Pentax 2008 Annual Report Download - page 40

The Hoya Group (the “Group”) consists of Hoya Corporation (the
“Company”), 100 consolidated subsidiaries (seven in Japan and 93
overseas) and 11 affiliates (five in Japan and six overseas). Eight
affiliates (two in Japan and six overseas) are accounted for by the
equity method. Compared with the end of the previous fiscal year, five
consolidated subsidiaries were added through the establishment of
new companies and 36 by acquisitions. Five consolidated subsidiaries
were eliminated through mergers with other subsidiaries as well as one
through a merger with the parent and two through liquidations.
Each of the Group’s major business divisions and subsidiaries carry
out their business strategies as formulated by the global headquarters
at Hoya Corporation, yet with their own management responsibility.
Each region—Asia, North America and Europe—has its own
headquarters, which focuses on enhancing relations within its country
or region of operations, as well as supporting business promotion
activities. Hoya’s branch in the Netherlands is the financial
headquarters for the Group.
On December 21, 2006, Hoya concluded a preliminary agreement to
merge with Pentax Corporation as of October 1, 2007. The merger
would leverage the management resources of both companies to forge
a solid business foundation, create synergies and accelerate growth.
After signing the preliminary agreement, HOYA and Pentax held
several meetings aiming for signing a merger agreement in early April
2007, but for various reasons we deemed our initial plans for business
integration by October 1, 2007, to be unworkable. However, the two
companies continued to recognize that business integration would
contribute to the corporate value of both companies. Subsequent
negotiations and examinations prompted Hoya to make a tender offer
for Pentax’s shares, and the two companies agreed on May 31, 2007, to
carry out the business integration by having Hoya take on Pentax as its
wholly owned subsidiary through stock swaps and other means.
Based on this agreement, Hoya’s tender offer for Pentax’s shares
conducted from July 3 to August 6, 2007, resulted in Hoya holding
90.48% of Pentax’s total outstanding shares, thereby bringing Pentax
and 33 of its consolidated subsidiaries under Hoya’s scope of
consolidation as of August 14, 2007.
Strengthening Pentax’s core businesses will require flexible
management. We realized that the merger that we initially planned
would be the ideal way to enable swift management decisions and
business operations at the Pentax divisions that rivaled the process at
Hoya’s other divisions, and would optimize the allocation of
management resources across the Group instead of just within each
subsidiary.
Consequently, the two companies concluded the merger
agreement at the Board of Directors’ meeting on October 29, 2007,
and Hoya merged with Pentax on March 31, 2008.
Even after the merger, the brand name “Pentax” will continue to be
used in light of its significance and economic value.
The income statements of Pentax and its consolidated subsidiaries
have been consolidated into Hoya’s income statements from the third
quarter of the fiscal year under review (the three-month period from
October 1, 2007, to December 31, 2007). Accordingly, the Group’s
business results only reflect the addition of Pentax’s results after the
consolidation, which is the second half of the fiscal year under review
(the six-month period from October 1, 2007, to March 31, 2008).
Consolidated net sales for the fiscal year ended March 31, 2008,
amounted to ¥481,631 million, rising 23.5% year on year and reaching a
historic high. By principal business segment, net sales in the
Electro-Optics Division of the Information Technology business
declined 4.3% year on year. Within the Eye Care business, net sales in
the Vision Care Division increased 5.5% year on year, and in the Health
Care Division net sales rose 13.0% year on year. The principal factor
behind these substantial increases in consolidated net sales during the
year was the addition of net sales for Pentax during the term. From
Pentax, only net sales of ¥89,032 million were added during the second
half of the fiscal year (the six-month period from October 1, 2007, to
March 31, 2008).
By customer region, net sales to customers in Japan increased
5.6%, to ¥188,520 million, and net sales to overseas customers surged
38.6%, to ¥293,111 million. As a result, the composition of net sales was
39.1% domestic and 60.9% overseas. Hoya continues to pursue global
business development, with its proportion of overseas net sales rising
accordingly.
Hoya calculates the effect of exchange rates on operating results
during the fiscal year under review by comparing the foreign currency
denominated financial statements of its overseas subsidiaries when
converted into yen at the average exchange rate during the fiscal year
with the same statements when converted into yen at the average
exchange rates prevailing during the previous year. In currency markets
during the fiscal year, the yen rose 2.7% against the U.S. dollar, to
¥113.80, weakened 7.5% against the euro, to ¥162.26, and fell 12.7%
against the Thai baht, to ¥3.65. Because the yen fell against these two
base currencies, the operating results of Group companies in Europe
and Thailand rose compared with conversion at the rate during the
previous fiscal year. For the Group overall, the effect of exchange rates
added ¥2,835 million to net sales and ¥4,391 million to net income.
Management’s Discussion and Analysis
Business Integration with Pentax
Net Sales
Hoya Group and Scope of Consolidation
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