This assessment system allows us to identify the growth potential of each business unit, making an optimal allocation of our resources and generating greater business growth. ■ Assessing Economic Value ■ Assessing Market Value ) % ( e t a R h t w o r G s e l a S B Expecting Growth S Investment C Proﬁt Restructuring A Examining Regrowth ) % ( e t a R h t w o r G t e k r a M B C S A ROIC (%) Market Share (%) ■ Portfolio Management Flow STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 Assess Economic Value Assess Market Value Identify Growth Opportunities /Issues Investigate/ Execute Improve Management in Each Field 13 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section 1.2. Accelerating Business Growth Our mid-term plan“EARTH-1 STAGE” calls for priority allocation of resources to accelerate growth in our Industrial Automation and Healthcare businesses. To set a foundation for growth, we acquired three companies over the past two fiscal years: NS Industria de Aparelhos Medicos (Brazilian nebulizer manufacturer), Delta Tau Data Systems (U.S.-based motion control manufacturer), and Adept Technologies (U.S.-based robot manufacturer). We intend to leverage the synergies each company brings to create new value for our customers and business partners. 　Incidentally, the ¥40 billion used for these three acquisitions came entirely from internal reserves. If Omron should require capital in excess of cash on hand for future mergers and acquisitions (M&A), we will raise capital through debt financing within a scope that allows us to maintain our current long-term credit rating*. At present, we estimate that our debt capacity is ¥100 billion. We will actively leverage debt financing to pursue new growth opportunities if we encounter a promising investment target. *Rating and Investment Information, Inc. rating: AA- Standard & Poor’s rating: A (as of July 2016) ■ Acquisitions NS Industria de Aparelhos Medicos Ltda. Year of Acquisition Fiscal 2014 Delta Tau Data Systems, Inc. Fiscal 2015 Adept Technologies, Inc. Fiscal 2015 Company Overview News Release URL Nebulizer manufacturer with No.1 share of the nebulizer market in Brazil U.S.-based manufacturer of motion controllers offering world-leading performance U.S.-based manufacturer of a wide range of industrial robot models http://www.healthcare.omron.co.jp/english/ news/2014/0905.html http://www.omron.com/media/press/2015/07/c0730. html http://www.omron.com/media/press/2015/09/c0916. html 1.3. Improving Capital Efﬁciency through Divestiture and Restructuring Portfolio management not only accelerates business growth, but also serves as a tool for management decisions regarding business divestiture or restructuring. As CFO, I believe I should provide particular leadership in making decisions regarding business divestiture. Recently, we made the decision to sell Omron Oilfield & Marine, Inc. and Omron Colin Co., Ltd. We announced the sale of these companies in June 2016. In making this decision, we made a rational assessment from a corporate-wide perspective, projecting the status of these businesses two-to-three years in the future. Based on this high- altitude view, we considered the negative factors and the positive factors to the company as a whole, eventually making a decision that was best for our entire organization. We also considered our customers, our employees, the acquiring companies, and a variety of other stakeholders, reaching an optimal solution for the benefit of all. We believe that these transactions generated significant value for both Omron (portfolio optimization) and the 14 OMRON Corporationpurchasers (value growth). 　Under our system of portfolio management, we generally set a cut-off term of two years for businesses we believe are struggling with significant issues. We begin restructuring these businesses as we formulate a policy for the future. In some cases, restructuring does not result in sufficient improvements, and synergies with other Group businesses remain weak. If, in our judgment, selling this business will result in greater value, we will investigate the potential for divestiture or other measures. 　The essence of portfolio management is to reallocate limited resources for the purpose of maximizing overall value. As Omron CFO, I plan to continue promoting and exercising portfolio management for the benefit of our company. As we commit more resources to growth businesses, we will also restructure or shift resources to businesses that struggle with certain issues. In so doing, we will improve capital efficiency. At the same time, structuring an optimal business portfolio will improve the overall corporate value of the Omron Group. ■ Divestments Omron Oilfield & Marine, Inc. Omron Colin Co., Ltd. Company Overview News Release URL U.S.-based manufacturer and seller of inverter control systems for drilling equipment, power houses, and related equipment Japan-based seller of patient monitors, non-invasive vascular screening devices, and other medical equipment http://www.omron.com/media/press/2016/06/c0603. html http://www.omron.com/media/press/2016/06/h0609. html 2. Improving Shareholder Returns Following fiscal 2014, Omron conducted another share buyback during fiscal 2015 totaling ¥15 billion. This reflects our ongoing consideration for strengthening shareholder returns and improving capital efficiency. We subsequently retired all 3.44 million shares of treasury stock acquired, leaving a balance of 150, 000 shares in treasury stock (less than 0.1% of shares outstanding). We are happy to announce that we met our fiscal 2016 goal of a 30% payout ratio one year ahead of schedule. Our dividend payout ratio for fiscal 2015 was 31.1%, up from 25% in the prior fiscal year. Omron improved shareholder return, even while actively engaging in M&As and other growth investment policies. 　We intend to continue to provide stable dividends and engage in strategic share buybacks, balanced by considerations related to earnings, financial status, and growth investments. 15 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial SectionBoard of Directors and Auditors As of June 23, 2016 Back row, from left: Kuniko Nishikawa Outside Director Personnel Advisory Committee Member CEO Selection Advisory Committee Member Compensation Advisory Committee Member Corporate Governance Committee Member Eizo Kobayashi Kazuhiko Toyama Outside Director Chairman of the Personnel Advisory Committee Chairman of the Compensation Advisory Committee Vice Chairman of the Corporate Governance Committee CEO Selection Advisory Committee Member Outside Director Chairman of the CEO Selection Advisory Committee Chairman of the Corporate Governance Committee Personnel Advisory Committee Member Compensation Advisory Committee Member Front row, from left: Koji Nitto Director, Senior Managing Executive Officer Senior General Manager, Global Strategy HQ Compensation Advisory Committee Member Yoshinori Suzuki Yoshihito Yamada Executive Vice President and CFO Personnel Advisory Committee Member President and CEO 16 OMRON CorporationA b o u t O m r o n 17 Yoshifumi Matsumoto Hideyo Uchiyama Kiichiro Kondo Tokio Kawashima Audit & Supervisory Board Member (Independent) Corporate Governance Committee Member Audit & Supervisory Board Member (Independent) Corporate Governance Committee Member Audit & Supervisory Board Member Audit & Supervisory Board Member Fumio Tateishi Akio Sakumiya Chairman CEO Selection Advisory Committee Member Executive Vice President Vice Chairman of the Personnel Advisory Committee Vice Chairman of the CEO Selection Advisory Committee Vice Chairman of the Compensation Advisory Committee Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Making the World Smaller through Sensing Omron manufactures and sells market-leading sensing and control products in over 110 countries around the world. Our products include control equipment, electronic components, automotive electronic components, social infrastructure, and healthcare. Other Businesses Identifying and developing the next generation of Omron businesses Healthcare Business (HCB) Providing a comprehensive lineup of healthcare products for home and hospital use Eliminations and Corporate 1% ¥5.3 billion Industrial Automation Business (IAB) Omron’s mainstay business; innovating global manufacturing through factory automation 8% ¥63.0 billion 13% ¥108.1 billion 9% ¥77. 5 billion Fiscal 2015 Net Sales by Segment ¥833.6 billion 40% ¥336.0 billion 17% ¥140.0 billion 12% ¥103.7 billion Social Systems, Solutions and Service Business (SSB) Offering social infrastructure systems for a safer, more comfortable society Automotive Electronic Components Business (AEC) Developing new ideas in automotive electronics to make automobiles safer and more environmentally friendly Electronic and Mechanical Components Business (EMC) Providing the global market with sophisticated components that create seamless relationships between people and machines ■ Fiscal 2015 Earnings by Business Segment (Billions of yen) Business Segment Net Sales Operating Income Operating Income Margin Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses Eliminations and Corporate Total 336.0 103.7 140.0 77.5 108.1 63.0 5.3 833.6 47.9 8.5 7.3 3.2 7.3 (4.1) (7.8) 62.3 14.3% 8.2% 5.2% 4.1% 6.7% ｰｰ 7.5% 18 OMRON Corporation& Control + Think Technologies Ratio of overseas sales to net sales Approx. 60% Asia Paciﬁc 11.0% ¥91.0 billion Greater China 19.6% ¥163.6 billion Europe Fiscal 2015 Net Sales by Region* ¥833.6 billion 13.7% ¥114.4 billion Americas 16.0% ¥133.8 billion Japan 39.7% ¥330.8 billion Ratio of overseas employees to total employees Approx. 69% Asia Paciﬁc 15.6% 5,888 Fiscal 2015 Employee Ratio by Region* 37, 709 Employees Worldwide Europe 5.7% 2,149 Greater China 36.6% 13,792 Japan 30.7% 11,572 Americas 11.4% 4,308 * As of March 31, 2016 Note: Regional categories are deﬁned as follows: Americas: North America, Central America, South America Europe: Europe, Russia, Africa, Middle East Greater China: China, Taiwan, Hong Kong Asia Paciﬁc: Southeast Asia, Korea, India, Oceania A b o u t O m r o n 19 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Business Model Omron uses a variety of capitals to build corporate value. These resources are a particular strength of Omron Corporation, and they include human capital (people who share the values of the Omron Principles), intellectual capital (leading-edge technologies), and manufactured capital (advanced equipment and factories capable of small lot production for a wide array of products). We use these resources to anticipate social needs and to deliver products and services that make the world a better place. Our employees are dedicated to their work and are excited to take on new challenges, uniﬁed by the Omron Principles. These talented professionals approach their daily duties looking to solve the issues that stand in the way of our customers’ success. From among all the information available to us, we extract only that which is necessary for our purposes. We use our proprietary technologies to convert this information into smarter products and services that Improvement Social Issues Businesses Main Inputs Omron Plan / Develop / Manufacture / Sell Industrial Automation Business Electronic and Mechanical Components Business Automotive Electronic Components Business Social Systems, Solutions and Service Business Healthcare Business Human Capital Intellectual Capital Financial Capital i k n h T + l o r t n o C & g n i s n e S Other Businesses Manufactured Capital Labor shortages Factory safety and security Quality Anticipate Station overcrowding, trafﬁc congestion Lifestyle diseases Energy shortages, environmental issues 20 OMRON Corporation offer new value according to our Sensing & Control + Think value model. Where production centers struggle with insufﬁcient labor, we deliver sensors, controllers, products, and technological services for automation that support more efﬁcient, safer, higher-quality manufacturing. Where lifestyle diseases are on the rise, we deliver highly accurate medical devices that capitalize on our expertise gained through patented technologies and clinical experience to contribute to a healthier, happier human race. The compensation we earn by creating value and the knowledge we earn through our business activities are long-term resources we use to reinvest in product development and services to provide solutions for the next generation of social issues. Through this cycle, Omron Corporation builds corporate value, invests efﬁciently in solutions for emerging social issues, and delivers new value for the world. Accumulation & Advancement Major Products FA Equipment Electronic Components Automotive Electronic Components Station Equipment, Trafﬁc Equipment, Maintenance Services Medical Equipment Customers Value Social Value Omron’s Value Manufacturers B to B & B to C A better life through manufacturing Electronics Automotive Food/Pharma Infrastructure, Other Railway/Roads Pharmacies r e s U d n E / r e m u s n o C Station/road safety, security Health Energy efﬁciency Human Capital Intellectual Capital Financial Capital Manufactured Capital PV Inverters Other Housing Construction, Other A b o u t O m r o n 21 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Omron Products (Market Share and Sales by Product) Industrial Automation Business Strengths ● Extensive product lineup ● Global infrastructure and services network Share of the Control-Related Equipment Market (Japan) Approx.40 % Source: Nippon Electric Control Equipment Industries Association Electronic and Mechanical Components Business Strengths ● Consultative sales approach ● Global delivery of high-quality products; superior manufacturing capabilities Share of the Relays Market (Global) Approx.20% Source: Internal survey Share of the Body Control Units for Miniature Vehicles Market (Japan) Approx.50% Source: Internal survey Automotive Electronic Components Business Strengths ● Global development and delivery of high-quality electronic components ● Trusted independent supplier to a diverse customer base ● Work with customers to develop products that anticipate market needs 22 OMRON CorporationOmron Products (Market Share and Sales by Product) A b o u t O m r o n Safety Equipment (Safety Light Curtains, etc.) 9% Safety Controllers Safety Light Curtains 31% Sensing Equipment (Sensors, Switches, etc.) Fiber Sensors Vision Sensors Power Relays for Printed Circuit Boards Programmable Controllers Servomotors and Servo Drivers Inverters Temperature Controllers Motion Controllers Parallel Robots 60% Control Equipment (Programmable Logic Controllers, etc.) 27% Other Electronic Components (Amusement Equipment, Image Sensing, etc.) Power Supply Units for Amusement Devices Image Sensing 51% Other (Passive Entry/Push-Button Engine Start Systems, Keyless Entry Systems, etc.) FPC Connectors Surface-Mounted Switches 73% Relays, Switches, Connectors 24% Switches (Power Window Switches, Power Seat Switches, etc.) Power Window Switches 25% Motor Controllers (Electronic Power Steering Controllers, Power Sliding Door Controllers, etc.) Electronic Power Steering Controllers 23 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Social Systems, Solutions and Service Business Strengths ● One-stop solutions (Component, system development, software development, and engineering services) Healthcare Business Strengths ● Recognized brand, trusted by medical and research institutes ● Compliance with regulations Other Businesses Headquarters is responsible for overseeing business development/support, as well as managing projects to research and develop new businesses. 解像度不足（92dpi） 24 Share of the Station Equipment Market (Japan) Approx.45% Source: Internal survey Share of the Home-Use Blood Pressure Monitors Market (Global) Approx.50% Source: Internal survey Share of the Residential-Use PV Inverters Market (Japan) Approx.40% Source: Internal survey OMRON CorporationOther (Software Development, etc.) 8% Automated Ticket Gates 31% Ticket Vending Machines Public Transportation (Automated Ticket Gates, Ticket Vending Machines) 54% Engineering, Environmental Solutions 7% Road Trafﬁc (Road Trafﬁc Management Systems, etc.) 24% Other (Activity Trackers, etc.) 5% Patient Monitors Body Composition Monitors 5% 6% Thermometers 50% Blood Pressure Monitors 10% Nebulizers Environmental Solutions PV inverters and other products for energy generation, storage, and savings Backlights LCD backlights for smartphones and other devices Hybrid Storage System for Solar Power LCD Backlights Electronic Systems and Equipment Micro Devices Uninterruptible power supply units for providing electricity during power outages or other emergencies Micro electro mechanical systems (MEMS) for emerging applications Uninterruptible Power Supply Units MEMS Pressure Sensors A b o u t O m r o n 25 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section The Year in Review For Omron, ﬁscal 2015 was a year for accelerating our goal of maximizing the Industrial Automation Business, one of our EARTH-1 STAGE basic strategies. Our progress included the acquisitions of motion control and robotics manufacturers in the United States. For the ﬁrst time in nine years, we revised the Omron Principles to support our goals of sustainable corporate value growth and stronger management. Manage- ment and Business May 2015 Revised the Omron Principles in support of sustainable corporate value growth and stronger management http://www.omron.com/media/ press/2015/05/c0508.html September 2015 Acquired U.S.-based Delta Tau Data Systems, Inc., a world-leading developer and manufacturer of motion controllers See P47 for more. April 2015 Omron received the Minister of Economy, Trade and Industry Award for Achievement in the Field of Intellectual Property http://www.omron.com/media/ press/2015/04/c0410.html 2015 June 2015 Established the Omron Corporate Governance Policies—Seeking Sustainable Enhancement of our Corporate Value http://www.omron.com/media/press/2015/06/ c0624.html April−May June July August September October November December January February March April Products and Services September 2015 Introduced a new network camera sensor to the market; detects human activity and sends the results wirelessly to a smartphone or other connected device October 2015 Delivered the latest in automated ticket gate technology for the Kita Kyushu Urban Monorail; allows use of both QR code and IC card tickets Awarded the Health Medical Science 2015 Award for our upper arm blood pressure monitor series 26 OMRON CorporationIndustrial Automation Business (IAB) Electronic and Mechanical 　　 Components Business (EMC) Automotive Electronic 　　 Components Business (AEC) Social Systems, Solutions and 　　 Service Business (SSB) Healthcare Business (HCB) Other Businesses October 2015 Acquired U.S.-based Adept Technologies, Inc., a leader in industrial robot control and vision sensor technologies See P47 for more. October 2015 - January 2016 Stock buyback (3.44 million shares for ¥15 billion); retired all repurchased shares in January http://www.omron.com/about/ir/irlib/news/ pdfs/20151201e.pdf March 2016 Established an open innovation venture fund in partnership with several companies April−May June July August September October November December January February March April 2016 November 2015 February 2016 Developed 3D safety sensing technology for production ﬂoor safety Awarded the 2015 Nikkei Business Daily Award for Superiority, Superior Products and Services category for the NX701 Machine Automation Controller April 2016 Introduced the KPT-A□ three-phase rooftop PV inverter for industrial solar power generation Developed a camera to detect in real-time the direction of a driver’s face, their line of sight, and whether their eyes are open or closed Introduced the HV-F320 electronic pulse massager; warms and uses low frequency vibrations to relieve pain A b o u t O m r o n 27 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Financial Highlights ■ Gross Profit Margin Gross profit margin Selling, general and administrative expenses ratio (excluding R&D expenses) R&D expenses ratio Operating income margin 38.5% ■ ROIC Return on invested capital (ROIC) ROIC= Net Income Invested Capital* (Net Assets + Interest-Bearing Debt) * Invested capital represents the average of prior year-end result and current year quarterly results 35.135.135.1 25.425.425.4 (%) 40 32 24 16 8 0 37.537.537.5 36.836.836.8 37.137.137.1 38.538.538.5 39.339.339.3 38.538.538.5 23.023.023.0 23.523.523.5 23.423.423.4 23.523.523.5 23.423.423.4 7.27.27.2 2.52.52.5 FY 09 7.87.87.8 6.76.76.7 10 6.86.86.8 6.56.56.5 11 7.07.07.0 6.76.76.7 12 8.88.88.8 6.26.26.2 13 10.210.210.2 5.75.75.7 14 (%) 15 10 5 0 1.01.01.0 7.87.87.8 8.68.68.6 4.84.84.8 24.724.724.7 7.57.57.5 6.36.36.3 15 9.7% 13.413.413.4 11.311.311.3 9.79.79.7 Expected cost of Expected cost of Expected cost of capital capital capital 6% 6% 6% FY 09 10 11 12 13 14 15 Lower profitability due to downturns in external factors. Omron will continue to invest for the future, including making increases to R&D expenses. Achieved ROIC in excess of the Company’s expected cost of capital of 6% under EARTH-1 STAGE. ■ Ratio of Overseas Sales to Total Net Sales Overseas total　　　Japan 60.3% 60.160.1 60.360.3 50.750.7 49.349.3 51.451.4 52.252.2 48.648.6 47.847.8 51.151.1 48.948.9 55.455.4 44.644.6 39.939.9 39.739.7 FY 09 10 11 12 13 14 15 (%) 60 50 40 30 20 10 0 Ratio of overseas revenues continued to grow, particularly in Southeast Asia and other emerging economies. 28 OMRON Corporation■ EPS ■ Earnings per share ■ Cash dividends per share Dividend payout ratio ■ Cash and Cash Equivalents ■ Cash and cash equivalents　■ Total interest-bearing liabilities ¥219.0 ¥82.9billion (Yen) 300 250 200 150 100 50 0 106.4% 106.4% 106.4% 283.9283.9283.9 209.8209.8209.8 219.0219.0219.0 137.2137.2137.2 121.7121.7121.7 37.6%37.6%37.6% 24.7%24.7%24.7% 303030 74.574.574.5 282828 16.016.016.0 171717 27.0%27.0%27.0% 25.3%25.3%25.3% 25.0%25.0%25.0% 373737 535353 717171 31.1%31.1%31.1% 686868 20 (%) 120 100 80 60 40 (Billions of yen) 120 90 60 30 74.774.774.7 55.755.755.7 45.545.545.5 45.345.345.3 51.751.751.7 36.636.636.6 18.818.818.8 102.6102.6102.6 90.390.390.3 82.982.982.9 FY 09 10 11 12 13 14 15 0 0 FY 09 5.65.65.6 0.50.50.5 0.00.00.0 0.00.00.0 10 11 12 13 14 15 Achieved a dividend payout ratio of 31.1%, up from 25.0% in fiscal 2014; reached 30% payout ratio one year ahead of plan. Maintained a zero balance for interest-bearing debt. The Company may use interest-bearing debt to finance future growth investments, if necessary. ■ Capital Expenditures ■ Capital expenditures　■ Depreciation and amortization ¥36.9billion (Billions of yen) 40 30 38.138.138.1 36.936.936.9 33.733.733.7 31.531.531.5 27.027.027.0 28.328.328.3 28.328.328.3 28.328.328.3 23.223.223.2 23.023.023.0 22.622.622.6 22.522.522.5 25.125.125.1 19.519.519.5 20 10 0 FY 09 10 11 12 13 14 15 The Company has continued to invest in infrastructure and productivity improvements for future growth. A b o u t O m r o n 29 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Non-Financial Highlights ■ Ratio of Non-Japanese in Managerial Positions Overseas*1 ■ Ratio of Women in Managerial Roles Omron Group (Japan) 46% 42 42 46 Ratio of women in managerial roles ■ No. of women in managerial roles 2.3% (%) (Number of Women managers) 5 4 3 2 1 0 3636 30 2727 22 23 1.8% 1.9% 1.4% 1.5% 3.0% 2.3% 5.0% 50 40 30 20 10 0 36 31 (%) 50 40 30 20 10 0 FY 11 12 13 14 15 FY 12 13 14 15 16 17 (Target) 19 (Target) We believe that local management is the best management. This is why we emphasize having local staff in key positions in our local entities overseas. We will continue to train and appoint local staff to perform managerial roles at our offices around the world. We are well aware that the low number of women in leadership roles in Japan is not only a critical issue, it’s also a lost opportunity. We plan to raise the number of women in managerial roles to 3.0% by the end of fiscal 2016 and to 5.0% by the end of fiscal 2018. *１ A position deemed crucial for executing VG2020. The CEO must approve the hiring/transfer of the person assigned this role. Note: Figures represent results as of April 20. ■ Ratio of Employees with Disabilities Employees with disabilities at Omron Corporation (Japan) Omron Group (Japan) Japanese national average Omron Corp. (Japan) Omron Group (Japan) 3.14% 2.41% 2.88 2.20 3.14 3.11 2.24 2.22 3.24 2.35 3.40 2.44 1.68 1.65 1.69 1.76 1.82 3.14 2.41 1.88 (%) 5 4 3 2 1 0 FY 10 12 15 Note: Ratio of employees with disabilities (including special subsidiaries) as of June 30 each year. 13 11 14 30 Employees of Omron Taiyo Since founding Omron Taiyo Co., Ltd. (special subsidiary of Omron) in 1972, Omron has continued to create jobs and expand opportunities for the disabled. Through these activities, Omron is helping to create a society in which the disabled feel the joy and satisfaction of making a positive contribution through work. OMRON CorporationNote: The ﬁve non-ﬁnancial indices presented here have been reviewed by Deloitte Tohmatsu Evaluation and Certiﬁcation Organization Co., Ltd., an independent evaluation entity. ■ Global Net Sales to CO2 Emissions*2 ■ Environmental Contribution*3 ■ Environmental contribution　■ CO2 emissions of global production sites ¥3.89 ／ton-CO2 million 20% Improvement vs. 2010 (Million yen ／ ton- CO2) 4.20 3.693.69 3.73 3.783.78 3.89 3.37 3.23 5 4 3 2 1 0 508 thousand ton-CO2 Environmental Contribution > CO2 Emissions of Global Production Sites Targets Achieved for Six Consecutive Years （Thousand ton-CO₂） 851 661 508 313313 193 191 189 184 176 207 224 214 1,000 800 600 400 200 0 FY 10 11 12 13 14 15 20（Target） FY 10 11 12 13 14 15 At Omron, we take pride in knowing that our businesses contribute to a sustainable society. We track and improve global net sales to CO2 emissions and environmental contribution as two important indicators of corporate value. *2 Global Net sales to CO2 emissions = Global Net sales per one ton of CO2 emissions A decrease in sales of power conditioners for solar power generation led to a 508 thousand ton-CO2 reduction in environmental contribution. However, this year marked the sixth consecutive year in which Omron’s environmental contribution exceeded the CO2 emissions of the Group’s global manufacturing centers (214 thousand ton-CO2). *3 Environmental Contribution = Volume of CO2 emissions reduction contributed by society’s use of the Omron Group’s energy generation and savings products and services. As we have changed our method for calculating Environmental Contribution, we revised figures from prior years for purposes of comparison. See our website for more about how we calculate these figures. ▶ Environmental Contribution http://www.omron.com/about/csr/environ/eco_products/eco_contribution/ ▶ CO2 Emissions of Global Production Sites http://www.omron.com/about/csr/environ/eco_fac_off_lab/co2_discharge/data_co2exhaust_volume.html ■ Environmental Management at Omron Contributing to the Global Environment through Business Activities Maximize the Effective Use of All Management Resources (Improve energy, resource productivity) Products and Services Useful to Society (Grow our businesses that have a positive impact on the global environment) Greater Efficiency Reduce Our Environmental Impact Greater Volume of Environmental Contribution Greater Contribution A b o u t O m r o n 31 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section 11-Year Financial and Non-Financial Highlights OMRON Corporation and Subsidiaries (As of and for the years ended March 31) FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Operating Results: 　Net sales 　Gross proﬁt 　Selling, general and administrative expenses (excl. R&D expenses) 　R&D expenses 　Operating income (Note 1) 　EBITDA (Note 2) 　Net income (loss) attributable to shareholders 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 Financial Position: 　Total assets 　Cash and cash equivalents 　Total interest-bearing liabilities 　Total shareholders’ equity ¥616,002 248,642 149,274 50,501 60,782 91,607 35,763 51,699 (43,020) 8,679 (38,320) 589,061 52,285 2,468 362,937 ¥723,866 278,241 164,167 52,028 62,046 95,968 38,280 40,539 (47,075) (6,536) (4,697) 630,337 42,995 19,988 382,822 ¥762,985 293,342 176,569 51,520 65,253 101,596 42,383 68,996 (36,681) 32,315 (34,481) 617,367 40,624 18,179 368,502 165.0 1,660.7 34.0 20.6% 151.1 1,548.1 30.0 19.9% 185.9 1,662.3 42.0 22.6% Per Share Data: 　Net income (loss) attributable to shareholders (EPS) 　Shareholders’ equity 　Cash dividends (Note 4) 　Dividend payout ratio Financial Indicators: 　Gross proﬁt margin 　Operating income margin 　EBITDA margin 　Return on invested capital (ROIC) 　Return on equity (ROE) 　Ratio of shareholders’ equity to total assets 　Total return ratio (Note 5) 　Capital expenditures 　Depreciation and amortization 　Ratio of overseas sales Non-Financial Data 　Number of employees 　Ratio of overseas employees to total employees 　Number of patents held (Note 6) 　Environmental contribution (thousand ton-CO2) (Note 7) 　CO2 emissions of global production sites (thousand ton-CO2) (Note 8) Notes: 1. Operating income for ﬁscal 2005 includes an ¥11,915 million gain recorded on the return of pension assets to the government. 40.4% 9.9% 14.9% 10.1% 10.7% 61.6% 47.8% 40,560 30,825 43.4% 38.4% 8.6% 13.3% 9.9% 10.3% 60.7% 49.7% 44,447 33,922 47.3% 38.4% 8.6% 13.3% 10.4% 11.3% 59.7% 74.7% 37,072 36,343 52.1% 32,456 64.9% 5,206 35,426 65.7% 5,717 27,408 61.1% 4,538 ¥627,190 218,522 164,284 48,899 5,339 38,835 (29,172) 31,408 (40,628) (9,220) 21,867 538,280 46,631 52,970 298,411 (132.2) 1,355.4 25.0 ー 34.8% 0.9% 6.2% (7.6%) (8.7%) 55.4% ー 36,844 33,496 49.7% 32,583 63.4% 5,205 2. EBITDA = Operating income + Depreciation and amortization 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 ﬁscal year. 5. Total return ratio = (Total dividends paid + Amount of shares repurchased) / Net income (loss) attributable to shareholders (does not include repurchases of 　 less than one trading unit) 6. Patent information is as of March 15. Long-Term Management Strategy Grand Design 2010 （GD2010） FY2001 – FY2003 1st Stage Establish a Proﬁt Structure Concentrate on cost structure reform and restructure the Company as a proﬁt-generating business Achievements • ROE of 10% • Withdrew from unproﬁtable business, spun off Healthcare Business • Raised the level of corporate governance to the global standard 32 FY2004 – FY2007 FY2008 – FY2010 2nd Stage Balance Growth and Earnings Reinforce business foundations through aggressive investment in growth areas, including M&A, and cost reduction Achievements • Increased earnings per share from ¥110.7 (FY2003) to ¥185.9 (FY2007) 3rd Stage Achieve a Growth Structure Fortify growth businesses (high proﬁtability) Revival Stage (February 2009 to March 2011) Revised 3rd-stage targets due to an abrupt change in the business environment, implement- ed cost reductions, and spun off Automotive Electronic Components Business and Social Systems, Solutions and Service Business ¥524,694 184,342 133,426 37,842 13,074 40,088 3,518 42,759 (18,584) 24,175 (20,358) 532,254 51,726 36,612 306,327 16.0 1,391.4 17.0 106.4% 35.1% 2.5% 7.6% 1.0% 1.2% 57.6% 106.7% 19,524 27,014 50.7% 36,299 68.1% 5,218 ¥617,825 231,702 142,365 41,300 48,037 71,021 26,782 41,956 (20,210) 21,746 3,333 562,790 74,735 45,519 312,753 121.7 1,421.0 30.0 24.7% 37.5% 7.8% 11.5% 7.8% 8.7% 55.6% 25.2% 23,192 22,984 51.4% 35,684 67.8% 5,452 193 191 ¥619,461 227,887 145,662 42,089 40,136 62,753 16,389 31,946 (26,486) 5,460 (33,492) 537,323 45,257 18,774 320,840 74.5 1,457.5 28.0 37.6% 36.8% 6.5% 10.1% 4.8% 5.2% 59.7% 37.7% 28,341 22,617 52.2% 35,992 67.7% 5,959 189 184 ¥650,461 241,507 152,676 43,488 45,343 67,795 30,203 53,058 (28,471) 24,587 (18,550) 573,637 55,708 5,570 366,962 137.2 1,667.0 37.0 27.0% 37.1% 7.0% 10.4% 8.6% 8.8% 64.0% 27.0% 28,285 22,452 51.1% 35,411 67.4% 6,448 313 176 ¥772,966 297,208 181,225 47,928 68,055 93,144 46,185 79,044 (31,125) 47,919 (16,298) 654,704 90,251 488 430,509 209.8 1,956.1 53.0 25.3% 38.5% 8.8% 12.1% 11.3% 11.6% 65.8% 25.3% 33,653 25,089 55.4% 36,842 69.1% 6,635 661 207 ¥847,252 332,607 198,103 47,913 86,591 114,930 62,170 77,057 (39,517) 37,540 (29,303) 711,011 102,622 0 489,769 283.9 2,254.4 71.0 25.0% 39.3% 10.2% 13.6% 13.4% 13.5% 68.9% 49.1% 38,143 28,339 60.1% 37,572 69.7% 7,194 851 224 (Millions of yen) (Yen) ¥833,604 320,812 205,735 52,790 62,287 93,747 47,290 84,207 (67,116) 17,091 (31,550) 683,325 82,910 0 444,718 219.0 2,080.0 68.0 31.1% 38.5% 7.5% 11.2% 9.7% 10.1% 65.1% 62.7% 36,859 31,460 60.3% 37,709 69.3% 7,686 508 214 OMRON CorporationOperating Results: 　Net sales 　Gross proﬁt 　R&D expenses 　Operating income (Note 1) 　EBITDA (Note 2) 　Selling, general and administrative expenses (excl. R&D expenses) 　Net income (loss) attributable to shareholders 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 　Net income (loss) attributable to shareholders (EPS) Financial Position: 　Total assets 　Cash and cash equivalents 　Total interest-bearing liabilities 　Total shareholders’ equity Per Share Data: 　Shareholders’ equity 　Cash dividends (Note 4) 　Dividend payout ratio Financial Indicators: 　Gross proﬁt margin 　Operating income margin 　EBITDA margin 　Return on invested capital (ROIC) 　Return on equity (ROE) 　Ratio of shareholders’ equity to total assets 　Total return ratio (Note 5) 　Capital expenditures 　Depreciation and amortization 　Ratio of overseas sales Non-Financial Data 　Number of employees ¥616,002 248,642 149,274 50,501 60,782 91,607 35,763 51,699 (43,020) 8,679 (38,320) 589,061 52,285 2,468 362,937 151.1 1,548.1 30.0 19.9% 40.4% 9.9% 14.9% 10.1% 10.7% 61.6% 47.8% 40,560 30,825 43.4% 27,408 61.1% 4,538 ¥723,866 278,241 164,167 52,028 62,046 95,968 38,280 40,539 (47,075) (6,536) (4,697) 630,337 42,995 19,988 382,822 165.0 1,660.7 34.0 20.6% 38.4% 8.6% 13.3% 9.9% 10.3% 60.7% 49.7% 44,447 33,922 47.3% 32,456 64.9% 5,206 ¥762,985 293,342 176,569 51,520 65,253 101,596 42,383 68,996 (36,681) 32,315 (34,481) 617,367 40,624 18,179 368,502 185.9 1,662.3 42.0 22.6% 38.4% 8.6% 13.3% 10.4% 11.3% 59.7% 74.7% 37,072 36,343 52.1% 35,426 65.7% 5,717 ¥627,190 218,522 164,284 48,899 5,339 38,835 (29,172) 31,408 (40,628) (9,220) 21,867 538,280 46,631 52,970 298,411 (132.2) 1,355.4 25.0 ー 34.8% 0.9% 6.2% (7.6%) (8.7%) 55.4% ー 36,844 33,496 49.7% 32,583 63.4% 5,205 　Ratio of overseas employees to total employees 　Number of patents held (Note 6) 　Environmental contribution (thousand ton-CO2) (Note 7) 　CO2 emissions of global production sites (thousand ton-CO2) (Note 8) FY2008 – FY2010 A b o u t O m r o n 11-Year Financial and Non-Financial Highlights FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 (Millions of yen) ¥524,694 184,342 133,426 37,842 13,074 40,088 3,518 42,759 (18,584) 24,175 (20,358) 532,254 51,726 36,612 306,327 16.0 1,391.4 17.0 106.4% 35.1% 2.5% 7.6% 1.0% 1.2% 57.6% 106.7% 19,524 27,014 50.7% 36,299 68.1% 5,218 ¥617,825 231,702 142,365 41,300 48,037 71,021 26,782 41,956 (20,210) 21,746 3,333 562,790 74,735 45,519 312,753 121.7 1,421.0 30.0 24.7% 37.5% 7.8% 11.5% 7.8% 8.7% 55.6% 25.2% 23,192 22,984 51.4% 35,684 67.8% 5,452 193 191 ¥619,461 227,887 145,662 42,089 40,136 62,753 16,389 31,946 (26,486) 5,460 (33,492) 537,323 45,257 18,774 320,840 74.5 1,457.5 28.0 37.6% 36.8% 6.5% 10.1% 4.8% 5.2% 59.7% 37.7% 28,341 22,617 52.2% 35,992 67.7% 5,959 189 184 ¥650,461 241,507 152,676 43,488 45,343 67,795 30,203 53,058 (28,471) 24,587 (18,550) 573,637 55,708 5,570 366,962 137.2 1,667.0 37.0 27.0% 37.1% 7.0% 10.4% 8.6% 8.8% 64.0% 27.0% 28,285 22,452 51.1% 35,411 67.4% 6,448 313 176 ¥772,966 297,208 181,225 47,928 68,055 93,144 46,185 79,044 (31,125) 47,919 (16,298) 654,704 90,251 488 430,509 209.8 1,956.1 53.0 25.3% 38.5% 8.8% 12.1% 11.3% 11.6% 65.8% 25.3% 33,653 25,089 55.4% 36,842 69.1% 6,635 661 207 ¥847,252 332,607 198,103 47,913 86,591 114,930 62,170 77,057 (39,517) 37,540 (29,303) 711,011 102,622 0 489,769 283.9 2,254.4 71.0 25.0% 39.3% 10.2% 13.6% 13.4% 13.5% 68.9% 49.1% 38,143 28,339 60.1% 37,572 69.7% 7,194 851 224 (Yen) ¥833,604 320,812 205,735 52,790 62,287 93,747 47,290 84,207 (67,116) 17,091 (31,550) 683,325 82,910 0 444,718 219.0 2,080.0 68.0 31.1% 38.5% 7.5% 11.2% 9.7% 10.1% 65.1% 62.7% 36,859 31,460 60.3% 37,709 69.3% 7,686 508 214 7. Environmental contribution = Volume of CO2 emissions reduction contributed by society's use of the Omron Group's energy-generation or saving products and services. The calculation method has been revised since ﬁscal 2016. Accordingly, the ﬁgures for ﬁscal 2015 and prior years have been restated. 8. CO2 emissions volumes calculated based on fuel consumption and electricity purchase volumes by the Company. Operating Income Omron applies the single step presentation of income under U.S. GAAP (that is, the various levels of income are not presented) in its consolidated statements of income. For comparison with other companies, operating income is presented as gross proﬁt less selling, general and administrative expenses and research and development expenses. Discontinued Operations Figures for FY2006 and prior years have been restated to account for businesses discontinued in FY2007. Value Generation 2020 （VG2020） FY2011 – FY2013 GLOBE STAGE Establishment of proﬁt and growth structures on a global basis Net sales Operating income Gross proﬁt margin Operating income margin ROE *1 Announced July 2011 Initial Target*1 FY2013 Result ¥773.0 billion ¥68.1 billion 38.5% 8.8% 11.6% ¥750.0 billion ¥100.0 billion 42.0% 13.3% over 15% FY2014 – FY2016 EARTH-1 STAGE Establish self-driven growth structure FY2017 – FY2020 EARTH-2 STAGE Net sales Gross proﬁt margin Operating margin ROIC ROE EPS Initial Target*2 over ¥900 billion over 40% over 10% approx. 13% approx. 13% approx. ¥290 FY2016 Plan*3 ¥820 billion 39.3% 7.7% 10% 10% ¥222.2 *2 Announced April 2014 *3 Announced April 2016 FY2020 Targets*4 ● Net sales over ¥1 trillion ● Operating profit margin15% *4 Announced July 2011 33 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Special Feature: 1 Evolution of Our Technology CTO Message I was named the ﬁrst Chief Technology Ofﬁcer (CTO) at Omron Corporation when it instituted the position in April 2015. As Omron CTO, my main role is to plan and execute our technology strategy from a management standpoint. Beyond strengthening our core technologies, my responsibilities include building value for our future through new technologies stemming from open innovation and cross-organizational initiatives. 1. The CTO and the Role of the Technology & Intellectual Property HQ Particularly after adopting an internal company Property HQ, I am responsible for this cross- system in 1999, Omron pursued corporate organizational strategy. I am also responsible technology strategy on a division-by-division for seeing future opportunities through the lens basis. We experienced a signiﬁcant jump in the of technology over a frame of reference even sophistication of our division technologies under longer than that addressed in our divisions. Since this structure. However, we realized that adapting assuming my current position, I have been working to a rapidly changing world required more ﬂexibility. to formulate medium- and long-term technology We needed to be able to uncover needs that strategies and manage cross-organizational existed in the spaces between the borders of our initiatives that encompass the entire Omron businesses. We needed a company-wide, cross- Group. In performing these duties, I will continue organizational approach to technology strategy. to promote open innovation through cooperative As CTO and head of the Technology & Intellectual relationships between Omron and outside entities. Short-term projects Medium- and long-term projects Technology & Intellectual Property HQ perspective Anticipate future opportunities ■ Technology & Intellectual Property HQ Projects l e v e l - n o i s i v i D e v i t c e p s r e p Industrial Automation Electronic Mechanical Automotive Electronic Components Social Infrastructure Healthcare Environmental, etc. 34 OMRON Corporation Evolution of Our Technology W h e r e W e ’r e H e a d e d Kiichiro Miyata CTO and Senior General Manager, Technology & Intellectual Property HQ July 2016 2. Evolving Core Technologies To date, our core technologies have focused on Sensing & Control. The idea of this concept is to use technology to detect the status of a situation, process that information, and then perform an appropriate control. At present, we are evolving this concept by adding Think. This Think represents human intelligence. 　In humans, intelligence is gained by analyzing volumes of information (data) and learning. In the market today, we see a ﬂood of new business models that use IoT, AI, or other mechanisms to analyze and learn from a cumulative store of data. Adding Think to Sensing & Control will make a signiﬁcant contribution to the growth of these business models. For example, we can incorporate the concept of Think into controllers for manufacturing equipment and robots in factories. This takes us beyond giving instructions for pre- programmed routine movements into a world of systems that combine machine tasks with the condition of experienced human workers on the production ﬂoor. Another example is from the healthcare ﬁeld. Here, Think means that we can do more than simply measure someone’s blood pressure. When an irregularity is detected, we can provide more health-related indicators and important information that the individual may want. By strengthening our core technologies, we can produce even greater technological growth over the medium and long term in our businesses. Integrated Report 2016 35 Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section 3. Creating Value for Our Future Today, our technology development work looks ahead to the year 2030. Our major ﬁelds of focus are in manufacturing, healthcare, and mobility. By operating a multiple number of businesses, we have created a large storehouse of technologies across a variety of specialty ﬁelds. Cross- organizational initiatives between and among our business divisions generates amazing technology and application synergies. Allow me to introduce some speciﬁc examples. 　At Omron, we have an initiative to redesign production by combining manufacturing and healthcare technologies. Under this project, we are working to integrate manufacturing technology and expertise with biological information sensing technologies from our healthcare business. The integration of these technologies allows manufacturing equipment to sense the health and movement of their human partners, providing appropriate controls in response. In this way, we provide an environment in which humans can work safely and efﬁciently in harmony with robots. Through systems like this, we can eliminate human error (careless mistakes, unplanned production stoppages, etc.) and offer greater efﬁciency for production activities. 　Another initiative is our work in developing ■ Cross-Organizational Initiatives new technologies in the growing ﬁeld of driver assistance and sensing. During ﬁscal 2016, we developed an on-board sensor equipped with technology that senses the degree of driver concentration and determines whether the driver is capable of safely operating the vehicle*1. This system combines ﬁrst-of-its kind image sensing technology with leading-edge AI technology (time-series deep learning*2). Integrating biological information sensing technologies from our healthcare business will allow us to go even further in sensing detailed information about a driver’s state of health and consciousness. Omron will continue to conceive and develop new technologies in the large and growing ﬁeld of automated driving. 　Look for even more innovations from Omron in the future, as we continue to integrate expertise and technology to create new and surprising value. *1 Related news release: http://www.omron.com/media/press/2016/06/c0606.html *2 Time-series deep learning: A type of deep learning technology. In general, deep learning technology has demonstrated extremely high performance in recognizing static images, while experiencing degraded performance in recognizing time-series events. Omron has successfully introduced independent improvements to Recurrent Neural Network technology, a mechanism that retains past information internally. This modiﬁed technology is capable of detecting the status of a driver and other time-series information with high precision. Eliminate human error from the production floor Driver assistance and sensing with high precision Industrial Automation Business Healthcare Business Automotive Electronic Components Business Manufacturing Healthcare Mobility 36 OMRON Corporation Intellectual Property Strategy Omron Wins the 13th Distinguished Service in Industry Award Omron was awarded the 2016 Distinguished Service in Industry Award by the Intellectual Property Association of Japan (IPAJ). Each year, the IPAJ gives this award to an organization that demonstrates outstanding achievement in the ﬁeld of intellectual property (IP). Omron was recognized for our IP activities*¹, our successful efforts under ROIC Management 2.0*² to focus on and invest in IP, and our effective program of external communications related to IP. *¹ IP activities under uniﬁed business and technology programs *² Investing in patent applications and IP education for engineers to make IP a tool for business growth. See our website for ROIC 2.0: http://www.omron.com/about/ir/irlib/pdfs/ar15e/ar15e_17.pdf Building an Advantage through Intellectual Property by the Year 2030 Strategies for Using IP as a Global Competitive Advantage Omron IP activities reﬂect an integration of business, technology, and IP strategies. Today, we look across the landscape toward the year 2030, anticipating future technologies that carry beyond our current business framework. We envision a number of technology scenarios for that future, creating and protecting medium-, long-term, and core technologies that align with our vision. Omron is pushing forward to build a stronger capacity for IP creation both today and tomorrow. Toward further globalization, we are stepping up our program of IP rights acquisition in countries that represent our most important markets. This program will secure greater degrees of freedom for our businesses in our major markets around the world. Finally, Omron will be tenacious in protecting our IP rights, defending and enhancing the Omron Brand. ■ Worldwide Intellectual Property Rights ■ Intellectual Property Data (No. of Patents) Trademark Rights 11% Design Rights 12% Patent Rights Utility Model Rights 29% FY 2012 2013 2014 2015 Applications 1,084 1,040 1,129 1,108 Overseas Total No. of Intellectual Properties 55% 12,837 (As of March 31, 2016) 45% Japan Approvals 1,172 949 856 866 Patents held 6,448 6,635 7,194 7,686 Patent Rights Utility Model Rights 32% Design Rights 9% Trademark Rights 7% W h e r e W e ’r e H e a d e d 37 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Special Feature: 2 Manufacturing Capability Linking Strong Manufacturing Capability to Sustainable Gross Proﬁt Margin Growth Kiyoshi Yoshikawa Managing Executive Officer Senior General Manager, Global Manufacturing Innovation HQ We view gross proﬁt margin (a measure of our ability to earn) as one of our most important key performance indicators. We implemented cost reduction activities and other internal measures between ﬁscal 2011 and 2014 to improve our gross proﬁt margin. Owing to these measures and favorable foreign exchange, we raised our gross proﬁt margin to 39.3%. Unfortunately, gross proﬁt margin decreased to 38.5% for ﬁscal 2015, mainly due to a slowing Chinese economy, foreign exchange ﬂuctuations, and other external ■ Net Sales, Gross Proﬁt Margin ■ Net Sales Gross Profit Margin (Billions of yen) 900 800 700 600 500 400 300 200 100 0 847.3 39.3% 833.6 773.0 619.5 650.5 38.5% 38.5% 37.1% 36.8% FY 2011 2012 2013 2014 2015 (%) 39.5 39.0 38.5 38.0 37.5 37.0 36.5 36.0 35.5 factors that drove down revenues. To achieve our VG2020 goals for ﬁscal 2020, we must be able to withstand external inﬂuences to create sustainable growth in gross proﬁt margin. Here, we plan to improve our overall Group business mix, restructure variable costs, restructure ﬁxed manufacturing costs, and strike a balance in our currency composition. As the lead of Omron manufacturing, we believe that stronger manufacturing capabilities translate directly to an improved ability to earn. ■ Major Initiatives for Improving Gross Proﬁt Margin Improve Business Mix businesses ・ Portfolio management ・ Accelerate growth of highly proﬁtable Restructure Variable Costs ・ Promote component standardization Restructure Fixed Manufacturing Costs ・ Improve productivity at overseas production bases Balance Currency Composition ・ Balance currency composition to sales, purchase costs 38 OMRON Corporation1. Strong Manufacturing Capabilities At Omron, we have a three-part deﬁnition for strong manufacturing capabilities: (1) Capability to integrate value; (2) Capability to deliver value; and (3) Capability to respond to changes in the business environment. As our businesses grow globally, we believe that our capability to deliver value to our customers is particularly important. We do this through optimal procurement of components and materials, optimal manufacturing processes, and optimal logistics. We have two speciﬁc measures to increase our capability in these areas. The ﬁrst is to restructure our variable costs, mainly through standardized components. The second is to restructure our ﬁxed manufacturing costs to improve productivity for optimal production processes and logistics. These ■ Strong Manufacturing Capabilities Technology Capability to integrate value Product Planning ❶ Product Design Production Design Procurement Manufacturing Sales Needs Materials ❷ Capability to deliver value Customers ❸ Capability to respond to changes in the business environment Business Environment changes measures will allow us to strengthen our capability to deliver value, improving our gross proﬁt margin at the same time. 2. Restructuring Variable Costs Improving Component Standardization To date, we have made progress in standardizing parts, mainly in general electronic components. In the future, we plan to adopt standardization for more components in other product lines for resin molded components, printed circuit boards, and more. Naturally, we select standard components based on cost and quality. However, we also promote standardization by using the Omron Master Guide. This guide provides rules enforced during the design phase, as well as guidelines for component speciﬁcations. Under these measures, we are at nearly 100% adoption of standard components for new products. As our products advance along their lifecycles, we project an increase in purchases of standard components (as a percentage of materials costs) to rise from ■ Beneﬁts of Standard Materials/Components 15% in ﬁscal 2015 to 60% by ﬁscal 2020. We plan to accelerate corporate-wide initiatives to achieve this goal by working closely with our business divisions, convincing them of the importance of this target. 　Costs and quality are not the only factors that inﬂuence our decision when selecting standard components. Our ﬁrst priority is to determine whether the supplier is a potential long-term partner for Omron. Once that decision is made, then we look at cost and quality. Standard components offer several advantages compared to non-standard components. These advantages include cost savings, lower defect rates, and higher on-time delivery, among others. We also ﬁnd another number of beneﬁts by working Cost Quality Delivery Environment Services Technology Indicator Standard Components Non-Standard Components Cost Reduction Ratio Defect Rate On-Time Delivery Rate High Low High Low High Low Regulated Chemicals/Environmental Management Reduce environmental risk based on guarantees related to environmentally hazardous substances Payment Terms Cash ﬂow improvement through standard payment terms Advanced Technology Exchange Coordinate technology road maps, perform joint development W h e r e W e ’r e H e a d e d 39 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section closely in partnership with our suppliers. Strong relationships reduce environmental risk by promoting the proper management of regulated chemical substances, improve cash ﬂow based on standard payment terms, and allow joint development through sharing the latest technologies. 3. Restructuring Fixed Manufacturing Costs Improving Global Productivity Today we produce 40% of our total in Japan, 30% in China, 10% in Southeast Asia, and 20% in Europe, the Americas, and other regions. We are making advances in automating our own production ﬂoors, particularly in China and Southeast Asia. However, soaring labor costs mean that improving productivity is still an urgent issue for us (and every manufacturer). To address this issue, we plan to accelerate restructuring of ﬁxed manufacturing costs, focusing our efforts mainly in China. Speciﬁcally, we are working toward improving productivity through three initiatives: ❶ Quality Assurance in Manufacturing Processes We plan to move away from quality assurance based on manual post-process inspection to a system that ensures quality has been built into the process from the beginning. Standardizing components is one way that will help us be more efﬁcient in receiving inspections. We will use information technology to share data with our supply partners for greater visibility and stronger relationships. We also plan to bring more visibility to inspection data and manufacturing process changes that affect quality. We will incorporate more information technology into our own production lines to ■ Initiatives for Productivity Improvements visualize data related to process quality, quickly identifying changes in quality on the production ﬂoor and repeating the cycle of improvement to continually raise the level of our manufacturing processes. ❷ Standardizing Manufacturing Technology Processes We will reduce the time needed to launch mass production by standardizing our manufacturing technology processes in all stages, from design to mass production. We also plan to accelerate visibility to the production line, allowing production ﬂoor leaders to proactively manage equipment maintenance and other operations. ❸ Optimizing Corporate-Wide Logistics Working from a corporate-wide perspective, we plan to optimize the logistics networks for products and components developed separately under each business and division. We will also drive greater efﬁciencies in warehouse management operations as we convert from manual processes to a digital format. Moving forward, we will continue to strengthen our capability to integrate value, our capability to deliver value, and our capability to respond to changes in the business environment. We also plan to improve gross proﬁt margins not impacted by factors in the external environment. ❶ Quality Assurance in 　　Manufacturing Processes Product Design Process Design ❷ Standardizing Manufacturing Technology Processes Component Suppliers Acceptance Inspection Assembly Process Inspection Process Shipping Inspection Product Warehouses ❸ Optimizing Corporate-Wide Logistics 40 OMRON CorporationManufacturing Policy During ﬁscal 2015, we created the Omron Manufacturing Policy. This policy formalized guidelines for practicing the Omron Principles in our manufacturing activities. As every employee involved in manufacturing learns and practices this policy, we will create greater value for customers and better solutions to social issues. And, as we communicate our policy to customers, suppliers, and partners, we will create a foundation of mutual trust and understanding. These long-term mutually cooperative relationships we build will lead to even greater advancements in our manufacturing capabilities. 1▶ Quality ﬁrst Our top priority is delivering products to customers at the promised levels of quality. The accepted convention is that a trade-off exists between cost and quality. At Omron, we don’t believe in trade-offs; we believe in keeping our promises and delivering products of the highest quality to our customers. 2 ▶ 3F (Front-loading, Flowing & Flexible) By front-loading, we mean integrating customers’ demands for value into our earliest stages of product development. We imbue our products and services with this value, delivering what our customers need, in the volumes they need, when they need it (Flowing & Flexible). 3 ▶ H&E (Human-oriented & Eco-manufacturing) We conduct Human-oriented manufacturing, rather than the type of manufacturing in which people become subservient to machines. By seamlessly integrating the relationship between human and machine, we create higher levels of productivity and an advanced production ﬂoor in which everyone involved in manufacturing can contribute their talents, intuition, and experience. Materials, water, electricity, land, buildings, and other resources are in ﬁnite supply. Omron believes in sustainable Eco-manufacturing that uses these resources with respect. Omron Eco-manufacturing technology provides the world with an example of how to conserve materials and energy, while producing high-quality products. W h e r e W e ’r e H e a d e d 41 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Factory Tour Healthcare Business Matsusaka Factory The Omron Matsusaka Factory was built in Japan's Mie Prefecture in 1973. At this factory, Omron manufactures products that aid in the prevention, improvement, or management of lifestyle diseases and respiratory diseases. Products made here run the range from blood pressure monitors, nebulizers, and other in-home care items to medical devices for measuring arteriosclerosis and visceral fat. In addition, the Matsusaka Factory serves as the mother factory of the Healthcare Business. Delivering Health to More than 110 Countries Worldwide ■ Production Sites China (Dalian) Japan (Matsusaka) Vietnam (Ho Chi Minh) Brazil (Sao Paulo) Through four major locations around the globe, the Omron Healthcare Business supplies products to more than 110 countries around the world. As the leader of Healthcare Business manufacturing, the Matsusaka Factory is responsible for developing new methods and production technologies. These developments ensure that production takes place at the same level of quality and cost at any location and for any product. The factory works in concert with the Global Manufacturing Innovation HQ to reduce assembly time and the number of components required, as well as to introduce new automation technologies in the assembly line. Look at This! Best Quality in the World Wrist blood pressure monitors As a factory producing health and medical equipment, the Matsusaka Factory must meet the highest levels of reliability anywhere in the world. The factory satisfies international standards related to quality and medical equipment, demonstrating world- leading levels of quality. 42 OMRON Corporation Upper arm blood pressure monitors Nebulizers The Return of “Made in Matsusaka” Blood Pressure Monitors Fiscal 2016 plan 1,700 thousand units Fiscal 2013 260 thousand units During the 1990s, the Matsusaka Factory produced more than 1 million blood pressure monitors annually. As production shifted to China and Vietnam, the rate of production fell to 260,000 units. More recently, however, an increase in inbound tourist demand in Japan and a greater focus on quality both in Japan and throughout Asia has given rise to greater demand for products labeled “Made in Japan.” Such products include blood pressure monitors and other health and medical equipment where demand is high for items made in Japan. 　To respond to this dramatic shift in demand, the Matsusaka Factory has built a production system that delivers stable output. This system features new technologies to reduce assembly time, a higher ratio of domestic component procurement, and other means to maintain a competitive cost structure. The factory ramped up production during ﬁscal 2014, forecasting total production of 1.7 million blood pressure monitors in ﬁscal 2016. This increase in production has much to do with this year’s adoption of the world’s ﬁrst automated assembly line for blood pressure monitors. By automating processes that used to require several people to accomplish, the factory has more than doubled per-person productivity. In addition to adding more manufacturing technology to increase production in Japan, the Matsusaka Factory is training technical staff who can supervise production overseas. These individuals will introduce technologies proven at Matsusaka at overseas production centers, which will lead to further productivity gains for the Healthcare Business. Blood Pressure Monitor Production Line Manual Assembly Emphasis on production efﬁciency for a cost structure competitive with overseas manufacturers. Freely changing the number of workers and processes allows the factory to handle changes in product type and production numbers. Automated Assembly Advances in technology led to the world’s ﬁrst automated assembly line for blood pressure monitors. Robots replace human workers to deliver greater productivity and quality in component, module, and ﬁnished product assembly. t C o r p o r a e V a u e I n l i t i a t i v e s Integrated Report 2016 43 Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section 200 100 60 40 20 0 At a Glance Industrial Automation Business (IAB) Electronic and Mechanical Components Business (EMC) Automotive Electronic Components Business (AEC) ■ Net Sales/Operating Income/ 　 Operating Income Margin ■ ■ Net Sales/Operating Income/ 　 Operating Income Margin ■ Net Sales/Operating Income/ 　 Operating Income Margin (Billions of yen) 400 300 263.0 291.7 331.8 336.0 336.0 13.3% 11.9% 16.5% 14.3%14.3% 15 13.8%13.8% 10 31.3 38.8 54.6 47.9 46.5 0 FY 12 13 14 15 16 5 0 (%) 20 (Billions of yen) 120 97.7 90 84.1 (%) 12 103.9 103.7 100.0 10.0%10.0% 9 8.9% 9.8% 8.2%8.2% 60 30 0 FY 5.2% 4.4 8.7 10.2 8.5 10.0 12 13 14 15 16 6 3 0 (Billions of yen) (%) 12 9 6 160 120 80 40 0 FY 126.6 137.9 140.0 130.0 97.6 7.2% 5.1% 6.7% 5.2%5.2% 5.0%5.0% 5.0 9.1 9.2 7.3 6.5 12 13 14 15 16 3 0 (Forecast) (Forecast) (Forecast) ■ Ratio of Net Sales by Region ■ Ratio of Net Sales by Region ■ Ratio of Net Sales by Region (%) 100 Direct Exports Asia Pacific 80 Greater China Europe Americas 0.2 9.4 15.0 19.2 12.0 Japan 44.2 0.2 11.0 17.4 20.6 12.0 38.8 Direct Exports Asia Pacific 1.7 8.4 Greater China 29.2 Europe Americas 13.4 15.6 Japan 31.7 (%) 100 80 60 40 20 0 0.5 10.0 32.4 15.5 19.2 22.4 (%) 100 80 60 40 20 0 Direct Exports Asia Pacific Greater China Europe Americas 6.3 20.0 14.2 2.9 25.6 Japan 31.0 5.2 22.8 19.6 3.3 34.0 15.1 FY 12 15 FY 12 15 FY 12 15 ■ Capital Expenditures/ Depreciation and Amortization ■ Capital Expenditures/ Depreciation and Amortization ■ Capital Expenditures/ Depreciation and Amortization Capital expenditures Depreciation and amortization Capital expenditures Depreciation and amortization Capital expenditures Depreciation and amortization (Billions of yen) (Billions of yen) (Billions of yen) 6.0 4.5 3.0 1.5 0 FY 5.3 4.0 4.2 3.5 3.5 2.8 3.6 3.3 12 13 14 15 12 9 6 3 0 FY 10.9 7.8 8.9 7.4 9.5 8.0 8.9 8.3 12 13 14 15 8 6 4 2 0 FY 6.5 4.7 6.9 5.3 6.7 3.4 5.5 2.4 12 13 14 15 ■ R&D Expenses ■ R&D Expenses ■ R&D Expenses (Billions of yen) (Billions of yen) 6.0 (Billions of yen) 20 15 10 5 0 FY 16.5 15.7 15.3 18.2 12 13 14 15 6.0 4.5 3.0 1.5 0 FY 5.2 5.4 4.9 12 13 14 15 10.0 7.5 5.0 2.5 0 FY 44 8.2 8.5 9.3 7.0 12 13 14 15 Net sales　■ Operating incomeOperating income margin■ Net sales　■ Operating incomeOperating income margin■ Net sales　■ Operating incomeOperating income marginOMRON CorporationNotes: 1. During fiscal 2013, certain divisions of the EMC were included in the IAB due to a change in management categorizations. Segment information for fiscal 2012 and earlier has been restated to reflect this change. 2. Fiscal 2016 forecasts are those as originally disclosed on April 27, 2016. 3. For more information about net sales by region, please refer to Page 85- 88. Social Systems, Solutions and Service Business (SSB) Healthcare Business (HCB) Other Businesses ■ Net Sales/Operating Income/ 　 Operating Income Margin ■ ■ Net Sales/Operating Income/ 　 Operating Income Margin ■ Net Sales/Operating Income/ 　 Operating Income Margin (%) 10 (Billions of yen) 120 (%) 12 108.1 108.0 (Billions of yen) 11.0% (Billions of yen) 100 75 68.8 82.7 80.4 77.5 70.0 6.7% 5.7%5.7% 4.2% 6.2% 4.1%4.1% 2.9 5.6 5.0 3.2 4.0 12 13 14 15 16 50 25 0 FY 8 6 4 2 0 90 60 30 0 FY 100.6 89.3 71.5 6.2% 8.5% 6.5% 6.7%6.7% 7.4%7.4% 4.4 7.5 6.5 7.3 8.0 9 6 3 0 (%) 12 9 6 87.4 9.6% 63.0 78.9 71.0 8.7 8.4 2.1% 3 1.5 0 -4.1 100 75 50 25 0 -25 59.2 4.3%4.3% 2.5 (Forecast) (Forecast) (Forecast) ■ Ratio of Net Sales by Region ■ Ratio of Net Sales by Region ■ Ratio of Net Sales by Region 12 13 14 15 16 FY 12 13 14 15 16 (%) 100 Direct Exports Greater China 0.3 0.1 1.6 0.7 (%) 100 Direct Exports Asia Pacific Greater China Japan 99.6 97.7 80 60 40 20 0 80 60 40 20 0 1.0 5.0 15.5 22.3 Europe Americas 15.0 Japan 41.2 0.5 8.2 23.5 17.7 21.3 28.8 Direct Exports 2.5 Greater China 27.6 3.0 27.1 Japan 69.9 69.9 (%) 100 80 60 40 20 0 FY 12 15 FY 12 15 FY 12 15 ■ Capital Expenditures/ Depreciation and Amortization ■ Capital Expenditures/ Depreciation and Amortization ■ Capital Expenditures/ Depreciation and Amortization Capital expenditures Depreciation and amortization Capital expenditures Depreciation and amortization Capital expenditures Depreciation and amortization (Billions of yen) (Billions of yen) (Billions of yen) 2.0 1.5 1.0 0.5 0 FY 1.5 1.5 1.1 1.2 1.7 1.4 1.5 1.2 12 13 14 15 6.0 4.5 3.0 1.5 0 FY 3.9 2.3 3.9 3.3 3.7 2.8 3.1 1.9 12 13 14 15 8 6 4 2 0 FY 2.5 1.4 12 6.9 2.5 5.3 3.1 14 15 4.0 2.0 13 ■ R&D Expenses ■ R&D Expenses ■ R&D Expenses (Billions of yen) (Billions of yen) (Billions of yen) 4 3 2 1 0 FY 2.5 2.2 2.1 2.2 12 13 14 15 8 6 4 2 0 FY 5.0 5.2 6.1 5.5 12 13 14 15 6.0 4.5 3.0 1.5 0 FY 5.5 4.3 4.6 3.0 12 13 14 15 t C o r p o r a e V a u e I n l i t i a t i v e s 45 Net sales　■ Operating incomeOperating income margin■ Net sales　■ Operating incomeOperating income margin■ Net sales　■ Operating incomeOperating income marginIntegrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Business Segment Industrial Automation Business (IAB) Manufacture and sales of factory automation equipment Vision Bring Innovation to Manufacturing by Automation to Enrich the Lives of People All over the World The Industrial Automation Business leverages Omron technologies to create innovations in manufacturing. These innovations advance the world’s manufacturing industry and improve productivity on the production ﬂoor. 　Our mission, today and tomorrow, is to contribute to better living standards in the world through manufacturing. In accomplishing this mission, we combine our lineup of unique products in creative ways to provide industry solutions that cannot be imitated by our competitors. Yutaka Miyanaga Senior Managing Executive Officer Company President Industrial Automation Company Toward Sustainable Growth Accelerating “innovative-Automation” To achieve sustainable growth, we focus our efforts in markets most likely to experience major growth in the future. These markets include automobiles, smartphones and other digital devices, food and beverages, social infrastructure. We rely on our global sales organization to continue making inroads in these large and growing sectors. 　To show the entire world Omron’s unique solutions and to maximize our growth potential, we are accelerating innovative- Automation to introduce new products and solutions to the market. 　In April of this year, we released 49 new robot models to the market. The Industrial Automation Business regularly introduces new sensors and high-performance controllers. These products incorporate communications devices that answer today’s rising needs for using Big Data analysis and the IoT on factory floors around the world. 　We will continue to create new innovations in industrial automation, growing as a business as we provide solutions to save labor and create harmony between humans and machines—solutions only Omron can deliver. 46 OMRON CorporationBusiness Acquisitions During ﬁscal 2015, Omron acquired Delta Tau Data Systems, Inc. and Adept Technologies, Inc. In so doing, Omron has obtained access to motion controllers for high-speed, high-precision equipment and robotics that will play a major role on production ﬂoors in the future. We will add these technologies to our existing lineup of products, continuing to introduce innovations to manufacturing as a true automation company in every sense. Delta Tau Data Systems, Inc. Founded in 1976 in the U.S., Delta Tau Data Systems is a leading provider of high-performance motion controllers. Delta Tau’s controllers are used by thousands of manufacturers and research institutes in applications ranging from semiconductor production equipment, to medical devices, packaging equipment, and more. Delta Tau continues to develop technologies that help customers secure competitive advantage in their respective markets. Motion Controllers Built-In Driver Model Motion Controllers Circuit Board Model Adept Technologies, Inc. Adept Technologies, founded in the U.S. in 1983, has become a leading provider of industrial robots. The company’s innovative robots are used in a variety of manufacturing applications, including inspection and assembly. More recently, Adept Technologies has designed products tailored to human movement, resulting in automated transport robots capable of easy adoption across a wide range of industries. t C o r p o r a e V a u e I n l i t i a t i v e s Parallel Robots Automated Mobile Robots 47 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Business Segment Electronic and Mechanical Components Business (EMC) Manufacture and sales of electronic components for consumer electronics, automobiles, mobile devices, and amusement equipment Vision Enhancing the Quality and Lifestyle of People in the World by Providing Components that Satisfy Customer Needs The Electronic and Mechanical Components Business produces relays and switches for use in finished products such as home appliances, automobiles, communications equipment, machine tools, and more. The finished products we support now reach markets throughout the world with the growth of the emerging economies. 　We listen to our customers and observe social issues to uncover needs, creating components that help improve the value of finished products. Kenji Matsunami Managing Executive Officer Company President Electronic and Mechanical Components Company Toward Sustainable Growth Contributing to the Development of Smarter Societies As our smartphones, smart cars, and other devices become even smarter,* components used in these products must provide ever-higher levels of performance and electronic sophistication. We view this social change as a market need. As such, we offer components that leverage both mechanical technologies and sensing technologies (sensing people, things, and the environment), contributing to the development of the smart society. 　As one example, we are involved in smart energy projects to bring better efﬁciency to electric power industries in Asia and other emerging countries. In India, which is beset by chronic power shortages, electricity theft and the illegal use of electricity is a major social issue. This issue has a tremendously negative impact on India’s national economy. Combining a number of different Omron technologies, we have developed a sensor that detects electricity theft. Now, we are working with the government and power companies to spread adoption of this sensor. 　We will continue to accelerate our initiatives in renewable energy and electric vehicles for use in housing and automotive markets. We also intend to engage in growth ﬁelds, where we will contribute solutions for the Earth’s environmental issues. ＊Embedding communications technology to facilitate advanced information processing and management. 48 OMRON CorporationBusiness Segment Automotive Electronic Components Business (AEC) Development, manufacture, and sales of on-board automobile electronic components Vision Solving the Social Needs of the Car Society Today, we see signiﬁcant and growing needs for new technologies spurred by the rising popularity of electric vehicles, advancements in autonomous driving, and the integration of communications technologies. Here, we are using Omron’s core technologies to contribute solutions for these needs. 　We view these changes as an opportunity to meet the challenge to create solutions answering new social needs in the car society. We will base our efforts on technologies related to smart entry systems and other radio wave mechanisms, body cooperative control systems, electronic power steering and anti- pinching power window control systems, and other motor control technologies. Katsuhiro Wada Managing Executive Officer President and CEO OMRON Automotive Electronics Co., Ltd. t C o r p o r a e V a u e I n l i t i a t i v e s Toward Sustainable Growth Seamless Interaction between Humans and Cars Over the past few years, the relationship between humans and cars has undergone an amazing change. Very soon, car society will enter a dramatic period of transition. The speed of change is remarkable, and automotive component makers must demonstrate both foresight in anticipating the evolution of car society and technological capabilities for guiding and executing on market opportunities. Our commitment is to work closely with customers from the earliest stages of internal planning, uncovering social issues quickly, and creating solutions that answer customer needs. 　One example is related to the recent dramatic rise in demand for automated driving and advanced driving support systems. Integrating Omron face detection, AI, and biological information sensing technologies, we are leading the world in developing an advanced sensor module capable of sensing the status of a driver. Beyond automobile driving support, we believe this technology will have applications in preventing accidents arising from driver health issues or driver error (more frequently, error on the part of senior drivers). 　We will spare no effort to develop products that answer the future needs of the car society, providing seamless interaction between humans and cars. 49 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Business Segment Social Systems, Solutions and Service Business (SSB) Solutions and services for a safer, comfortable, more secure society Vision Creating the Future We have continued to anticipate and solve numerous social needs, just as when we introduced the world’s ﬁrst automated trafﬁc signal. Our automated passenger ticket gates and other station systems have resulted in the safe and comfortable use of train stations by hundreds of millions of passengers. In the future, an increasing number of visitors from around the world coming to the Tokyo Olympics, Paralympics, and other events will experience these systems for themselves. We have developed new services and equipment that guide passengers smoothly through stations. 　We will continue to offer solutions that integrate equipment and support to solve future issues and create a new future in transportation. Toshio Hosoi Managing Executive Officer President and CEO OMRON SOCIAL SOLUTIONS Co., Ltd. Toward Sustainable Growth Contributing to Safe, Secure Social Infrastructure In addition to our storehouse of technological assets and expertise, we aim to leverage the IoT to make even greater contributions to safe, secure social infrastructure. 　Our work in predictive controls is one such example. The Social Systems, Solutions and Service Business has developed predictive controls that reduce the risk of trafﬁc accidents. These controls use advanced sensing technology to capture real- time information about unusual pedestrian or road conditions, analyzing conditions in correlation with data based on past information. 　If the results of this analysis indicate a potential accident, trafﬁc signal controls and other measures are used as needed to avoid dangerous conditions. The world still struggles with the social issues of trafﬁc congestion and accidents. Our mission is to develop solutions to these issues for a safer, more secure society. There are still many social needs that have yet to be identiﬁed. 　The Social Systems, Solutions and Service Business is committed to discovering these needs and offering solutions through unique technologies. We invite you to watch as we take on new and important challenges to improve lives and contribute to a better society. 50 OMRON CorporationBusiness Segment Healthcare Business (HCB) Manufacture, sales, and services related to home-use / institutional healthcare and medical devices Vision All for Healthcare. To Help Realize Healthy and Comfortable Lives for People around the World The Healthcare Business enjoys the No. 1 share of the global blood pressure monitor market (internal survey). We deliver these and other products and services to the world to help prevent, improve, and manage lifestyle diseases. As the world has become wealthier, the number of people suffering from lifestyle diseases has started to skyrocket. This trend is particularly remarkable among the emerging economies. 　Through advanced sensing technologies and many years of clinical research, we have gained the trust of numerous medical and research institutes. Leveraging this trust, we will continue to create innovative products and services to help realize healthy and comfortable lives for people around the world. Isao Ogino Managing Executive Officer President and CEO OMRON HEALTHCARE Co., Ltd. t C o r p o r a e V a u e I n l i t i a t i v e s Toward Sustainable Growth Imagine a World with Zero Heart Attacks, Zero Strokes Death due to heart attack and stroke caused by high blood pressure is on top of the list. In many cases, the onset of these diseases have a major impact on healthy life expectancies, reducing patients to bed conﬁnement, causing speech impediments, or even worse. Accordingly, detecting and preventing the onset is an extremely important mission. We are engaged in business realizing zero cerebral and cardiovascular events. 　Accurate blood pressure monitoring is a critical part of detecting the risk of disease onset. To allow as many people as possible access to blood pressure monitors, we are expanding our sales network among emerging economies. As more people track their blood pressure, we will begin to see more details about types of high blood pressure (e.g. rapid increase of blood pressure in the morning). We believe this information will lead to better drug management, dosage timing, and even lifestyle recommendations tailored more speciﬁcally to each individual. 　We plan to accelerate the speed of our projects to eradicate the onset of cerebral and cardiovascular disease, growing our businesses by helping realize healthy and comfortable lives for people around the world. 51 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Business Segment Other Businesses Our Environmental Solutions and Backlights businesses experienced a signiﬁcant decline in sales for the year, mainly due to major changes in the business environment. We reallocated resources to new growth ﬁelds within these businesses, rebuilding our earnings structure. While the business environment is expected to remain challenging throughout ﬁscal 2016, we will continue to reform our business structure for growth and proﬁt. Review of Operations Environmental Solutions Business Backlights Business Hybrid Storage System for Solar Power LCD Backlights ● Fiscal 2015: Slack demand in the solar power generation market led to a signiﬁcant decrease in revenues. ● Fiscal 2015: Decrease in demand in the Chinese smartphone market resulted in sharply lower revenues. ● Fiscal 2016: We forecast higher revenues driven by demand for both existing products and new systems that integrate storage batteries. ● Fiscal 2016: Despite slowing growth in the smartphone market, we forecast higher revenues as we capture demand by responding to changes in customer needs. Electronic Systems and Equipment Business Micro Devices Business Uninterruptible Power Supply Units MEMS Pressure Sensors ● Fiscal 2015: Higher revenues due to strong ● Fiscal 2015: Decrease in demand for demand for uninterruptible power supply units and contract development and production services for electronic devices. ● Fiscal 2016: We forecast higher revenues as we expand our lineup of uninterruptible power supply units. smartphone microphones resulted in lower revenues. ● Fiscal 2016: We forecast revenue growth due to expected demand for smartphone microphones and absolute pressure sensors. 52 OMRON CorporationSustainability Topics Electronic and Mechanical Components Business × Network Camera Sensors 500Million Licenses OKAO® Vision Shipments Expanding IoT through Image Sensing Technologies In 1995, Omron began development on our proprietary OKAO® Vision image sensing technology. This technology uses facial recognition to detect detailed changes in expression and mannerisms to estimate the gender and age of a person. As IoT connects all manner of objects through networks, we will begin to use this technology to create new social needs. Simple Image Sensors Anyone Can Use In September 2015, Omron introduced a consumer product using network camera sensors*1 equipped with OKAO® Vision. This marked the advent of user-friendly image sensors—technology that used to require a high level of skill and knowledge to operate. 　Now, families can use this product to remotely monitor children, grandparents, pets, and more. Businesses can use this technology in marketing, hospitals, nursing care, and even simple security applications. Open Innovation Developers who have purchased this product for personal or commercial use have free access to the Sensing Egg Project*2, Omron’s open innovation website. This platform offers a variety of information necessary for application development. User needs are becoming more varied and diverse. As manufacturers shift to developing applications and systems from the user’s perspective, we will see an amazing leap forward in the potential for new uses of image sensors. ■ The Expanding Role of Omron Image Sensing Technologies in Society Protecting Families (Children, Grandparents, Pets) Family Security and Safety Marketing, Monitoring in Hospitals and Nursing Care Business Solutions 13 Sensing Functions OKAO® Vision 11 Types of Detection/ Estimation Face Detection Body Detection Hand Detection Age Estimation Gender Estimation Expression Estimation age 25 male happiness Face Direction Estimation Gaze Estimation Blink Estimation *1 Network Camera Sensor Human Vision Components (HVC-C2W) Right 30° Right 30° Face Recognition Pet Detection Open Innovation Mr. Alex Motion Detection Sound Detection Development of New Applications *2 Sensing Egg Project Website t C o r p o r a e V a u e I n l i t i a t i v e s 53 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Sustainability Topics More than180Million Units Helping Prevent Cerebral and Cardiovascular Diseases Cumulative No. of Blood Pressure Monitors Sold Over the Past 43 Years Healthcare Business × Lifestyle Diseases Estimates suggest that nearly 1 billion people–or roughly 13% of the planet’s population*1 have high blood pressure. In 2012, 17.5 million people*2 died from cerebral and cardiovascular diseases caused by high blood pressure. Omron is applying our unique technologies in a new ﬁght to realize zero cerebral and cardiovascular events. Technology that Measures Blood Pressure with Every Heartbeat Our blood pressure goes through signiﬁcant changes throughout the day. To fully understand our risk of disease, we must monitor our blood pressure on a continual basis. Traditional blood pressure monitors squeeze the upper arm or wrist tightly, temporarily stopping the ﬂow of blood. This discomfort associated with measuring blood pressure makes it difﬁcult for users to measure with frequency. 　To resolve this issue, Omron developed the world’s ﬁrst wrist-wearable blood pressure monitor that uses the tonometry method*3. With this technology, patients only need place the monitor on their wrist to measure their blood pressure health. If this type of comfortable blood pressure monitor becomes a practical everyday product, users will be able to track blood pressure variations in a way not possible with current monitors. In particular, this development will allow users to monitor their blood pressure during sleep. Dramatic spikes in blood pressure during sleep have been tied to an increased risk of heart attacks and strokes. Continuously measuring blood pressure at every heartbeat lets a user track variations in blood pressure that could indicate the onset of cerebral and cardiovascular diseases. This in turn can aid in preventing sickness, as users can be prompted to take measures against lifestyle diseases and high blood pressure. New Technology Creates New Value in the Blood Pressure Business Using this technology, our ﬁrst step is to create a product for clinical use by the end of 2017. At present, blood pressure monitors account for 50% of the ¥100 billion in annual Healthcare Business sales. We will deliver new value to customers, who will be able to predict their risk of heart attacks and strokes by detecting ﬂuctuations in their blood pressure. At the same time, this new technology will serve as the foundation for our sustainable growth over the next 10 to 20 years. *1 Source: WHO 2013 Report *2 Source: WHO 2015 Report *3 Method to measure blood pressure by pressing a pressure sensor on the radial artery. † News release: http://www.healthcare.omron.co.jp/english/news/2016/0418.html ■ Blood Pressure Varies Widely throughout the Day Temperature Stress Night (sleep) Early morning (waking up) Meals (salt intake) Exercise/activity Sleep apnea (snoring) ■ Diagram of Blood Pressure Monitor Using New Technology (on Radial Artery) Pressure sensor 54 Radial artery OMRON CorporationSustainability Topics Social Systems, Solutions and Service Business × Railroad Infrastructure Nearly 50Years A Half-Century of Train Station Solutions Evolving as a Pioneer in Train Station Solutions In 1967, we developed the world’s ﬁrst automated train station system, combining automated ticket vending machines with automated ticket gates. In nearly 50 years since that time, we have evolved our train station systems to meet the needs of railroad companies, passengers, and society at large. In 2015, we delivered a new automated ticket gate system to Kitakyushu Urban Monorail Co., Ltd. (Kitakyushu Monorail). This system allows the use of both QR Code tickets* and IC card tickets. Responding to the Changing Times Omron established a position as a leader in high- precision mechatronics for moving magnetic tickets quickly and smoothly through automated ticket gates. As the use of IC card tickets has become widely popular, we developed non- contact ticket gates that do not involve complicated mechanical movements. At the same time, many passengers still prefer not to use IC card tickets for their travel. These customers require automated ticket gates that still work with paper-based magnetic tickets. 　The automated ticket gate we delivered for the Kitakyushu Monorail uses QR Code tickets, rather than magnetic tickets. This eliminates the need for complex mechanics inside the ticket gate. QR Code tickets, however, demand new answers for security, which we solved by developing new technologies. Speciﬁcally, we created a multi- layered security system to prevent copying or counterfeiting QR Codes. This is an issue because QR Code technology is widely available to the public. We also created a system that can determine whether a particular QR Code has been used, preventing unauthorized access to the train platforms. Eco-Friendly Tickets Magnetic tickets are coated with iron powder on one side, which means these tickets must be painstakingly separated from other trash before recycling. In contrast, QR Code tickets need no magnetic processing, making them easily recyclable and eco-friendly. 　We will continue to anticipate new social needs in the future, creating new products and services for a more secure, safer, more comfortable society. * Paper ticket with a printed QR code (2D code). QR Code is a registered trademark of Denso Wave Incorporated. t C o r p o r a e V a u e I n l i t i a t i v e s Tap QR Code Ticket Tap IC Card Ticket † Image courtesy of Kitakyushu Urban Monorail Co., Ltd. ■ Beneﬁts of QR Code Tickets to Railroad Companies ① Reduced investment in station equipment, lower maintenance costs, and less incidence of equipment failure ② Eco-friendly (easily recyclable) 55 New Automated Ticket Gate System Compatible with both QR Code tickets and IC card tickets Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Management Compass The SINIC Theory Our founder, Kazuma Tateishi, believed that to solve social issues through business and create a better society required the ability to anticipate future social needs. He believed that a company needed a compass to help predict the future. As our compass, Mr. Tateishi formulated the SINIC predictive theory, which projects the future based on the cycle of interrelationships between Science, Technology, and Society. Omron ﬁrst announced this predictive theory to the world at the International Future Research World Congress in 1970. Since then, the SINIC Theory has been our compass for projecting into the future. Note: See http://www.omron.com/about/principles/sinic/ for more. From an Optimization Society to an Autonomous Society According to the SINIC Theory, we are presently living in the Optimization Society*1. In the preceding Industrial Society, the world emphasized the values of efﬁciency, productivity, physical goods, and groups. The Autonomous Society is the next stage in which the world values higher-level pursuits of spiritual and emotional development. These values focus on contentment and individual lifestyle. 　The Optimization Society is a repeated cycle of destruction and creation in the gaps that exist between these two social values. Today, we are experiencing a period of chaos in the advancement of optimization. We predict that the Autonomous Society will arrive in 10 years or so. This society will be a more mature one in which individuals can experience the joy of self-actualization, deciding their own values and living their own lifestyle without outside interference. 　Over time, we will experience a shift away from physical goods toward an increase in collective wisdom, emotional intelligence, and the capacity to concern ourselves with others. These changes will require advancements in science and technology related to human intellect, sensitivity, and other human virtues. The Internet of Things and Artiﬁcial Intelligence are ushering in the Fourth Industrial Revolution, a development that conﬁrms the predictive model of the SINIC Theory. The Evolving Relationship between Humans and Machines This change in society is inextricably tied to the changing nature of the relationship between humans and machines. The relationship between humans and machines develops across three stages. The ﬁrst stage is one of separating humans and machines, having the machine take over certain tasks from the human. This was the beginning of automation: using machines to replace humans to do work that does not require human intervention. The Omron history mirrors this history, as we introduced factory automation, automated ticket gates, and other inventions. 　The second stage in this relationship is one of connecting humans and machines in a cooperative relationship. An example of this is a 56 OMRON Corporation1876～ 1945～ 1974～ 2005～ 2025～ 2033～ Industrial Society Mechanization Society Automation Society Cybernation Society *1 Optimization Society Autonomous Society Natural Society Second Industrial Revolution Societal emphasis on production efficiency IT Revolution Shift in values from material goods to spiritual pursuits Harmony between individual and society, humans and nature, humans and machines Sustainable society incorporating advanced biomechanisms Automatic Control Technics Electronic Control Technics Biologic Control Technics Psycho-Biologic Technics Meta-Psychologic Technics [Harmonize] Machines enhance the capabilities of humans [Connect] Humans cooperate with machines Humans Machines [Separate] Machines replace humans Humans Machines Humans Machines *1 While this addresses the period of change coming to advanced nations in the future, the pace of change among emerging nations will be much faster and far more dramatic. production line where humans and robots work together, each performing the most suitable task to increase productivity. Another example is the Omron collision-prevention technology that supports our vision of a collision-free mobile society. Here, humans and machines work together to ensure peace of mind, safety, and comfort. 　The third stage in this relationship is harmony between humans and machines. Here, harmony enhances the capabilities of the human worker. As machines become a more integral part of society, humans will enjoy machine support in a number of new and different ways that extend the potential of human capabilities. We are already seeing the practical implementation of these technologies. Wearable devices that monitor human biological information and robot suits that detect and aid human intent are just a few examples. Automating Our Way to the Future Looking forward to a new future in human and machine interaction, Omron is taking up the challenge to create new forms of automation in this era of the Internet of Things. More speciﬁcally, our approach to automation will follow three concepts: (1) Evolution in control (integrated); (2) Intelligence developed through ICT (intelligent); and (3) New harmonization between humans and machines (interactive). Our sights are set beyond industrial applications, as we look to introduce automation in the agricultural and services industries as well. To accomplish our goals, we are developing new technologies for use in applications such as cognitive sciences, neuroscience, and artiﬁcial intelligence. 　Since our founding, we have continued to anticipate social needs, develop technologies to solve social issues, and contribute to a better society through our businesses. The good we have brought to society is based on the future- predictive SINIC Theory and our basic founding philosophy: “To the machine, the work of the machine; to humankind, the thrill of unfettered creativity.” Guided by our vision of the future of automation, Omron will continue to develop technologies and carry out businesses that contribute to a better society. t C o r p o r a e V a u e F o u n d a l t i o n 57 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Sustainability Management Supporting International Initiatives In 2008, we declared our support for the Ten Principles of the United Nations Global Compact (UNGC). These are universally accepted principles for human rights, labor, environmental impact, and anti-corruption practices. Currently, Omron is a member of the local UNGC chapters in Japan and China. 　In September 2015, the United Nations adopted Transforming our world: the 2030 Agenda for Sustainable Development. This agenda includes 17 goals and 169 associated targets, described as Sustainable Development Goals. Omron is determined to promote the achievement of these goals through our businesses. 　We intend to continue to support this and other international initiatives, contributing to the creation of a sustainable society through responsible engagement with our stakeholders. Fumio Tateishi Chairman July 2016 58 OMRON CorporationEnvironmental, Social, and Governance Initiatives Omron is an active agent for sustainable business through environmental, social, and governance initiatives (ESG). Supporting this stance, we announced the formation of a platform to incorporate and practice ESG policies within the ﬁscal 2016 policy for the operation of the Board of Directors. At present, we are identifying ESG issues and starting programs in areas likely to directly affect sustainable growth at Omron. ■ Important ESG Issues ESG Issue Important Initiatives Related Pages Social Diversity ● Educating the next generation of top-rank managers 　KPI: Ratio of non-Japanese in managerial positions overseas ● Promoting career advancement for women 　KPI: Ratio of women in managerial roles Non-Financial Highlights P30-P31 Environ- ment Eco-Manu- facturing ● Providing products and services that contribute to the 　global environment 　KPI: Environmental contribution ● Adopting measures to combat global warming 　KPI: Global net sales to CO2 emissions 　Target: 30% improvement by ﬁscal 2020 (ﬁscal 2010 baseline) Non-Financial Highlights P30-P31 Corporate Governance ● Strengthening systems to improve transparency, 　fairness 　(Board diversity, compensation) Gover- nance Risk Man- agement ● Adopting measures against signiﬁcant Group risks Corporate Governance P70-P75 Compliance and Risk Management P60-P63 Coverage in Socially Responsible Investment Indexes Recognizing our commitment to sustainability, several socially responsible indexes (SRIs) now include Omron as a constituent member. Overseas, we have been included for the sixth consecutive year in the Dow Jones Sustainability Asia/Paciﬁc Index. We have also been included for the second consecutive year in the MSCI Global Sustainability Indexes, and have been newly selected this year for inclusion in the FTSE4Good Index Series. In Japan, we are covered under the Morningstar Socially Responsible Investment Index. t C o r p o r a e V a u e F o u n d a l t i o n FTSE4Good is an investment index designed to promote investment in corporations meeting global ESG standards. 59 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section TOPICS Integrated Risk Management Engaging in more global, speedier activities to contribute to the Group’s ability to respond to change Omron Risk Management Activities and Annual Cycle At the time we launched our Long-term Vision VG2020 business plan in 2011, we also took the opportunity to review our risk management activities. As a result of this review, we initiated a program of integrated risk management. 　At the time, our president charged us with two tasks: (1) Identify global risks to be able to respond with speed, and (2) Have every employee in the Group view risk as a seed of opportunity and seize upon these opportunities for growth. With these instructions, we established three main activities related to integrated global risk management. ❶ Conduct an annual global risk analysis to identify important risks and establish appropriate responses ❷ Establish crisis response measures when a risk is identiﬁed ❸ Promptly report and share important risk information among affected parties (risk information management) Shuji Tamaki Executive Officer Senior General Manager Global Risk Management and Legal HQ 60 OMRON CorporationIntegrated Risk Management ■ Integrated Risk Management Framework Deﬁnitions of Concepts and Terms Basic Policy Organizational Structure 【Group Management PDCA】【Front-Line PDCA】　We view compliance with laws and statutes as a legal risk, which is included in our integrated risk management program. 　We have clearly deﬁned our activity framework to promote efﬁciency and effectiveness in our global activities. This framework is formalized in the Omron Group Rules for Integrated Risk Management. 　This activity cycle for integrated risk management begins every autumn with a risk analysis. The Executive Council (consisting of the president and division managers) determines important risks, while the Board of Directors evaluates these activities. Next, risk response plans are determined and related budgets are set. Finally, these measures are carried out and the results are published through our integrated report and website. ■ Activity Cycle for Integrated Risk Management Corporate Ethics & Risk Management Committee ・ Determine risk response plan for the upcoming year ・ Determine budgets for the upcoming year Plan Do Execute Plan ・ Share/report information related to important risks ・ Conduct activities based on the plan ・ Corporate ethics month Board of Directors ・Annual activity review Act Check ・ Headquarters, regional headquarters, divisions Analyze Global Risk Executive Council ・ Report the progress of activities for the current year ・ Report results of global risk analysis ・ Determine important Group risks for the upcoming year Corporate Ethics & Risk Management Committee ・ Annual activity review ・ Share analysis of risks ・ Select important Group risks (draft) t C o r p o r a e V a u e F o u n d a l t i o n Publish Results of Activities (Business report, securities report, integrated report, website) 61 Management ReviewWhistle-Blower HotlineInternal AuditDevelopment of Professional FunctionsCrisis ManagementRisk Analysis and CountermeasuresRisk Information ManagementInternal Rules and ProceduresCrisis ManagementRisk Analysis and CountermeasuresRisk Information ManagementIntegrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Omron Group Important Risks and Risk Information Management We assign a rank of “S” to the most critical management risks that threaten the existence of the Group or call into question important issues of corporate social responsibility. We assign a rank of “A” to risks that may impede important Group goals. These ranks are determined annually by the Executive Council after discussion in the Corporate Ethics & Risk Management Committee. 　We have selected nearly 100 sources of information from within Japan and around the world to monitor important trends in external risk. Each day we check risk information, promptly sharing any important developments with the appropriate individuals. 　As a rule, important risks identiﬁed within the Group are reported to headquarters within 24 hours. In the event of a major disaster or accident, for example, we will immediately conﬁrm the safety of local Group employees. The results of this investigation are immediately forwarded to the Global Risk Management and Compliance Initiatives One example of our compliance structure is our whistleblower hotline, an effective means to prevent corruption within the Group. We are setting up this program at regional headquarters throughout the world, with systems already completed in Japan, the Americas, Europe, Asia, and China. During ﬁscal 2012, we received six reports with the only overseas hotline existing in the Americas (compared to 20 reports in Japan). In ﬁscal 2015, we received 21 reports across the ﬁve regions Legal HQ by telephone or email. 　Our network of employees and their response to risk management play a critical role in accomplishing this task. For this reason, risk managers are selected within each headquarters department, each business division, each overseas region, and within each Group company. ■ Omron Group Important Risks Frequency Very High High Medium Low h c a E n i s k s i R t n a t r o p m I s s e n i s u B k s i R k n a R A - k s i R k n a R S - C B A S t c a p m I f o e e r g e D listed above (31 reports in Japan). With the consultation of attorneys, we discreetly investigated each report, taking measures to prevent recurrence when necessary. 　Every October, we hold the Corporate Ethics Month in Japan. During this month, we conduct training, publish a special message from the president, and conduct other activities. Beginning this year, the Corporate Ethics Month will be a global event for Omron. 62 OMRON Corporation Risk Management and ESG In our global risk analysis last autumn, we noted rising demands for ESG, and concluded that an improper response to ESG matters could result in a number of issues. Emerging economies in particular have started to introduce stricter laws as they struggle with national issues related to pollution, bribery and corruption, and labor conditions. Early on, we identiﬁed Group risks related to the environment, labor safety, Business Risk and Operating Risk We deﬁned comparatively short-term ﬁnancial risks as business risk and longer-term non- ﬁnancial risks related to earnings and corporate value as operating risk. The activities we have described thus far have mainly been related to operating risk. 　In addition to risk management, I also have responsibility for legal affairs, which relates to business risk in terms of important contracts and issues arising during the course of conducting our business. In these cases, I communicate with business divisions about both legal risks and important business risks, offering advice regarding any needed measures. However, I believe we must look for risk and provide advice much earlier in the business process, during product development, individual business and Future Issues and Initiatives and corruption. Although we have measures in place to respond to these risks, we believe we must strengthen related activities. For example, we have held regular training related to corruption prevention at our locations throughout the world. Moving forward, we plan to introduce more detailed controls according to the situation within each Group company. transaction planning, and so forth. 　In our M&A activity as well, we must instill in our new members a commitment to the Omron Principles, our rules, and our integrated operations aligned with business strategy. I am convinced that failure to do so will mean failure of the acquisition. I believe this is a clear example of business risk, as well as active risk management in the integration post-merger/ acquisition. We studied the risks involved in the companies we acquired during ﬁscal 2014 and 2015, taking steps to address the risks identiﬁed in our integration plan. We must raise our skill level in analyzing risk and planning efﬁcient/effective measures if we are to respond correctly to M&A involving any type of company in any country around the world. As discussed above, we plan to instill an understanding of risk management in each Group company as we engage in more activity across the world. Our vision is that each locale becomes capable of analyzing their own risks, taking effective action quickly while the risks are still small and manageable. This will accelerate the speed of our business at the Group company level, as well as for the Omron Group as a whole. 　We are committed to advancing integrated risk management activities that promote greater globalization and speed, helping strengthen the ability of the Omron Group to respond to change. t C o r p o r a e V a u e F o u n d a l t i o n 63 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Human Resources Management Promoting Greater Roles for Women Diversity drives Omron growth. President and CEO At Omron, Respect for All is an important part of how we deﬁne Our Values included in the Omron Principles. We strive to be a company that allows individuals from a variety of backgrounds the chance to express their individuality and talents without regard to nationality, religion, marriage status, gender, sexual orientation, or disabilities. I sincerely believe that a diverse employee base working as one can generate amazing and creative innovations that solve social issues through our businesses. To be a company valued by the people of the world, Omron must continue to be active in promoting diversity. Expanding the Role of Women in Japan Participation in the Council of Male Leaders Promoting Women’s Roles in Society our company. Moving forward, I will continue to take opportunities to spread the message of diversity both inside our company and in public. I hope to help foster an environment in which every individual can exercise their own initiative and develop their own potential. In May 2016, I began participating in the Council of Male Leaders Promoting Women’s Roles in Society, sponsored by the Cabinet Ofﬁce. Promoting the active role of women in Japan is one of the most important issues facing Japan. At the same time, women are an indispensable part of the Omron push for diversity. The Council issued a declaration based on three concepts: (1) Taking the lead in promoting the role of women; (2) Disrupting the status quo; and (3) Developing networks of like-minded leaders. This declaration closely resembles how Omron is supporting diversity in 64 OMRON Corporation Action Plan for Promoting the Role of Women The Act on Promotion of Women's Participation and Advancement in the Workplace came into effect on April 1, 2016. In response, Omron created a set of speciﬁc goals and an action plan for promoting the role of women, based on the circumstances within each Omron Group company. We have formally published these goals and our action plan for public reference. Through this initiative, we hope to further expand the role of women within the Omron Group. At the same time, we hope to foster an awareness and build a culture in which any employee can excel, growing as an individual together with the Omron Group. t C o r p o r a e V a u e F o u n d a l t i o n Integrated Report 2016 65 Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Human Resources Management Promoting Diversity and Team Management The Omron Principles include the idea of Respect for All. We recognize that it beneﬁts both our company and our people when a diverse base of employees can express their personalities and talents freely without regard to nationality, gender, or disabilities. Our nearly 38,000 employees worldwide are what support sustainable growth at Omron. Each Person Plays a Starring Role The Joy and Satisfaction of Making a Positive Contribution through Work Omron Taiyo* manufactures electronic components. Among its workforce, the company includes 32 individuals with varying degrees of disabilities. To offer more opportunities for the disabled, this manufacturing plant strives to provide a work environment in which anyone can accomplish tasks tailored to their temperament and capabilities. For example, the plant has improved the picking process to make in-plant delivery of components much easier. 　In the past, the plant had used a set allotment system to deliver only the necessary components in the necessary numbers to a work station. At ﬁrst, management attempted to make the set allotment system more efﬁcient by providing easy-to-see information about which components stored on which racks should be delivered to which production lines. They soon understood, however, that certain disabilities prevented individuals from dealing effectively with large integers, detailed fractions, or complex computer operations. 　In response, management shifted to the kanban method, which provided instructions for replacing a supply of components after a certain volume has been used. This method relies more on rounded numbers (for example, units of 500), eliminating the need for detailed counting. In the past, picking work required signiﬁcant time as disabled workers read part numbers out loud several times to verify they were retrieving the correct components. The new kanban system incorporates bar codes and bar code readers, making part number veriﬁcation a matter of seconds. This has resulted in much greater efﬁciency for our disabled workers and the virtual elimination of part picking mistakes. 　Omron will continue to use our creativity and imagination to build accessible work environments in which any employee can be proud to work side by side, without regard to disability or capability. * Omron Taiyo: Located in Oita Prefecture, the company employs a total of 61 workers (as of March 2016). Omron Taiyo introduced barcode readers for more efficient part picking 66 OMRON CorporationTeam-Based Solutions Delivering Pharmaceutical Serialization Solutions OMRON Electronics GmbH (OEE-D) sells control equipment in Germany. More recently, this company has been creating solutions for pharmaceutical serialization* to ﬁght counterfeit medicines and the potential harm these illegal substances can cause. 　According to the World Health Organization, as much as 24% of pharmaceutical drugs on the global market are counterfeit. Each year, counterfeit medicines cost the lives of 1 million people. The EU has put regulations into place requiring serial numbers to be printed on the exterior of pharmaceutical packaging to help identify genuine products. 　The OEE-D is working with packaging companies, printing companies, equipment vendors, and data processing companies to deliver a solution to trace the movement of medicine through the entire supply chain, from manufacturer to end consumer. This solution incorporates the use of a drug veriﬁcation database provided by the EU government. This system, which relies on Omron image sensors, is a product of the combined efforts of our sales, marketing, and application development professionals. The OEE-D also turned to the European product support team and the development division at Japan’s Kusatsu Plant to round out the project team. 　This serialization system has promising applications in other industries as well, including foods, beverages, and cosmetics. Other nations and regions around the world are also looking to introduce regulations for tracking the movement of medicines. These include Russia, Brazil, the United States, Saudi Arabia, and South and Central America. 　We believe there are a number of other business opportunities ahead for expanding this solution to neighboring industries. * Serialization Solution: System for managing the flow of individual products throughout an entire supply chain Mandated serial number display on exterior packaging for medicines t C o r p o r a e V a u e F o u n d a l t i o n 67 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section TOPICS Driving Business Growth with Information Technology Global IT Strategy 2020 Through ﬁscal 2014, our IT strategy in support of the Omron VG2020 long-term vision consisted mainly of restructuring enterprise applications. At the same time, however, we recognized that most of these initiatives were the adoption of IT tools having little connection to management strategy or business process improvements. To address this situation, we created the Global IT Strategy in ﬁscal 2015. Under this strategy, we will make more effective use of strategic information and strengthen our IT governance. ■ Global IT Strategy 2020 Overview OMRON GLOBAL IT STRATEGY 2020 Strategic Information as the Driver of Global Growth Existing Businesses Strategic Marketing and Business Management Model (Based on Projections via Leading Indicators) VG2020 Basic Strategy Super-Global Growth Structure Cross-Division Platform for Greater Efﬁciencies New Businesses Create New Businesses Using IoT Strengthen IT Governance to Support Global Management Unify Global Codes for Better Use of Information Optimize IT Investment/Costs Based on ROI Business Process Restructuring through Information Technology We intend to use IT to restructure our sales processes in a way that automates a seamless ﬂow of information throughout our organization without the need for a formal report chain. We believe this restructuring will lead to improved accuracy in projecting global trends, letting Omron take decisive action while others wait. This new system will reduce the current lead time required for information to pass through our reporting chain, moving information quickly from the front lines of our business up to our decision makers. 　We also plan to leverage IT to give us a competitive advantage in our sales activities. Using IT to visualize market and customer information in each sector, we can perform cross-region analyses to avoid missed sales and identify new sales opportunities on a global scale. For example, we could take successful solutions for customers in Europe and implement them for customers in Asia through cross-region collaboration. 　To achieve this goal, we plan to accelerate our adoption of a uniﬁed code system to create a master customer database. By managing customers through a uniﬁed global code system, we can cross-reference manufacturing processes and issues across our entire customer base. This will allow us to strategically approach customers based on region, as well as potential products and services, leading to much more effective business development. 68 OMRON Corporation■ Global IT Strategy 2020 Framework Long-Term Vision VG2020 Existing Businesses Super-Global Growth New Businesses Management Customers Identify Information Necessary for Decision-Making, Link to Immediate Action Seamless Information Flow (no Formal Reporting Chain Needed) Market/Production Floor Data (Front-Line, Granular) Unified Global Codes Value-Added Information (Insight) Analytics Information Data (Extract, Combine, Sort, Compare) Market/ Customer Data Enterprise Data M2M Data Codes/Master Processes Applications IT Infrastructure IT Investment/Costs HR/Organization/Mindset Information Utilization Concept IT Governance MES*1 as Global Standard for Production Floor Visibility At Omron, we developed a proprietary manufacturing execution system (MES) in use at 13 factories worldwide. Greater visibility to the production ﬂoor is driving productivity improvement at each of these factories. The Kusatsu Factory*2 provides one case in point. Here, we have seen productivity gains by combining real-time production line information with greater visibility. Sequential analysis of production line variables, such as labor hours, production volume, and defects provides a clear picture of the impact that variances in labor hours by station and product have on productivity. Now, managers can identify areas for improvement without having to rely on the intuition and experience of ﬂoor workers. Since adopting this system in 2011, we have achieved an 80% improvement in productivity (as of ﬁscal 2015). 　Future plans include incorporating IoT technology to capture an even wider range of production data. Using our own factories as a test bed, we plan to create new value by providing managers with production ﬂoor information that even the most experienced workers would not be able to identify or communicate efﬁciently. *1 MES: Manufacturing Execution System. Information system for capturing and managing manufacturing process information, providing guidance and support to floor workers. *2 Kusatsu Factory: Manufacturing facility for the Industrial Automa- tion Business and Social Systems, Solutions and Service Business. IAB manufactures FA controllers and other products. t C o r p o r a e V a u e F o u n d a l t i o n Total visibility on one screen. See production line information at a glance. Red line indicates production line delays. 69 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Corporate Governance Omron continually reviews and improves our corporate governance structures supporting sustainable value creation Basic Stance for Corporate Governance of the Company At the OMRON Group, corporate governance is deﬁned as the system of processes and practices based on the Omron Principles and the Omron Management Philosophy. The system is intended to ensure transparency and fairness in business and speed up management decisions and practices. This is done by connecting the entire process from oversight and supervision all the way to business execution in order to boost the OMRON Group’s competitive edge. Omron’s corporate governance also involves building such a system and maintaining its proper function. The ultimate objective is to achieve sustained enhancement of corporate value by earning the support of all stakeholders. Omron Corporate Governance Policies Omron Corporation established the Omron Corporate Governance Policies based on the Basic Stance for Corporate Governance. Since establishing the Management Personnel Advisory Committee in 1996, we have spent nearly 20 years in formalizing and strengthening our systems of corporate governance. We intend to continue our pursuit of ongoing corporate governance improvement as we develop our own unique vision of governance. OMRON Corporate Governance Policies http://www.omron.com/about/governance/governance/pdfs/20160329_ governance_policies_e.pdf ■ Corporate Governance Initiatives 1999 2003 2011 President 1987: Yoshio Tateishi 2003: Hisao Sakuta 2011: Yoshihito Yamada Chair of the Board of Directors / CEO Separation of management oversight and business execution President served as both Chairman serves as chair of the Board of Directors; president serves as CEO 1999: Revised articles of incorporation, setting number of board members to 10 or fewer 30 directors 1999: Adopted executive officer system Advisory Board 1999: Advisory Board Outside Directors 2001: One outside director 2003: Two outside directors (seven directors) 2015: Three outside directors (eight directors) Audit & Supervisory Board (Outside Members) 1998: One member 1999: Two members 2003: Three members (four auditors) 2011: Two members (four auditors) 1996: Management Personnel Advisory Committee 2000: Personnel Advisory Committee 2003: Compensation Advisory Committee Advisory and Other Committees Corporate Philosophy 1959: Corporate Motto Omron Corporate Governance Policies 1990: Omron Principles 1998: Revised 2006: CEO Selection Advisory Committee 2008: Corporate Governance Committee 2006: Revised 2015: Revised 2015 Established 70 OMRON CorporationCorporate Governance Framework Omron has elected to be a company with an Audit & Supervisory Board under the provisions of the Companies Act. 　The Omron Board of Directors is made up of eight members to ensure substantive discussion and deliberation about important corporate matters. Omron has separated the management oversight and business execution functions within the company, creating a system whereby the majority of board directors are not engaged directly in business operations. We have also adopted a policy setting the ratio of outside directors to at least one third of the total number of directors on the Board. 　To increase objectivity on behalf of the Board of Directors, the titles and roles of Chairman of the Board and President (CEO) are separated. The Chairman serves as chair of the Board of Directors, without direct corporate representational authority. 　Omron has established several advisory committees to assist the Board of Directors. These committees include the Personnel Advisory Committee, the CEO Selection Advisory Committee, the Compensation Advisory Committee, and the Corporate Governance Committee. The Personnel Advisory Committee, the CEO Selection Advisory Committee, and the Compensation Advisory Committee are all chaired by outside directors, with at least half of the committee members being outside directors. The chair and members of the Corporate Governance Committee are outside directors and outside corporate auditors, which offers yet another layer of transparency and objectivity onto its decision-making process. 　In these policies, we have created a hybrid governance framework, combining the best features of a Company with an Audit & Supervisory Board and a Company with a Nominating Committee. ■ Corporate Governance Structure Shareholders’ Meeting Board of Directors Chair: Chairman of the Board Audit & Supervisory Board Audit & Supervisory Board Office Accounting Auditor Executive Organization Board of Directors Office President & CEO Executive Council Personnel Advisory Committee CEO Selection Advisory Committee Compensation Advisory Committee Corporate Governance Committee CSR-Related Committees* Head Office Divisions Businesses Companies Internal Audit Division * Includes Corporate Ethics & Risk Management Committee, Information Disclosure Executive Committee, and Group Environment Activity Committee Board of Directors Makes decisions related to perfor- mance targets and strategies; over- sees the execution of business op- erations. Audit & Supervisory Board Oversees corporate governance structure and execution business operations; conducts audits of day- to-day business activities, including those performed by directors. Personnel Advisory Committee Sets standards and policies related to selecting and hiring directors, Audit & Supervisory Board members, and ex- ecutive ofﬁcers; selects candidates and evaluates performance of current direc- tors and executive ofﬁcers. CEO Selection Advisory Committee Deliberates and nominates candi- dates for corporate president & CEO; deliberates succession candidates in the event of an emergency. Compensation Advisory Committee Sets policies for director and execu- tive ofﬁcer compensation; evaluates compensation levels, deliberates speciﬁc compensation packages. Corporate Governance Committee Oversees ongoing corporate gover- nance improvement; deliberates pol- icies to advance management trans- parency and fairness. Executive Council Deliberates and makes decisions re- garding important operational mat- ters within the scope of the authority of the president and CEO. t C o r p o r a e V a u e F o u n d a l t i o n 71 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Audit Functions The Audit & Supervisory Board performs compliance and validity audits related to director performance and Board of Director supervisory duties. The Audit & Supervisory Board works to provide a basis for ensuring the practicability of these audits. The Global Internal Auditing HQ, which reports directly to the president and CEO, periodically conducts internal audits of accounting, administration, business risks, and compliance in each headquarters division and business company. Internal audits are more than just a tool to conﬁrm compliance; they are also a valuable means for providing feedback and advice for operational improvement. Selection of Outside Directors and Auditors The Omron Board of Directors nominates and selects outside directors and outside Audit & Supervisory Board members as a means to oversee business operations as a representative of Omron shareholders and other stakeholders. Outside directors are selected based on predeﬁned standards of independence. 　In addition to the requirements under the Companies Act, Omron has established other rules for governing the independence of outside directors in compliance with independence standards set by the relevant stock exchanges. 　Based on these standard of independence, three of Omron’s eight members of the Board of Directors are outside directors, and two of the four members of the Audit & Supervisory Board are likewise outside members. Omron has submitted ■ Advisory Committee Composition ﬁlings to the relevant stock exchanges designating these individuals as outside independent directors. ■ Number of Major Meetings Held and Rates of 　Attendance (Fiscal 2015) Meetings of the Board of Directors Meetings of the Audit & Supervisory Board 13 13 Outside Director attendance at Board of Director Meetings 97.2% Outside Audit & Supervisory Board member attendance at Board of Director Meetings 100% Outside Audit & Supervisory Board member attendance at Audit & Supervisory Board meetings 96.2% Title Name Personnel Advisory Committee CEO Selection Advisory Committee Compensation Advisory Committee Corporate Governance Committee Chairman President and CEO Executive Vice President and CFO Executive Vice President Director Outside Director Outside Director Outside Director Audit & Supervisory Board Member Audit & Supervisory Board Member Fumio Tateishi Yoshihito Yamada Yoshinori Suzuki Akio Sakumiya Koji Nitto Kazuhiko Toyama† Eizo Kobayashi† Kuniko Nishikawa† Kiichiro Kondo Tokio Kawashima □ ○ □ ◎ □ Audit & Supervisory Board Member (Independent) Yoshifumi Matsumoto† Audit & Supervisory Board Member (Independent) Hideyo Uchiyama† Note: ◎Chairman ○Vice Chairman □Committee Member 　　 †Independent Ofﬁcer □ ○ ◎ □ □ ○ □ □ ◎ □ ◎ ○ □ □ □ 72 OMRON Corporation Financial Incentives for Directors and Audit & Supervisory Board Members The Company established the Compensation Advisory Committee to enhance objectivity and transparency related to director remuneration*. This committee is chaired by an outside director and consists of ﬁve directors, none of whom can be the Company’s chairman or president. 　The Compensation Advisory Committee conducts deliberations and makes recommendations regarding director compensation. These recommendations are presented before the annual general meeting of shareholders, where shareholders vote on the total amount of compensation for members of the Board of Directors. The Company’s Board of Directors then determines director compensation within the scope set by the shareholders. 　The Company has introduced medium-term performance-linked bonuses and performance-linked stock acquisition rights in an effort to give directors incentives to achieve medium-term management targets and to strengthen governance over compensation. 　Under this structure, the governance system for director compensation incorporates three components: (1) base salary; (2) yearly performance-linked bonuses; and (3) medium-term performance-linked bonuses, stock compensation, and performance-linked stock acquisition rights. With this compensation structure, the Company aims to motivate directors to achieve short-, medium-, and long-term targets and to generate sustainable corporate value. 　Total compensation for members of the Audit & Supervisory Board is determined by a vote at the annual general meeting of shareholders. The members of the Audit & Supervisory Board then consult and determine their compensation within the scope set by the shareholders. * Compensation of Directors and Audit & Supervisory Board Members 　http://www.omron.com/about/ir/shareholder/pdfs/convocation_notice_79th.pdf 　（Convocation Notice for The 79th Ordinary General Meeting of Shareholders P34-36） Evaluating the Effectiveness of the Board of Directors The Company conducts analysis and evaluation on the effectiveness of the Board of Directors so that the members of the Board will enhance the function and the effectiveness of the Board to realize the sustained improvements in corporate value by recognizing, sharing, and improving the direction to be taken by the Board and the issues arising from such direction. Method for Evaluating the Effectiveness of the Board of Directors Evaluation on the effectiveness of the Board of Directors is conducted mainly by the Corporate Governance Committee chaired by a director (independent) and comprising directors (independent) and Audit & Supervisory Board members (independent). 　As an initial process in evaluating the effectiveness of the Board of Directors, all directors comprising the Board of Directors and Audit & Supervisory Board members were asked to complete an anonymous self-evaluation questionnaire. The Corporate Governance Committee analyzed the contents of the self- evaluation, sorted out the issues and reported the results of evaluating the effectiveness of the Board of Directors to the Board of Directors. 　The Board of Directors veriﬁed the evaluation results, discussed measures to enhance the effectiveness of the Board and formulated the Board’s operating policy for the following ﬁscal year. t C o r p o r a e V a u e F o u n d a l t i o n 73 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Fiscal 2015 Results of Evaluating the Effectiveness of the Board of Directors As a result of analysis and evaluation on the effectiveness of the Board, it was conﬁrmed that the governance system currently adopted by the Company and the operation of the system were appropriate. The evaluation indicated that an open atmosphere conducive to active discussions pervaded the Board of Directors and the Advisory Committees and that oversight over management in general was being appropriately conducted through constructive discussions. 　Meanwhile, the necessity to reinforce the oversight functions of the Board of Directors through expanded discussion of medium-to long-term management strategies was pointed out as an issue going forward. Fiscal 2016 Bord of Director Operating Policy In light of the evaluation results by the Corporate Governance Committee as well as the recent changes in the environment, the Board of Directors shall continue to delegate its authorities to executive organizations, and in addition to existing initiatives, further expand its discussions on medium-to-long term management strategies to reinforce the oversight functions of the Board of Directors through the following initiatives. ・ The Board of Directors shall expand discussions of the medium-term management plan based on medium-to long-term management strategies in preparation for the formulation of the next medium-term management plan for ﬁscal 2017 forward, as well as to enhance its oversight functions. ・ As ESG has become a topic of growing interest among institutional investors and society in general, the Board of Directors shall coordinate ESG policies (from a standpoint of meeting social responsibilities) and build a system to put these policies into practice. ・ The Board of Directors shall continue to delegate its authorities related to the execution of measures for short-term issues to the executive organizations and build a structure to reinforce oversight function for medium-to long-term management issues. ■ Initiatives towards Improving the Effectiveness of the Board of Directors Evaluation Determination of the operating policy Execution Evaluation Determination of the operating policy Execution Analyze and evaluate the effectiveness of the Board Determine Board of Director operating policy for the following ﬁscal year based on evaluation results Implement measures to improve effectiveness through Board of Director meetings Analyze and evaluate the effectiveness of the Board and the execution status of measures Determine Board of Director operating policy for the following ﬁscal year based on evaluation results Implement measures to improve effectiveness through Board of Director meetings Implemen- tation bodies Corporate Governance Committee Board of Directors Corporate Governance Committee Board of Directors 74 OMRON CorporationMessage from an Outside Director Evaluating the Effectiveness of the Board of Directors In launching this initiative, we began building a framework based on discussions within the Corporate Governance Committee, which is made up of outside directors. These discussions addressed by whom and how such evaluations would be conducted, as well as how we would link the results of evaluations to improving the effectiveness of the Board of Directors. 　While objectivity is important, evaluations that solely emphasize form and numerical data will not lead to substantial and autonomous improvements in effectiveness. To ensure both effectiveness and objectivity, we asked all members of the Board of Directors to complete a self-evaluation. Based on the results of these evaluations, the Corporate Governance Committee performed an evaluation of the effectiveness of the Board. This evaluation focused on areas having room for reform and improvement. 　The committee then submitted a report to the Board of Directors. This report included frank opinions and proposals for solving the issues. The report was framed as the result of an evaluation from outside directors and auditors familiar with Omron and intimately involved in Omron management oversight. As such, we believe our Board of Directors accepted the feedback earnestly and sincerely. 　After receiving the evaluation results, the Board of Directors promptly set about implementing operating policies. I believe that this evaluation of the effectiveness of our Board of Directors has served as an impetus for change, and that the Board of Directors will serve as an even more robust platform for decision-making, which will be proven as the Corporate Governance Committee continues to gauge our progress. Kazuhiko Toyama Outside Director Chairman of the Corporate Governance Committee President and CEO, Industrial Growth Platform, Inc. July 2016 t C o r p o r a e V a u e F o u n d a l t i o n 75 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Cultivating Strong Relationships through Omron furthers mutual understanding with our stakeholders through engagement conducted by management and division representatives. We incorporate the feedback received through engagement to improve our management, our transparency, and our reliability. We will continue to engage responsibly with our stakeholders, reﬂecting our interactions through improved corporate value. Engagement with Shareholders and Investors General Meeting of Shareholders The 78th Ordinary General Meeting of Shareholders Institutional Investors Beyond interviews and teleconferences with global institutional investors, Omron also sponsors factory tours and technology seminars throughout the year. 　During ﬁscal 2015, Omron held an investor relations event in Chicago that combined a presentation on business strategy with a factory tour. 　A technology seminar was also held, where attendees were able to inspect factory automation equipment of the Industrial Automation Business. The seminar helped investors understand more about the superiority of our products, which translates into competitive market advantage for the Industrial Automation Business. ■ Fiscal 2015 Engagement Direct Talks 941times At our last general meeting of shareholders, President Yamada addressed our progress toward our long-term vision. President Yamada and Omron executives then provided thoughtful answers to shareholder questions related to cooperative relationships with other companies, policies for appointing non-Japanese and women employees to management positions, and numerous other topics. ■ The 78th Ordinary General Meeting of Shareholders (June 23, 2015) Attendees 822 Ratio of Voting Rights Exercised 82.0% Individual Investors Omron holds a number of information sessions during the year, providing opportunities to engage directly with many individual investors. We are also unique in that we hold joint information sessions with other companies. ■ Fiscal 2015 Engagement No. of Events Total No. of Participants 10 566 Event for institutional investors in North America Factory automation technology seminar A joint information session with another company (for individual investors) 76 OMRON CorporationResponsible Engagement Engagement with Customers Engagement with Suppliers We engage with numerous customers through our technology and products. At CEATEC JAPAN 2015, we let customers experience the latest in Omron technologies through our exhibit, “Omron: An Evolution in Harmony between Humans and Machines.” Each year we invite major suppliers to discuss our purchasing policies. Suppliers are an important part of our success, and it is important that they understand our purchasing policies and long-term strategies. CEATEC JAPAN 2015 Discussing purchasing policies with suppliers Engagement with Communities Engagement with Employees Omron engages with communities through activities deeply rooted in local traditions. For instance, as a company headquartered in Kyoto, Omron has been a special sponsor of the Kyoto Marathon since its inception. Omron employees volunteer at water stations, cheer runners along the course, and do other work to make the Kyoto Marathon a success for participants and fans alike. Omron executives travel hundreds of thousands of miles every year to meet with employees around the globe. This kind of in-person engagement is invaluable for creating a shared sense of purpose and understanding of the Omron Principles among global employees. t C o r p o r a e V a u e F o u n d a l t i o n Kyoto Marathon 2016 President Yamada visiting a production plant in Shanghai 77 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Directors, Audit & Supervisory Board As of June 23, 2016 Directors Chairman　Fumio Tateishi Aug. 1975 Joined Omron Jun. 1997 Director Jun. 1999 Managing Executive Ofﬁcer Jun. 2001 Senior General Manager, Corporate Strategy Planning HQ Jun. 2003 Executive Ofﬁcer and Executive Vice President; President, Industrial Automation Company Jun. 2008 Executive Vice Chairman Jun. 2013 Chairman (to present) President and CEO　Yoshihito Yamada Apr. 1984 Joined Omron Jun. 2008 Executive Ofﬁcer; President and CEO, OMRON Healthcare Co., Ltd. Mar. 2010 Senior General Manager, Corporate Strategy Planning HQ Jun. 2010 Managing Executive Ofﬁcer Jun. 2011 President and CEO (to present) Executive Vice President and CFO Yoshinori Suzuki Apr. 1975 Joined Omron Jun. 2003 Executive Ofﬁcer and Senior General Manager, Corporate Strategy Planning HQ Jun. 2006 Managing Executive Ofﬁcer Mar. 2007 President, Automotive Electronic Components Company May 2010 President and CEO, OMRON Automotive Electronics Co., Ltd. Apr. 2013 Senior Managing Executive Ofﬁcer and CFO Jun. 2013 Senior Managing Director and CFO Jun. 2014 Executive Vice President and CFO (to present) Executive Vice President　Akio Sakumiya Apr. 1975 Joined Omron Jun. 2003 Executive Ofﬁcer; President and CEO, OMRON Ichinomiya Co., Ltd. (now OMRON Amusement Co., Ltd.) Mar. 2009 President, Electronic and Mechanical Components Company Jun. 2010 Managing Executive Ofﬁcer Jun. 2011 Senior Managing Director Jun. 2014 Executive Vice President (to present) 78 Director, Senior Managing Executive Ofﬁcer　Koji Nitto Apr. 1983 Joined Omron Mar. 2011 Senior General Manager, Global Resource Management HQ Jun. 2011 Executive Ofﬁcer Mar. 2013 Senior General Manager, Global SCM and IT Innovation HQ Apr. 2013 Managing Executive Ofﬁcer Mar. 2014 Senior General Manager, Global Strategy HQ (to present) Apr. 2014 Senior Managing Executive Ofﬁcer (to present) Jun. 2014 Director (to present) Outside Director　Kazuhiko Toyama Apr. 1985 Joined Boston Consulting Group, Inc. Apr. 1986 Established Corporate Direction Co., Ltd. Mar. 1993 Director, Corporate Direction Co., Ltd. Apr. 2000 Managing Director, Corporate Direction Co., Ltd. Apr. 2001 President and CEO, Corporate Direction Co., Ltd. Apr. 2003 COO & Executive Managing Director, Industrial Revitalization Corporation of Japan (IRCJ) Apr. 2007 President and CEO, Industrial Growth Platform, Inc. (to present) Jun. 2007 Outside Director, Omron (to present) Outside Director　Eizo Kobayashi Apr. 1972 Joined ITOCHU Corporation Jun. 2000 Executive Ofﬁcer Apr. 2002 Managing Executive Ofﬁcer Jun. 2003 Representative Director and Managing Director Apr. 2004 Representative Director and Senior Managing Director Jun. 2004 President and CEO Apr. 2010 Chairman and Representative Director Jun. 2011 Chairman Jun. 2013 Outside Director, Omron (to present) Jun. 2016 Chairman, ITOCHU Corporation (to present) Outside Director　Kuniko Nishikawa Apr. 1986 Joined Citibank N.A. Feb. 1996 Joined A.T. Kearney, Inc. Sep. 2000 President and CEO, Supernurse Co. Ltd. Aug. 2010 Established Firststar Healthcare Co. Ltd., President & CEO (to present) Jun. 2013 President, Benesse MCM Corp. (to present) Jun. 2015 Outside Director, Omron (to present) OMRON CorporationMembers, and Honorary Chairman Audit & Supervisory Board Member (Independent) Yoshifumi Matsumoto Apr. 1989 Registered as attorney with the Osaka Bar Association; joined Miyake Law Ofﬁce (now Miyake & Partners) Jan. 1996 Partner, Miyake & Partners (to present) Jun. 1997 Registered as patent attorney with the Japan Patent Attorneys Association Jun. 2013 Audit & Supervisory Board Member (Independent), Omron (to present) Audit & Supervisory Board Member (Independent) Hideyo Uchiyama Nov. 1975 Joined Arthur Young & Company Dec. 1979 Joined Asahi Accounting Company (now KPMG AZSA LLC) Mar. 1980 Registered as Certiﬁed Public Accountant July 1999 Representative Partner of KPMG AZSA LLC May 2002 Board Member of KPMG AZSA LLC Jun. 2006 Executive Board Member of KPMG AZSA LLC Jun. 2010 Managing Partner of KPMG AZSA LLC, Chairman of KPMG Japan Sep. 2011 Chairman of KPMG Asia Paciﬁc Oct. 2013 CEO of KPMG Japan Sep. 2015 Executive Advisor of ASAHI Tax Corporation (to present) Jun. 2016 Audit & Supervisory Board Member (Independent), Omron (to present) Audit & Supervisory Board Members Audit & Supervisory Board Member　 Kiichiro Kondo Apr. 1977 Joined Mitsui Ocean Development & Engineering Co., Ltd. Jan. 1988 Joined Mitsui Trust and Banking Company, Limited (now Sumitomo Mitsui Trust Bank, Limited) Apr. 1999 Joined Omron Apr. 2007 Senior General Manager, Public Solutions Business Department, Social Systems, Solutions and Service Business Company Jun. 2007 Executive Ofﬁcer Apr. 2011 President and CEO, OMRON Social Solutions Co., Ltd. Jun. 2011 Managing Executive Ofﬁcer Jun. 2015 Audit & Supervisory Board Member, Omron (to present) Audit & Supervisory Board Member　 Tokio Kawashima Apr. 1982 Joined Mitsubishi Bank Ltd. (now The Bank of Tokyo-Mitsubishi UFJ, Ltd.) Sep. 2008 Regional Head for Germany and General Manager, Düsseldorf Branch, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Apr. 2011 Joined Omron Jun. 2011 Audit & Supervisory Board Member, Omron (to present) Honorary Chairman Honorary Chairman　Yoshio Tateishi Apr. 1963 Joined Omron May 1973 Director Jun. 1976 Managing Director Jun. 1983 Senior Managing Director Jun. 1987 President and CEO Jun. 2003 Representative Director and Chairman of the Board May 2007 Chairman, Kyoto Chamber of Commerce and Industry (to present) Jun. 2011 Honorary Chairman (to present) t C o r p o r a e V a u e F o u n d a l t i o n 79 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Executive Off icers Senior Managing Executive Ofﬁcers Koji Nitto Senior General Manager, Global Strategy HQ Yutaka Miyanaga Company President, Industrial Automation Company Managing Executive Ofﬁcers Shigeki Fujimoto Senior General Manager, Business Development HQ Kiichiro Miyata CTO and Senior General Manager, Technology & Intellectual Property HQ Katsuhiro Wada President and CEO, OMRON Automotive Electronics Co., Ltd. Shizuto Yukumoto Senior General Manager, Environmental Solutions Business HQ Kenji Matsunami Company President, Electronic and Mechanical Components Company 80 Satoshi Ando Senior General Manager, Global Investor Relations & Corporate Communications HQ Toshio Hosoi President and CEO, OMRON SOCIAL SOLUTIONS Co., Ltd. Isao Ogino President and CEO, OMRON HEALTHCARE Co., Ltd. Kiyoshi Yoshikawa Senior General Manager, Global Manufacturing Innovation HQ Nigel Blakeway　 Senior General Manager, Robotics Business Development Project, Industrial Automation Company, and Chairman and CEO, OMRON ADEPT TECHNOLOGY INC., and Chairman, President and CEO, OMRON MANAGEMENT CENTER OF AMERICA, INC. OMRON CorporationExecutive Ofﬁcers Goshi Oba　 Masahiko Tomita Chairman and President, OMRON INDUSTRIAL AUTOMATION (CHINA) Co., Ltd. General Manager, Corporate Planning Department, Global Strategy HQ Takayoshi Oue Munenori Odake Senior General Manager, Global Finance and Accounting HQ Senior General Manager, Sales & Marketing Division HQ, Industrial Automation Company Izumi Echizen Kenji Sugawa Senior General Manager, Global Human Resources and Administration HQ Director, Executive Vice President, and Senior General Manager, Global Sales and Marketing Group HQ, OMRON HEALTHCARE Co., Ltd. Hideji Ejima General Manager, Business Planning Department and General Manager, Application Engineering Center, Environmental Solutions Business HQ Shuji Tamaki Senior General Manager, Global Risk Management and Legal HQ Seigo Kinugawa Ken Tanikawa Senior General Manager, Strategy Planning Division HQ, Industrial Automation Company President and CEO, OMRON PRECISION TECHNOLOGY Co., Ltd. Takashi Kitagawa Senior General Manager, Board of Directors Ofﬁce Makoto Ota President and CEO, OMRON RELAY & DEVICES Corporation t C o r p o r a e V a u e F o u n d a l t i o n 81 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Financial Section (U.S. GAAP) 83 Six-Year Summary 84 Fiscal 2015 in Review 90 Outlook for Fiscal 2016 92 Consolidated Balance Sheets 94 Consolidated Statements of Income 94 Consolidated Statements of Comprehensive Income 95 Consolidated Statements of Shareholders’ Equity 96 Consolidated Statements of Cash Flows Fiscal 2016 forecast ﬁgures shown here are plan ﬁgures as published on April 27, 2016. Forecasts use exchange rates of ¥110 to the U.S. dollar and ¥125 to the Euro. The impact of the British exit from the EU and exchange rate trends occurring after July 2016 have not been incorporated into these forecasts. For more information, please refer to the Company’s audited annual ﬁnancial report: http://www.omron.com/ir/irlib/annual.html 82 OMRON Corporation Six-Year Summary OMRON Corporation and Subsidiaries Years ended March 31 Net Sales: 　Industrial Automation Business (IAB) 　Electronic and Mechanical Components 　　Business (EMC) 　Automotive Electronic Components 　　Business (AEC) 　Social Systems, Solutions and Service 　　Business (SSB) 　Healthcare Business (HCB) 　Other Businesses 　Eliminations and Corporate Net Sales by Region 　Japan 　Americas 　Europe 　Greater China 　Asia Pacific 　(Total) Costs and Expenses: 　Cost of sales 　Selling, general and administrative expenses 　　　　(excl. R&D expenses) 　R&D expenses 　Other expenses (income), net 　(Total) Income before income taxes and equity in 　earnings of afﬁliates Income taxes Equity in loss (earnings) of affiliates Net income (loss) FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Millions of yen (except per share data) ¥271,894 ¥270,835 ¥262,983 ¥291,739 ¥331,840 ¥335,959 81,216 83,002 84,107 97,699 103,946 103,681 84,259 85,027 97,643 126,620 137,883 139,966 63,846 57,200 68,754 82,695 80,410 77,538 60,629 49,672 6,309 62,446 53,535 7,416 71,520 59,240 6,214 89,275 100,615 108,121 78,949 87,382 63,028 5,989 5,176 5,311 311,906 307,649 328,470 356,342 351,321 342,824 74,397 84,511 74,820 83,561 80,427 100,992 123,496 130,968 80,453 100,929 108,427 109,147 97,012 101,074 106,283 142,444 180,954 162,508 49,999 52,357 54,828 72,259 83,054 88,157 617,825 619,461 650,461 772,966 847,252 833,604 386,123 391,574 408,954 475,758 514,645 512,792 142,365 145,662 152,676 181,225 198,103 205,735 41,300 42,089 43,488 47,928 47,913 52,790 6,344 6,589 4,106 6,048 (797) (3,399) 576,132 585,914 609,224 710,959 759,864 767,918 41,693 33,547 41,237 62,007 87,388 65,686 14,487 17,826 14,096 19,475 28,893 20,043 190 (631) (2,976) (3,782) (3,937) (2,039) 27,016 16,352 30,117 46,314 62,432 47,682 Net income (loss) attributable to noncontrolling interests 234 (37) (86) 129 262 392 Net income attributable to shareholders 26,782 16,389 30,203 46,185 62,170 47,290 Per Share Data (yen): 　Income from continuing operations 　　Basic 　　Diluted 　Cash dividends (Note) Capital expenditures (cash basis) Total assets Total shareholders' equity Financial Indicators: 　Gross profit margin 　Operating income margin 　Return on sales 　ROIC (Return on invested capital) 　ROE (Return on equity) 　Asset turnover (times) 　Inventory turnover (times) 　Shareholders’ equity ratio 121.7 121.7 30.0 74.5 74.5 28.0 137.2 137.2 37.0 209.8 ー 53.0 283.9 283.9 71.0 219.0 219.0 68.0 21,647 27,502 30,383 32,218 37,123 37,903 562,790 537,323 573,637 654,704 711,011 683,325 312,753 320,840 366,962 430,509 489,769 444,718 37.5% 36.8% 37.1% 38.5% 7.8% 4.3% 7.8% 8.7% 1.1 4.7 6.5% 2.6% 4.8% 5.2% 1.1 4.4 7.0% 4.6% 8.6% 8.8% 1.2 4.5 8.8% 6.0% 11.3% 11.6% 1.3 5.0 39.3% 10.2% 7.3% 13.4% 13.5% 1.2 4.8 38.5% 7.5% 5.7% 9.7% 10.1% 1.2 4.6 55.6% 59.7% 64.0% 65.8% 68.9% 65.1% Note: Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the fiscal year. i F n a n c i a l S e c t i o n 83 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Fiscal 2015 in Review Consolidated Results Omron Group net sales for ﬁscal 2015 amounted to ¥833.6 billion, a 1.6% decline compared to ﬁscal 2014. Operating income amounted to ¥62.3 billion, a decline of 28.1%. Operating income margin fell to 7.5% (2.7-point decline), while net income attributable to shareholders amounted to ¥47.3 billion, a 23.9% drop-off. 　The global economy beneﬁted during the ﬁrst half of ﬁscal 2015 from strong demand for capital investment, particularly in the U.S. and the EU. During the second half of the year, however, the Chinese economic slowdown and rapid appreciation of the yen led to concerns about the future direction of world economics. Reﬂecting this environment, our Industrial Automation Business, Automotive Electronic Components Business, and Healthcare Business recorded ongoing revenue growth. On the other hand, we experienced signiﬁcant revenue declines in our Other Businesses segment. Looking toward long-term, sustainable growth, our mainstay Industrial Automation Business acquired two companies during the year. We believe these companies will provide a springboard for future expansion. At the same time, the segment incurred higher R&D expenses and other costs related to up- front investments for the future. These transactions had an impact on overall proﬁts for the Group. This performance marked a year-on- year decline in revenues and proﬁts for the ﬁrst time in seven years. Review of Consolidated Statement of Income Net Sales Omron Group net sales for ﬁscal 2015 fell to ¥833.6 billion, down ¥13.6 billion from the prior year (1.6%). This decrease was due to several dramatic changes in the business environment, including slowing demand in the solar power and smartphone markets and weak growth in the Chinese economy. By region, net sales in Greater China amounted to ¥162.5 billion, an ¥18.4 billion (10.2%) decrease. This decline was a signiﬁcant drag on overall Group revenues. On the other hand, stable growth in the Americas led to strong demand for capital investment in the automobile and other industries. Southeast Asia and other emerging economies also showed strengthening demand for capital investment, as well as ongoing growth in markets for healthcare and medical devices. The strength in these regions combined to support overall revenue performance throughout the year. Gross Proﬁt Margin, SG&A Expenses and R&D Expenses Gross proﬁt margin for ﬁscal 2015 was down 0.8 point to 38.5%. This decline was mainly due to the impact of a stronger U.S. dollar, a weaker Euro, and weaker currencies among emerging economies. Controlling for these variables, raw materials costs, and other external factors shows that gross proﬁt margin would have actually improved year-on-year. Selling, general and administrative expenses were ¥205.7 billion, up ¥7.6 billion from the prior year (1.3-point increase in comparison to net sales). This increase was mainly due to acquisitions and post-acquisition costs incurred to integrate these new entities into the Omron Group. R&D expenses amounted to ¥52.8 billion, up ¥4.9 billion (0.6-point increase in comparison to net sales). This increase was mainly due to up-front investment for future growth on the part of the Industrial Automation Business. 84 OMRON CorporationOperating Income, Income before Income Taxes, and Net Income Attributable to Shareholders Omron Group operating income for the year was ¥62.3 billion (28.1% decrease), with avn operating income margin of 7.5% (2.7-point decrease). ■ Consolidated Operating Income Analysis (YoY) Income before income taxes amounted to ¥65.7 billion (24.8% decrease), while net income attributable to shareholders came in at ¥47.3 billion for the year (23.9% decrease). 86.6 Forex, raw materials impacts -2.4 Added value down -12.5 Fixed manufacturing costs down 1.0 SG&A up -5.8 R&D up -4.6 (Billions of yen) 62.3 Gross profit　-11.5 (excl. forex & raw materials impacts) FY2014 Actual FY2015 Actual Note: SG&A and R&D expenses do not reflect foreign exchange or material costs. Accordingly, these figures do not match prior-year comparative figures on P84. Review of Operations by Business Segment Industrial Automation Business (IAB) Our Industrial Automation Business recorded domestic net sales of ¥130.5 billion for ﬁscal 2015, a 2.9% gain year on year. This growth was mainly due to strong demand for capital investment in the automobile and electronic components ﬁelds. Revenues were lower overseas, primarily due to lower demand in the petroleum industry of the Americas. Europe reported revenue gains based on slightly improving business conditions in the region. The slowdown of the Chinese economy during the second half of the year resulted in overall sluggish demand. However, the positive impact of foreign exchange rates led to higher sales in the region. Weakening market conditions and currency weakness in Asia led to revenue declines in the ASEAN markets. Korea, however, experienced strong demand for electronic components, pushing revenues higher in that nation. As a result, overseas net sales amounted to ¥205.5 billion, an increase of 0.2% compared to ﬁscal 2014. While the segment reported higher revenues as a whole, investments for future growth resulted in increased R&D expenses, driving operating income down to ¥47.9 billion (12.2% year-on-year decline) for the year. Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures FY2011 270.8 123.1 147.7 29.3 55.3 36.8 25.3 1.0 35.4 13.1% 15.4 4.2 3.8 FY2012 263.0 116.3 146.7 31.6 50.4 39.4 24.7 0.6 31.3 11.9% 16.5 3.5 2.8 FY2013 291.7 119.4 172.3 36.9 61.9 43.8 28.9 0.8 38.8 13.3% 15.7 3.6 3.3 FY2014 331.8 126.7 205.1 47.6 67.8 55.0 34.1 0.7 54.6 16.5% 15.3 3.5 4.2 (Billions of yen) FY2015 FY2016 (Forecast) 336.0 130.5 205.5 40.4 69.3 58.3 36.9 0.6 47.9 336.0 136.0 200.0 37.5 71.0 55.0 36.0 0.5 46.5 14.3% 13.8% 18.2 4.0 5.3 i F n a n c i a l S e c t i o n 85 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Electronic and Mechanical Components Business (EMC) Domestic net sales for the segment were down 2.8% to ¥23.2 billion. Despite strong demand in the Japanese consumer and commercial product markets, the April 2015 tax hike on mini vehicles (kei cars) had a negative impact on the automobile industry. Overseas net sales rose 0.5% to ¥80.4 billion. The Americas, with strong demand in the automobile industries, and Europe, with strong demand in the consumer and commercial product industries, drove overseas revenue performance. The increasing economic slowdown in China led to weak demand in the automobile and consumer and commercial products industries, resulting in lower revenues in that region. However, the added factors of a strong U.S. dollar and the positive impact of exchange rates for the Chinese yuan contributed to overall revenue growth overseas. While segment net sales were level with the prior year as a whole, investments in productivity improvements drove operating income down 16.5% to ¥8.5 billion. FY2011 FY2012 FY2013 Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 83.0 25.3 57.7 13.2 12.9 22.7 7.6 1.3 5.1 6.2% 5.5 7.2 9.9 84.1 26.7 57.4 13.1 11.3 24.6 7.1 1.4 4.4 5.2% 5.2 7.4 8.9 97.7 28.1 69.6 16.6 14.7 28.7 8.7 0.9 8.7 8.9% 6.0 7.8 10.9 FY2014 103.9 FY2015 103.7 23.9 80.0 18.1 15.9 35.0 10.1 0.9 10.2 9.8% 5.4 8.0 9.5 23.2 80.4 19.9 16.1 33.6 10.4 0.5 8.5 8.2% 4.9 8.3 8.9 (Billions of yen) FY2016 (Forecast) 100.0 23.5 76.5 18.0 15.5 32.0 11.0 0.0 10.0 10.0% Automotive Electronic Components Business (AEC) Domestically, net sales were down 18.5% to ¥21.1 billion. This was mainly the result of the tax hike on mini vehicles resulting in signiﬁcantly lower auto production. Overseas sales amounted to ¥118.9 billion, which was a 6.1% increase year on year. While inventory adjustments among our Chinese customers resulted in lower demand, favorable business conditions in North America drove continued growth in demand, raising overseas segment net sales. Overall segment operating income was down 20.5% on the year to ¥7.3 billion. Despite growth in overseas revenues, lower domestic sales and higher R&D expenses combined for this result. FY2011 FY2012 Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 85.0 28.9 56.1 21.5 2.4 9.5 16.2 6.5 2.7 3.2% 6.6 2.1 5.2 97.6 30.2 67.4 25.0 2.8 13.9 19.5 6.2 5.0 5.1% 7.0 2.4 5.5 FY2013 126.6 28.4 98.2 33.3 3.3 25.4 29.2 7.2 9.1 7.2% 8.2 3.4 6.7 FY2014 FY2015 FY2016 (Forecast) (Billions of yen) 137.9 25.9 112.0 39.3 3.6 29.9 32.2 7.1 9.2 6.7% 8.5 4.7 6.5 140.0 21.1 118.9 47.6 4.6 27.4 31.9 7.3 7.3 5.2% 9.3 5.3 6.9 130.0 17.5 112.5 44.5 4.0 27.0 30.5 6.5 6.5 5.0% 86 OMRON CorporationSocial Systems, Solutions and Service Business (SSB) Total segment net sales amounted to ¥77.5 billion for the year (3.6% decrease), while operating income was ¥3.2 billion (36.0% decrease). The public transportation business reported signiﬁcantly higher sales for the year, driven mainly by demand for updated station equipment. Our trafﬁc and road management system business also experienced signiﬁcant growth, mainly due to strong capital investment resulting in higher volumes of sales in terminals for use in trafﬁc-related applications. Meanwhile, slow demand for solar power and related markets led to signiﬁcantly lower revenues in our environmental solutions business products and services. FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 (Forecast) (Billions of yen) Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 57.2 56.9 0.3 0.0 0.0 0.0 0.0 0.3 0.1 0.2% 2.2 1.1 0.9 68.8 68.5 0.3 0.0 0.0 0.1 0.0 0.2 2.9 4.2% 2.2 1.1 15 82.7 82.4 0.3 0.0 0.0 0.2 0.0 0.1 5.6 6.7% 2.5 1.2 1.5 80.4 79.1 1.3 0.0 0.0 0.3 0.0 1.1 5.0 6.2% 2.1 1.4 1.7 77.5 75.7 1.8 0.0 0.0 0.6 0.0 1.2 3.2 4.1% 2.2 1.2 1.5 70.0 69.0 1.0 0.0 0.0 0.5 0.0 0.5 4.0 5.7% Healthcare Business (HCB) Net sales for the Healthcare Business segment amounted to ¥108.1 billion, representing an increase of 7.5%. Operating income was up 11.9% to ¥7.3 billion. Domestic net sales fell slightly to ¥31.1 billion (1.0% decrease). We reported sales growth for home-use healthcare and medical devices. This growth came mainly from captured inbound tourist demand, the introduction of new blood pressure monitors and other new products, and stronger in-store promotions of massagers and other products. On the other hand, slack capital investment among medical institutions led to lower demand for institutional equipment. Overseas sales increased by a signiﬁcant margin, up 11.3% to ¥77.0 billion. Sales in the Americas were driven by synergies with one of our Brazilian subsidiaries acquired in ﬁscal 2014 and strong demand for nebulizers (inhalers to treat respiratory diseases) in South America. At the same time, demand for medical devices continued to grow in China and Asia. FY2011 FY2012 FY2013 Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 62.4 27.2 35.2 9.8 13.0 8.6 2.9 0.9 2.9 4.7% 5.1 1.5 2.8 71.5 29.5 42.0 10.8 15.9 11.1 3.5 0.7 4.4 6.2% 5.0 1.9 3.1 89.3 30.8 58.5 14.3 21.0 17.3 5.5 0.4 7.5 8.5% 5.2 2.3 3.9 FY2014 100.6 FY2015 108.1 31.4 69.2 18.6 21.2 22.4 6.6 0.5 6.5 6.5% 5.5 3.3 3.9 31.1 77.0 23.1 19.2 25.4 8.9 0.5 7.3 6.7% 6.1 3.7 2.8 (Billions of yen) FY2016 (Forecast) 108.0 32.5 75.5 22.0 19.0 25.0 9.0 0.5 8.0 7.4% i F n a n c i a l S e c t i o n 87 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Other Businesses The Other Businesses segment recorded net sales of ¥63.0 billion, down 27.9% year on year. The segment recorded an operating loss of ¥4.1 billion. With the decrease in demand in the Chinese smartphone market, revenues for the Backlights Business decreased by a signiﬁcant margin. In the meantime, slow demand in the solar power market drove revenues down in our Environmental Solutions Business. Net sales in our Electronic Systems and Equipment Business outperformed the prior year, driven higher by strong demand for uninterruptible power supply units and development/contract production services for electronic devices. On the other hand, revenues were lower in our Micro Devices Business due to slow demand for smartphone microphones. FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 (Forecast) (Billions of yen) Net sales Japan Overseas 　Americas 　Europe 　Greater China 　Asia Paciﬁc 　Direct Exports Operating income Operating income margin R&D expenses Depreciation and amortization Capital expenditures 53.5 29.5 24.0 0.0 0.0 22.6 0.0 1.4 (3.6) － 2.8 0.9 2.1 59.2 41.4 17.8 0.0 0.0 16.3 0.0 1.5 2.5 4.3% 3.0 1.4 2.5 78.9 51.0 27.9 0 .0 0.0 25.6 0.0 2.3 8.7 11.0% 4.3 2.0 4.0 87.4 45.8 41.6 0.0 0.0 38.2 0.0 3.4 8.4 9.6% 5.5 2.5 6.9 71.0 42.0 29.0 0.0 0.0 25.5 0.0 3.5 1.5 2.1% 63.0 44.0 19.0 0.0 0.0 17.1 0.0 1.9 (4.1) − 4.6 3.1 5.3 Review of Financial Condition Total assets at the end of the period amounted to ¥683.3 billion, which was ¥27.7 billion lower than the end of the prior ﬁscal year. This decrease was mainly due to decreases in cash and cash equivalents used for share buybacks. In addition, we established a retirement beneﬁt trust designed for more efﬁcient pension reserves. As we have transferred a portion of investment securities to this retirement beneﬁt trust, the balance of investment securities decreased ¥20.1 billion compared to the end of the prior ﬁscal year. Total liabilities amounted to ¥236.3 billion, which was a ¥17.4 billion increase. The main factor in this increase was a ¥31.9 billion increase in allowance for retirement beneﬁts due to a major reduction in the discount rate used for calculating beneﬁt obligations. Total net assets amounted to ¥447.0 billion, which was a decrease of ¥45.1 billion. Pension liability adjustments, affected by low interest rates, and foreign currency translation adjustments, impacted by a strong yen, contributed to other comprehensive loss of ¥50.2 billion. This decreased shareholders’ equity by ¥45.1 billion compared to the end of the prior ﬁscal year. Shareholders’ equity ratio fell by 3.8 points to 65.1%, while the debt equity ratio increased 0.08 points to 0.53. 88 OMRON CorporationCapital Expenditures During ﬁscal 2015, the Omron Group made a total capital investment of ¥36.9 billion, which was a 3.4% decrease compared to ﬁscal 2014. Our Industrial Automation Business engaged in active capital investment in infrastructure and productivity improvements to serve as the basis for future growth. On the other hand, the Other Businesses segment revised its investments in response to dramatic changes in the external environment. As a whole, the Group spent ¥1.3 billion less in capital investment than the prior year. Cash Flows Cash and cash equivalents at the end of ﬁscal 2015 amounted to ¥82.9 billion, a decrease of ¥19.7 billion compared to the end of the prior ﬁscal year. Net cash provided by operating activities amounted to ¥84.2 billion for ﬁscal 2015. This was an increase of ¥7.2 billion over the prior year, resulting mainly from increased depreciation and amortization and decreases in accounts receivable and inventories. Net cash used in investing activities amounted to ¥67.1 billion, an increase of ¥27.6 billion year over year. While we maintained capital expenditures (¥37.9 billion) at the same level as ﬁscal 2014, we also spent ¥33.4 billion in cash for mergers and acquisitions. Free cash ﬂow based on net cash provided by operating activities and used in investing activities amounted to ¥17.1 billion, which was a decrease of ¥20.4 billion. Net cash used in ﬁnancing activities increased ¥2.2 billion over the prior year, reaching ¥31.6 billion. The Omron Group paid ¥16.1 billion in dividends (¥3.1 billion increase over ﬁscal 2014) and ¥15.0 billion for stock buybacks (nearly level with prior year). ■ Cash Flows ■ Net cash from operating activities ■ Net cash from investing activities Free cash flow (Billions of yen) 90 80 70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50 -60 -70 79.0 77.1 84.2 53.1 47.9 31.9 5.5 24.6 37.5 17.1 -26.5 -28.5 -31.1 -39.5 FY2011 FY2012 FY2013 FY2014 FY2015 -67.1 Capital Policies (Dividends, Share Buybacks and Cancellations) Our policy for proﬁt distribution is to secure sufﬁcient internal capital for future growth, while at the same time providing consistent shareholder returns. In ﬁscal 2015, we applied our medium-term business plan target for ﬁscal 2016 of a payout ratio of 30% a year earlier. Our actual payout ratio for ﬁscal 2015 was 31.1% (6.1-point increase compared to ﬁscal 2014), which translated into a ¥68 per share dividend for the year. Our dividend on equity ratio was 3.1%, which was a 0.3-point decrease compared to the prior year. i F n a n c i a l S e c t i o n 89 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Outlook for Fiscal 2016 Consolidated Earnings While the global economy is expected to gradually improve during ﬁscal 2016, we believe our business will continue to face challenges in the external environment. These challenges include the continued slowdown in Chinese economic growth and the impact of the strong yen on our domestic businesses. Based on these assumptions, the Omron Group has enacted a company-wide policy to rebuild our earnings structure and create an engine for self-driven growth. While we are engaged in improving our earnings structure, we will also be active in using our capital for growth investments, pushing forward to create an engine for self-driven growth. We have set ﬁscal 2016 targets for net sales and operating income growth at 4% and 23% (excluding foreign exchange adjustments). We will accomplish this by continuing to invest in growth and rebuild our earnings structure. Considering the impact of foreign exchange and recent currency trends, however, we have forecast ﬁscal 2016 net sales of ¥820.0 billion, a 1.6% decrease compared to ﬁscal 2015. We estimate operating income of ¥63.0 billion (1.1% increase year on year) and net income attributable to shareholders of ¥47.5 billion (0.4% increase). By rebuilding our earnings structure, we believe we will improve gross proﬁt margin to 39.3% (0.8-point increase), while setting a target for ROIC and ROE, two of our major management indicators, to 10%. These improvements will be the result of dedicated company-wide efforts. Industrial Automation Business (IAB) The IAB forecasts (Note 1) overall ﬁscal 2016 segment net sales of ¥336.0 billion (level with ﬁscal 2015) and operating income of ¥46.5 billion (3.0% decrease year on year). Domestically, we expect continued strong demand for capital investment in automobile-related industries to drive revenue growth. Overseas, we project steady demand for capital investment, as well as demand for automation and labor-saving systems. However, the likely negative impact of foreign exchange has led us to forecast lower revenues for the year compared to ﬁscal 2015. Our continued commitment to investing in future growth will be reﬂected in higher research and development expenses, leading to a ﬁscal 2016 operating income forecast lower than ﬁscal 2015 results. (Note 1) Fiscal 2016 forecasts do not include the impact of the May 31, 2016 sale of Omron Oilfield and Marine, Inc. in North America. Electronic and Mechanical Components Business (EMC) The EMC forecasts overall ﬁscal 2016 segment net sales of ¥100.0 billion (3.6% decrease year on year) and operating income of ¥10.0 billion (17.7% increase). Domestically, we forecast slight gains of 1.1% to ¥23.5 billion. While we expect demand for consumer and commercial products to weaken, demand among automobile- related industries should continue to be strong. Overseas, we forecast net sales of ¥76.5 billion, a 4.9% year-on-year decrease. Despite the positive impact of introducing new products to the Chinese automobile-related industries, slower growth will likely drive lower demand for consumer and commercial products. The negative impact of a strong yen in major markets such as the Americas and Europe is another factor we considered in our revenue forecast. Despite downward pressure on revenues, we forecast higher proﬁts due to cost reductions and productivity improvements. Automotive Electronic Components Business (AEC) The AEC forecasts domestic and overseas net sales of ¥17.5 billion (17.1% decrease year on year) and ¥112.5 billion (5.4% decrease). We expect operating income for the segment as a whole to amount to ¥6.5 billion (11.5% decrease). Domestically, we expect net sales to underperform prior year due to a slowdown in demand for mini vehicles (kei cars). Despite continued strength in the North American market slowing growth among the emerging economies and the negative impact of the strong yen have 90 OMRON Corporationa recovery in demand in Russia, where consumer spending has been weak. Considering, however, the negative impact of foreign exchange, we forecast a slight decrease in overseas revenues, resulting in lower overall revenues for the segment (Note 2). Despite lower revenue projections, we forecast higher proﬁts for ﬁscal 2016. While we remain committed to making up-front investments for future growth, we will also review our ﬁxed cost structure and make efforts in productivity improvements. (Note 2) Fiscal 2016 forecasts do not include the impact of our business tie-up with Fukuda Denshi Co., Ltd. or the pending sale of subsidiary Omron Colin Co., Ltd. as announced on June 9, 2016. Other Businesses The Other Businesses segment forecasts overall ﬁscal 2016 segment net sales of ¥71.0 billion (12.6% increase year on year) and operating income of ¥1.5 billion. We project recovery in our Backlights Business, despite slowing growth in the smartphone market. We plan to grow by capitalizing on capturing demand in response to changing consumer needs in the market. In our Environmental Solutions Business, we expect to create greater demand in the solar power market for our current solar panels, as well as for new systems that integrate storage batteries. We plan on building out our lineup of uninterruptible power supply units within our Electronic Systems and Equipment Business. At the same time, we expect to see growing demand for smartphone microphones and absolute pressure sensors. led us to forecast lower overseas net sales compared to ﬁscal 2015. Our forecast of lower operating income for ﬁscal 2016 is mainly a reﬂection of soaring labor expenses among the emerging economies. We intend to rise to the challenge for real revenue and proﬁt growth (excluding the impact of foreign exchange) by creating more high-value-added products and improving operations efﬁciencies. Social Systems, Solutions and Service Business (SSB) The SSB forecasts overall ﬁscal 2016 segment net sales of ¥70.0 billion (9.7% decrease year on year) and operating income of ¥4.0 billion (25.1% increase). We forecast lower revenues for our train station solutions business due to a low point in the demand cycle for upgraded station equipment. At the same time, we forecast sales in our trafﬁc and road management systems business to be level with the prior year, as we do not expect signiﬁcant changes in capital investment trends. We do, however, project continued strong demand for system computer terminal upgrades. Due to continued weakness in the solar power and related markets, we forecast ﬁscal 2016 environmental solutions business revenues lower than ﬁscal 2015. Healthcare Business (HCB) The HCB forecasts overall ﬁscal 2016 segment net sales of ¥108.0 billion (0.1% decrease year on year), consisting of ¥32.5 billion (4.4% increase) in domestic sales and ¥75.5 billion (1.9% decrease) in overseas sales. We expect operating income for the segment as a whole to amount to ¥8.0 billion (9.8% increase). Domestically, we expect an increase in lifestyle diseases associated with aging and greater health consciousness to create strong demand for our products. Overseas, we anticipate economic growth among emerging economies in Asia that will result in lifestyle changes and a greater health consciousness in those markets. We also expect i F n a n c i a l S e c t i o n 91 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Consolidated Balance Sheets OMRON Corporation and Subsidiaries　 March 31, 2015 and 2016 ASSETS Current Assets: Cash and cash equivalents Notes and accounts receivable - trade Allowance for doubtful receivables Inventories Deferred income taxes Other current assets Total current assets Property, Plant and Equipment: Land Buildings Machinery and equipment Construction in progress Total Accumulated depreciation Net Property, Plant and Equipment Investments and Other Assets: Goodwill Investments in and advances to afﬁliates Investment securities Leasehold deposits Deferred income taxes Other assets Total Investments and Other Assets FY2014 FY2015 (Millions of yen) ¥ 102,622 ¥ 82,910 178,775 (1,624) 116,020 19,941 18,362 434,096 26,721 147,120 202,149 6,619 382,609 (231,157) 151,452 8,776 24,318 57,106 6,971 6,366 21,926 125,463 165,093 (1,654) 107,267 18,469 17,524 389,609 26,376 146,412 204,499 6,142 383,429 (236,864) 146,565 30,253 25,048 37,055 6,758 22,080 25,957 147,151 Total ¥ 711,011 ¥ 683,325 92 OMRON Corporation LIABILITIES AND SHAREHOLDERS' EQUITY FY2014 FY2015 (Millions of yen) Current Liabilities: Notes and accounts payable - trade Accrued expenses Income taxes payable Other current liabilities Total Current Liabilities Deferred Income Taxes Termination and Retirement Beneﬁts Other Long-Term Liabilities Total Liabilities Shareholders’ Equity: Common stock, no par value: Authorized: 487,000,000 shares in 2015 487,000,000 shares in 2014 Issued: 213,958,172 shares in 2015 217,397,872 shares in 2014 Capital surplus Legal reserve Retained earnings Accumulated other comprehensive income (loss) Treasury stock, at cost: 149,398 shares in 2015 144,467 shares in 2014 Total Shareholders' Equity Noncontrolling Interests Total Net Assets Total ¥ 92,702 41,942 3,680 38,438 176,762 697 30,393 11,065 218,917 64,100 99,070 13,403 301,174 12,489 (467) 489,769 2,325 492,094 ¥ 82,606 37,975 6,890 35,192 162,663 660 62,289 10,679 236,291 64,100 99,101 15,194 317,171 (50,204) (644) 444,718 2,316 447,034 ¥ 711,011 ¥ 683,325 i F n a n c i a l S e c t i o n 93 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Consolidated Statements of Income OMRON Corporation and Subsidiaries Years ended March 31, 2014, 2015 and 2016 Net Sales Costs and Expenses: Cost of sales Selling, general and administrative expenses Research and development expenses Other expenses (income), net Total Income before Income Taxes and Equity in Earnings of Afﬁliates Income Taxes Equity in Loss (Earnings) of Afﬁliates Net Income Net Income Attributable to Noncontrolling Interests FY2013 ¥772,966 475,758 181,225 47,928 6,048 710,959 62,007 19,475 (3,782) 46,314 129 FY2014 ¥847,252 514,645 198,103 47,913 (797) 759,864 87,388 28,893 (3,937) 62,432 262 (Millions of yen) FY2015 ¥833,604 512,792 205,735 52,790 (3,399) 767,918 65,686 20,043 (2,039) 47,682 392 Net Income Attributable to Shareholders ¥ 46,185 ¥ 62,170 ¥ 47,290 Per Share Data: Net Income Attributable to Shareholders Basic Diluted FY2013 FY2014 FY2015 (Yen) ¥ 209.82 － ¥ 283.89 283.89 ¥ 218.95 218.95 Consolidated Statements of Comprehensive Income OMRON Corporation and Subsidiaries Years ended March 31, 2014, 2015 and 2016 Net Income Other Comprehensive Income (Loss), Net of Tax: Foreign currency translation adjustments: Foreign currency translation adjustments arising during the year Reclassiﬁcation adjustment for the portion realized in net income Net unrealized gain (loss) Pension liability adjustments: Pension liability adjustments arising during the year Reclassiﬁcation adjustment for the portion realized in net income Net unrealized gain (loss) Unrealized gains (losses) on available-for-sale securities: Unrealized holding gains (losses) arising during the year Reclassiﬁcation adjustment for the portion realized in net income Net unrealized gain (loss) Net gains (losses) on derivative instruments: Unrealized holding gains (losses) arising during the year Reclassiﬁcation adjustment for the portion realized in net income Net unrealized gain (loss) Other Comprehensive Income (Loss) Comprehensive Income (Loss) Comprehensive Income Attributable to Noncontrolling Interests FY2013 ¥46,314 18,946 (1) 18,945 326 1,375 1,701 10,002 (1,116) 8,886 (1,409) 1,249 (160) 29,372 75,686 314 Comprehensive Income (Loss) Attributable to Shareholders ¥75,372 FY2014 ¥62,432 21,846 － 21,846 227 1,316 1,543 7,074 (3,062) 4,012 (656) 975 319 27,720 90,152 331 ¥89,821 (Millions of yen) FY2015 ¥ 47,682 (23,916) − (23,916) (29,525) 1,486 (28,039) (5,776) (4,818) (10,594) 658 (946) (288) (62,837) (15,155) 248 ¥(15,403) 94 OMRON Corporation Consolidated Statements of Shareholders’ Equity OMRON Corporation and Subsidiaries Years ended March 31, 2014, 2015 and 2016 Number of common shares issued Common stock Capital surplus Legal reserve Retained earnings Accumulated other comprehensive income (loss) Treasury stock Total shareholders' equity Noncontrolling interests Total net assets (Millions of yen) Balance, March 31, 2013 227,121,372 ¥ 64,100 ¥ 99,066 ¥ 10,876 ¥ 253,654 ¥ (44,349) ¥ (16,385) ¥ 366,962 ¥ 1,801 ¥ 368,763 　Net income 　Cash dividends paid to 　　OMRON Corporation 　　shareholders, ¥53 per 　　share 　Equity transaction with 　　noncontrolling interests 　　and other 　Transfer to legal reserve 　Other comprehensive 　　income (loss) 　Acquisition of treasury 　　stock 　Sale of treasury stock 46,185 (11,666) 320 (320) 46,185 129 46,314 (11,666) (11,666) — — 154 154 — 1 29,187 29,187 185 29,372 (161) (161) 1 2 (161) 2 Balance, March 31, 2014 227,121,372 64,100 99,067 11,196 287,853 (15,162) (16,545) 430,509 2,269 432,778 　Net income 　Cash dividends paid to 　　OMRON Corporation 　　shareholders, ¥71 per 　　share 　Cash dividends paid to 　　noncontrolling interests 　Equity transaction with 　　noncontrolling interests 　　and other 　Transfer to legal reserve 　Other comprehensive 　　income (loss) 　Acquisition of treasury 　　stock 　Sale of treasury stock 　Retirement of treasury 　　stock 　Issuance of stock 　　acquisition right 62,170 (15,513) 2,207 (2,207) 62,170 262 62,432 (15,513) (15,513) — — — (277) (277) 2 2 — 27,651 27,651 69 27,720 (15,054) (15,054) (15,054) (9,723,500) 0 (2) 5 (31,129) 1 31,131 1 — 5 1 — 5 Balance, March 31, 2015 217,397,872 64,100 99,070 13,403 301,174 12,489 (467) 489,769 2,325 492,094 　Net income 　Cash dividends paid to 　　OMRON Corporation 　　shareholders, ¥68 per 　　share 　Cash dividends paid to 　　noncontrolling interests 　Equity transaction with 　　noncontrolling interests 　　and other 　Transfer to legal reserve 　Other comprehensive 　　income (loss) 　Acquisition of treasury 　　stock 　Sale of treasury stock 　Retirement of treasury 　　stock 　Issuance of stock 　　acquisition right 47,290 (14,656) 47,290 392 47,682 (14,656) (14,656) 1,791 (1,791) — — — (256) (256) (1) (1) — (62,693) (62,693) (144) (62,837) (15,023) (15,023) (15,023) (3,439,700) 0 31 (14,846) 0 14,846 0 — 31 0 — 31 Balance, March 31, 2016 213,958,172 ¥ 64,100 ¥ 99,101 ¥ 15,194 ¥ 317,171 ¥ (50,204) ¥ (644) ¥ 444,718 ¥ 2,316 ¥ 447,034 i F n a n c i a l S e c t i o n 95 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Consolidated Statements of Cash Flows OMRON Corporation and Subsidiaries Years ended March 31, 2014, 2015 and 2016 Operating Activities: Net income Adjustments to reconcile net income to net cash provided 　by operating activities: Depreciation and amortization Net loss (gain) on sales and disposals of property, plant, 　　and equipment Loss on impairment of long-lived assets Net gain on sale of investment securities Loss on impairment of investment securities Gain on contribution of securities to retirement beneﬁt trust Termination and retirement beneﬁts Deferred income taxes Equity in loss (earnings) of afﬁliates Changes in assets and liabilities: Decrease (increase) in notes and accounts receivable - trade Decrease (increase) in inventories Decrease (increase) in other assets Increase (decrease) in notes and accounts payable - trade Increase (decrease) in income taxes payable Increase (decrease) in accrued expenses and other current 　　　liabilities Other, net Total adjustments Net cash provided by operating activities Investing Activities: Proceeds from sale or maturities of investment securities Purchase of investment securities Capital expenditures Decrease in leasehold deposits, net Proceeds from sale of property, plant, and equipment Decrease (increase) in investment in and loans to afﬁliates Proceeds from sale of business Acquisition of business, net of cash acquired Other, net Net cash used in investing activities Financing Activities: Net repayments of short-term debt Dividends paid by the Company Dividends paid to noncontrolling interests Proceeds from equity transactions with noncontrolling interests Acquisition of treasury stock Other, net 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 FY2013 FY2014 FY2015 (Millions of yen) ¥ 46,314 ¥ 62,432 ¥ 47,682 25,089 1,146 804 (1,714) 501 － (4,417) 2,170 (3,782) (6,613) (325) (32) 5,824 2,277 10,883 919 32,730 79,044 2,840 (2,179) (32,218) 75 794 209 26 (672) － (31,125) (5,135) (10,566) － 22 (161) (458) (16,298) 2,922 34,543 55,708 ¥ 90,251 28,339 3,432 137 (4,337) 166 － (17,427) 11,938 (3,937) 3,384 (10,671) (2,828) 1,658 (3,127) 6,318 1,580 14,625 77,057 5,274 (603) (37,123) 118 768 (30) － (8,003) 82 (39,517) (853) (12,985) (277) － (15,054) (134) (29,303) 4,134 12,371 90,251 ¥ 102,622 31,460 (485) 463 (1,499) 68 (4,140) 698 2,283 (2,039) 9,436 6,061 1,003 (7,189) 3,433 (4,614) 1,586 36,525 84,207 2,214 (330) (37,903) 115 2,239 (20) − (33,448) 17 (67,116) 2 (16,077) (256) − (15,023) (196) (31,550) (5,253) (19,712) 102,622 ¥ 82,910 96 OMRON Corporation Corporate Information / Stock Information As of March 31, 2016 Established May 10, 1933 Incorporated May 19, 1948 Capital ¥64,100 million Number of Employees (Consolidated) 37,709 Common Stock Issued 213,958 thousand shares Trading Unit 100 shares Number of Shareholders 44,787 Stock Listings Tokyo Stock Exchange, Frankfurt Stock Exchange Securities Code 6645 Fiscal Year-End March 31 Annual Shareholders’ Meeting June Custodian of Register of Shareholders Mitsubishi UFJ Trust and Banking Corporation Depositary and Transfer Agent for American Depositary Receipts JPMorgan Chase Bank, N.A. Head Ofﬁce Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan Tel: +81-75-344-7000 Fax: +81-75-344-7001 Overseas Headquarters North America OMRON MANAGEMENT CENTER OF AMERICA (Illinois) Brazil OMRON MANAGEMENT CENTER OF BRAZIL (São Paulo) Europe OMRON MANAGEMENT CENTER OF EUROPE (The Netherlands) Greater China OMRON MANAGEMENT CENTER OF CHINA (Shanghai) Asia Paciﬁc OMRON MANAGEMENT CENTER OF ASIA PACIFIC (Singapore) India OMRON MANAGEMENT CENTER OF INDIA (Haryana) Major Manufacturing & Development, Sales & Marketing, and Research & Development Centers in Japan Manufacturing & Development Kusatsu Ofﬁce Ayabe Ofﬁce Yasu Ofﬁce Research & Development Keihanna Technology Innovation Center Okayama Ofﬁce Sales & Marketing Tokyo Ofﬁce Mishima Ofﬁce Nagoya Ofﬁce Osaka Ofﬁce ■ Total Shareholder Return (TSR*1) Tokyo Stock Exchange and Osaka Securities Exchange Daily Trading Volume Omron TOPIX TOPIX Electric Appliances TSR (annualized rate) Holding Period*2 Omron TOPIX TOPIX Electric Appliances 3 years 15% 12% 13% 5 years 9% 11% 7% 10 years 1% -1% -2% (Index) 250 200 150 100 50 0 (1,000 Shares) 2,000 1,600 1,200 800 400 0 2006/3 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 Notes: 1. Share index (2006/3E = 100) 2. Stock price and trading volume information is for the 1st section of the Osaka Securities Exchange before July 16, 2013, and for the 1st section of the Tokyo Stock Exchange thereafter. *1 TSR: Total investment return, combining capital gains and dividends *2 TSR holding period indexed to March 2016 ■ 52-Week High / Low, Volatility*3 ■ Ownership and Distribution of Shares (%) High (¥) Low (¥) Volatility (%) 100 FY 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 3,590 3,510 2,385 2,215 2,418 2,357 2,478 4,730 5,800 5,900 2,615 1,950 940 1,132 1,749 1,381 1,436 2,213 3,365 2,742 27.1 36.3 52.4 35.9 34.7 36.5 29.9 39.7 30.9 40.0 *3 Volatility: Price ﬂuctuation risk, expressed in standard deviations 14.5% 12.4% 14.4% 48.2% 47.6% 45.2% 5.5% 1.0% 5.7% 1.8% 5.8% 0.9% 30.8% 32.5% 33.7% 2013 2014 2015 （FYE） 80 60 40 20 0 Individuals and others Foreign investors Other corporations Financial instru- ments dealers Financial institutions i F n a n c i a l S e c t i o n 97 Integrated Report 2016Where We’re HeadedAbout OmronCorporate Value InitiativesCorporate Value FoundationFinancial Section Independent Practitioner’s Assurance Omron believes the independent assurance process is important to improve the accuracy and objectivity of its Integrated Report 2016. The following information contained in the Integrated Report was reviewed by an independent third party*. The process leading to issuance of the Independent Practitioner’s Assurance Report was as follows: * Deloitte Tohmatsu Evaluation and Certification Organization Co., Ltd.: A related company of Deloitte Touche Tohmatsu LLC, a member firm of Deloitte Touche Tohmatsu Limited. ■ Independent Practitioner’s Assurance Process STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 Planning Perform Procedures Reporting Check Final Report Quality Assurance Issue Assurance Report Determine scope, categories, proce- dures, and schedule Perform procedures at Om- ron headquarters and other ofﬁces (site visit, analytical procedures, vouching, document reviews, inquiries, etc.) Report the results of procedures, including identiﬁed issues Follow up on issues identiﬁed in Step 3 A professional separate from the assurance team performs a quality control check Obtain management represen- tation letter, and issue the inde- pendent practitioner’s assurance report ■ Scope of Independent Practitioner’s Assurance Report ● Ratio of non-Japanese in managerial positions overseas (P30) ● Ratio of women in managerial roles (OMRON Group in Japan) (P30) ● Ratio of employees with disabilities (P30) ● Global net sales to CO2 emissions (P31) ● Environmental contribution (P31, 32-33) 98 OMRON CorporationFrom the Editor-in-Chief This Integrated Report 2016 represents the ﬁfth Omron Corporation integrated report since our ﬁrst publication in 2012. 　We consider the integrated report an important tool for disclosing information to our stakeholders. We believe that we can accomplish our duty of corporate governance by practicing diligent management in combination with sustainable corporate value improvement. This belief is also embodied in the Omron Corporate Governance Policies, formulated in June 2015, which organized lessons learned from our 20-plus years of focused commitment to strengthening corporate governance. 　We are pleased that these efforts have been recognized by outside institutions. The Japan Investor Relations Association awarded Omron the ﬁscal 2015 Best IR Award. As well, our Integrated Report 2015 received the Award for Excellence in Integrated Reporting from the World Intellectual Capital Initiative Japan, a partner with the International Integrated Reporting Council for the third consecutive year, and the Nikkei Annual Report Awards Second Prize from Nikkei Inc., publisher of the Nikkei Shimbun. 　We created the Integrated Report 2016 with particular focus on our overall value creation story. Human resources (source of corporate value) and technology (source of sustainable growth) are emphasized as two important capitals at Omron in this report. 　Continuing last year’s effort, we have been taking steps to improve reliability by contracting an independent assurance organization to conﬁrm our main non-ﬁnancial indicators. 　At the opening of this report, our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer each issued messages under their signatures as representatives of management. As Chief Communications Ofﬁcer with responsibility for this integrated report, I assure the reader of the validity of the report creation process, as well as the accuracy of the content herein. 　We will strive to communicate with our stakeholders about our path of corporate value creation. I encourage you to support us in this endeavor by sharing your frank opinions and ideas with us. Satoshi Ando Managing Executive Officer Senior General Manager, Global Investor Relations & Corporate Communications HQ July 2016 Omron Integrated Report 2015: Awarded for Excellence The Omron Integrated Report 2015 was selected winner of the Award for Excellence in Integrated Reporting from the World Intellectual Capital Initiative Japan. This report was also awarded Second Prize in the Nikkei Annual Report Awards sponsored by Nikkei, Inc. Integrated Report 2016 99 Website OMRON Global Site http://www.omron.com/ Financial Information http://www.omron.com/about/ir/ Non-Financial Information http://www.omron.com/about/sustainability/ Integrated Report http://www.omron.com/about/annual/index.html Financial Results http://www.omron.com/about/ir/irlib/presen/ INQUIRIES OMRON Corporation Shinagawa Front Building 7F　 2-3-13, Konan, Minato-ku, Tokyo 108-0075, Japan Global Investor Relations & Corporate Communications HQ Investor Relations Department Board of Directors Ofﬁce Corporate Social Responsibility Department Tel: +81-3-6718-3421　　Fax: +81-3-6718-3429 Tel: +81-3-6718-3410　　Fax: +81-3-6718-3411

Continue reading text version or see original annual report in PDF format above