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ANNUAL REPORT 2016
SEIKO EPSON CORPORATION
April 2015 - March 2016

Table of contents

  • Page 1
    ANNUAL REPORT 2016 SEIKO EPSON CORPORATION April 2015 - March 2016

  • Page 2
    ... to quickly introduce new products and services, consumption trends, competition, technology trends, and exchange rate fluctuations. In this annual report, "Epson" or the "Group" refers to the Epson Group, while "the Company" may refer to the Group or the parent company, Seiko Epson Corporation. 1

  • Page 3
    ... Report of Independent Auditors ...121 Additional Information ...122 1. Principal subsidiaries and affiliates ...122 2. Distribution of ownership among shareholders ...126 3. Major shareholders ...127 4. Employee stock ownership plans ...128 5. Epson stock price ...130 6. Corporate data and investor...

  • Page 4
    ... in) investing activities Free cash flows Net cash provided by (used in) financing activities Statement of Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Equity attributable to owners of the parent company 2015 2016 2016 1,008,407...

  • Page 5
    ...from operating activities / Revenue) Number of Employees 235.35 50.00 1,012.83 2015 314.61 115.00 1,381.66 2016 127.94 60.00 1,307.58 2016 1.14 0.52 11.60 39.9 49.1 49.7 27.7 26.3 9.5 9.2 7.9 13.7 12.1 9.7 8.6 Information-related equipment business segment Devices and precision products...

  • Page 6
    ... business segment Other Eliminations and corporate Information-related equipment business segment Devices and precision products business segment Sensing and industrial solutions business segment Other Eliminations and corporate Gross profit Selling, general and administrative expenses Operating...

  • Page 7
    ... Non-current liabilities Net assets Number of Employees 487,190 213,086 740,769 313,314 179,314 248,140 2013 519,457 217,388 778,547 326,688 193,052 258,806 2014 602,452 216,170 865,872 313,636 200,505 351,730 Information-related equipment business segment Devices and precision products business...

  • Page 8
    Information on the Company 1. Overview of the business group Epson is primarily engaged in developing, manufacturing, selling, and providing services for products in the printing solutions, visual communications, wearable and industrial products, and the other business. Epson is organized into ...

  • Page 9
    ... Epson Sales Japan Corporation Epson America, Inc. Epson Europe B.V. Epson (U.K.) Ltd. Epson Deutschland GmbH Epson France S.A. Epson Italia s.p.a. Epson Iberica, S.A. Epson (China) Co., Ltd. Epson Korea Co., Ltd. Epson Hong Kong Ltd. Epson Taiwan Technology & Trading Ltd. Epson Singapore Pte...

  • Page 10
    ... robots and other production systems that dramatically increase productivity. Micro-devices and others business This business designs, manufactures, and sells small, accurate, energy-efficient electronic devices for external customers as well as for other businesses in the Epson Group. It also...

  • Page 11
    ... Epson Precision (Johor) Sdn. Bhd. Akita Epson Corporation Sales companies Orient Watch Co., Ltd. Epson Hong Kong Ltd. Epson Sales Japan Corporation Epson Sales Japan Corporation Epson America, Inc. Epson Deutschland GmbH Epson (China) Co., Ltd. Epson Hong Kong Ltd. Epson Taiwan Technology & Trading...

  • Page 12
    ...as follows. (1) Seiko Epson Corporation As of March 31, 2016 Book value (Millions of yen) Name of plant (location) Business segment Type of facilities Buildings and structures Machinery, equipment and vehicles Land (Area: m2) Number of employees (Persons) Other Total Head Office (Suwa-shi, Nagano...

  • Page 13
    ...Number of employees (Persons) Other Total Epson Engineering (Shenzhen) Ltd. (Shenzhen, China) Singapore Epson Industrial Pte. Ltd. (Singapore) P.T. Indonesia Epson Industry (Bekasi, Indonesia) Epson Precision (Philippines), Inc. (Lipa, Philippines) Epson Precision Malaysia Sdn. Bhd. (Kuala Lumpur...

  • Page 14
    ...3LCD projectors, and for rationalizing, upgrading and maintaining equipment and facilities amounted to ¥10.7 billion in the fiscal year under review. Wearable & Industrial products segment Investment used for commercializing new products such as watches, sensing systems, factory automation products...

  • Page 15
    ... fiscal year ending March 31, 2017. Planned amount of Business segment capital expenditures Main type and purpose of equipment and facilities (100 million yen) Commercializing new products; rationalizing, upgrading and Printing solutions 460 maintaining equipment and facilities, etc. Visual...

  • Page 16
    ... technical assistance agreements Name of contracting company Seiko Epson Corporation Seiko Epson Corporation Seiko Epson Corporation Seiko Epson Corporation Seiko Epson Corporation Seiko Epson Corporation Seiko Epson Corporation Name of other party Hewlett-Packard Company International Business...

  • Page 17
    ... were made at Epson's discretion as of the date this Annual Report was submitted. 1. Our financial performance could be adversely affected by fluctuations in printer sales. The ¥736.3 billion in revenue in the printing solutions segment in the year ended March 2016 accounted for slightly less...

  • Page 18
    ... precision technologies that have become a part of Epson's DNA over many decades. By combining these technologies to create platforms, we are developing, manufacturing, and selling products and providing services that match customer needs. However, in the product markets and businesses where Epson...

  • Page 19
    ... such as supplier's parts shortages or supplier's quality problems, our operating results could adversely be affected. 7. Problems could arise relating to quality issues. The existence of quality guarantees on Epson products and the details of those guarantees differ from one customer account to...

  • Page 20
    ... difficult or impossible to execute our business plans. 11. Fluctuations in foreign currency exchanges create risks for Epson. A significant portion of our revenue is denominated in U.S. dollars or the euro. We expanded our overseas procurement and moved our production sites overseas, so our dollar...

  • Page 21
    ... of the influenza virus, infection by computer viruses, leaks or theft of customer data, failures of mission-critical internal IT systems, supply chain disruptions, and acts of terrorism or war. The central region of Nagano Prefecture, home to some of our key plants and offices, has numerous cities...

  • Page 22
    ... dot-matrix (SIDM) printer demand was firm in China owing to upgrade demand in the tax collection systems market, but demand continued to contract in the Americas and Europe. Demand for point-of-sale (POS) system products remained stable in North America, Europe, and Japan. Demand for projectors in...

  • Page 23
    ...The operations grouped within each segment changed effective in the first quarter of the current accounting period in conjunction with a reorganization that took effect on April 1, 2015. The printing systems business, which was included in the information-related equipment segment, the label printer...

  • Page 24
    ... of increased sales of luxury watch models, and foreign exchange effects. Revenue in the robotics solutions business increased. Although Epson did not receive a large order for industrial robots as it did previous fiscal year, sales grew on increased orders in China, Japan, and Europe. IC handler...

  • Page 25
    ... to ¥32.7 billion in the previous fiscal year. Epson used ¥66.1 billion in the acquisition of property, plant and equipment and intangible assets. Proceeds from sales of investment property provided ¥13.9 billion in cash. Net cash used in financing activities totaled ¥67.1 billion compared...

  • Page 26
    ... 93.2 100.9 Business segment Printing solutions Visual communications Wearable & Industrial products Total for the reporting segments Other Notes 1. Intersegment transactions are offset and therefore eliminated. 2. The above figures do not include consumption tax. 3. No customer accounts for more...

  • Page 27
    ... demand in the Chinese tax collection system market, as well as to hardware and system upgrade demand, which fueled sales of passbook printers in Europe and China. On the other hand, unit shipments declined in Europe and Americas due to a contraction of those markets and a decline in demand in Asian...

  • Page 28
    ... of factors, including but not limited to foreign exchange effects; ink cartridge printer price competition in Japan and North America; the stronger U.S. dollar, which caused the cost of products manufactured overseas to rise; and strategic investment and spending. Segment profit in the visual...

  • Page 29
    ... of defined benefit plan net liabilities, the decrease in equity attributable to owners of the parent company was largely due to a ¥25.0 billion decrease in other components of equity, including a decrease in exchange differences on translation of foreign operations accompanying the rise of...

  • Page 30
    ... gradations, a wide color gamut, and stable image quality. Epson also launched its fastest-ever A4 business inkjet printer, a model that also boasts a durability rating of 300,000 pages. This product eliminates the stress of waiting for your prints. Its PrecisionCore printhead achieves speeds of...

  • Page 31
    ... inside the machine)9. Information on the used paper is completely and securely destroyed in the process. Epson, which sells high-speed, energy-efficient business inkjet printers that deliver crisp, vivid output at a low cost per print, helps customers improve the efficiency of their operations by...

  • Page 32
    ..."creating a new connected age of people, things and information" by using attractive, advanced products as leverage to collaborate with IT companies and increase the value of the technologies it provides to customers. In this "new connected age" Epson aims to free people from repetitive manual labor...

  • Page 33
    ... higher return on equity on a continuous basis. Strategies in Each Business ï,§ In the printer business Epson will aim to establish a competitive advantage in the home printer market by boosting the attractiveness of its products and to getting office market development on track with linehead models...

  • Page 34
    ... create new customer value. Manufacturing. Provide timely products that others cannot easily imitate. Offer them at highly competitive costs and quality. Sales and support. Strengthen the office and industrial domains, establish optimum area sales organization, improve products quality with a market...

  • Page 35
    ...fiscal year. (Epson declared a two-for-one stock split of the Company's common shares, effective April 1st, 2015.) The Company's Articles of Incorporation allow the Company to issue an interim dividend with a record date of September 30 every year by resolution of the board of directors. The Company...

  • Page 36
    ... cooperate with, stakeholders, including shareholders, customers, local communities, business partners, and Epson personnel. â-ª Appropriately disclose company information and maintain transparency. â-ª Directors, executive officers, and special audit & supervisory officers shall be aware of their...

  • Page 37
    .... Meetings of the Corporate Strategy Council are where directors, executive officers, and special audit & supervisory officers exhaustively examine important business topics that affect the Epson Group as a whole and matters on the agenda for meetings of the Board of Directors. Compliance Committee...

  • Page 38
    ...of compliance programs by monitoring compliance across the Epson Group and by taking corrective action or making adjustments where needed. (5) The Corporate Strategy Council, an advisory body to the president comprised of members of the Board of Directors, etc. of the Company, will address important...

  • Page 39
    ... Group. (3) Personnel responsible for business operations report the matters below to the Board of Directors at least once every three months. • Current business performance and performance outlook • Risk management responses • Status of key business operations Risk management (1) The Company...

  • Page 40
    ... of management within the Epson Group, including subsidiaries. It can also view supporting materials. The Audit & Supervisory Committee can also ask, as needed, subsidiary company directors, corporate auditors, internal audit departments, and other organizations to report the state of management...

  • Page 41
    ... affairs. Audit & Supervisory Committee members can attend meetings of the Corporate Strategy Council and other important meetings as part of their efforts to properly monitor business affairs. They examine the legality and suitability of actions taken by the directors by checking and confirming...

  • Page 42
    ... rights on important business decisions made by the Board of Directors (ii) Advisory function for improving business efficiency (iii) Monitoring of conflicts of interest - Monitoring of conflicts of interest between Epson and its directors and executive officers - Monitoring of conflicts of interest...

  • Page 43
    ...10 million yen or ii) 30% of the annual expense of the group, whichever is higher. 7 "Interlocking Outside Officers" means mutual dispatch of Outside Officers between the Company and another corporation. Number of outside directors, selection criteria, and human, capital, business or other interests...

  • Page 44
    ... no business transactions between Epson and the TOYOTA MOTOR CORPORATION in the past three years. Epson has registered him as an Independent Director with the Tokyo Stock Exchange. (6) Officer compensation, etc. (i) Compensation for performance through the 2015 fiscal year Basic policy - The policy...

  • Page 45
    ...455 94 15 Notes 1. The number of individuals above includes one corporate auditor who retired on January 31, 2016. 2. Epson introduced a stock performance (stock-based) component to the compensation system to link compensation more closely to share price, so Epson stock accounts for a portion of the...

  • Page 46
    ... independent from executive functions, officers who do not have executive duties do not receive performance and share price-linked bonuses and stock compensation. Procedure for determining compensation - Compensation is determined by general shareholders' meeting and the Board of Directors or Audit...

  • Page 47
    ... buyer of Epson products Pixelworks, Inc. 100,000 60 To maintain and strengthen the business relationship with a supplier of key parts used in Epson products Nippon BS Broadcasting 33,200 41 To maintain and strengthen the Corporation business relationship with a company whose parent company is major...

  • Page 48
    ... strengthen the business relationship with a company whose parent company is major buyer of Epson products To maintain and strengthen the business relationship with a supplier of key parts used in Epson products Mizuho Financial Group, Inc. 15,008,880 2,522 Seiko Holdings Corporation 1,644,080...

  • Page 49
    ... of the Board of Directors Treasury stock acquisition The Company's Articles of Incorporation allow the Company to acquire treasury stock through stock market trade and other means by resolution of the Board of Directors. This enables a more flexible capital policy in response to a changing business...

  • Page 50
    ... year ended March 31, 2016, amounted to ¥590 million. (3) Non-audit work performed by auditing certified public accountant at filing company Previous fiscal year Remuneration paid for non-audit work performed by the certified public accountant was for various consultancy services. Fiscal year under...

  • Page 51
    ... policy regarding company control Epson's board of directors agreed on a basic policy governing persons who control our financial and business policy decisions (hereinafter the "basic policy"). (1) Overview Epson believes that its shareholders should be determined through free trade on the market...

  • Page 52
    ... made up of highly independent external parties. Actions of the special committee shall include examination of stock acquisition details, requesting information from the Epson board of directors regarding alternative proposals, disclosing information to shareholders, and negotiating with parties...

  • Page 53
    ...Company as of the date when the annual securities report (yukashoken-houkokusho) was submitted and their functions are listed below. Name Minoru Usui Shigeki Inoue Position President (Representative Director) Senior Managing Director (Representative Director) Current function Yoneharu Fukushima...

  • Page 54
    ... Executive Officer Sunao Murata Executive Officer Yoshiyuki Moriyama Executive Officer Toshiya Takahata Executive Officer President, Epson Precision (Philippines), Inc. General Administrative Manager, Second Technology Development Division Chief Operating Officer, Visual Products Operations...

  • Page 55
    ... Division President, Epson Europe B.V. President, Epson (China) Co., Ltd. Deputy Chief Operating Officer, Printer Operations Division President, Epson America, Inc. President, Epson Atmix Corporation Naoyuki Saeki Nobuyuki Shimotome Executive Officer Executive Officer Kazuyoshi Yamamoto Munenori...

  • Page 56
    ... Seiko Epson Corporation and Subsidiaries Consolidated Statement of Financial Position...56 Consolidated Statement of Comprehensive Income ...58 Consolidated Statement of Changes in Equity ...60 Consolidated Statement of Cash Flows...62 Notes to Consolidated Financial Statements ...63 Report of...

  • Page 57
    ... receivables Other financial assets Other current assets Subtotal Non-current assets held for sale Total current assets Non-current assets Property, plant and equipment Intangible assets Investment property Investments accounted for using the equity method Net defined benefit assets Other financial...

  • Page 58
    ... Net defined benefit liabilities Provisions Other non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Equity Share capital Capital surplus Treasury shares Other components of equity Retained earnings Equity attributable to owners of the parent company...

  • Page 59
    ... 2016: Millions of yen Year ended March 31, Notes Revenue Cost of sales Gross profit Selling, general and administrative expenses Other operating income Other operating expense Profit from operating activities Finance income Finance costs Share of profit of investments accounted for using the equity...

  • Page 60
    ... Profit for the period Total comprehensive income for the period attributable to: Owners of the parent company Non-controlling interests Total comprehensive income for the period 2015 2016 Thousands of U.S. dollars Year ended March 31, 2016 112,560 225 112,785 45,772 294 46,067 406,221 2,609...

  • Page 61
    ...March 31, 2015 and 2016: Millions of yen Equity attributable to owners of the parent company Other components of equity Total equity attributable to owners of the parent company Non-controlling interests Total equity Share capital Notes Capital surplus Treasury shares Net gain (loss) on Exchange...

  • Page 62
    ... yen Equity attributable to owners of the parent company Other components of equity Net gain (loss) on Exchange differences Net changes in fair Remeasurement of net revaluation of financial value of cash flow on translation of defined benefit assets measured at hedges foreign operations liabilities...

  • Page 63
    ...loss Finance (income) costs, net Share of (profit) loss of investments accounted for using the equity method Loss (gain) on sales and disposal of property, plant and equipment, intangible assets and investment property, net Income taxes Decrease (increase) in trade receivables Decrease (increase) in...

  • Page 64
    ... 1. Reporting Entity Seiko Epson Corporation (the "Company") is a stock corporation domiciled in Japan. The addresses of the Company's registered head office and principal business offices are available on the Company's website (http://www.epson.jp). The details of businesses and principal business...

  • Page 65
    ...influence that is the power to participate in the financial and operating policy decisions of the entity. Investments in associates are accounted for using the equity method from the date on which Epson has the significant influence until the date on which it ceases to have the significant influence...

  • Page 66
    ...equity instruments held for trading...Epson recognises trade and other receivables on the date they are originated. All other financial assets are recognised on the trade date when Epson becomes a party to the contractual provisions of the instrument. (ii.... (iii) Derecognition... allowance account and ...

  • Page 67
    ... in other comprehensive income continue to be recognised in equity until the forecast transactions or firm commitments occur. (iii) Hedges of a Net Investment in Foreign Operation Hedges of a net investment in foreign operation are accounted for similarly to cash flow hedges. The portion of...

  • Page 68
    .... Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (7) Property, Plant and Equipment The cost of property, plant and equipment includes any costs directly attributable...

  • Page 69
    ...of its carrying amount and fair value less costs to sell. The non-current asset is not depreciated or amortised while it is classified as held for sale or while it is part of a disposal group classified as held for sale. A discontinued operation is a component of an entity, that is a cash-generating...

  • Page 70
    ... that the tax arises from a transaction which is recognised either in other comprehensive income or directly in equity or a business combination. For the calculation of the tax amount, Epson uses the tax rates and tax laws that have been enacted or substantively enacted by the end of fiscal year...

  • Page 71
    ... Board of Directors. 4. Significant Accounting Estimates and Judgments The preparation of Epson's consolidated financial statements includes management estimates and assumptions in order to measure income, expenses, assets and liabilities, and disclosed contingencies as of the fiscal year end date...

  • Page 72
    ...are disclosed in light of all the available evidence as of the fiscal year end date and by taking into account the probability of these contingencies and their impact on financial reporting. The content of contingencies is stated in "39. Contingencies." 5. Changes in Accounting Policies There is no...

  • Page 73
    ... scanners, commercial inkjet printers, industrial inkjet printing systems, printers for use in POS systems, label printers and related consumables, personal computers and others. 3LCD projectors, HTPS-TFT panels for 3LCD projectors, smart eyewear and others. Watches, watch movements, sensing systems...

  • Page 74
    ...,104 131,380 948 207 132,536 Other operating income (expense) Profit from operating activities Finance income (costs), net Share of profit of investments accounted for using the equity method Profit before tax Other items Printing Solutions Depreciation and amortisation expense Impairment loss and...

  • Page 75
    ...104 91,530 Other operating income (expense) Profit from operating activities Finance income (costs), net Share of profit of investments accounted for using the equity method Profit before tax Other items Reportable segments Wearable & Visual CommuniIndustrial cations Products (7,420) (8,171) Other...

  • Page 76
    ...922 812,300 Other operating income (expense) Profit from operating activities Finance income (costs), net Share of profit of investments accounted for using the equity method Profit before tax Other items Reportable segments Wearable & Visual CommuniIndustrial cations Products (65,850) (3,603) 959...

  • Page 77
    ... of U.S. dollars Year ended March 31, 2016 2,343,024 2,022,089 1,282,090 4,048,226 9,695,429 Japan The United States China Other Total (Note) Revenue is segmented by country based on the location of the customers. (4) Major Customers Information Epson had no transactions with a single external...

  • Page 78
    ...,655) 1,345,935 Notes and trade receivables Other receivables Allowance account for credit losses Total Millions of yen March 31, 2015 2016 156,440 140,623 12,563 12,463 (1,521) (1,426) 167,482 151,660 Trade and other receivables are presented net of the allowance account for credit losses in the...

  • Page 79
    ... assets Equity securities Bonds receivable Time deposits Other Allowance account for credit losses Total Current assets Non-current assets Total Millions of yen March 31, 2015 2016 1,383...excluding a case where hedge accounting is applied. Equity securities held for other than trading purposes are...

  • Page 80
    ... Assets The breakdown of "Other current assets" and "Other non-current assets" was as follows: Millions of yen March 31, 2015 2016 13,620 13,887 1,954 1,724 1,922 3,845 17,497 19,457 11,539 5,958 17,497 14,335 5,122 19,457 Thousands of U.S. dollars March 31, 2016 123,242 15,299 34...

  • Page 81
    ...2014 Individual acquisition Acquisition of subsidiary Transfer to(from) investment property Transfer to(from) non-current assets held for sale Sale or disposal Exchange differences on translation of foreign operations Transfer from construction in progress Other As of M arch 31, 2015...Tools, furniture...

  • Page 82
    ... arch 31, 2015 Depreciation expense (Note) Impairment losses Acquisition of subsidiary Transfer to(from) investment property Transfer to(from) non-current assets held for sale Sale or disposal Exchange differences on translation of foreign operations Other As of M arch 31, 2016 Tools, furniture and...

  • Page 83
    ... and vehicles 869 1,677 Tools, furniture and fixtures 674 408 Leased Assets As of March 31, 2015 As of March 31, 2016 Total 2,520 2,644 (2) Impairment Losses Epson's business assets are generally grouped by business segment under the Company's management accounting system, and their cash flows...

  • Page 84
    ...73,894 Thousands of U.S. dollars Product development assets 65,859 5,067 17 (0) (97) (26) 70,820 Cost As of March 31, 2015 Individual acquisition Acquisition of subsidiary Sale or disposal Exchange differences on translation of foreign operations Other As of March 31, 2016 Software 369,062 51,553...

  • Page 85
    ... was included in cost of sales and selling, general and administrative expenses in the consolidated statement of comprehensive income. Millions of yen Product development assets 2,714 2,291 1,496 Carrying Amount As of April 1, 2014 As of March 31, 2015 As of March 31, 2016 Software 9,617 10,907 11...

  • Page 86
    ... payments, future finance costs and their present value for leased assets recognised based on the finance lease contracts by maturity were as follows: Thousands of U.S. dollars March 31, 2016 92 (3) 88 816 (36) 780 Millions of yen March 31, 2015 2016 Not later than 1 year Total of future minimum...

  • Page 87
    ...than 5 years Total Millions of yen March 31, 2015 2016 4,497 5,277 8,663 11,926 1,529 1,046 14,690 18,251 (2)Total of Minimum Lease Payments and Contingent Rents The total of minimum lease payments and contingent rents of operating lease contracts recognised as an expense was as follows: Thousands...

  • Page 88
    ... of the year Expenditure after acquisition Transfer from(to) property, plant and equipment Depreciation expense Impairment losses and reversal of impairment losses Sale or disposal Exchange differences on translation of foreign operations Balance at the end of the year Breakdown of "Balance at...

  • Page 89
    ... impact of foreign exchange movements. Epson assesses its ability to utilize carryforward of unused tax losses in future periods based on the Mid-Range Business Plan and financial forecasts approved by the Board of Directors annually. This takes account of Epson's medium and long-term strategy and...

  • Page 90
    ...for the years ended March 31, 2015 and 2016, respectively. (3) Reconciliation of the Effective Tax Rate The breakdown of major items that caused differences between the effective statutory tax rate and the actual tax rate was as follows. Epson is subject mainly to corporate tax, inhabitant tax, and...

  • Page 91
    ... payables" was as follows: Thousands of U.S. dollars March 31, 2016 620,979 538,268 1,159,247 Notes and trade payables Other payables Total Millions of yen March 31, 2015 2016 80,359 69,972 59,688 60,651 140,047 130,624 Trade and other payables are classified as financial liabilities measured at...

  • Page 92
    % Company Name of bonds issued Issue date interest rate 0.58 Collateral Maturity date Millions of yen March 31, 2015 20,000 Non Sep 3, 2015 (20,000) 20,000 2016 - Thousands of U.S. dollars March 31, 2016 177,493 (177,493) - The Company T he 5th Series unsecured straight bonds issued (with inter-...

  • Page 93
    ...FY2014: Year ended March 31, 2015 Millions of yen Provision for product warranties As of April 1, 2014 Arising during the year Utilised Unused amounts reversed Exchange differences on translation of foreign operations As of March 31, 2015 Current liabilities Non-current liabilities Total 10,100 10...

  • Page 94
    ... rate of historical service contract expenses to sales. Other specific warranty provisions are made for those products where future warranty expenses can be specifically estimated. Most of these expenses are expected to be incurred in the next fiscal year. (2) Provision for rebates Epson recognises...

  • Page 95
    ...the rules of the Fund, dismissal of the board members including members who execute operations related to the administration and investment of pension reserves for the Fund, and resolutions of the business report and the closing of account. (1)Schedule of Defined Benefit Obligations The schedule of...

  • Page 96
    ... Remeasurement Return on plan assets Gains (losses) arising from settlements Exchange differences on translation of foreign operations Contributions by the employer Contributions by plan participants Benefits paid Balance at the end of the year Millions of yen Year ended March 31, 2015 2016 237...

  • Page 97
    ... 31, 2015 2016 Investments quoted in active markets Equity securities Bonds receivable Alternative investments (Note 2) Cash and deposits Other Total Investments unquoted in active markets Pooled funds (Equity securities) Pooled funds (Bonds receivable) General accounts of life insurance companies...

  • Page 98
    ...actuarial assumptions was as follows: % March 31, 2015 Discount rate 1.3 March 31, 2016 0.8 The valuation of defined benefit obligations reflects ... in the discount rate as of March 31, 2016 were as follows. Each of these sensitivities assumes that other variables remain fixed. Negative figures show ...

  • Page 99
    ... (Note2) Increase in the number of treasury shares during the year ended March 31, 2016 resulted from the purchase of odd shares and the Company's common shares split with an effective date of April 1, 2015. (3) Other Components of Equity (A) Remeasurement of net defined benefit liabilities (assets...

  • Page 100
    ... per share 80 30 Basis date Effective date March 31, 2015 September 30, 2015 June 26, 2015 December 4, 2015 FY2015: Year ended March 31, 2016 Class of shares (Resolution) Annual Shareholders Meeting (June 25, 2015) Board of Directors (October 29, 2015) Ordinary shares Ordinary shares Thousands...

  • Page 101
    ...shares Total dividends 14,311 Yen Dividends per share 80 Basis date Effective date March 31, 2015 June 26, 2015 FY2015: Year ended March 31, 2016 Millions of yen Class of shares (Resolution) Annual Shareholders Meeting (June 28, 2016) Ordinary shares Total dividends 10,733 Yen Dividends per share...

  • Page 102
    ...(200,780) (188,755) (147,231) (607,156) (2,775,186) Employee benefit expense Research and development expense Promotion expense Advertising expense Service contract expense Transportation expense Other Total Millions of yen Year ended March 31, 2015 2016 (94,749) (98,355) (47,837) (53,172) (28,722...

  • Page 103
    ... of yen Year ended March 31, 2015 2016 Thousands of U.S. dollars Year ended March 31, 2016 Gain on sales of property, plant and equipment, 5,270 7,733 68,627 intangible assets and investment property Income from reversal of impairment loss 3,828 33,972 Foreign exchange gain 931 8,262 Income from...

  • Page 104
    ... 3,017 328 14,660 Interest income Dividend income Foreign exchange gain (Note) Other Total Finance Costs Interest expense Foreign exchange loss (Note) Employee benefit expense Other Total Millions of yen Year ended March 31, 2015 2016 (1,559) (1,319) (2,177) (531) (700) (229) (55) (2,320) (4,252...

  • Page 105
    ... ended March 31, 2015 and 2016 was classified into "Discontinued operations". As of November 16, 2012, Epson concluded an agreement with Hoya Corporation ("Hoya") about the transfer of the optical products business of the Company and related subsidiaries to Hoya group. After the Company and related...

  • Page 106
    ... on revaluation of financial assets measured at FVTOCI (Note) Exchange differences on translation of foreign operations Net changes in fair value of cash flow hedges Share of other comprehensive income of investments accounted for using the equity method Total (Note) FVTOCI: Fair Value Through Other...

  • Page 107
    ... March 31, 2015 Weighted-average number of ordinary shares 357,779 Year ended March 31, 2016 357,775 (Note) The Company completed the Company's ordinary shares split with an effective date of April 1, 2015 based on the resolution by the Company's Board of Directors on January 30, 2015. As a result...

  • Page 108
    ... parent company) 2015 185,978 (245,330) (59,351) 494,325 2016 141,755 (230,498) (88,743) 467,818 Epson monitors financial indicators in order to maintain a well-balanced capital structure that ensures an appropriate return on equity and a sound and flexible financial condition for future investment...

  • Page 109
    ... financial and general accounting department of the Company regularly monitors the status of the occurrence and collection of bad debts, and reports them to the Executive Committee of the Company. There is no over-concentrated credit risk for a single customer. With regard to the investment of cash...

  • Page 110
    ... on the annual business plan and the financial and general accounting department of the Company regularly monitors and collects information on the balance of liquidity-in-hand and interest-bearing debt and reports it to the Executive Committee of the Company. In addition, Epson manages liquidity...

  • Page 111
    ... current conditions and forecast of the foreign exchange market, implements the aforementioned hedges under the supervision of the Foreign Exchange Management Committee of the Company. The financial and general accounting department of the Company regularly reports the performances to the Executive...

  • Page 112
    ...Operation Regulation. Epson intends to hold equity instruments not for short-term trading but for long-term investment. Therefore, Epson does not sell the instruments actively. The equity price fluctuation risks are calculated based on the price of equity instruments at the fiscal year end. In cases...

  • Page 113
    ... of non-current borrowings with fixed rates are calculated by the total sum of the principal and interest discounted using the interest rates that would be applied if similar new borrowings were conducted. (Bonds issued) The fair values of bonds issued are determined based on market prices. (Lease...

  • Page 114
    ... were as follows: Millions of yen March 31, 2015 Carrying amount Financial assets measured at fair value Derivative financial assets Equity securities Financial assets measured at amortised cost Cash and cash equivalents Trade and other receivables Bonds receivable Other Financial liabilities...

  • Page 115
    ... follows: Level 1: Fair value measured at quoted prices in active markets for identical assets or liabilities Level 2: Fair value calculated using inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly Level 3: Fair value calculated using valuation...

  • Page 116
    ... was as follows: Thousands of U.S. dollars Year ended March 31, 2016 21,352 (2,841) (283) 18,228 Millions of yen Year ended March 31, Balance as of April 1 Gains and losses Other comprehensive income Sales Other Balance as of March 31 2015 2,606 (174) (25) 0 2,406 2016 2,406 (319) (32) 2,054 115

  • Page 117
    ...March 31, 2016 were as follows: Company name Epson Sales Japan Corporation Epson Direct Corporation Orient Watch Co., Ltd. Miyazaki Epson Corporation Tohoku Epson Corporation Akita Epson Corporation Epson Atmix Corporation U.S. Epson, Inc. Location Shinjuku-ku, Tokyo Main business Printing solutions...

  • Page 118
    ... (Shenzhen) Ltd. Epson Precision (Shenzhen) Ltd. Orient Watch (Shenzhen) Ltd. Singapore Epson Industrial Pte. Ltd. P.T. Epson Batam P.T. Indonesia Epson Industry Epson Precision (Philippines), Inc. Epson Precision Malaysia Sdn. Bhd. Epson Precision (Johor) Sdn. Bhd. Seoul, Korea Hong Kong, China...

  • Page 119
    ... (stock-based) remuneration system to link remuneration more closely to share price, so a certain portion of short-term remuneration is allotted for the purchase of Epson Stock. (Note 2) A director who retired at the closing of the general shareholders' meeting held on June 24, 2014 receipted...

  • Page 120
    ... in a liquid crystal display price-fixing cartel. Moreover, the Company and certain of its consolidated subsidiaries are currently under investigation by a certain anti-monopoly-related authority. (2) The civil action on copyright fee of ink-jet printers In June 2010, Epson Europe B.V. ("EEB...

  • Page 121
    41. Approval of Consolidated Financial Statements The consolidated financial statements were approved by Minoru Usui (President and Representative Director) and Tatsuaki Seki (Director and General Administrative Manager, Management Control Division) on June 28, 2016. 120

  • Page 122
    Report of Independent Auditors 121

  • Page 123
    ... 100.0 systems, Financial assistance Manufacture and sales of 100.0 metal powders, etc., Rental of assets Holding company in 100.0 Americas, Interlocking directors Regional headquarters in Americas, 100.0 Sales of printers and other (100.0) PC peripherals, and sales of factory automation products...

  • Page 124
    ...Epson Telford Ltd. Telford, UK Epson (China) Co., Ltd. Beijing, * China Epson Korea Co., Ltd. Seoul, Korea Epson Hong Kong Ltd. Hong Kong, China Sales of printers and other PC peripherals, and sales of 100.0 watch movements, factory automation products and electronic devices Sales of printers...

  • Page 125
    ...) products P.T. Epson Indonesia Epson (Thailand) Co., Ltd. Epson Australia Pty. Ltd. Jakarta, Indonesia Bangkok, Thailand North Ryde, Australia Epson India Pvt. Ltd. Bangalore, India Tianjin Epson Co., Ltd. Epson Precision (Hong Kong), Ltd. * Epson Engineering (Shenzhen) Ltd. * Tianjin, China...

  • Page 126
    ... directors Epson Precision (Philippines), Inc. * Lipa, Philippines Printing solutions, 157,533 Visual (thousand USD) communications Epson Precision Malaysia Sdn. Bhd. Kuala Lumpur, Malaysia 16,000 Wearable & Industrial (thousand MYR) products 100.0 Epson Precision (Johor) Sdn. Bhd...

  • Page 127
    ... (Shares) Notes 1. 41,860,396 shares of treasury stock are included as 418,603 units under "Japanese individuals and others" and 96 shares under "Shares less than one unit." 2. Six units in the name of Japan Securities Depository Center, Inc. are included under "Other Japanese corporations." 126

  • Page 128
    ...2016 Name Sanko Kigyo Kabushiki Kaisha Japan Trustee Services Bank, Ltd. (Trustee Account) The Master Trust Bank of Japan, Ltd. (Trust account) Seiko Holdings Corporation Yasuo Hattori Noboru Hattori The Dai-ichi Life Insurance Company... Office Tower Z, 8-12, Harumi 1-chome, Chuo-ku, Tokyo) Number of...

  • Page 129
    4. Employee stock ownership plans On March 16, 2016, Epson's Board of Directors resolved to introduce a transparent & fair performance-linked stock compensation plan for the Company's directors and executive officers who have been engaged by the Company (...

  • Page 130
    ... the stock market August 4, 2016 through August 31, 2016 Epson Residual assets that Epson may receive as the vested rightholder shall be within the scope of trust expense reserve after subtracting funds for acquiring shares from the trust money. (3) Content of trust/stock related business 1) Trust...

  • Page 131
    ... March 2014 3,390 795 73rd year Mar 2015 5,970 â-¡2,333 2,752 â-¡2,120 74th year Mar 2016 2,357 1,492 Notes 1. High and low stock prices noted above are based on Tokyo Stock Exchange (First Section) data. 2. The â-¡ mark indicates the highest and lowest ex-rights prices after a stock split (the...

  • Page 132
    ... of the interim cash dividend payment date Transfer agent September 30 Mitsubishi UFJ Trust and Banking Corporation 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo Agent's business address Stock Transfer Agency Department Mitsubishi UFJ Trust and Banking Corporation 10-11, Higashisuna 7-chome, Koto-ku...

  • Page 133
    3-3-5 Owa, Suwa, Nagano 392-8502, Japan TEL: +81-266-52-3131 http://global.epson.com