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SEIKO EPSON CORPORATION
ANNUAL REPORT 2015
April 2014 - March 2015

Table of contents

  • Page 1
    SEIKO EPSON CORPORATION ANNUAL REPORT 2015 April 2014 - March 2015

  • 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
    ...results...22 2. Manufacturing, orders received and sales ...25 3. Analysis of financial condition and results of operations ...26 4. Research and development activities ...29 5. Issues for Fiscal 2015 ...31 6. Dividend policy ...33 Corporate Governance ...34 1. Approach to corporate governance ...34...

  • Page 4
    ... Financial Highlights Seiko Epson Corporation and Subsidiaries For the years ended March 31 IFRS Thousands of Millions of yen U.S. dollars 2014 Statement of Comprehensive Income Revenue Information-related equipment business segment Devices and precision products business segment Sensing and...

  • Page 5
    ... prepared on the basis of International Financial Reporting Standards (IFRS) from the year ended March 31, 2014. 2. Seiko Epson Corporation (the "Company") completed the Company' s ordinary shares split into two shares with an effective date of April 1, 2015. Per share data are calculated under the...

  • Page 6
    ... yen 2010 Statements of Income Net sales Information-related equipment Electronic devices Precision products Other Eliminations and corporate Information-related equipment business segment Devices and precision products business segment Other Eliminations and corporate Information-related equipment...

  • Page 7
    ... 258,806 2014 602,452 216,170 865,872 313,636 200,505 351,730 Information-related equipment Electronic devices Precision products Information-related equipment business segment Devices and precision products business segment Sensing and industrial solutions business segment Other Corporate Total...

  • Page 8
    ... Ltd. Epson Hong Kong Ltd. Epson Taiwan Technology & Trading Ltd. Epson Singapore Pte. Ltd. Epson Australia Pty. Ltd. Epson India Pvt. Ltd. Epson Sales Japan Corporation Epson Direct Corporation Printing Systems Visual Communications Epson Engineering (Shenzhen) Ltd. Epson Precision (Philippines...

  • Page 9
    ...Akita Epson Corporation Epson Precision Malaysia Sdn. Bhd. Tohoku Epson Corporation Singapore Epson Industrial Pte. Ltd. Sales companies Epson Electronics America, Inc. Epson Europe Electronics GmbH Epson Hong Kong Ltd. Epson Taiwan Technology & Trading Ltd. Epson Singapore Pte. Ltd. Orient Watch Co...

  • Page 10
    ... Business area Main products Manufacturing companies Industrial robots, IC handlers, industrial inkjet printing systems, sensing systems and others Sales companies Epson Sales Japan Corporation Epson America, Inc. Epson Deutschland GmbH Epson (China) Co., Ltd. Epson Hong Kong Ltd. Sensing and...

  • Page 11
    ... Seiko Epson Corporation As of March 31, 2015 Book value (Millions of yen) Name of (location) plant Business segment Type of facilities Machinery, Buildings and structures equipment and vehicles Overall administration and other Overall administration and other Printer development and Hirooka Office...

  • Page 12
    ... yen) Company name (location) Number of Business segment Type of facilities Buildings and structures Machinery, equipment and vehicles Land (Area: m2) Other Total employees (Persons) Tohoku Epson Corporation (Sakata-shi, Yamagata) Information-related equipment Devices and precision products...

  • Page 13
    ...and vehicles Land (Area: m2) 621 Other Total employees (Persons) Epson Precision (Philippines), Inc. (Lipa, Philippines) Epson Precision Malaysia Sdn. Bhd. (Kuala Lumpur, Malaysia) Information-related equipment Printer and 3LCD projector manufacturing facilities 8,709 3,150 (100,000) [130,000...

  • Page 14
    ... as crystal devices and watches, etc., and for rationalizing, upgrading and maintaining equipment and facilities amounted to ¥7.7 billion in the fiscal year under review. Sensing and industrial solutions segment Investment used for commercializing new products such as factory automation systems and...

  • Page 15
    ...and 90 Industrial products maintaining equipment and facilities, etc. Increase of production capacity, investment in research and Other and overall 200 development, etc. Total 700 - Notes 1. The above amounts do not include consumption tax. 2. Required funds will be covered by current funds in hand...

  • Page 16
    ... Major management contracts Reciprocal 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 Country Type...

  • Page 17
    ...action to address the risk of such declines in prices and unit shipments. On one hand, we must provide products tailored to customer needs in each market along with high-value products and services. On the other hand, we must reduce manufacturing costs by increasing design and development efficiency...

  • Page 18
    ... sites all over Asia, including China, Indonesia, Singapore, Malaysia and the Philippines, as well as in the United States, the United Kingdom, and other countries. We have also established many sales companies all over the world. As of the end of March 31, 2015, our overseas employees accounted...

  • Page 19
    ... procurement operations that are stable and efficient, so we work with our suppliers to maintain product quality, improve products, and reduce costs. However, if our manufacturing and sales activities were to be disrupted due to things such as supplier parts shortages or supplier quality problems...

  • Page 20
    ... of material legal actions being brought against it. Epson conducts businesses internationally. We are engaged primarily in the development, manufacture and sale of printing solutions, visual communications equipment, and wearable and industrial products, as well as the provision of services related...

  • Page 21
    ... 2011, the Supreme Court referred the case to the Court of Justice of the European Union, and an inquiry was begun in October 2012, but in June 2013 the Court of Justice of the European Union issued a ruling that would allow EU member states to impose copyright fees on printer and PC manufacturers...

  • Page 22
    ... our sales and marketing activities that target new customers, including public institutions, and we must develop new areas, such as the health and medical markets, where legal, regulatory, and compliance requirements are extremely strict. Compliance remains high on our list of important management...

  • Page 23
    ...) system products was similar to that in the same period last year in both the Americas and Europe. Demand for projectors was firm thanks largely to growth in the Americas and Asia, where the FIFA World Cup helped drive unit sales higher in the first half of the year. In the main markets for Epson...

  • Page 24
    ... projector revenue grew sharply in the Americas and Asia. This growth was the result of an expanded and improved lineup of high-performance products, the special demand generated by the FIFA World Cup, and increased sales in the education market. Segment profit in the information-related equipment...

  • Page 25
    ... loss mainly comprises selling, general and administrative expenses for areas that do not correspond to the reporting segments, such as research and development expenses for new businesses and basic technology, and general corporate expenses. (2) Cash flow performance Net cash provided by operating...

  • Page 26
    ...received Epson' s policy is to manufacture products based on sales forecasts. Accordingly, this section does not apply. (3) Actual sales The following table shows actual sales information by segment in the fiscal year under review. Change Year ended March 31, 2015 compared to (From April 1, 2014, to...

  • Page 27
    ... a decline in unit shipments in the Americas and Europe were offset by foreign exchange effects and increased sales of low-priced models in Asia. POS system product revenue increased due to unit shipment growth in Europe and expanded sales of label printers for on-demand, in-house printing. Visual...

  • Page 28
    ...year. Segment profit (business profit) in each reporting segment was as follows. Segment profit in the information-related equipment segment was ¥133.6 billion, up ¥9.8 billion (8.0%) year over year. This was due primarily to increased sales of key products, in addition to foreign exchange effects...

  • Page 29
    ... a net reduction in short-term and long-term loans payable and bonds payable, as well as a ¥25.1 billion decrease in net defined benefit liabilities accompanying changes to Epson's defined-benefit plan for employees in Japan. The equity attributable to owners of the parent company totaled ¥494...

  • Page 30
    ... customers who want to reduce costs by printing the labels they need when they need them, on-demand, in quantities of about 1,000 labels. In the visual communications business, the Company released a new wall-mounted ultra-short throw projector for educational purposes that has a built-in electronic...

  • Page 31
    ... using a special website or mobile app. These activity monitors can continuously track the wearer's heart rate for up to about 36 hours at a time and can thus record the wearer's activity, whether exercise or sleep patterns, around the clock. The Company also released a new IC test handler that is...

  • Page 32
    ... to print everything from billboards to wrapping film for food products to textiles. By creating new customer value in the form of shorter production processes and lower environmental impact, we will tap more deeply into these markets and build strong core businesses that will sustain future growth...

  • Page 33
    ... in the watch business, to help enrich the lives of our customers. Going forward, we want to provide life-enriching wearable personal devices in the health, sports, and medical fields, and toward that end are integrating cloud technology and building a product development process that will...

  • Page 34
    ... policy The Company is a proponent of paying regular dividends, and in the interests of all stakeholders, we strive to achieve sustained business growth through the creation of customer value, generate stable cash flow by improving profitability and using management resources efficiently, invest...

  • Page 35
    ... business checks and balances, practicing sound corporate ethics, and ensuring business transparency and health. The Company has a board of directors and a board of corporate auditors. The board of directors had 10 members, including two outside directors, as of the date the Annual Securities Report...

  • Page 36
    ... current system of corporate governance Epson is looking to initiate fresh growth by developing and executing strategic measures based on the Updated SE15 Second-Half Mid-Range Business Plan (FY2013-FY2015), which is aimed at achieving the goals set forth in Epson's SE15 Long-Range Corporate Vision...

  • Page 37
    ... training and other educational opportunities. The president of Seiko Epson will periodically report important compliance-related matters to the board of directors and will take measures as needed to respond to issues. Epson's "Principles of Corporate Behavior" states that the Company will have no...

  • Page 38
    ... in line with the Company's prescribed crisis management program. (4) The president of Seiko Epson will periodically report to the board of directors on critical risk management issues and formulate appropriate measures to respond to these issues. Ensuring the appropriateness of operations in...

  • Page 39
    ... more of the person's or supplier's annual consolidated sales for any fiscal year in the last three years. 2 An "executive officer" is an employee in a senior executive management position, including executive, managing director, operating officer, or general manager or higher position. 3 A "person...

  • Page 40
    ... are thus kept abreast of operational issues and the status of measures to address those issues. (4) Director remuneration Basic policy Directors serve to enhance corporate value, both in the immediate and long terms, and Epson has designed its system of director remuneration to provide them with...

  • Page 41
    ... three directors and two corporate auditors who retired at the closing of the general shareholders' meeting on June 24, 2014. 2. Epson introduced a stock performance (stock-based) component to the remuneration system to link remuneration more closely to share price, so Epson stock accounts for...

  • Page 42
    ... and strengthen business ties King Jim Co., Ltd. 221,980 158 Otsuka Corporation 10,000 134 Joshin Denki Co., Ltd. 70,000 57 Pixelworks, Inc. 100,000 57 Nippon BS Broadcasting Corporation 16,600 30 Current Fiscal year Company NGK Insulators, Ltd. Shares (stock) 3,757,000 Balance sheet...

  • Page 43
    ...at the General Shareholders' Meeting that can be determined by 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...

  • Page 44
    ... record of September 30 every year by resolution of the board of directors. This provides the Company with flexibility in paying dividends to shareholders. (11) Special resolution requirements of the General Shareholders' Meeting The Company's Articles of Incorporation set forth the requirements for...

  • Page 45
    ..., 2015, amounted to ¥562 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 consultancy services in IFRS. Fiscal year under review Remuneration...

  • Page 46
    ...FY2015), the Company remains firmly committed to the strategies outlined in the SE15 Long-Range Corporate Vision but has adopted new tactics and a different emphasis. Under the updated basic policy, Epson will pursue a basic strategy of managing its businesses so that they create steady profit while...

  • Page 47
    ... formulated to enhance both Epson' s corporate value and the common interests of its shareholders in a continuous and sustained manner. These actions support the basic policy. As well as having been introduced and updated in order to ensure and enhance corporate value and the common interests...

  • Page 48
    ... Chief Operating Officer, Visual Products Operations Division, and Deputy General Administrative Manager, Business Infrastructure Development Division General Administrative Manager, Human Resources Division, and President, Orient Watch Co., Ltd. Yoneharu Fukushima Managing Director Koichi...

  • Page 49
    ... Officer, Professional Printing Operations Division Chief Operating Officer, Wearable Products Operations Division General Administrative Manager, Intellectual Property Division Deputy General Administrative Manager, Corporate Research & Development Division President, Epson Sales Japan Corporation...

  • Page 50
    ... Seiko Epson Corporation and Subsidiaries Consolidated Statement of Financial Position ...50 Consolidated Statement of Comprehensive Income...52 Consolidated Statement of Changes in Equity...54 Consolidated Statement of Cash Flows ...56 Notes to Consolidated Financial Statements ...57 Report...

  • Page 51
    ... 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 assets...

  • Page 52
    ... 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 Non-controlling interests Total equity Total liabilities and equity 24 24 24 24...

  • Page 53
    ... 31, 2014 and 2015: 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...

  • Page 54
    ... the period attributable to: Owners of the parent company Non-controlling interests 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 2014 2015 Thousands of U.S. dollars...

  • Page 55
    ... Statement of Changes in Equity Years ended March 31, 2014 and 2015: 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...

  • Page 56
    ...14,296 14,296 8,779 Retained earnings Total equity attributable to owners of the parent company Non-controlling interests Total equity Share capital Notes Capital surplus Treasury shares Total other components of equity As of April 1, 2014 Profit (loss) for the period Other comprehensive income...

  • Page 57
    ...March 31, 2014 and 2015: Millions of yen Year ended March 31, 2014 2015 84,442...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...

  • Page 58
    ... Consolidated Financial Statements 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...

  • Page 59
    ... about the activities that significantly affect the investee's returns require the unanimous consent of the parties sharing control, have rights to the net assets of the arrangement. Epson accounts for that investment using the equity method. (2) Business Combinations Business combinations are...

  • Page 60
    ...recognised as profit or loss. However, changes in fair value of equity instruments ...account for credit losses and impairment losses are recognised in profit or loss. The carrying amount of financial assets measured at amortised cost is directly...directly attributable to the financial liabilities. (ii...

  • Page 61
    ... in other components of equity as other comprehensive income are reclassified to profit or loss. (G) Fair Value of Financial Instruments Fair value of financial instruments that are traded in active financial markets at the fiscal year end refers to quoted market prices or dealer quotations. If...

  • Page 62
    ...amortised. It is allocated to cash-generating units that are identified according to locations and types of businesses and tested for impairment annually or whenever there is any indication of impairment. Impairment losses on goodwill are recognised as profit or loss in the consolidated statement of...

  • Page 63
    ... contribution plans as post-employment benefits plans. For each defined benefit plan, Epson calculates the present value of defined benefit obligations, related current service cost and past service cost using the projected unit credit method. For a discount rate, a discount period is determined...

  • Page 64
    ...value of money is material, the amount of provisions is measured at the present value of the expenditures expected to be required to settle the obligations. (15) Revenue (A) Sale of Goods Epson sells information-related equipment, devices and precision products, and sensing and industrial solutions...

  • Page 65
    ...the shareholders of the Company are recognised as liabilities in the period in which the distribution is approved by the Annual Shareholders' Meeting. Interim dividend distributions are recognised as liabilities in the period in which the distribution is approved by Epson' s Board of Directors. (22...

  • Page 66
    ... that may have a material effect on the amounts recognised in Epson's consolidated financial statements: (1) Impairment of Property, Plant and Equipment, Goodwill, Intangible Assets and Investment Property Epson performs an impairment test for property, plant and equipment, goodwill, intangible...

  • Page 67
    ... reporting. The content of contingencies is stated in "39. Contingencies." 5. Changes in Accounting Policies The following are the accounting standards and interpretations applied by Epson from fiscal year 2014 ended March 31, 2015. These standards and interpretations did not have a material...

  • Page 68
    ...of products, and markets. Epson conducts development, manufacturing and sales within its reportable segments as follows: Reportable segments Information-related equipment Main products Inkjet printers, page printers, color image scanners, commercial inkjet printers, serial impact dot matrix printers...

  • Page 69
    ... 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 Information Devices & Sensing & -related precision industrial equipment products solutions...

  • Page 70
    ... 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 Information- Devices & Sensing & related precision industrial equipment products solutions (31,424...

  • Page 71
    ... 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 Information- Devices & Sensing & related precision industrial equipment products solutions...

  • Page 72
    ... 2,166,756 Japan The Americas China(including Hong Kong) Other Total (Note) Non-current assets, excluding other financial assets, deferred tax assets and retirement benefits assets, are segmented by the location of the assets. External Revenue Millions of yen Year ended March 31, 2014 2015 276,238...

  • Page 73
    ... 49,855 1,834,284 Merchandise and finished goods Work in process Raw materials Supplies Total Millions of yen March 31 2014 2015 140,825 109,708 54,360 49,994 19,250 16,979 5,989 4,898 220,426 181,581 The amount of inventories included in cost of sales recognised as an expense totaled (Â¥639,595...

  • Page 74
    ... 31 2014 2015 3,181 169 19,639 16,784 108 103 44 69 5,980 5,520 (64) (260) 28,889 22,386 505 21,881 22,386 3,544 25,345 28,889 Derivative assets are classified as financial assets measured at fair value through profit or loss, excluding a case where hedge accounting is applied. Equity securities...

  • Page 75
    ... 31 2014 2015 8,854 13,620 1,582 1,954 2,947 1,922 13,384 17,497 10,452 2,931 13,384 11,539 5,958 17,497 Thousands of U.S. dollars March 31, 2015 113,339 16,260 16,066 145,665 96,050 49,615 145,665 Prepaid expense Advances to suppliers Other Total Current assets Non-current assets...

  • Page 76
    ...in progress Other As of M arch 31, 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...

  • Page 77
    ... arch 31, 2014 Depreciation expense (Note) Impairment losses Acquisition of subsidiary Transfer from(to) investment property Transfer from(to) non-current assets held for sale Sale or disposal Exchange differences on translation of foreign operations Other As of M arch 31, 2015 Tools, furniture and...

  • Page 78
    ... Machinery, equipment and vehicles 515 815 Tools, furniture and fixtures 965 632 Leased Assets As of March 31, 2014 As of March 31, 2015 Total 3,345 2,363 (2) Impairment Losses Epson's business assets are generally grouped by business segment under the Company's management accounting system, and...

  • Page 79
    ...,744 Thousands of U.S. dollars Product development assets 52,051 11,134 1,340 8 (2,779) 61,754 Cost As of M arch 31, 2014 Individual acquisition Acquisition of subsidiary Sale or disposal Exchange differences on translation of foreign operations Other As of M arch 31, 2015 Software 313,073 34,526...

  • Page 80
    ...included in cost of sales and selling, general and administrative expenses in the consolidated statement of comprehensive income. Millions of yen Product development assets 2,162 2,714 2,291 Carrying Amount As of April 1, 2013 As of M arch 31, 2014 As of M arch 31, 2015 Software 7,372 9,617 10,907...

  • Page 81
    15. Finance Lease Transactions Epson leases industrial uninterruptible power supply, host computers and computer terminals as a lessee. The total of future minimum lease payments, future finance costs and their present value for leased assets recognised based on the finance lease contracts by ...

  • Page 82
    ...than 5 years Total Millions of yen March 31, 2014 2015 3,083 4,497 6,861 8,663 1,487 1,529 11,432 14,690 (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 83
    ..., 2015 85,487 3,819 27,353 (1,414) (1,048) (74,653) 49 39,593 95,614 (10,127) 85,487 96,487 (56,894) 39,593 Balance at the beginning of the year Expenditure after acquisition Transfer from(to) property, plant and equipment Depreciation expense Impairment losses Sale or disposal Exchange differences...

  • Page 84
    ... recognised in the years ended March 31, 2014 and 2015, less the respective net amounts of deferred tax assets recognised directly in equity and in other comprehensive income, is mainly attributable to the impact of foreign exchange movements. Epson assesses its ability to utilize carryforward of...

  • Page 85
    ...tax rate and the actual tax rate was as follows. Epson is subject mainly to corporate tax, inhabitant tax, and enterprise tax, and the effective statutory tax rates calculated based on these taxes were 37.8% and 35.4% for the years ended March 31, 2014 and 2015, respectively. The Special Corporation...

  • Page 86
    ... payables" was as follows: Thousands of U.S. dollars March 31, 2015 668,710 496,697 1,165,407 Notes and trade payables Other payables Total Millions of yen March 31, 2014 2015 80,359 72,821 59,688 50,642 140,047 123,463 Trade and other payables are classified as financial liabilities measured at...

  • Page 87
    ... conditions of the bonds issued was as follows: % Company Name of bonds issued Issue date interest rate 0.58 Collateral Maturity date Millions of yen March 31 2014 Non Sep 3, 2015 20,000 (20,000) 20,000 Jun 14, 2011 0.49 Non Jun 13, 2014 (20,000) Jun 14, 2011 0.72 Non Jun 14, 2016 20,000 20,000...

  • Page 88
    ...: Year ended March 31, 2014 Millions of yen Provision for product warranties As of April 1, 2013 Arising during the year Utilised Unused amounts reversed Exchange differences on translation of foreign operations As of March 31, 2014 Current liabilities Non-current liabilities Total 8,276 9,458...

  • Page 89
    ... 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 90
    ... and losses arising from changes in financial assumptions Past service cost and losses (gains) arising from settlements Exchange differences on translation of foreign operations Benefits paid Balance at the end of the year Millions of yen Year ended March 31, 2014 2015 290,201 293,895 11,169 10,687...

  • Page 91
    ... the year Interest income Remeasurement Return on plan assets 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, 2014 2015 218,116 237,543 3,362...

  • Page 92
    ... middle- and long-term in order to ensure the redemption of the defined benefit obligations. Epson sets a best qualified asset mix policy through performing pension ALM, which is combined management of assets and liabilities" by an external agency to secure stable returns.Epson invests plan assets...

  • Page 93
    ... was as follows: % March 31, 2014 Discount rate 1.7 March 31, 2015 1.3 The valuation of defined benefit obligations reflects judgments on uncertain future events. The sensitivities of defined benefit obligations due to changes of 1% in the discount rate as of March 31, 2015 were as follows. Each of...

  • Page 94
    ... As of April 1, 2013 Increase (decrease) (Note1) As of March 31, 2014 Increase (decrease) (Note1) As of March 31, 2015 170,243 49 170,292 (Note1) The reason for the increase was due to the purchase of odd shares. (Note2) The Company completed the Company's common shares split into two shares with...

  • Page 95
    ...value through other comprehensive income. (C) Exchange differences on translation of foreign operations This is a foreign currency translation difference... statements of foreign operations are prepared in foreign currencies. (D) Net changes in fair value of cash flow hedges Epson uses derivatives for ...

  • Page 96
    ... 35 Basis date Effective date March 31, 2014 September 30, 2014 June 25, 2014 December 5, 2014 FY2014: Year ended March 31, 2015 Class of shares (Resolution) Annual Shareholders Meeting (June 24, 2014) Board of Directors (October 31, 2014) Ordinary shares Ordinary shares Thousands of U.S. dollars...

  • Page 97
    ...(167,337) (164,957) (151,135) (542,951) (2,451,926) Employee benefit expense Research and development expense Promotion expense Service contract expense Advertising expense Transportation expense Other Total Millions of yen Year ended March 31, 2014 2015 (94,749) (88,925) (47,837) (48,535) (28,722...

  • Page 98
    ... income" was as follows: Millions of yen Year ended March 31 2014 2015 Income from a revision of the defined benefit plan (Note) Gains on sales of property, plant and equipment, intangible assets and investment property Other Total 359 5,638 5,998 30,071 5,270 4,564 39,907 Thousands of U.S. dollars...

  • Page 99
    ... 2,159 1,394 278 225 567 263 1,065 3,268 2,685 Finance Costs Interest expense Foreign exchange losses (Note) Employee benefit expense Other Total Millions of yen Year ended March 31 2014 2015 (1,559) (2,955) (179) (531) (1,241) (229) (51) (2,320) (4,428) (Note) The increase or decrease in the...

  • Page 100
    ...sized liquid crystal displays to Sony Corporation and Sony Mobile Display Corporation and terminated the production operation at the end of December, 2010. The profit and loss related to allegations concerning a LCD price-fixing cartel that occurred during the years ended March 31, 2014 and 2015 was...

  • Page 101
    ... defined benefit liabilities (assets) Net gain (loss) 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...

  • Page 102
    ... to ordinary shareholders of the parent company Thousands of U.S. dollars Year ended March 31, 2015 945,985 (9,312) 936,673 Millions of yen Year ended March 31 2014 2015 Profit from continuing operations attributable to owners of the parent company Loss from discontinued operations attributable to...

  • Page 103
    ...(return on equity) for profitability, while focusing on changes in the domestic and overseas environment. (2) Financial Risk Management Epson is exposed to financial risks (credit risks, liquidity risks, foreign exchange risks, interest rate risks, and market price fluctuation risks) in the process...

  • Page 104
    ... Receivables, such as notes and trade receivables, resulting from the operating activities of Epson are exposed to customer credit risks. Epson holds mainly bonds receivable as investments of surplus funds and equity securities of customers and suppliers to strengthen relationships with them; those...

  • Page 105
    ... 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 risks with the balance of...

  • Page 106
    .... In order to mitigate risks mentioned above resulting from the foreign exchange fluctuation, in accordance with Epson' s Foreign Exchange Management Regulation, Epson establishes a foreign currency hedge policy based on the current conditions and forecast of the foreign exchange market, implements...

  • Page 107
    ...the issuers, and reviews the portfolio held by taking into account the relationship with counterparty entities in accordance with Epson' s Securities Operation Regulation. Epson intends to hold equity instruments not for short-term trading but for long-term investment. Therefore, Epson does not sell...

  • Page 108
    ... to the carrying amounts, because the rates are affected in the short term by fluctuations in market interest rates, and because Epson's credit status has not greatly changed since they were implemented. The fair values of non-current borrowings with fixed rates are calculated by the total sum of...

  • Page 109
    ... were as follows: Millions of yen March 31, 2014 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 receivables Financial...

  • Page 110
    ... to have occurred at the end of the reporting period. Classification by hierarchy regarding financial assets and liabilities measured at fair value FY2013: As of March 31, 2014 Level 1 Financial assets Derivative financial assets Equity securities Total Financial liabilities Derivative financial...

  • Page 111
    ...: Thousands of U.S. dollars Year ended March 31, 2015 21,685 (1,456) (208) 0 20,021 Balance at the beginning of the year Gains and losses Other comprehensive income Sales Other Balance at the end of the year Millions of yen Year ended March 31, 2014 2015 2,731 2,606 (125) 2,606 (174) (25) 0 2,406...

  • Page 112
    ... America, Inc. Epson Portland Inc. Epson El Paso, Inc. Epson Europe B.V. Epson (U.K.) Ltd. Epson Deutschland GmbH Epson Europe Electronics GmbH Epson France S.A. Long Beach, U.S.A. San Jose, U.S.A. Portland, U.S.A. El Paso, U.S.A. Amsterdam, the Netherlands Hemel Hempstead, UK Dusseldorf, Germany...

  • Page 113
    ...Epson Australia Pty. Ltd. Epson India Pvt. Ltd. Tianjin Epson Co., Ltd. Epson Precision (Hong Kong), Ltd. Epson Engineering (Shenzhen) Ltd. Epson Precision (Shenzhen) Ltd. Orient Watch (Shenzhen) Ltd. Singapore Epson Industrial Pte. Ltd. P.T. Epson Batam P.T. Indonesia Epson Industry Taipei, Taiwan...

  • Page 114
    ...Bhd. Location Main business Manufacture of information-related equipment Manufacture of devices and precision products Manufacture of devices and precision products Ownership percentage of voting rights (%) (Note) 100.0 100.0 100.0 (100.0) Lipa, Philippines Kuala Lumpur, Malaysia Johor, Malaysia...

  • Page 115
    ... for review. In July 2011, the supreme court referred the case to the Court of Justice of the European Union, and an inquiry was begun in October 2012. In June 2013, the Court of Justice of the European Union ruled that EU member states can impose levies on printer and PC manufacturers in order to...

  • Page 116
    ...by the Company's Board of Directors on January 30, 2015. (1) Purpose of share splits The Company, in the light of recent share price trends, aims to make it easier for investors to invest in the Company and expand its investor base by reducing the investment unit amount of the Company' s shares and...

  • Page 117
    Report of Independent Auditors 116

  • Page 118
    ... assistance, 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, Interlocking directors 100.0 Sales of electronic devices (100.0) Manufacture...

  • Page 119
    ...peripherals and factory automation products, Interlocking directors 100.0 Sales of printers and other PC peripherals Epson Europe B.V. * Amsterdam, the Netherlands Regional headquarters, 95,000 Sales of (thousand EUR) information-related equipment Epson (U.K.) Ltd. Hemel Hempstead, UK Sales of...

  • Page 120
    ... and 3LCD projectors, 100.0 Interlocking directors, Guaranty of liabilities Epson Singapore Pte. Ltd. Singapore Regional headquarters, Sales of 200 information-related (thousand SGD) equipment, devices and precision products Sales of 1,000 information-related (thousand AUD) equipment Sales of 108...

  • Page 121
    ... between parent percentage of company and subsidiary voting rights (%) Manufacture of crystal 100.0 devices, Interlocking directors, Guaranty of liabilities Manufacture of watches, 100.0 etc., (100.0) Guaranty of liabilities Epson Precision Malaysia Sdn. Bhd. Kuala Lumpur, Malaysia Manufacture of...

  • Page 122
    ... unit (Shares) Notes 1. 20,928,657 shares of treasury stock are included as 209,286 units under "Japanese individuals and others" and 57 shares under "Shares less than one unit." 2. Three units in the name of Japan Securities Depository Center, Inc. are included under "Other Japanese corporations...

  • Page 123
    ... As of March 31, 2015 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, Limited (Standing proxy: Trust & Custody...

  • Page 124
    ... Trust & Banking Co., Ltd. Mizuho Asset Management Co., Ltd. Total Address 5-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 2-1, Yaesu 1-chome, Chuo-ku, Tokyo 5-27, Mita 3-chome, Minato-ku, Tokyo － Number of shares held 6,947,000 2,696,800 459,500 10,103,300 Shareholding ratio (%) 3.48 1.35 0.23 5.06...

  • Page 125
    ... March 2013 1,183 431 72nd year March 2014 3,390 795 73rd year Mar 2015 5,970 â-¡2,333 2,752 â-¡2,120 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 126
    ... investor information (1) Company name (2) Founded (3) Head office Seiko Epson Corporation May 1942 3-5 Owa 3-chome, Suwa, Nagano 392-8502, Japan Tel: +81-266-52-3131(main) (4) Tokyo office Shinjuku NS Building, 4-1 Nishi-shinjuku 2-chome, Shinjuku-ku, Tokyo 163-0811, Japan Tel: +81-3-3348-8531(main...

  • Page 127
    3-3-5 Owa, Suwa, Nagano 392-8502, Japan tel: +81-266-52-3131 http://global.epson.com