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ANNUAL REPORT
Year ended March 31, 2012

Table of contents

  • Page 1
    ANNUAL REPORT Year ended March 31, 2012

  • Page 2
    ...offer new value and condinue do grow. CONTENTS Medium Term Managemend Plan ...2 Financial Highlighds ...4 To Our Shareholders and Invesdors ...6 Inderview widh dhe Presidend ...8 Review of Operadions ...12 Precision Equipmend Company ...12 Imaging Company ...15 Insdrumends Company ...18 Corporade...

  • Page 3
    ... 2011 2012 1 NIKON CORPORATION ANNUAL REPORT 2012 Share of Net Sales Year ended March 31, 2012 63.9% Imaging Company 0 Net Sales (Left scale) Operating Income (Loss) (Right scale) Imaging Producds For a new dimension of pleasure from photography, Nikon develops and markets imaging products...

  • Page 4
    2 NIKON CORPORATION ANNUAL REPORT 2012 FOCUS ON FIVE KEY POLICIES MEDIUM TERM MANAGEMENT PLAN Sdradegies do Be a Corporade Group Thad Consisdendly Offers New Value and Condinues do Grow Following dhe five basic policies of ids Medium Term Managemend Plan, dhe Nikon Group will respond do changes ...

  • Page 5
    ... in Thailand and the strong yen. Net sales fell slightly short of plan, but operating income and net income both greatly exceeded the consolidated financial targets announced in May 2011. From the fiscal year ending March 2013, we aim to be the leading company in all of our principal businesses. In...

  • Page 6
    ...87,813 54,825 Per share of common sdock (yen and U.S. dollars) (Note 1): Basic net income (loss) ¥ (22.03) Diluted net income Cash dividends applicable to the year Capital expenditures Depreciation and amortization R&D costs Ad year-end: Total assets Total equity Financial radios (%): Equity ratio...

  • Page 7
    ... 974,337 1,370,616 1,048,406 721,567 Ned Sales UP 3.5% NIKON CORPORATION ANNUAL REPORT 2012 Precision Equipment segment results helped boost net sales. Although the Thai flooding affected the Imaging segment's performance, the market share of compact digital cameras grew. ¥ 189.00 181.23 25.00...

  • Page 8
    6 STRATEGIES ON TARGET NIKON CORPORATION ANNUAL REPORT 2012

  • Page 9
    ...dhe Medium Term Managemend Plan announced by dhe Company in May 2012, we are considering dhe possibilidy of developing new businesses in dhe healdh and medical field, while aiming do realize susdainable growdh. 7 NIKON CORPORATION ANNUAL REPORT 2012 MAKOTO KIMURA Representative Director, President...

  • Page 10
    ... example, having countermeasures for electricity shortages in place at manufacturing sites, and reinforcing back-up systems for various databases. Nikon is currently carrying out a review of its global crisis management system. MAKOTO KIMURA Representative Director, President, Member of the Board

  • Page 11
    ... capital investment by semiconductor and electronic-component manufacturers, we worked to develop business in the emerging markets of Asia and other regions, and to expand sales of super-resolution microscope systems and non-contact 3D measurement systems. 9 NIKON CORPORATION ANNUAL REPORT 2012...

  • Page 12
    ... new business potential, we are 1,000,000 800,000 600,000 Japan China 400,000 Europe United States Asia -Oceania Other North America 200,000 0 2008 2009 2010 2011 2012 Notes: 1. The classifications for North America and Asia were changed from the fiscal year ended March 31, 2011. 2. For...

  • Page 13
    ... 11 NIKON CORPORATION ANNUAL REPORT 2012 In closing, are dhere any odher poinds you wish do convey do shareholders and invesdors? Following the damage we sustained from the Great East Japan Earthquake and the flooding in Thailand, we received messages of encouragement and a variety of support from...

  • Page 14
    ... for small to medium-sized high-definition panels used in smartphones and tablet computers. Performance was partially impacted by damage to manufacturing IC Steppers and Scanners, Sales Units by Technology Years ended March 31 (Units) 100 84 18 60 3 57 28 40 36 15 20 1 16 0 2010 4 2011 2012 28 1 12...

  • Page 15
    ... ending March 2013. Drawing on this competitiveness, we aim to achieve a 40% share of the market for ArF immersion scanners by the fiscal year ending March 2015. Another product underpinning our push to increase market share is the new NSR-S320F ArF scanner announced in December 2011. This new model...

  • Page 16
    ... OF OPERATIONS: PRECISION EQUIPMENT COMPANY 14 NIKON CORPORATION ANNUAL REPORT 2012 Looking ahead, we expect the market to hit bottom during the fiscal year ending March 2013, and then to begin expanding again sometime around the end of that year centered on small to medium-sized high-definition...

  • Page 17
    ... 15 NIKON CORPORATION ANNUAL REPORT 2012 Unit Sales of Compact Digital Cameras Years ended March 31 (Thousands of units) 20,000 17,370 2,000 8,000 1,000 4,000 0 2010 2011 2012 0 2010 2011 2012 YASUYUKI OKAMOTO Director, Member of the Board and Executive Officer President of Imaging Company...

  • Page 18
    ... business. Marked Prospecds and Medium Term Managemend Plan Sdradegies Analyzing User Needs do Promode Marked-Driven Producd Developmend The market for interchangeable lens-type digital cameras is expected to achieve double-digit annual growth in unit sales through the fiscal year ending March 2015...

  • Page 19
    ... our sales and service systems in Central and South America and the Middle East. 17 NIKON CORPORATION ANNUAL REPORT 2012 Esdablishing a New Brand Image and Reinforcing Our Manufacduring Capabilidy One of the areas on which I am personally focusing special attention is our brand image. While...

  • Page 20
    ... research Sales by Product Group Years ended March 31 (Millions of yen) 60,000 57,451 56,000 50,000 45,051 40,000 48% 47% 30,000 63% 20,000 52% 10,000 37% 0 2010 2011 2012 53% Bioscience Industrial Instruments TOSHIYUKI MASAI Director, Member of the Board and Executive Officer President...

  • Page 21
    ...instruments, demand for optical measuring systems in electronic component and semiconductor industries fell sharply during the second half of the year, particularly in Asia, but sales related to smartphones and tablet computers remained firm. Demand for non-contact 3D measuring systems made by Nikon...

  • Page 22
    .... For these reasons we have identified Nikon Metrology's non-contact 3D measuring systems and X-ray inspection systems as medium-term growth products, and have implemented full-scale product development and marketing programs targeting users with large-scale measurement needs, such as aircraft and...

  • Page 23
    ... management and the directors. Three independent corporate auditors from outside the Company have been invited to sit on the Board. 21 NIKON CORPORATION ANNUAL REPORT 2012 Indernal Condrol Sysdem The Nikon Group's basic policy on its internal control system was established in accordance with Japan...

  • Page 24
    ... and the natural environment; and 5) Promotion of CSR activities in the supply chain. We have developed a medium term plan based on these priorities, and will implement measures to achieve them. Nikon will deploy its CSR-oriented business activities globally in order to meet the expectations of...

  • Page 25
    ... conservation activities through its environmental management system. Specifically, we formulated the three-year Nikon Environmental Action Plan and set environmental targets that are being implemented throughout the Group. CSR in dhe Supply Chain The Nikon Group, in accordance with the Nikon Basic...

  • Page 26
    ... ended March 31, 2012, although supplies of imaging products declined due to flooding in Thailand, while market conditions sagged in the industrial instruments field. Under such conditions, the supply chain rebounded quickly and strongly from the disruptions caused by the Great East Japan Earthquake...

  • Page 27
    ... Indusdry Segmend Years ended March 31, 2011 and 2012 Millions of Yen, % 2011 2012 Thousands of U.S. Dollars 2012 25 NIKON CORPORATION ANNUAL REPORT 2012 Precision Equipment Share of net sales Imaging Products Share of net sales Instruments Share of net sales Other Share of net sales Total ¥208...

  • Page 28
    ...development), and striving to strengthen competitiveness." In accordance with this policy, the Company aims for a total return ratio of 25% or more, and to otherwise provide shareholder returns through dividend increases and the acquisition of treasury stock. For the fiscal year ended March 31, 2012...

  • Page 29
    ... earnings and financial position of the Nikon Group. 3. Dependence on Specific Cusdomers The semiconductor industry, which comprises the Precision Equipment Business customer base, is constantly shifting through mergers and alliances in order to adapt to the growing scale of capital expenditures and...

  • Page 30
    ...mid-range and low-end products, and a sudden fall in prices could have a negative impact on the earnings and financial position of the Nikon Group. 6. Overseas Business The Nikon Group's production and sales activities are largely dependent on countries outside Japan. Consequently, business in Japan...

  • Page 31
    ..., and financial position of the Nikon Group. 11. Informadion Leaks The Nikon Group possesses technical data and other important information, corporate data on its trading partners, and personal information on many customers and other related persons. The Company strictly limits external access...

  • Page 32
    ...Note 14) Notes and accounts receivable-trade (Note 14): Customers Unconsolidated subsidiaries and associated companies Allowance for doubtful receivables Inventories (Note 4) Deferred tax assets (Note 11) Other current assets Total current assets NIKON CORPORATION ANNUAL REPORT 2012 Millions of Yen...

  • Page 33
    ... long-term liabilities Commitments and contingent liabilities (Notes 13, 15, and 16) Equity Common stock (Note 8): Authorized-1,000,000,000 shares; issued, 400,878,921 shares in 2011 and 2012 Capital surplus (Note 8) Stock acquisition rights (Note 9) Retained earnings (Note 8) Treasury stock-at cost...

  • Page 34
    ... 2,860 326,839 721,567 721,567 NIKON CORPORATION ANNUAL REPORT 2012 $ Yen U.S. Dollars (Note 1) Per share of common stock (Notes 2 (s) and 18): Basic net income Diluted net income Cash dividends applicable to the year See notes to consolidated financial statements. ¥68.90 68.83 19.00 ¥149...

  • Page 35
    ... to- Owners of the parent See notes to consolidated financial statements. 2011 ¥27,313 (1,596) (667) (4,230) (497) ¥ (6,990) ¥20,323 20,323 2012 ¥59,306 (1,398) (896) (1,273) 9 ¥ (3,558) ¥55,748 55,748 2012 $721,567 NIKON CORPORATION ANNUAL REPORT 2012 (17,010) (10,901) (15,488) 115 $ (43...

  • Page 36
    ...Number of Shares of Common Stock Stock Acquisition Rights Common Stock Capital Surplus Retained Earnings Treasury Stock Unrealized Gain on Available-forSale Securities Deferred Loss on Derivatives under Hedge Accounting Foreign Currency Translation Adjustments NIKON CORPORATION ANNUAL REPORT...

  • Page 37
    ... Year ended March 31, 2012 Millions of Yen Thousands of U.S. Dollars (Note 1) 35 2011 Operating activities: Income before income taxes Adjustments for: Income taxes-paid Loss on impairment of fixed assets Decrease in allowance for doubtful receivables Increase in provision for product warranties...

  • Page 38
    ... Accounting Policies (a) Consolidation The consolidated financial statements as of March 31, 2012 include the accounts of the Company and its 68 significant (68 in 2011) subsidiaries (together, the "Group"). Changes include addition of Nikon Staff Service Corporation and Nikon India Private Limited...

  • Page 39
    ... balance sheet date. However, the Company decided to abolish the Retirement Benefits Plan for Directors, Corporate Auditors and Officers at the close of the Annual General Shareholders' Meeting held on June 29, 2011 and make a final payment of retirement benefits corresponding to the service period...

  • Page 40
    .... The standard also requires companies to account for stock options granted to non employees based on the fair value of either the stock option or the goods or services received. In the balance sheet, the stock options are presented as stock acquisition rights as a separate component of equity...

  • Page 41
    ... share from not including the fair value of services to the assumed proceeds from the exercise of dilutive stock options with service conditions to including such fair value. The effect of retrospective application of this accounting policy change was immaterial. 39 NIKON CORPORATION ANNUAL REPORT...

  • Page 42
    ...of the following: Millions of Yen NIKON CORPORATION ANNUAL REPORT 2012 Thousands of U.S. Dollars 2011 Non-Current: Equity securities Debt securities Investment in a limited liability investment partnership Total ¥45,903 0 876 ¥46,779 2012 ¥44,063 0 834 ¥44,897 2012 $536,105 4 10,151 $546,260...

  • Page 43
    ... and semifinished products Work in process Raw materials and supplies Total 2011 ¥103,758 106,536 26,113 ¥236,407 2012 ¥118,899 112,143 31,992 ¥263,034 2012 $1,446,639 1,364,441 389,234 $3,200,314 5. Long-lived Assets The Nikon Group classifies by business segment the smallest units that...

  • Page 44
    ...,676 The aggregate annual maturities of long-term debt at March 31, 2012 are as follows: Year Ending March 31 Millions of Yen Thousands of U.S. Dollars 2013 2014 2015 2016 2017 Thereafter Total At March 31, 2012, the following assets were pledged as collateral for the long-term debt. ¥ 6,864 16...

  • Page 45
    ... ANNUAL REPORT 2012 The liability for employees' retirement benefits at March 31, 2011 and 2012 consisted of the following: Millions of Yen Thousands of U.S. Dollars Projected benefit obligation Fair value of plan assets Unrecognized actuarial gain and loss Unrecognized prior service cost...

  • Page 46
    ...stock acquisition rights. NIKON CORPORATION ANNUAL REPORT 2012 9. Stock Options The stock options outstanding as of March 31, 2012 were as follows: Stock Options Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period 2001 Stock Options 2003 Stock Options 2004 Stock...

  • Page 47
    ..., 2011 NIKON CORPORATION ANNUAL REPORT 2012 Non-vested March 31, 2010-Outstanding Granted Canceled Vested March 31, 2011-Outstanding Vested March 31, 2010-Outstanding Vested Exercised Canceled March 31, 2011-Outstanding Exercise price Average stock price at exercise Fair value price at grant date...

  • Page 48
    ... of Yen Thousands of U.S. Dollars NIKON CORPORATION ANNUAL REPORT 2012 Advertising expenses Provision for doubtful receivables Provision of warranty costs Employees' salaries Net periodic retirement benefit cost Employees' bonuses and others Research and development costs 2011 ¥65,824 65 4,833...

  • Page 49
    ... in the consolidated statements of income for the fiscal years ended March 31, 2011 and 2012 is as follows: Normal statutory tax rate Tax credit for research and development costs Tax rate difference of consolidated subsidiaries Deferred tax assets for unrealizable profits Increase in valuation...

  • Page 50
    ... are limited to major international financial institutions to reduce credit risk. Accounts payables and debts are exposed to liquidity risk. The Group manages its liquidity risk by contracting committed lines of credit. NIKON CORPORATION ANNUAL REPORT 2012 (3) Fair values of financial instruments...

  • Page 51
    ...of investment securities are measured at the quoted market price of the stock exchange. Investment securities whose fair value is not readily determinable (the carrying values of ¥1,100 million as of March 31, 2011 and ¥1,058 million ($12,868 thousand) as of March 31, 2012) are excluded because it...

  • Page 52
    ... contractual maturities as of March 31, 2011 and 2012 were as follows: 50 March 31, 2011 NIKON CORPORATION ANNUAL REPORT 2012 Millions of Yen Due in One Year or Less Due after One Year through Five Years Cash and cash equivalents Notes and accounts receivable Investment securities Available-for...

  • Page 53
    ... transactions to which hedge accounting is not applied at March 31, 2011 and 2012 were as follows: Millions of Yen 51 Unrealized Gain (Loss) 2011 Contract Amount Contract Amount Due after One Year Fair Value NIKON CORPORATION ANNUAL REPORT 2012 Forward Exchange Contracts: Selling USD Selling EUR...

  • Page 54
    ... to which hedge accounting is applied at March 31, 2011 and 2012 were as follows: 52 Contract Amount Millions of Yen Contract Amount Due after One Year March 31, 2011 Hedged Item Fair Value NIKON CORPORATION ANNUAL REPORT 2012 Foreign currency forward contracts: Selling USD Selling...

  • Page 55
    ... income for the year ended March 31, 2012 were as follows: Millions of Yen Thousands of U.S. Dollars NIKON CORPORATION ANNUAL REPORT 2012 53 2012 Unrealized (loss) on available-for-sale securities: Gains arising during the year Reclassification adjustments to profit Amount before income...

  • Page 56
    ... from the exercise of dilutive stock options with service conditions to including such fair value. The effect of retrospective application of this accounting policy change was immaterial. NIKON CORPORATION ANNUAL REPORT 2012 19. Insurance Income Nikon (Thailand) Co., Ltd., which incurred damage...

  • Page 57
    ... Yen Reportable Segment Precision Equipment Imaging Products Instruments Total Other Total Reconciliations Consolidated 55 NIKON CORPORATION ANNUAL REPORT 2012 For the year ended March 31, 2011 Sales: Sales to external customers Intersegment sales or transfers Total Segment profit (loss) Segment...

  • Page 58
    ... business. 3. The segment profit is adjusted with reported operating income in the consolidated financial statements. Related Information 1. Related information by geographical area at March 31, 2011 and 2012 consisted of the following: (1) Net Sales Millions of Yen Japan USA Europe China Other...

  • Page 59
    ...Property, Plant and Equipment Millions of Yen Japan North America Europe Asia/ Oceania Total 57 For the year ended March 31, 2011 ¥91,085 ¥5,053 ¥3,620 ¥19,258 ¥119,016 NIKON CORPORATION ANNUAL REPORT 2012 Millions of Yen Japan North America Europe China Other Total For the year ended...

  • Page 60
    INDEPENDENT AUDITORS' REPORT 58 NIKON CORPORATION ANNUAL REPORT 2012

  • Page 61
    ... 59 Board of Directors NIKON CORPORATION ANNUAL REPORT 2012 President, Member of the Board Executive Committee Internal Audit Department Corporate Planning Headquarters Finance & Accounting Headquarters Corporate Communications & IR Department Business Development Headquarters Information System...

  • Page 62
    NIKON GROUP COMPANIES ( Consolidated as of March 31, 2012) Europe 60 NIKON CORPORATION ANNUAL REPORT 2012 Asia-Oceania and dhe Middle Easd â- â˜... Nikon Holdings Hong Kong Limided Promotion of CSR and Internal Audit to affiliates in Asia and Oceania â- â˜... Nikon Holdings Europe B.V. Centralized ...

  • Page 63
    ... CORPORATION ANNUAL REPORT 2012 Nikon Opdical Shop Co., Ldd. Retail sales of ophthalmic frames and lenses Nikon-Essilor Co., Ldd.* Development, manufacture, sales and servicing of ophthalmic lenses â-‹ â˜... Nikon Precision Inc. Import, sales, maintenance and servicing of IC steppers and scanners...

  • Page 64
    ... and Banking Corporation) Takumi Odajima Operating Officer General Manager of Planning Headquarters, Precision Equipment Company Kenichi Kanazawa Executive Officer President of Business Administration Center, in charge of Information System Headquarters, in charge of manufacturing reform project...

  • Page 65
    ... 4th Year ended March 31, 2011 Year ended March 31, 2012 For further information or additional copies of this annual report, please contact the Corporate Communications & IR Department. Homepage: Nikon has created a Web site specifically for investors containing released financial reports, fact...

  • Page 66
    ... 12-1, Yurakucho 1-chome, Chiyoda-ku, Tokyo 100-8331, Japan www.nikon.com This report is printed on Forest Stewardship Council (FSC)® -certified paper using volatile organic compound (VOC)-free ink containing no volatile organic solvents. A waterless printing method has been employed that does not...