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ANNUAL REPORT 2004
Excitement of
Discovery
c1-4 04.7.23 3:59 PM ページ 2

Table of contents

  • Page 1
    Excitement of Discovery ANNUAL REPORT 2004

  • Page 2
    ... and wholesale of eyeglass lenses and frames, development and retail sales of contact lenses, and the development and manufacture of intraocular lenses (IOLs) used in cataract operations. From everyday life to medical applications, Hoya's high-quality products help people regain clear sight. Hoya...

  • Page 3
    ... Price cash flow ratio Price book value ratio Stock price at year-end Contents To Our Stakeholders Our Businesses Information Technology Electro-Optics Eye Care Vision Care Health Care Lifestyle Refinement Crystal R&D and New Businesses Environmental Efforts Financial Section and Corporate Data...

  • Page 4
    ..., high-quality products, but the extraordinary rise in the scale of the digital consumer electronics market resulted in a flood of orders and requests that exceeded the Company's production capacity. In response we formulated a plan to increase capacity through equipment purchases, staff increases...

  • Page 5
    ..., the contact lens business, which operates retail stores in Japan, undertook a scrap-and-build program to proactively open new stores and increase convenience to customers, and sought to differentiate itself from discount retailers by offering service with high degrees of added value. The eyeglass...

  • Page 6
    .... Review of Fiscal 2004 Results Looking at results by segment, sales rose 19.0% in the Information Technology field, due to the rapid expansion of the digital consumer electronics market, and greater orders for high-precision products brought on by rising demand from customers for new development...

  • Page 7
    ..., so that investment in business to meet customers' needs over the medium to long term will not be forestalled. To do this it is necessary to uncover and acquire new businesses. Going forward, we will concentrate on addressing this longstanding issue. The Hoya Group seeks to acquire and maintain...

  • Page 8
    Our Businesses 6

  • Page 9
    H o y a 's m a i n b u s i n e s s f i e l d s a r e I n f o r m a t i o n Te c h n o l o g y a n d E y e C a r e . Hoya continually strives to increase growth and profitability for the Group, and to maximize cor porate value. 7

  • Page 10
    ... glass plates coated with a thin, metallic light-sensitive film. Etching circuit patterns in these blanks with an electron beam produces a photomask. In fiscal 2004, sales of digital consumer electronics such as digital cameras and LCD televisions grew significantly, demand for mobile telephones...

  • Page 11
    ... Te c h n o l o g y f i e l d a c c o u n t s f o r a p p r o x i m a t e l y h a l f o f t h e H o y a G r o u p 's s a l e s . A l l t h e p r o d u c t s a r e i n t e r mediary device materials, those used in the production process. These products are essential to the manufacture of digital cons...

  • Page 12
    ... rules. Expansion of sales overseas was a priority issue during fiscal 2004, and Hoya's products have been highly praised by overseas customers. Large-scale LCD photomasks are the master plates used in the manufacture of display panels found in LCD televisions, PC monitors and mobile handset screens...

  • Page 13
    ... routinely used in notebook computers and other mobile devices, and demand increased to a point that exceeded supply. In terms of facilities, in March 2004 Hoya took over the substrate business of Nippon Sheet Glass Co., Ltd., further enhancing its position in the market. In media products, sales of...

  • Page 14
    ... customers is that Hoya is able to produce glass materials tailored to the specifications of each company, and develop a consistent strategy in terms of design, production and supply. Sales rose during fiscal 2004, owing to brisk business in the market for finished products employing optical lenses...

  • Page 15
    ... use of single-lens reflex lenses in digital cameras, and more camera-equipped mobile telephones. In particular, it is expected that the plastic lenses commonly used in camera-equipped mobile telephones will be replaced by aspherical glass lenses in the future, a development that will allow Hoya...

  • Page 16
    ..., good eye care helps improve the conduct of everyday life. Hoya helps people maintain their eyesight through vision correction, conducting research from the varying perspectives of customers, developing and offering new products. Vision Care The Vision Care division handles eyeglass lenses to...

  • Page 17
    The Eye Care field encompasses the manufacture and wholesale of lenses and frames for eyeglasses, development and retail sale of contact lenses, and development and manufacture of IOLs, providing high-quality products to help people maintain good vision. 15

  • Page 18
    ..., and lenses with special scratch-resistant coatings. During fiscal 2004, the economy began to improve overall, and demand returned for eyeglass lenses, stymieing the fall in prices. Amid this market trend, Hoya continued to develop and sell high-value-added products, particularly progressive lenses...

  • Page 19
    ... Japan to Thailand. These measures are part of an ongoing revision of the production structure that seeks to transform the production system and achieve optimum production. EYEGLASS FRAMES Drawing on the accumulated expertise of a specialist eyeglass lens manufacturer, Hoya has launched a line...

  • Page 20
    ... to insert IOLs during surgery was launched in January 2004, and has been highly praised by ophthalmologists for its ease of use. Looking ahead, Hoya plans to introduce yellow IOLs, with a lens color that more closely matches the actual color of the natural lens of the eye, as well as an injector...

  • Page 21
    ...for more than 80% of sales. The number of Eye City locations, Hoya's contact lens retail chain in Japan, totaled 111 stores as of March 31, 2004. While pursuing a program of scrap-and-build the Company plans an aggressive increase in the number of stores to 150 locations by fiscal 2007. The division...

  • Page 22
    ...in corporate demand, however, and the market situation is expected to remain difficult. Lifestyle Refinement Glass melted at high heat is transformed by the hand of a skilled craftsman, finding new life as a variety of objects. As these objects are carefully cut, they are reborn as glittering works...

  • Page 23
    ... ystal division and other services. Hoya cr ystal is the symbol of the corporate brand, and remains highly regarded. Each product is a first-class piece, praised both in Japan and around the world for quality and design. Though the business has been restructured to be more in line with market trends...

  • Page 24
    ...and services. Specific areas of R&D for existing businesses include photomask technologies for next-generation lithography, new products and innovation in glass molded lens technology, greater density in glass memory disks, more advanced eyeglass lenses, and treatments for cataracts. Hoya's Electro...

  • Page 25
    ... businesses related to Hoya's current business fields, but either upstream or downstream. For example, the acquisition of eyeglass lens laboratories in Europe and the United States, and the acquisition of the glass disk business from Nippon Sheet Glass Co., Ltd. fall into this category. Third is new...

  • Page 26
    ... in a decline in the ratio of waste volume to net sales of approximately 27% from the previous fiscal year. 4. VOLUME OF PACKAGING MATERIALS A review of packaging methods and reuse of the cardboard boxes used to ship products led to a decline in the ratio of packaging material volume to net...

  • Page 27
    ...2004) Company Name (Location) Site (Date of Certification) Notes: 1.Ratio to net sales is indicated based on 1999=100. 2.Statistics of the 10 domestic production sites Hoya Corporation: Nagasaka, Hachioji, Kumamoto, Akishima, Nagano, Lens Technology Center, Minakuchi, Kofu, Musashi Hoya Health Care...

  • Page 28
    ...(Malaysia) HOYA LENS NEDERLAND B.V. (Netherland) HOYA LENS MANUFACTURING HUNGARY RT. (Hungary) HOYA LENS AUSTRALIA PTY. LTD. (Australia) HOYA LENS AUSTRALIA PTY. LTD. (Australia) HOYA LENS KOREA CO., LTD. (Korea) HOYA LENS TAIWAN LTD. HOYA CORP. Vision Care Company (Japan) HOYA LENS IBERIA S.A. HOYA...

  • Page 29
    Financial Section and Corporate Data 27

  • Page 30
    ... of yen) Research and development expenses (Billions of yen) Per share data (Yen): Net income Diluted net income Cash flow Shareholders' equity Price earnings ratio (Times) Price cash flow ratio (Times) Price book value ratio (Times) Stock price at year-end (Yen) ¥151,470 21,038 21,001 8,812...

  • Page 31
    ... / net sales Return on assets Return on equity Inventory turnover Financial leverage Capital expenditures Depreciation, amortization and other* R&D expenses Per share data: 151.10... flow Shareholders' equity Price earnings ratio Price cash flow ratio Price book value ratio Stock price at year-end 29

  • Page 32
    ... three during the year under review. This was the net result of the establishment of new companies, acquisition of companies and reapportionment of voting rights that increased the number by eight, while mergers into Hoya Corporation, liquidation and sales of business reduced the number by five. The...

  • Page 33
    ... 2002 2003 2004 75 73.4 71.3 67.8 67.5 69.4 Sales by Region (Based on the location of the Company's offices) 50 25 4.0 11.5 3.7 10.5 14.5 4.2 12.3 15.7 4.8 13.2 14.5 4.6 13.8 12.2 0 11.1 Japan (Millions of yen) Asia (Millions of yen) Europe (Millions of yen) North America (Millions of...

  • Page 34
    ... total net sales, this was a new record high for the Group. Return on assets (ROA) rose 6.7 percentage points to 14.0%, and return on equity ... compensation resulting from the dissolution of the Group's employees' funded pension plan was recorded during the third quarter of fiscal 2003, resulting in ...

  • Page 35
    ... from the dissolution of the Group's employees' funded pension plan was recorded during the third quarter of fiscal 2003, resulting in return on sales for the quarter of -3.4%. (%) 30 2000 2001 2002 2003 2004 24 18 Profitability 12 6 0 Return on equity [ROE](%) Ordinary income/total...

  • Page 36
    ...upswing in the semiconductor market on the back of strong sales of digital consumer electronics, while sales of LCD photomasks rose due to growing demand for LCD televisions and the establishment of new production lines by manufacturers. In glass disks for HDDs, demand increased due to a recovery in...

  • Page 37
    ... high-value-added products as multifocal contact lenses and system products, aggressive new-store openings, and improved customer service drawing on expert knowledge. Moreover, the Group's soft-type IOL continued to be well received, and sales increased. The strong launch of this product in Europe...

  • Page 38
    ... volume of operating income. 30 Sales Growth and Profitability by Geographical Segment Fiscal year ended March 31, 2004 (Compared with the previous fiscal year) 20 Sales Growth Ratio (%) Asia Europe Consolidated Basis 10 Consolidated Basis 0 North America Japan -10 0 5 10 15 20 25...

  • Page 39
    .../net sales (%) 7.7 3.8 7.3 3.1 7.3 3.1 8.7 3.5 9.8 3.6 (% of total) 100 2000 2001 2002 2003 2004 16.7 75 33.8 27.4 24.7 22.5 Group Employees by Region 50 45.0 43.0 25 15.4 19.3 0 3.9 12.2 48.2 52.4 65.9 15.8 11.3 14.8 10.1 10.3 7.3 Total Japan Asia Europe North America 10...

  • Page 40
    ...increase in noncurrent assets, to ¥96,608, total assets at March 31, 2004 stood at ¥289,887 million, up 5.7% from a year earlier. Total current....3% increase in retained earnings, as a result of a ¥32,451 million increase in treasury stock. The shareholders' equity ratio fell 6.2 percentage points,...

  • Page 41
    ... in the Electro-Optics division for investment related to products for the next fiscal year. Net cash used in financing activities totaled ¥42,853 million, a year-on-year increase of ¥28,305 million. The main uses of cash were payments for purchases of treasury stock totaling ¥32,921 million (an...

  • Page 42
    (Times) 100 2000 2001 2002 2003 2004 (Yen) 12,000 80 9,600 60 7,200 Stock Price Data 40 4,800 20 2,400 0 0 Price earnings ratio (Times) Price cash flow ratio (Times) Price book value ratio (Times) Stock price at fiscal year-end (Yen) 55.03 30.64 6.44 9,700 43.73 17.55 4.86 8,160...

  • Page 43
    Independent Auditors' Report 41

  • Page 44
    ... and other current assets (Note 14) Total current assets PROPERTY, PLANT AND EQUIPMENT: Land Buildings and structures Machinery and vehicles Furniture and equipment Construction in progress Total Accumulated depreciation Net property, plant and equipment 9,219 53,353 140,876 20,421 5,276 229,145...

  • Page 45
    ... Capital surplus Retained earnings Net unrealized gain (loss) on available-for-sale securities Foreign currency translation adjustments Treasury stock-at cost, 4,857,867 shares in 2004 and 951,050 shares in 2003 (Note 18) Total shareholders' equity TOTAL (39,504) 218,979 ¥289,887 (7,053) 224,219...

  • Page 46
    ...income Interest expense Foreign exchange gains (losses)-net Gain on sales of investment securities Gain on sales of property, plant and equipment and other assets Gain on transfer of business (Note 3) Loss on sales of investment securities Loss on write-down of investment securities Loss on disposal...

  • Page 47
    ... of Shareholders' Equity Hoya Corporation and Subsidiaries Years Ended March 31, 2004, 2003 and 2002 Millions of Yen Outstanding Number of Shares of Common Stock Common Stock Capital Surplus Retained Earnings Net Unrealized Foreign Currency Gain (Loss) on Available- Translation for-Sale Securities...

  • Page 48
    ... Bonuses to directors Repurchase of treasury stock Disposal of treasury stock Net decrease in unrealized gain on available-for-sale securities Net decrease in foreign currency translation adjustments BALANCE, MARCH 31, 2004 See notes to consolidated financial statements. $ 59,094 $ 149,990 $ 2,040...

  • Page 49
    ...Purchases of investment securities Proceeds from sales of property, plant and equipment Purchases of property, plant and equipment Collection of loans Payment of loans Purchase of goodwill Decrease in other assets Increase in other assets Proceeds from transfer of business Net cash used in investing...

  • Page 50
    ... and property) Liabilities (primarily trade payables) ADDITIONAL INFORMATION: Decrease in assets and liabilities due to transfer of business: Assets (primarily property and rental deposits) Liabilities (primarily deposit recieved) See notes to consolidated financial statements. ¥ 7,552 378 ¥10...

  • Page 51
    ...and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is applied to buildings of...

  • Page 52
    ...the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. The effect of adoption of the new accounting standard for impairment of fixed assets was to decrease income...

  • Page 53
    ...1, 2003, the Company merged with Hoya Techno Process Corporation and two other companies, which had been wholly owned unconsolidated subsidiaries of the Company. (3) Transfer of Business On March 31, 2003, a part of the hearing aid business in the eye care field was transferred to a third party. 51

  • Page 54
    ...INVESTMENT SECURITIES Investment securities as of March 31, 2004 and 2003 consisted of the following: Millions of Yen Thousands of U.S. Dollars 2004 2003 2004... 2004 and 2003 were as follows: March 31, 2004 Millions of Yen Cost Unrealized Gains Unrealized Losses Fair Value Available-for-sale-...

  • Page 55
    ... of that machinery group was measured at its value in use and the discount rate used for computation of the present value of future cash flows was 5%. No»7 I NVESTMENTS IN AND ADVANCES TO ASSOCIATED COMPANIES Investments in and advances to associated companies at March 31, 2004 and 2003 were...

  • Page 56
    ... benefits. Assumptions used for the years ended March 31, 2003 and 2002 were set forth as follows: 2003 2002 Discount rate Expected rate of return on plan assets Amortization period of prior service cost Recognition period of actuarial gain/loss Amortization period of transitional obligation 0.00...

  • Page 57
    ... SHAREHOLDERS' EQUITY Japanese companies are subject to the Code to which certain amendments became effective from October 1, 2001. The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no par value and at least 50% of the issue price of new...

  • Page 58
    ...The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 41.7% for the years ended March 31, 2004, 2003 and 2002. The tax effects of significant temporary differences...

  • Page 59
    ...289 million, respectively. N o » 13 LEASES Income from equipment leases for the year ended March 31, 2002 was ¥4 million. The Group leases certain machinery, computer equipment, office space and other assets. Total rental expenses for the years ended March 31, 2004, 2003 and 2002 were ¥6,748...

  • Page 60
    ...137 $ 10,726 N o » 14 RELATED PARTY TRANSACTIONS Transactions of the Group with associated companies for the years ended March 31, 2004, 2003 and 2002 were as follows: Millions of Yen Thousands of U.S. Dollars 2004 2003 2002 2004 Sales Purchases Selling, general and administrative expenses...

  • Page 61
    ... to major international financial institutions, the Group does not anticipate any losses arising from credit risk. Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization and credit limit amount. Foreign currency forward...

  • Page 62
    ... and Operating Income Millions of Yen 2004 Information Technology Electro-Optics Photonics Eye Care Vision Care Health Care Lifestyle Refinement Crystal Service Total Eliminations and Corporate Consolidated Sales to customers Intersegment sales Total sales Operating expenses Operating income (loss...

  • Page 63
    ... Income Thousands of U.S. Dollars 2004 Information Technology Electro-Optics Photonics Eye Care Vision Care Health Care Lifestyle Refinement Crystal Service Total Eliminations and Corporate Consolidated Sales to customers Intersegment sales Total sales Operating expenses Operating income (loss...

  • Page 64
    .... Vision Care: Eyeglasses, eyeglass frames, ophthalmic equipment, etc. Health Care: Contact lenses and related accessories, intraocular lenses, hearing aids, etc. On March 31, 2003, hearing aids business was transferred to a third party. Crystal: Crystal glass products Service: Design of information...

  • Page 65
    ... countries where the Group is located. The segments consisted of the following countries: North America: United States of America, Canada, etc. Europe: Netherlands, Germany, United Kingdom, etc. Asia: Singapore, Thailand, China, Republic of Korea, Taiwan, etc. 2. Corporate operating expenses consist...

  • Page 66
    ...on the countries where the customers are located. The segments consisted of the following countries: North America: United States of America, Canada, etc. Europe: Netherlands, Germany, United Kingdom, etc. Asia: Singapore, Thailand, Republic of Korea, Taiwan, etc. Other: Saudi Arabia and Brazil, etc...

  • Page 67
    ...& CEO of Kikkoman Corporation on June 25, 2004. HOYA Group (As of March 31, 2004) Global Headquarters (Formulating group strategy) Information Technology Eye Care Crystal (Area) Supporting Legal and Financial Operations Japan (Holding Company) Asia (Holding Company) North America EUROPE...

  • Page 68
    Investor Information (As of March 31, 2004) Listing of the Company's Shares First Section of the Tokyo Stock Exchange Breakdown of Shareholders Ownership >> Number of Shareholders >> Financial institutions 2.52% Number of Shares of Common Stock Authorized: 320,000,000 ( Issued: 116,124,405 ( ) ) ...

  • Page 69
    ...the Tokyo and Nagoya Stock Exchanges. The Electronics Division's Nagasaka Plant was completed, and the production of IC substrates began. Hoya's on-line network to handle eyeglass lens orders was introduced in the Vision Care Division. Hoya Electronics Co., Ltd., merged with the parent company. July...

  • Page 70
    ...Columbia, IL 62236, U.S.A. TEL 618-281-3344 Business Development Division 3-3-1 Musashino, Akishima-shi, R&D Center Building Tokyo 196-8510, Japan TEL 042-546-2701 HOYA VISION CARE, NORTH AMERICA HEADQUARTERS 651E, Corporate Drive, Lewisville, TX 75057-6403, U.S.A. TEL 972-221...

  • Page 71
    ...Binan, Laguna Philippines TEL 049-541-2730 HOYA LENS THAILAND LTD. HOYA GLASS DISK MALAYSIA SDN, BHD.*2 Lot 28 & 29, Phase 1, Jalan Hi-Tech 4, Kulim Hi-Tech Park, 09000 Kulim, Kedah, Malaysia TEL 4-403-3118 HOYA LENS HONG KONG LTD. 16/F, Unison Industrial Centre, HOYA OPTICS (THAILAND) LTD. Northern...

  • Page 72
    ... H-4702 Mateszalka, Hungary TEL 044-418 200 21-3330 Ridgeway Drive, Missisauga, Ontario, Canada L5L 2Z9 TEL 888-258-4692 HOYA CRYSTAL, INC. North America HOYA HOLDINGS, INC. 41 Madison Ave. 9th Floor, New York, NY 10010, U.S.A. TEL 212-679-3100 HOYA LENS SWEDEN AB Scheelegatan 15, SE-212 28 Malm...

  • Page 73
    For additional information about the Company, contact: Investor Relations 2-7-5 Naka-Ochiai, Shinjuku-ku, Tokyo 161-8525, Japan TEL (03) 3952-1160 FAX (03) 3952-0726 URL http://www.hoya.co.jp/

  • Page 74
    2-7-5 Naka-Ochiai, Shinjuku-ku, Tokyo 161-8525, Japan This annual report is printed on recycled paper. Printed in Japan