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NIKON
REPORT
2015
Year Ended March 31, 2015

Table of contents

  • Page 1
    NIKON REPORT 2015 Year Ended March 31, 2015

  • Page 2
    ...In June 2014, Nikon Corporation announced "Next 100 - Transform to Grow," its Medium-Term Management Plan, and set out the changes to be made to its business portfolio to transform the Company into a corporate entity capable of realizing growth over the next 100 years. In the fiscal year ended March...

  • Page 3
    ... Medium-Term Management Plan 08 10 12 16 NIKON AT A GLANCE Business Review for the Fiscal Year Ended March 31, 2015 Performance Highlights Overview of Divisions and Business Units 16 Corporate Strategy Division 18 Semiconductor Lithography Business Unit 20 FPD Lithography Business Unit 22 Imaging...

  • Page 4
    ... in the number of units sold in the Precision Equipment Business and delayed recoveries in the European and Chinese markets in the Imaging Products Business. However, in the three fields that are positioned as growth businesses-Medical, Microscope Solutions, and Industrial Metrology-marked progress...

  • Page 5
    ... Products Business, market recovery was delayed in Europe and China, and the number of units sold in all product categories was down from the previous fiscal year, including of digital cameras-interchangeable lens type. In the Semiconductor Lithography Business, despite progress made with cost...

  • Page 6
    ...corporate entity capable of realizing sustainable growth. Announced in May 2015, the Medium-Term Management Plan Update was set for the next three years. In addition to changes to the forecasts regarding the scale of the market in the existing Imaging Products Business, in the Medium-Term Management...

  • Page 7
    .... Basic Policy of Medium-Term Management Plan Update Announced in May 2015 Next 100 - Transform to Grow Transforming into a corporate entity that grows by means of its six-business portfolio By maintaining the stable earnings of the FPD Lithography Business and the Imaging Products Business as...

  • Page 8
    ... R&D, and focus our efforts on regrowth in the fiscal year ending March 31, 2018. Management's Numerical Targets (Billions of yen) Years ended / ending March 31 2015 (result) 2016 (target) 2017 (target) 2018 target) Net Sales Corporate Precision Equipment Business Imaging Products Business...

  • Page 9
    ... into account factors linking diversity initiatives with corporate growth. n A Closing Word To become a corporate entity capable of another century of growth Nikon will mark the 100th anniversary of its establishment on July 25, 2017. In the Medium-Term Management Plan Update announced in May 2015...

  • Page 10
    .... Business Lines Development, manufacture, and sales of digital cameras- interchangeable lens type, interchangeable lenses and compact digital cameras, and other products Nikon has been developing high-performance products by combining the latest digital image processing and network technologies...

  • Page 11
    ... optical microscopes and its Perfect Focus System (PFS) that prevents focus drift over long hours of observations, Nikon opens up new possibilities in live cell imaging. Having decided to enter into a contract manufacturing business covering the cells used in regenerative medicine in 2015, Nikon...

  • Page 12
    ...compact digital cameras, sales were strong for products including the COOLPIX P600 and COOLPIX S9700. The cumulative production of interchangeable lenses reached 95 million units in July 2015. Semiconductor Lithography Systems, Unit Sales by Technology (Including refurbished equipment) (Years ended...

  • Page 13
    ... microscopes were particularly strong. With a view to launching a stem cell business, the decision was made to enter the contract manufacturing business to produce cells in May 2015. In addition to higher sales of such products as the NEXIV Series CNC video measuring system and the non-contact...

  • Page 14
    ...the exchange rate at March 31, 2015. Environment-related data applies to seven Group manufacturing companies in Japan and two Group manufacturing companies outside Japan. For more details, please refer to "The Nikon Group's Environmental Management Systems and Environmental Performance Data Boundary...

  • Page 15
    ...*5 2010 2011 2012 2013 2014 2015 2015 ¥ 785,499... 361,258 69,528 471,820 9,982 681,262 292,529 152,819 Business Strategy ¥ (31.82) - 8.00 ¥ 37,525 35,956 60,261 ...: Quantitative data covered by the independent practitioner's assurance. (See page 77 for details.) NIKON REPORT 2015 13

  • Page 16
    ... in supporting career development for women. *5. Investment universe comprised of companies identified by Forum Ethibel as displaying high performance in terms of social responsibility. *6. An MSCI index comprising companies in each industry that have gained high ESG ratings. 14 NIKON REPORT 2015

  • Page 17
    ...the industry-leading commitment Nikon demonstrated across all critical focus areas on which the Company was measured: the quality, cost, availability, technology, customer service, labor and ethics systems, and environmental sustainability of its semiconductor lithography systems. NIKON REPORT 2015...

  • Page 18
    ...early commercialization of new businesses, the Corporate Strategy Division will link its efforts to the sustainable growth of the Nikon Group. Tomohide Hamada Senior Vice President and Director, General Manager of Corporate Strategy Division Message Q In the Medium-Term Management Plan announced...

  • Page 19
    ... though sales in the Imaging Products Business are declining, the ability to maintain the operating margin indicates that cost reductions are linked to steady results. The plan for the coming years calls for the promotion of more upstream cost reductions, such as at the development and design stages...

  • Page 20
    ...Unit Business Strategies for Medium-Term Management Plan Update Message Q To optimize lithography systems for customer processes and sustain stable operations How would you sum up the fiscal year ended March 31, 2015? For two consecutive years ended December 31, 2013 and 2014, the semiconductor...

  • Page 21
    ...on-site performance verification. Business Strategy Q Please tell us the background to the cost reductions. ArF immersion scanner NSR-S630D We recognize that manufacturing costs are one of the important areas of efficiency for an item of equipment, and we are improving specific measures designed...

  • Page 22
    ... our systems for higher-definition panels and aim to achieve our goal of remaining an operation that supports the advances of the display industry. Kiyoyuki Muramatsu Corporate Vice President General Manager of FPD Lithography Business Unit Business Strategies for Medium-Term Management Plan Update...

  • Page 23
    ... benefit both our customers and us. We will proactively advance the search for innovative businesses related to existing FPD lithography systems and make progress toward our aim of remaining an operation that supports the advances of the display industry. FPD scanner FX-101S NIKON REPORT 2015...

  • Page 24
    ... of Imaging Business Unit Business Strategies for Medium-Term Management Plan Update Message Q Consolidate leading position in digital cameras- interchangeable lens type How would you sum up the fiscal year ended March 31, 2015? Compared with the fiscal year ended March 31, 2014, the market for...

  • Page 25
    .... For example, the high-value-added COOLPIX P900, equipped with an 83x optical zoom lens, was launched in the spring of 2015 and has exceeded our sales expectations, so we have increased production. Secondly, we will enforce our Customer Relationship Management (CRM). This policy is centered on an...

  • Page 26
    ... Corporate Vice President General Manager of Microscope Solutions Business Unit & Department Manager of Marketing Department Business Strategies for Medium-Term Management Plan Update Message Q Enter regenerative medicine contract manufacturing business and accelerate launch of stem cell business...

  • Page 27
    ...fiscal year ending March 31, 2018, onward. Full-scale business operations are being considered from around 2020. Image Analysis (Retinal Pigment Epithelial Cells) Cell culture observation system BioStation CT Q Please tell us about the long-term prospects for the Microscope Solutions Business Unit...

  • Page 28
    ... services. Masao Nakajima Senior Vice President General Manager of Industrial Metrology Business Unit Business Strategies for Medium-Term Management Plan Update Message Q Utilizing M&A and alliances centered on X-ray inspection and non-contact sensor 3D metrology systems to expand business scale...

  • Page 29
    ... by reviewing a service by which we conduct regular measurements and allow potential customers to come into direct contact with Nikon's technologies and precision. CNC video measuring system iNEXIV VMA-4540 Business Strategy Q What are your thoughts on cost reductions? Many of the products of...

  • Page 30
    ... fields in the retinal area inside the eye, Optos is a leading company in the retina diagnostic imaging equipment market. With the fundus camera utilized in the company's unique advanced technologies as its mainstay product, Optos is undertaking business development on a global scale. In the area of...

  • Page 31
    ... equipment by drawing on a range of technologies, including Nikon's optical and precision technologies. In 2014, we started collaboration with LSI Medience Corporation, which develops testing- and analysis-related business, and are now proceeding with the development of a product that benefits...

  • Page 32
    ... 2012 Director, Member of the Board & Senior Vice President, President of Core Technology Center 2014 Senior Vice President and Director, General Manager of Core Technology Division, Overseeing Intellectual Property Division, Semiconductor Lithography Business Unit, Microscope Solutions Business...

  • Page 33
    ...CEO of Nikon Inc. 2007 Corporate Vice President, President of Nikon Europe B.V. 2009 Director, Member of the Board & Senior Vice President, President of Instruments Company 2014 Director (to present) Tadashi Nakayama Corporate Vice President Sector Manager of Marketing Sector, Imaging Business Unit...

  • Page 34
    ...a management system that responds swiftly to changes in the business environment through our officer system. Number of Female and Non-Japanese Directors, Corporate Auditors and Officers (As of March 31, 2015) Nikon Corporation Group companies Number of female: 0; number of non-Japanese: 0 Board of...

  • Page 35
    ... from outside the Nikon Group, examines and offers proposals regarding related systems. Compensation levels at major Japanese companies with global operations are also considered in setting compensation at a level that reflects the Company's business performance and scale. The Compensation Committee...

  • Page 36
    ...Vision Nikon Group's basic policy on social responsibility Guidelines for Conduct Nikon Code of Conduct Code for daily business activities Society Nikon's stakeholders Priority Issues in the Medium-Term CSR Plan The Nikon Group promotes "CSR-oriented management." For CSR promotion activities, we...

  • Page 37
    ..., and the Middle East. Nikon is currently promoting CSR in six distinct countries and regions: Japan, Greater China, Asia, Europe, the Americas, and Korea. Priority Issues in the CSR Medium-Term Plan (Three-year plan from the year ending March 31, 2016, to year ending March 31, 2018) We will...

  • Page 38
    ... at overseas sites. Utilizing the Nikon Eco Program, we will work to enhance our environmental activities in offices. Fiscal Year Ended March 31, 2014 • Policy development In the fiscal year ended March 31, 2015, the guidelines were published for Group companies in Japan, China, and Europe. To...

  • Page 39
    ... activities in the supply chain Formulation of CSR Procurement Standards Nikon promotes CSR procurement to address CSR issues, including FUTURE Succession Planning Selection and development of future manager candidates IN FOCUS Global Performance and Development Goal setting and evaluation system...

  • Page 40
    ...Medium-Term Management Plan. The Nikon Group's Value Creation Semiconductor Lithography Business Imaging Products Business FPD Lithography Business Provide New Value Realize sustainable growth Medium-Term Management Plan Next 100 - Transform to Grow To be a corporate entity that grows by means...

  • Page 41
    ... handled a wide variety of products, ranging from glass materials and camera lenses to semiconductor lithography systems, which are called the most precise machines ever built. We will integrate the great number of technologies available to the Company with new technologies demanded in the medical...

  • Page 42
    ... throughout the Group. To realize "Next 100 -Transform to Grow," its Medium-Term Management Plan, the Group will introduce FUTURE IN FOCUS, a human resource policy targeting human resource development that will facilitate raising the awareness of each and every employee and give added incentive...

  • Page 43
    ... manner from the fiscal year ending March 31, 2017. Japan 39.5% Number of Employees (Consolidated) 25,415 Asia and Oceania 49.4% United States Europe Using "Succession Planning" for Sustainable and Active Organizational Management "Succession Planning" is by design a system that continues to...

  • Page 44
    ... in Europe and China, and the compact digital camera market continued to shrink. In the Instruments Business, although the microscope-related field was sluggish due to a reduction in the public budget of Japan and delays in execution, the field was robust in the Americas and China. In the industrial...

  • Page 45
    ..., compared with operating loss of ¥2,156 million for the previous fiscal year. Financial and Corporate Data n Imaging Products Business In the Imaging Products Business, the performance of digital cameras-interchangeable lens type was strong for the D750 and D810, the digital single-lens reflex...

  • Page 46
    ... 2011 2012 2013 2014 2015 n Precision Equipment n Instruments n Imaging Products n Other n Precision Equipment n Imaging Products n Instruments n Other n Corporate expenses * The "Other" segment comprises businesses not included in reportable segments, such as the Glass Business and Customized...

  • Page 47
    ...for-sale securities in line with stock price rises. The equity ratio moved up 1.1 percentage points from the previous fiscal year to 58.6%. Balance Sheet Analysis As of March 31, 2014 and 2015 % of Total Assets Total assets Total current assets Inventories Property, plant and equipment Investments...

  • Page 48
    Financial Information Consolidated Balance Sheet Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2015 Millions of Yen Thousands of U.S. Dollars (Note 1) 2014 2015 2015 ASSETS Current assets Cash and cash equivalents (Note 14) Notes and accounts receivable - trade (Note 14...

  • Page 49
    ... (Note 1) 2014 2015 2015 LIABILITIES AND EQUITY Current liabilities Short-term borrowings (Notes 6 and 14) Current portion of long-term debt (Notes 6 and 14) Notes and accounts payable - trade (Note 14): Suppliers Unconsolidated subsidiaries and associated companies Income taxes payable (Note...

  • Page 50
    ... U.S. Dollars (Note 1) 2014 2015 2015 Net sales Cost of sales Gross profit Selling, general and administrative expenses (Note 10) Operating income Other income (expenses) Interest and dividend income Interest expense Foreign exchange losses Loss on sales of property, plant and equipment Loss on...

  • Page 51
    ...Statement of Changes in Equity Nikon Corporation and Consolidated Subsidiaries Year ended March 31, 2015 Thousands Accumulated Other Comprehensive Income (Loss) Number of Shares of Common Stock...11,971) 534,755 87 (11,971) 534,842 Financial and Corporate Data 88 88 88 18,364 (12,693) (4) 71 180...

  • Page 52
    ... and accounts payable-trade Increase (decrease) in accrued expenses Decrease in advances received Decrease in net defined benefit liability Other-net Total adjustments Net cash provided by operating activities Investing activities: Purchases of property, plant and equipment Proceeds from sales of...

  • Page 53
    ...fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting; and 5) exclusion of minority interests from net income, if contained in net income. Financial and Corporate Data (c) Business Combinations In September 2013...

  • Page 54
    ... method for property, plant and equipment within the Group, in coordination with cost reduction in design and manufacturing processes and a fundamental review of production structure, from the perspective of strengthening the maturing core businesses under the Medium-Term Management Plan "Next 100...

  • Page 55
    ... 2015, both with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required. (g) Long-lived Assets The Group reviews...

  • Page 56
    ...companies to measure options at their intrinsic value if they cannot reliably estimate fair value. (o) Foreign Currency Financial Statements The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date...

  • Page 57
    ... swaps which qualify for hedge accounting are measured at market value at the balance sheet date, and the unrealized gains or losses are deferred until maturity. (r) Changes in Presentation Consolidated balance sheet For the year ended March 31, 2015, deferred tax assets included in "other" under...

  • Page 58
    ...Financial Statements 3. Investment Securities Investment securities as of March 31, 2014 and 2015 consisted of the following: Millions of Yen Thousands of U.S. Dollars 2014 2015 2015 Non-current: Equity securities...sales of available-for-sale securities for the years ended March 31, 2014 and 2015...

  • Page 59
    ... Semiconductor Lithography Business Unit of the Precision Equipment Business due to declining profitability of the unit, and the carrying amounts of the following long-lived assets were written down to the recoverable amounts for the year ended March 31, 2015. Financial and Corporate Data Millions...

  • Page 60
    ...U.S. Dollars 2014 2015 2015 Balance at beginning of year (as previously reported) Cumulative effect of accounting changes Balance at the beginning of the year (as restated) Current service cost Interest cost Actuarial gains and losses Benefits paid Past service cost Others Balance at end of year...

  • Page 61
    ...832) Financial and Corporate Data (4) The components of net periodic benefit costs for the years ended March 31, 2014 and 2015, were as follows: Millions of Yen Thousands of U.S. Dollars 2014 2015 2015 Service cost Interest cost Expected return on plan assets Amortization of past service cost...

  • Page 62
    ...expected currently and in the future from the various components of the plan assets. (8) Assumptions used for the years ended March 31, 2014 and 2015, were set forth mainly as follows: 2014 2015 Discount rate Expected rate of return on plan assets 1.8% 2.0% 1.0% 1.3% 8. Equity Japanese companies...

  • Page 63
    ... Date of Grant Exercise Price Exercise Period 2004 Stock Options 2005 Stock Options 2007 Stock Options 2007 Stock Options 2008 Stock Options 2009 Stock Options 2010 Stock Options 2012 Stock Options 2012 Stock Options 2013 Stock Options 2014 Stock Options 12 directors 10 officers 11 directors...

  • Page 64
    ... measure the fair value of 2015 Stock Options which were granted on August 1, 2014: Estimate method: Black-Scholes option pricing model Volatility of stock price: 46.188% Estimate remaining outstanding period: 15 years Estimate dividend: ¥32.00 per share Risk free interest rate: 0.951% 10. Selling...

  • Page 65
    ... tax-deferred increased by ¥2,826 million ($23,520 thousand). 12. Research and Development Costs Research and development costs charged to income were ¥74,552 million and ¥66,730 million ($555,298 thousand ) for the fiscal years ended March 31, 2014 and 2015, respectively. 13. Leases The Group...

  • Page 66
    ... currency exchange rates, the position net of payables in foreign currencies is hedged, principally by using forward foreign currency contracts. Investment securities are exposed to the risk of market price fluctuations but are managed by monitoring market values and financial position of issuers...

  • Page 67
    ... the market price, if it is available, or by discounting the future cash flows related to the debt at the rate assumed based on interest rates on government securities and credit risk. Bonds are included in long-term debt in the consolidated balance sheet. Financial and Corporate Data (d) Maturity...

  • Page 68
    ... transactions to which hedge accounting is not applied at March 31, 2014 and 2015 were as follows: Millions of Yen Contract Amount Contract Amount Due after One Year Unrealized (Loss) Gain Fair Value 2014 Forward exchange contracts: Selling USD Selling EUR Selling Other Buying JPY Buying...

  • Page 69
    ... exchange contracts: Forward exchange rates are used to determine fair values of forward exchange contracts. (2) Currency option contracts: The fair values of derivative transactions are measured at the quoted prices provided by financial institutions. The currency option contracts are zero-cost...

  • Page 70
    ... for the years ended March 31, 2014 and 2015 were as follows: Millions of Yen Thousands of U.S. Dollars 2014 2015 2015 Unrealized (loss) gain on available-for-sale securities: Gains arising during the year Reclassification adjustments to profit Amount before income tax effect Income tax effect...

  • Page 71
    ... systems for live cells (including iPS cells). Moreover, in order to develop a regenerative treatment for retinal disease (e.g. age-related macular degeneration) by using iPS cells, Nikon invested in Healios K.K. in August 2013. By combining Optos' expertise and technology with Nikon's products...

  • Page 72
    ... camera lenses. The Instruments Business provides products and services in relation to microscopes, measuring instruments, x-ray/CT inspection systems, etc. 2. Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, and Other Items for Each Reportable Segment The accounting policies...

  • Page 73
    ... (loss) and operating income reported in the consolidated financial statements. Millions of Yen Financial and Corporate Data Precision Equipment Reportable Segments Imaging Products Instruments Total Other Total Reconciliations Consolidated For the year ended March 31, 2015 Sales: Sales to...

  • Page 74
    ...2015 $1,017,433 $1,669,307 $1,767,267 $1,004,333 $1,679,731 $7,138,072 Note: Sales are classified in countries or regions based on location of customers. (2) Property, plant and equipment Japan North America Europe China Thailand Other Millions of Yen Total For the year ended March 31, 2014...

  • Page 75
    3. Information for amortization of goodwill for the years ended March 31, 2014 and 2015, and the balance of goodwill by reportable segments as of March 31, 2014 and 2015 was as follows: Millions of Yen Precision Equipment Reportable Segments Imaging Products Instruments Corporate or Eliminations ...

  • Page 76
    Independent Auditor's Report 74 NIKON REPORT 2015

  • Page 77
    ... Property Division Core Technology Division Semiconductor Lithography Business Unit FPD Lithography Business Unit Imaging Business Unit Microscope Solutions Business Unit Industrial Metrology Business Unit Customized Products Business Unit Glass Business Unit Encoder Business Unit NIKON REPORT 2015...

  • Page 78
    ... to the Nikon website for a variety of additional information, including financial results and presentation materials. Investor Relations 1st 2nd 3rd 4th 1st 2nd 3rd 4th Year ended March 31, 2014 * Trading volume is the average of monthly performance. Year ended March 31, 2015 http://www...

  • Page 79
    ... its website. In conjunction with reading this report, we would be grateful if you would visit the sites listed below to gain a deeper understanding of our CSR activities. Nikon Group CSR website: http://www.nikon.com/about/csr/ Website CSR Report 2015 (PDF version) Financial and Corporate Data...

  • Page 80
    This eco-friendly booklet was produced using FSC®-certified paper; non-VOC (volatile organic compound), vegetable-oil ink; and waterless printing technology. Shinagawa Intercity Tower C, 2-15-3, Konan, Minato-ku, Tokyo 108-6290, Japan www.nikon.com Printed in Japan