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ANNUAL REPORT
Year ended March 31, 2013

Table of contents

  • Page 1
    ANNUAL REPORT Year ended March 31, 2013

  • Page 2
    ..., from consumer opdics such as digidal cameras, camerareladed producds and binoculars, do indusdrial precision equipmend including IC and LCD sdeppers and scanners, microscopes and measuring insdrumends. In dhe fiscal year ended March 2013, ned sales rose 10% year on year do dop one drillion yen for...

  • Page 3
    ... forward-looking statements due to changes in various factors, including-but not limited to-economic conditions in principal markets, product and service demand trends, customer capital expenditure trends, and currency exchange rate fluctuations. The financial figures in this annual report have been...

  • Page 4
    ... dimension of pleasure from phodography, Nikon develops and markeds imaging producds worldwide widh various feadures using sophisdicaded digidal imaging dechnology. Marked Trends The compact digital camera market codtidues to shridk id the fiscal year eddidg March 2014. By codtrast, we adticipate...

  • Page 5
    ...150,000 100,000 50,000 0 2011 2012 2013 Net Sales (Left scale) Operating Income (Right scale) marked share for ArF immersion scanners â- Maindain dhe large marked share for LCD sdeppers and scanners P12 Objecdives of dhe Medium Term Managemend Plan â- Successive Share of Net Sales Year ended...

  • Page 6
    ... common stock information is computed based on the weighted average number of shares outstanding during the year. 2. U.S. dollar figures are translated for reference only at ¥94.05 to U.S. $1.00, the exchange rate at March 31, 2013. 3. Throughout this annual report,EBITDA is calculated as operating...

  • Page 7
    ... 76,497 $ 1.14 1.14 0.33 $ 639,641 385,174 813,364 Revenue increase in Imaging Products contributed to gain, with unit sales of interchangeable lens-type digital cameras rising amid deteriorating market conditions in the second half of the period. Operading Income DOWN 36.3% ¥ 749,805 379,087...

  • Page 8
    ... dederiorading marked condidions during dhe second half of dhe period in dhe Imaging Company. These facdors harshly affecded resulds, driving down consolidaded operading income 36.3% year on year. In dhe fiscal year ending March 2014, we dhus will focus on building a robusd operading sdrucdure able...

  • Page 9
    ...such as how far the compact digital camera market is likely to shrink and the interchangeable lens-type digital camera market to grow. In the Instruments Company, our key Sales by Region Yehrs ended Mhrch 31 (Millions of yen) 1,200,000 Sales by Business Segment Yehrs ended Mhrch 31 (Millions of yen...

  • Page 10
    ... for almost 10 years, yet I want the entire Group to again push forward with renewed vigor. Major Challenges (Fiscal years ending March 2014 to 2016) 1. Sdrengdhening of exisding businesses •Cost reductions •Better supply chain management (SCM) •Product differentiation 2. Promodion of...

  • Page 11
    ... a leading position, from the fiscal year ending March 2014 we plan to launch new products, including non-contact three-dimensional (3D) measurement systems for the industrial instruments market. The Instruments Company has adequate potential to achieve profitability if sales are increased, and...

  • Page 12
    ... reasons that it is so important for the Nikon Group to become more international as an organization, and to pursue a localization strategy. Another core factor of corporate social responsibility policy is our duty to humanity and the environment. The pursuit of profit alone will ultimately lead to...

  • Page 13
    ... the activities of the Global Human Resources Development Section, we aim to create an organization in which all employees can attain their full potential. Annual Cash Dividends and Total Return Ratio Years ended March 31 (Yen) 40 35 30 25 20 15 10 5 0 2009 2010 2011 2012 2013 In closing, are...

  • Page 14
    ... the fiscal year ended March 2012. We also launched the latest model of ArF immersion scanner, the top-of-the-line NSR-S622D, for which we received several orders. A purchase request for this scanner even came from a new customer, while KAZUO USHIDA Director, Member of the Board and Executive Vice...

  • Page 15
    .... By contrast, Nikon sold just one system in the 7th generation and beyond, compared with 17 units sold in the fiscal year ended March 2012, since prices for large-screen televisions remained low. Be that as it may, Nikon managed to maintain its 80% market share for LCD scanners. Nexd-generadion...

  • Page 16
    ... cost reductions and shorten production lead time, while also bearing in mind the importance of enhancing our product innovativeness. The fiscal year ending March 2014 will be when, amid a harsh operating environment, we sow the seeds to establish our revised business structure. We plan to return...

  • Page 17
    ...-model digital SLR cameras, we faced a serious decline in profitability. This has served as an important lesson for us. YASUYUKI OKAMOTO Director, Member of the Board and Executive Officer President of Imaging Company LEADING THE MARKET Highlighds of dhe Fiscal Year Ended March 2013 • Ned sales...

  • Page 18
    ... strengthen its product lineup for the FX and DX formats. Our Medium Term Management Plan target is to gain a market share of between 40% and 45% by the fiscal year ending March 2016. We already have unwavering confidence in such aspects of our interchangeable lens-type advanced digital cameras as...

  • Page 19
    ... in the market. Under our Medium Term Management Plan, we aim to achieve a 25% to 30% share of the market by the fiscal year ending March 2016. We believe that compact digital cameras play an important role in enhancing the value of the Nikon brand and, during the fiscal year ended March 2013, made...

  • Page 20
    ... next-generation products that contributed to the increased market share include bioscience-related high-end system products, and industrial instruments-related noncontact 3D measuring instruments. TOSHIYUKI MASAI Director, Member of the Board and Executive Officer President of Instruments Company...

  • Page 21
    ...this end, we will strengthen that part of our structure related to the direct sale of advanced research products. In the area of products for general research and clinical use, we will broaden our sales channels in Japan and emerging markets, enhancing Nikon's competitiveness through cost reductions...

  • Page 22
    ... VMA series, a low-priced basic-level line targeting Asian markets. Meanwhile, we will use Nikon's non-contact 3D scanner technology, which can quickly compile large quantities of point groups, for our non-contact 3D measurement systems. At the same time, we plan to market new models compatible with...

  • Page 23
    ... Resources Development Section was established within the Human Resources Department at the Business Administration Center in order to develop the frameworks to make this possible. 1. Figures for the proportion of overseas sales and employees are for the fiscal year ended March 2013. FOCUS: NIKON...

  • Page 24
    ... have been invited to sit on the Board in order to further strengthen the supervisory function. The Executive Committee deliberates on and resolves major issues regarding the general operation of company business, internal controls, and management, in accordance with the basic management policies as

  • Page 25
    ...'s sales and workforce is outside Japan, implementing CSR activities at overseas Group companies is important. Accordingly, Nikon is strengthening its CSR structure overseas. A structure to administer CSR at Group companies in the China and Hong Kong region was established in the fiscal year ended...

  • Page 26
    .... In Japan, Nikon's efforts include promoting the role of women in the workplace, and supporting people with disabilities. Recognizing that the development of global-minded employees has become an urgent issue, in the fiscal year ended March 2013, Nikon held a Global HR Meeting of human resources...

  • Page 27
    ... corruption, ensure respect for human rights, and promote CSR in the supply chain overall. We have also established the Nikon Basic Green Procurement Policy to procure environment friendly parts and materials. In the fiscal year ended March 2012, in concert with international efforts to address the...

  • Page 28
    ...scanners contracted significantly as semiconductor and LCD manufacturers scaled back capital investment. For the Imaging Products Business segment, the market for interchangeable lens-type digital cameras deteriorated sharply from the middle of the third quarter, while the market for compact digital...

  • Page 29
    ...cleared, and by the end of the fiscal period we were able to realign performance with our plan. The Nikon 1 interchangeable lens-type advanced digital camera gained a large market share in North America and Europe, expanding the brand recognition for the series. In compact digital cameras, while the...

  • Page 30
    ... with this policy, Nikon Corporation (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, 2013, Nikon has decreased its year-end dividend by...

  • Page 31
    ..., prices will fall, perhaps causing a sudden falloff in demand for steppers and scanners. In digital cameras, the principal products of the Imaging Products Business, the market for interchangeable lens-type digital cameras is expanding while the market for compact digital cameras is contracting...

  • Page 32
    ... in the market for 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...

  • Page 33
    ... and skills internally. In overseas locations as well, retaining exceptional local personnel is important, but there is a strong possibility of personnel loss in regions with high labor mobility. In the Nikon Group's business, technical innovation is rapid, and long-term education and training...

  • Page 34
    32 CONSOLIDATED BALANCE SHEET Nikon Corporation and Consolidated Subsidiaries March 31, 2013 Millions of Yen Thousands of U.S. Dollars (Note 1) 2012 ASSETS Current assets Cash and cash equivalents (Note 14) Notes and accounts receivable-trade (Note 14): Customers Unconsolidated subsidiaries and ...

  • Page 35
    ...shares; issued, 400,878,921 shares in 2012 and 2013 Capital surplus (Note 8) Stock acquisition rights (Note 9) Retained earnings (Note 8) Treasury stock-at cost: 4,342,128 shares in 2012 and 4,279,760 shares in 2013 Accumulated other comprehensive income (loss): Unrealized gain on available-for-sale...

  • Page 36
    34 CONSOLIDATED STATEMENT OF INCOME Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2013 Millions of Yen Thousands of U.S. Dollars (Note 1) Net sales Cost of sales Gross profit Selling, general and administrative expenses (Note 10) Operating income Other income (expenses) ...

  • Page 37
    35 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2013 Millions of Yen Thousands of U.S. Dollars (Note 1) Net income before minority interests Other comprehensive income (Note 17): Unrealized (loss) gain on available-for-sale ...

  • Page 38
    36 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2013 Thousands Millions of Yen Accumulated Other Comprehensive Income (Loss) Outstanding Number of Shares of Common Stock Common Stock Capital Surplus Stock Acquisition Rights ...

  • Page 39
    37 CONSOLIDATED STATEMENT OF CASH FLOWS Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2013 Millions of Yen Thousands of U.S. Dollars (Note 1) 2012 Operating activities: Income before income taxes Adjustments for: Income taxes-paid Loss on impairment of fixed assets ...

  • Page 40
    ... is more familiar to readers outside Japan. The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nikon Corporation (the "Company") is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely...

  • Page 41
    ... Instruments and Exchange Law) using the amount of interest in such partnerships calculated based on ownership percentage and the most recent financial statements on the report date stipulated in the partnership agreement. (h) Retirement and Pension Plans The Company has a defined-benefit corporate...

  • Page 42
    ... 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 until exercised. The standard covers equity-settled, share...

  • Page 43
    ...time to time through 2009. Major changes are as follows: (1) Treatment in the balance sheet Under the current requirements, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement...

  • Page 44
    ...million, respectively, for the fiscal year ended March 31, 2012. Proceeds from sales of available-for-sale securities were ¥779 million ($8,285 thousand) for the fiscal year ended March 31, 2013. Gross realized gains and losses on these sales computed on a moving-average cost basis were ¥0 million...

  • Page 45
    ... Thousands of U.S. Dollars 2012 Loans, principally from banks and insurance companies: 2012: 0.64500%âˆ'1.95250% due 2012âˆ'2017 2013: 0.63125%âˆ'1.95250% due 2014âˆ'2023 Obligations under finance leases Bonds Total Less: Current portion Long-term debt, less current portion 2013 2013 Â¥27,600...

  • Page 46
    ...The aggregate annual maturities of long-term debt at March 31, 2013 are as follows: Year Ending March 31 Millions of Yen Thousands of U.S. Dollars 2014 2015 2016 2017 2018 2019 and thereafter Total At March 31, 2013, the following assets were pledged as collateral for the long-term debt: ¥ 6,703...

  • Page 47
    45 FINANCIAL SECTION The liability for employees' retirement benefits at March 31, 2012 and 2013 consisted of the following: Millions of Yen Thousands of U.S. Dollars Projected benefit obligation Fair value of plan assets Unrecognized actuarial gain Unrecognized prior service cost Prepayment of ...

  • Page 48
    ... the accounts under certain conditions upon resolution of the shareholders. (c) Treasury Stock and Treasury Stock Acquisition Rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of...

  • Page 49
    ... The assumptions used to measure the fair value of 2013 Stock Options which were granted on August 23, 2012: Estimate method: Black-Scholes option-pricing model Volatility of stock price: 47.635% Estimate remaining outstanding period: 15 years Estimate dividend: ¥38.00 per share Risk free interest...

  • Page 50
    ... periodic retirement benefit costs Employees' bonuses and others Research and development costs 2012 ¥74,389 35 2,967 30,479 3,520 16,583 68,701 2013 ¥83,815 (461) 4,212 32,855 2,357 17,682 76,497 2013 $891,178 (4,904) 44,784 349,339 25,057 188,003 813,364 11. Income Taxes The Company and its...

  • Page 51
    ...and Social Structures" (Act No. 114 of 2011) and the "Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake" (Act No. 117 of 2011) promulgated on December 2, 2011 led to a reduction of corporate tax rates...

  • Page 52
    ... for financial instruments Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment terms and balances of major customers by each business...

  • Page 53
    ... are measured at the quoted market price of the stock exchange. Investment securities and investments in and advances to unconsolidated subsidiaries and associated companies whose fair value is not readily determinable (the carrying values of ¥1,058 million and ¥13,992 million as of March 31, 2012...

  • Page 54
    ... exchange rates. Credit risk is the possibility that a loss may result from a counterparty's failure to perform according to the terms and conditions of the contract. Because the counterparties to the Group's derivative contracts are limited to major international financial institutions, the Group...

  • Page 55
    ... Contracts: Forward exchange rates are used for the fair values of forward exchange contracts. 2. Currency Option Contracts: The fair values of derivative transactions are based on information provided by financial institutions. In case of transacting zero cost option contracts, only the fair value...

  • Page 56
    ... are used for the fair values of forward exchange contracts. Millions of Yen March 31, 2012 Hedged Item Contract Amount Contract Amount Due after One Year Interest rate swaps: (fixed-rate payment, floating rate receipt) Long-term debt ¥4,900 ¥3,400 Thousands of U.S. Dollars Contract Amount...

  • Page 57
    ... for the years ended March 31, 2012 and 2013 were as follows: Millions of Yen Thousands of U.S. Dollars 2012 Unrealized gain (loss) on available-for-sale securities: Gains (losses) arising during the year Reclassification adjustments to profit Amount before income tax effect Income tax effect Total...

  • Page 58
    ... products and its peripheral domain, like digital SLR cameras, compact digital cameras and interchangeable camera lenses. The Instruments Business provides products and services of microscopes, measuring instruments and inspection equipment. 2. Methods of measurement for the amounts of sales, profit...

  • Page 59
    ... profit (loss) is adjusted with reported operating income in the consolidated financial statements. Millions of Yen Reportable Segment Precision Equipment Imaging Products Instruments Total Other Total Reconciliations Consolidated For the year ended March 31, 2013 Sales Sales to external customers...

  • Page 60
    ... with reported operating income in the consolidated financial statements. Related Information 1. Related information by geographical area at March 31, 2012 and 2013 consisted of the following: (1) Net Sales Millions of Yen Japan USA Europe China Other Total For the year ended March 31, 2012 ¥130...

  • Page 61
    ... Dollars Japan North America Europe China Thailand Other Total For the year ended March 31, 2013 $983,636 $66,038 $46,469 $185,506 $422,375 $14,267 $1,718,291 2. Information for amortization of goodwill for the years ended March 31, 2012 and 2013, and the balance of goodwill by reportable...

  • Page 62
    60 INDEPENDENT AUDITORS' REPORT

  • Page 63
    ...Accounting Headquarters Corporate Communications & IR Department Business Development Headquarters Information System Headquarters Intellectual Property Headquarters Business Administration Center Core Technology Center Research & Development Headquarters Production Technology Headquarters Precision...

  • Page 64
    ...scanners â-‡ â˜... Nikon Europe B.V. Import, sales and servicing of cameras â-‹ â˜... Nikon Precision Taiwan Ldd. Maintenance and servicing of IC/LCD steppers and scanners â-‡ â˜... Nikon AG Import, sales and servicing of cameras, microscopes and measuring instruments â-‹ â˜... Nikon Precision Singapore...

  • Page 65
    ... of cameras â-‡ â˜... Nikon Imaging Japan Inc. Sales and servicing of cameras â-‡ â˜... Nikon Vision Co., Ldd. Development, manufacture, sales and servicing of sport optics products â-³ Kurobane Nikon Co., Ldd. Manufacture of objective lenses for microscopes, measuring instruments, semiconductor...

  • Page 66
    ... Kawai Standing Corporate Auditor Hiroshi Ohki Executive Officer President of Core Technology Center, Officer overseeing Customized Products Division Adsumi Nakamura Operating Officer General Manager of Business Planning Department & Bioscience Marketing Department, Instruments Company Yoshiyuki...

  • Page 67
    ... Year ended March 31, 2012 Year ended March 31, 2013 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 books...

  • Page 68
    ...-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 generate alkaline wastewater...