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The Productivity to Create
Annual Report 2003
Year ended March 31, 2003

Table of contents

  • Page 1
    The Productivity to Create Annual Report 2003 Year ended March 31, 2003

  • Page 2
    ... social needs and turn them into businesses. Today, Omron conducts a wide range of businesses that aim to provide innovative solutions for industry, society and daily life. In the fiscal year ended March 31, 2003, Omron moved ahead with its Structural Reforms for Group Productivity to build a solid...

  • Page 3
    ...096,750 Notes: 1. Cash dividends per share represent the amounts applicable to the respective year, including dividends to be paid after the end of the year. 2. The U.S. dollar amounts represent translations of Japanese yen at the approximate exchange rate at March 31, 2003, of ¥120=$1. Net Sales...

  • Page 4
    ... is currently operating under Grand Design 2010 (GD2010), a long-term vision announced in May 2001 for the Omron Group's first decade in the 21st century. Since April 2002, we have been carrying out Structural Reforms for Group Productivity to ensure that we achieve the goals of GD2010. The benefits...

  • Page 5
    ... Industrial Automation Company (IAB), the Electronic Components Company (ECB) and the Healthcare Company (HCB) performed well. As a result, despite the loss of sales due to business transfers made as part of the structural reforms, consolidated net sales for the year ended March 31, 2003 increased...

  • Page 6
    ... management with speed. I am committed to maximizing Omron's corporate value and leading the Omron Group's transformation into a truly global enterprise. Achieving the Goals of GD2010 In May 2001, Omron began implementation of Grand Design 2010 (GD2010) to establish the direction of the Omron Group...

  • Page 7
    ... of a high-profit model in our core businesses. In addition, we will position "Sensing Network Solutions" as the image of our targeted growth businesses, and establish the Device Business and the Solutions Business as our two main strategic areas. Annual Report 2003 • 5 Group Corporate Value

  • Page 8
    ... Device Business in ECB. "Sensing Network Solution" Device Business Use our strength in Solutions Business SENSING components in the growing ➤ Solutions Business In the Solutions Business, which is centered in IAB, we will complete our examination of the market for a high-profit business model...

  • Page 9
    ... Corporate Transformation Vision Vision that needs to be preserved Corporate Philosophy Core Competence Management Identity Vision Vision supporting the achievement of an ideal image Internal Business Company Vision Industrial Business, Social Business, Lifestyle Business Annual Report 2003...

  • Page 10
    ...which would later become Omron Corporation. Successfully developing a timer for X-ray photography and a precision switch, the subsequent establishment of the Company led to the opportunity for development of advanced automated control (cybernation) technology. Tateisi Electric was incorporated after...

  • Page 11
    ... headquarters in three major regions around the world in addition to Japan. In 1987, the Company developed the world's first super-high-speed fuzzy logic controller, and worked to expand its fuzzy logic business. ➤ 1990 ➤ 1999 From Tateisi Electric to Omron Corporation Promoting management...

  • Page 12
    ... Sales Industrial Automation Company (IAB) 37.8% Electronic Components Company (ECB) Automotive Electronic Components Company 25.9% Social Systems Solutions and Service Business Company (SSB) Advanced Modules Business Company (AMB) 21.8% Healthcare Company (HCB) 7.9% Others 6.6% Note: The...

  • Page 13
    ...Chair Massagers, Pedometers, Body-Fat Analyzers, etc.) Medical Equipment (Nebulizers, Professional Digital Blood Pressure Monitors, etc.) Health Management Services (Consultations, Health Promotion Programs, etc.) 2002 2003 49.2 34.7 Personal Computer Peripherals (ADSL Modems, Terminal Adapters...

  • Page 14
    ... Z5FP This sensor measures the profile of seals used to bond flat panel displays (FPD) with both high speed and high precision to effectively improve manufacturing process yields and quality. Industrial Automation Company ➤ Business Overview For the fiscal year ended March 31, 2003, net sales of...

  • Page 15
    ...systems for the amusement industry, both introduced in the previous fiscal year. In the consumer and commerce components business, although sales of relays for telecommunications equipment were weak, exports of relays and switches for consumer appliances remained firm. Sales of automotive electronic...

  • Page 16
    ... ticket vending machines Card Reader/Writer Applicable in all industrial fields, including financial systems, security systems, card issuing machines and ID systems Automated Teller Machine A totally barrier-free ATM designed for ease of use "goopas" Content Delivery Service A new system that...

  • Page 17
    .... Blood pressure monitors, thermometers and nebulizers, the core products of this division, sold well, and sales of a new compact, low-cost massage chair expanded steadily in a brisk market. However, sales of products in other categories such as electronic pulse massagers and pedometers declined...

  • Page 18
    ... its businesses as part of the Group productivity structural reforms, Omron placed each business under the control of the head office to increase Group productivity by focusing on internal services in specialized fields. As a result, in March 2003, the Creative Service Company was dissolved...

  • Page 19
    ... its operations by developing environmentally friendly products utilizing the company's sensing and control technology, conserving energy and resources, and reducing industrial waste. In addition, as a responsible corporate citizen, Omron is involved in community service activities such as clean-ups...

  • Page 20
    ... 1995). Eco-Factories/ Laboratories/ Offices Promotion of waste recycling • Waste recycling rate of 95.1%, final disposal rate of 2.0%. •Zero emissions achieved at 10 domestic production sites; achieved at 12 of 15 sites to date. Promotion of green procurement (indirect materials) Reduction...

  • Page 21
    ... Management System has been adopted and put into operation at Omron Group companies in Japan to promote purchasing of green products and reduce costs. In the year ended March 2003, the green product purchasing rate was 82 percent. Omron plans to enhance this system by expanding its application...

  • Page 22
    Board of Directors, Corporate Auditors and Corporate Officers Board of Directors Chairman and Representative Director Corporate Officers Executive Vice Presidents Yoshio Tateisi CEO and Representative Director Shingo Akechi Fumio Tateisi Senior Managing Officers Hisao Sakuta Vice President and ...

  • Page 23
    ... Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report Annual Report 2003...

  • Page 24
    ... share data) 2003 2002 2001 2000 1999 1998 Net Sales (Notes 2 and 3): Industrial Automation ...Electronic Components ...Social Systems Business ...Healthcare ...Open Systems ...Control Components and Systems ...Specialty Products ...Others ...Costs and Expenses: Cost of sales...Selling, general and...

  • Page 25
    ...where Omron conducts business, a recovery in production and steady consumption lent vigor to the Industrial Automation Company, the Electronic Components Company and the Healthcare Company. However, the Social Systems Business, which includes the Social Systems Solutions and Service Business Company...

  • Page 26
    ...1,291 1,430 26.83 23.59 Electronic Components ...Social Systems Business ...Healthcare ...Others ... -4.8 1999 2000 2001 2002 2003 5.56 4.36 1999 2000 2001 2002 2003 Note: The composition of net sales is based on the classifications reported in the Six-year Summary. 24 • Omron Corporation...

  • Page 27
    ...In overseas markets, sales of relays and switches for consumer appliances offset slumping demand in the telecommunications equipment industry in North America, Europe and Asia, and sales of automotive devices expanded strongly. Sales of the Social Systems Solutions and Service Business Company (SSB...

  • Page 28
    ...Sales of Internal Business Companies 2003 Industrial Automation ...Electronic Components ...Social Systems Business ...Healthcare ...Others ...10.0% 5.3 (8.9) 4.2 (29.5) 2002 (1.0) (12.2) 3.3 (4.2) 2001 7.5 10.4 (7.8) (6.0) (17.9)% 11.2% prospects. IAB, ECB and HCB generated firm results, supported...

  • Page 29
    ... Current Ratio times a year earlier. Shareholders' equity per share was ¥1,036.01, compared to ¥1,201.23 a year earlier. Cash Flow Cash and cash equivalents at March 31, 2003 increased ¥9,140 million from a year earlier, or 12.9 percent, to ¥79,919 million. The effect of exchange rates on cash...

  • Page 30
    Consolidated Balance Sheets OMRON Corporation and Subsidiaries March 31, 2003 and 2002 Millions of yen Thousands of U.S. dollars (Note 2) 2002 2003 ASSETS Current Assets: Cash and cash equivalents...Notes and accounts receivable - trade ...Allowance for doubtful receivables...Inventories (Note ...

  • Page 31
    ... loss (Note 15)...Treasury stock, at cost - 6,245,053 shares in 2003 and 836,289 shares in 2002 ...Total Shareholders' Equity ...Total ...See notes to consolidated financial statements. (12,021) 251,610 ¥567,399 (1,919) 298,234 ¥549,366 (100,175) 2,096,750 $4,728,325 Annual Report 2003...

  • Page 32
    Consolidated Statements of Operations OMRON Corporation and Subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen 2003 2002 2001 Thousands of U.S. dollars (Note 2) 2003 Net Sales ...Costs and Expenses: Cost of sales ...Selling, general and administrative expenses ...Research and ...

  • Page 33
    ... (losses) on available-for-sale securities: Unrealized holding losses arising during the year ...Reclassification adjustment for losses on impairment realized in net income (loss) ...Reclassification adjustment for net losses (gains) on sales realized in net income (loss)...Net unrealized losses...

  • Page 34
    ...Corporation and Subsidiaries Years ended March 31, 2003, 2002 and 2001 Millions of yen Number of common shares issued Additional paid-in capital Accumulated other comprehensive income (loss) Common stock Legal reserve Retained earnings Treasury stock Balance, April 1, 2000 ...Net income...Cash...

  • Page 35
    ... securities and other assets...2,269 Bad debt expenses ...465 Termination and retirement benefits ...(1,087) Deferred income taxes ...(3,915) Minority interests...285 Cumulative effect of accounting change ...- Net gain on sales of business entities...(1,550) Changes in assets and liabilities: Notes...

  • Page 36
    ... are also supplied for the domestic market. Advanced Modules Business manufactures products for the Social Systems Business, and also sells products for certain domestic customers and overseas markets. Healthcare sells blood pressure monitors, digital thermometers, body-fat monitors, nebulizers and...

  • Page 37
    ... for Pensions" and are disclosed in accordance with SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The provision for termination and retirement benefits includes amounts for directors and corporate auditors of the Company. Annual Report 2003 • 35

  • Page 38
    ... they are applicable, even though payment is not approved by shareholders until the annual general meeting of shareholders held early in the following fiscal year. Resulting dividends payable are included in Other current liabilities in the consolidated balance sheets. Comprehensive Income (Loss...

  • Page 39
    ... benefit pension plan established under the Welfare Pension Insurance Law. The Company has not yet decided if they will apply for the transfer. In February 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," which addresses the consolidation by business enterprises...

  • Page 40
    ... ¥38,749 ¥(5,171) ¥31,218 Thousands of U.S. dollars 2003 Gross unrealized gains Gross unrealized losses Fair value Cost (*) Available-for-sale securities: Debt securities ...$ 367 Equity securities ...232,892 Total available-for-sale securities ...$233,259 $ - 33,333 $33,333 $ - (43,092...

  • Page 41
    ... were ¥1,194 million ($9,950 thousand), ¥13,845 million and ¥674 million for the years ended March 31, 2003, 2002 and 2001, respectively. Net unrealized holding gains (losses) on available-for-sale securities, net of related taxes, decreased by ¥5,047 million ($42,058 thousand) and ¥286...

  • Page 42
    ... face value, decreasing 1% per year. At March 31, 2003 the convertible bonds were redeemable, in whole or in part, at 101%. The number of contingently issuable shares of common stock related to the convertible bonds as of March 31, 2003 was 10,026,639 shares. The conversion price per share at March...

  • Page 43
    ... of U.S. dollars 2003 2002 2003 Change in benefit obligation: Benefit obligation at beginning of year...Service cost, less employees' contributions ...Interest cost...Employees' contributions ...Plan amendments...Actuarial losses...Benefits paid ...Settlement paid ...Benefit obligation at end...

  • Page 44
    ... recorded for the contributory termination and retirement plans included the following components for the years ended March 31: Millions of yen Thousands of U.S. dollars 2003 2002 2003 Service cost, less employees' contributions ...Interest cost on projected benefit obligation...Expected return...

  • Page 45
    ... price of the Company's common stock on the date of grant and the options expire 5 years after the date of the grant. Generally, options become fully vested and exercisable after 3 years. A summary of the Company's fixed stock option plan activity and related information is as follows: Yen Weighted...

  • Page 46
    .... In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. It is management's opinion that the Company's stock options have characteristics significantly different from those of traded options and because changes in...

  • Page 47
    During the year ended March 31, 2001 the Company recognized a net loss of ¥2,312 million ($19,267 thousand) as a result of an office relocation plan, primarily consisting of the relocation of the headquarters within Kyoto, Japan. In 2003 and 2002, the Companies assessed the potential impairment of ...

  • Page 48
    ... has been computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during each year. Diluted net income (loss) per share reflects the potential dilution of convertible bonds and stock options, and has been computed by the...

  • Page 49
    ...2003 2002 2001 2003 Foreign currency translation adjustments: Beginning balance...Change for the year...Ending balance...Minimum pension liability adjustments: Beginning balance...Change for the year...Ending balance...Unrealized gains (losses) on available-for-sale securities: Beginning balance...

  • Page 50
    ... in foreign currency translation adjustments during the year ...Minimum pension liability adjustments ...Unrealized gains (losses) on available-for-sale securities: Unrealized holding gains (losses) arising during period...Reclassification adjustment for losses on impairment realized in net income...

  • Page 51
    ...estimated amounts that the Companies would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts. Dealer quotes are available for most of the Companies' derivatives; otherwise, pricing or valuation models...

  • Page 52
    ... the information currently available to both the Company and its legal counsel, the Company management believes that damages from such lawsuits, if any, would not have a material effect on the consolidated financial statements. 18. Commitments and Contingent Liabilities 50 • Omron Corporation

  • Page 53
    ... in consolidation. Product Warranties The Companies issue contractual product warranties under which they generally guarantee the performance of products delivered and services rendered for a certain period or term. Changes in accrued product warranty cost for the year ended March 31, 2003 are...

  • Page 54
    ... position of OMRON Corporation and subsidiaries as of March 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Our...

  • Page 55
    ... Automation Company] OMRON Electronics Pte. Ltd. (Singapore) Phone: 65-6835-3011 Fax: 65-6835-2711 OMRON Electronics Sdn. Bhd. (Malaysia) Phone: 603-7628-8388 Fax: 603-7628-8333 OMRON Electronics Pty. Ltd. (Australia) Phone: 61-2-9878-6377 Fax: 61-2-9878-6981 OMRON Electronics Ltd. (New Zealand...

  • Page 56
    ... Business Associates Co., Ltd. Phone: 81-75-344-7359 Fax: 81-75-344-7265 OMRON Entertainment Co., Ltd. Phone: 81-3-5728-1761 Fax: 81-3-5489-9310 Research and Development Keihanna Technology Innovation Center Phone: 81-774-74-2000 Fax: 81-774-74-2001 [Automotive Electronic Components Company] OMRON...

  • Page 57
    ...: 23,574 Stock Listings Osaka Securities Exchange Tokyo Stock Exchange Nagoya Stock Exchange Frankfurt Stock Exchange Ticker Symbol Number 6645 Transfer Agent The Mitsubishi Trust and Banking Corporation 1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan Common Stock Price Range/Trading Volume...

  • Page 58
    This annual report is printed on recycled paper. Printed in Japan Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan Phone: 81-75-344-7000 Fax: 81-75-344-7001 Home page: http://www.omron.co.jp (Japanese) Home page: http://www.omron.com (English)