Omron 2005 Annual Report Download

Download and view the complete annual report

Please find the complete 2005 Omron annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

Annual Report 2005
Year ended March 31, 2005

Table of contents

  • Page 1
    Annual Report 2005 Year ended March 31, 2005

  • Page 2
    ... Message from the President Special Feature: Technology-Driven Sustainable Growth Begins Now Segment Information Business Lineup Industrial Automation Business (IAB) Electronic Components Business (ECB) Automotive Electronic Components Business (AEC) Social Systems Business (SSB) Healthcare Business...

  • Page 3
    ... Stage is "Balancing Growth & Earnings," and we are making significant strides toward achieving that aim. Leveraging our core sensing & control technology competencies in combination with our know-how, we will continue to pursue our goal of becoming the leading company in the global industry as we...

  • Page 4
    SNAPSHOT WE ARE STEADILY WORKING OUR WAY TOWARD THE ESTABLISHMENT OF PLATFORMS FOR SUSTAINED GROWTH. MAXIMIZE LONG-TERM CORPORATE VALUE In 2001, the Omron Group formulated Grand Design 2010 (GD2010), a long-term management plan expressing the desired direction for the Group over the coming decade, ...

  • Page 5
    ... 71.5 71.3 67.0 13.7 15.2 11.0 10.8 63.7 64.3 63.7 I A B : Industrial Automation Business ECB: Electronic Components Business AEC: Automotive Electronic Components Business SSB: Social Systems Business HCB: Healthcare Business 20 0 1999 2000 2001 2002 2003 2004 (FY) OPERATIONAL STRUCTURAL...

  • Page 6
    ... 2004/3 2003/3 2005/3 Operating Results (for the year): Net sales Gross profit Selling, general and administrative expenses (Except research and development expenses) Research and development expenses Operating income EBITDA (Note 3) Foreign exchange loss, net Net income Cash Flows (for the year...

  • Page 7
    ... Income Margin (Billions of yen) 700 600 500 400 300 200 100 0 01/3 02/3 03/3 04/3 05/3 Net sales Operating income margin Net Income (Loss) and ROE (%) 14 12 10 8 6 4 2 0 -10 -20 01/3 ROE Free Cash Flow (%) 15 10 (Billions of yen) 50 40 30 (Billions of yen) 30 20 10 5 20 0 0 10 -5 -10 02...

  • Page 8
    ... led by technology that is itself one step ahead- this is the heart of Omron's corporate DNA and the very essence of our corporate mission. 2005: THE FOUNDING YEAR OF OPTIMIZATION SOCIETY WHAT IS OMRON'S CORPORATE DNA? As mentioned above, 2005 marks the advent of the OptiAs Chairman of the Board of...

  • Page 9
    ... offset by our higher net sales (about ¥10.5 billion). Sales growth in nearly all business segments Asia maintains high growth As Omron transferred its sales function in the ATM and other information equipment business market to HitachiOmron Terminal Solutions Corp. (HOTS), a joint venture in which...

  • Page 10
    ..., mainly to China. In the Healthcare Business (HCB), blood pressure monitors, body composition monitors, and other healthcare devices for home use recorded steady sales. With respect to the Automotive Electronic Components Business (AEC), sales of relays, sensors, and other electronic parts for...

  • Page 11
    ... be short-term fluctuations in unit sales, the strong trend of increased use of electronic parts is continuing to gather speed. Demands for automobile safety, security, and environmental considerations are also on the rise. The Group has set laser radars (sensors that monitor the space between two...

  • Page 12
    ... Business Value Omron defines business value as the total of present values of future FCF (Free Cash Flow) generated by each business unit New Technological Fields Simulate 10-year FCF based on five-year plan. Stabilize FCF with lasting value after 11 years. Existing + Greater China Market Simulate...

  • Page 13
    ... means creating new business areas through differentiated new technologies and expanding sales. Our aim is to carry out continuous investment for such technological development, to heighten the Group's superiority, and achieve sustainable growth and increased corporate value driven by technology. In...

  • Page 14
    ... devices, and driving safety systems. 12 Optical display devices Power electronics technology Energy MEMS RFID Optical communications devices In-vehicle QLM Vision sensing technology Lightwave sensing technology Radio wave sensing technology Knowledge and information control technology

  • Page 15
    ... 50% or greater growth in fiscal 2005. Sales Growth in New Tech Fields (Billions of yen) 90 AEC (Automotive Electronic Components): Laser radars for automobiles MEMS : MEMS Sensors, etc. LCD BL: Liquid crystal backlight Q L M : Automated Optical Inspection Machines, etc 45.0 Others Others 60 30...

  • Page 16
    ... market the Tire Pressure Monitoring System (TPMS), an application of our radio wave sensing technology. The TPMS receives information from sensors located in each of the four tires via the high-frequency receiver of a wireless central processing unit. It performs concentrated management of the...

  • Page 17
    S E G M E N T I N F O R M AT I O N CONTENTS 16 18 20 22 24 26 28 Business Lineup Industrial Automation Business (IAB) Electronic Components Business (ECB) Automotive Electronic Components Business (AEC) Social Systems Business (SSB) Healthcare Business (HCB) Business Development Group and Other ...

  • Page 18
    ... systems as its main market. Note: The ATM business were transferred to Hitachi-Omron Terminal Solutions, Corp. on October 1, 2004. 136.0 116.7 115.2 18.9% 2002 2003 2004 (FY) HCB HEALTHCARE BUSINESS Top Global Brand in Blood Pressure Monitors for Home Use With our proprietary bio-information...

  • Page 19
    ..., Door Switches, Safety Controller, Area Sensors, Safety Mats, etc.) • Switches (Micro Switches, Tactile Switches, Trigger Switches, etc.) • Relays (General-Purpose Relays, PCB Relays, relays for telecommunications equipment, etc.) • Amusement Components, Units and Systems (Sensors, Keys, ICs...

  • Page 20
    ...-edge automation equipment such as PLCs with the innovative software of Delmia Corp. •Expansion of manufacturing bases in China In Shanghai, China, the IAB segment until now has operated development and production companies that specialize in: (1) programmable logic controllers (PLCs), (2) sensors...

  • Page 21
    ... FY2003 Billions of yen FY2002 Sales Breakdown, by Product (Fiscal 2004 Actual) Industrial Equipment 40% (Power supplies, Temperature controllers, Control relays, Timers, Switches etc.) Net sales* Domestic Overseas North America Europe Asia China Direct exports Operating income* Operating income...

  • Page 22
    ... number of sales offices. Additionally the ECB segment will promote the development of new products supported by its own technological advantages, as typified by products already developed as mainstays such as LCD backlights. MEASURES FOR ACCELERATING GROWTH •Expansion of production bases in China...

  • Page 23
    ... Switches, Relays, Built-in sensors, etc.) Semiconductors 14% (B-MLA etc.) Amusement equipment 19% (IC coin systems, etc.) Other 9% (Mobile equipment (LED backlight, transducer), Toner sensors for office automation equipment, etc.) Net sales* Domestic Overseas North America Europe Asia China Direct...

  • Page 24
    ... Bitron Industrie SpA of Italy, establishing a joint venture company with Bitron. Automotive relays have many uses in cars, from headlights and fans to power switches for a variety of motors. The two main types of relays are the plug-in type used for high current switches and a type mounted directly...

  • Page 25
    ...-field laser for traffic control purposes. People and bicycles are also detectable. Automotive Relay High reliability and longevity are the important qualities required of automotive relays. Demand for automotive PBC relays for use in motor control is rapidly increasing. Tire Pressure Monitoring...

  • Page 26
    ... demand associated with the need to adapt financial terminal machines for use with IC cards expanded in Taiwan. Our train station management and electronic fund transfer systems businesses saw demand related to the accommodation of new yen notes and the introduction of IC cards as a security measure...

  • Page 27
    ... machine business responsible for ATMs and other such equipment was transferred to HitachiOmron Terminal Solutions Corp., in which Hitachi and Omron have a 55% stake and 45% stake respectively. Core SSB Products Automatic Gate State-of-the-art automatic gate developed through advanced software...

  • Page 28
    ... expansion of demand for healthcare and medical equipment such as digital blood pressure monitors for home use and body composition monitors with scales. The HCB segment will aggressively expand sales of its digital blood pressure monitors, already established as the world's top brand, in China...

  • Page 29
    ... arise. Blood Pressure Monitor and Manager "Medinote" HEM-5001 This is Japan's first upper-arm cuff blood pressure monitor useful for measuring blood pressure upon rising and at bedtime to check morning hypertension. The monitor automatically stores measurement results and can display graphs of...

  • Page 30
    ...* RFID (Radio Frequency Identification) tag systems are anticipated as next-generation technology to replace bar codes, which can automatically take simultaneous, multiple readings. tion for mobile phones and the prize business for commercial game machines, as well as our existing business in photo...

  • Page 31
    MANAGEMENT SYSTEMS CONTENTS 30 32 34 36 Corporate Governance and Legal Compliance Corporate Social Responsibility Intellectual Property Strategy Directors, Corporate Auditors and Executive Officers 29

  • Page 32
    ... transparency, and pursuing high business ethics in order to strengthen corporate governance. Progress Status In 1999, our Group implemented the Managing Officer System and the Internal Company System, thus separating the roles of corporate management and business execution. Seizing this opportunity...

  • Page 33
    ... detecting, analyzing, countering, and monitoring risk in each division and internal company. Moreover, the Corporate General Affairs Division is responsible for risk management oversight functions, and Omron is improving and promoting its risk management system and working to understand and control...

  • Page 34
    ...as an important management issue and are working to create products and technology that will help in the preservation of the environment. Our aim is to be a 21st century company that brings together ecology and economy. In other words, this means the long-term maximization of corporate value and the...

  • Page 35
    ... sustainable development of society Maximizing Omron value on a long-term basis Topics Dealing with RoHS: Plan to Finish in Fiscal 2005 Europe has issued the RoHS (Restriction of Hazardous Substances) directive, which bans the use of six hazardous materials used in electronic equipment, including...

  • Page 36
    ... on the present value (PV) of cash flows anticipated from the Group's various business domains. For this purpose, operating with a balance between increasing top line growth potential and improving profitability will be essential. We believe that the core technologies Omron has developed through the...

  • Page 37
    ... property does not leak outside of the company, we have adopted a system of rules for managing confidential information. In recent years, the circulation of large numbers of imitation Omron brand products, mainly in China, has resulted in damage to our corporate value. In response, we have initiated...

  • Page 38
    DIRECTORS, CORPORATE AUDITORS AND EXECUTIVE OFFICERS (As of June 23, 2005) DIRECTORS Chairman of the BOD EXECUTIVE OFFICERS Executive Vice President Executive Officers Yoshio Tateisi President and CEO Fumio Tateisi Senior Managing Officers Hisao Sakuta Director and Executive Vice President ...

  • Page 39
    ... Fiscal 2004 Management's Discussion and Analysis (including Business and Other Risks) Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income (Loss) Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to...

  • Page 40
    ... (ECB)...Automotive Electronic Components Business (AEC)...Social Systems Business (SSB) ...Healthcare Business (HCB) ...Other Businesses...Cost of sales ...Gross profit ...SG&A expenses (excluding R&D expenses)...R&D expenses ...Operating income ...EBITDA (Note 4)...Net income (loss)...Cash Flows...

  • Page 41
    ...ECB...AEC...SSB ...HCB ...Other Businesses ...Eliminations & Corporate...Cash Flows: Net cash provided by operating activities ...Net cash used in investing activities...Net cash used in financing activities...Cash and cash equivalents at end of the year ...96,962 (3,528) (5,379) 10,689 2004 2005...

  • Page 42
    ... 2003). Although China has on occasion controlled excessive economic expansion, given the acceleration of its buying power and upcoming large-scale events such as the Olympics and World Exposition, it is likely to still experience high growth in the medium to long term. General Overview of Fiscal...

  • Page 43
    ...flat panel display (FPD), electronic component, automobile, food, machine tool, transportation equipment, and packaging equipment industries, there was an increase in sales including PCB Inspection Systems, displacement sensors, vision sensors, network devices, motion controllers, and safety-related...

  • Page 44
    ... blood pressure monitors. Overseas, there was a significant expansion in digital blood pressure monitors in North America. Conversely, while the development of marketing centers in China led to rapid growth in sales there in fiscal 2003, the Chinese market stalled impacted by the measures to control...

  • Page 45
    .... •North America Sales increased steadily for the Industrial Automation Business (IAB), Automotive Electronics Components Business (AEC) and Healthcare Business (HCB). The fall in income in the Electronic Components Business (ECB) due to growth issues for digital consumer electronics as well...

  • Page 46
    ... primary business of the Omron Group is consumer and commerce electronic components used in the manufacture of control system equipment and other electrical and electronic equipment by the manufacturing sector and in capital investment related areas. Accordingly, demand for Omron Group products is...

  • Page 47
    .... The Omron Group is strengthening its security measures to prevent external entry into its internal information systems, and a special committee has been established centering on the Corporate General Affairs Division. Steps are accordingly being taken to reinforce control over the information we...

  • Page 48
    ...Balance Sheets OMRON Corporation and Subsidiaries March 31, 2005 and 2004 Millions of yen Thousands of U.S. dollars (Note 2) ASSETS Current Assets: ...Cash and cash equivalents...Notes and accounts receivable - trade...Allowance for doubtful receivables...Inventories...Leasehold deposits ...Deferred...

  • Page 49
    ... Taxes (Note 11)...Termination and Retirement Benefits (Note 8)...Other Long-Term Liabilities...Minority Interests in Subsidiaries ...Total Liabilities ...Shareholders' Equity (Note 9): Common stock, no par value: Authorized: Issued: 487,000,000 shares 249,121,372 shares in 2005 and 249,109,236...

  • Page 50
    ...Statements of Income OMRON Corporation and Subsidiaries Years ended March 31, 2005, 2004 and 2003 Millions of yen Thousands of U.S. dollars (Note 2) 2005 Net Sales ...Costs and Expenses: Cost of sales ...Selling, general and administrative expenses ...Research and development expenses ...Interest...

  • Page 51
    ...in net income ...Reclassification adjustment for net losses (gains) on sales realized in net income (loss) ...Net unrealized gains (losses) ...Net gains (losses) on derivative instruments: Net gains (losses) on derivative instruments designated as cash flow hedges during the year ...Reclassification...

  • Page 52
    ... of Shareholders' Equity OMRON Corporation and Subsidiaries Years ended March 31, 2005, 2004 and 2003 Millions of yen Number of common shares issued Common stock Additional paid-in capital Legal reserve Retained earnings Accumulated other comprehensive income (loss) Treasury stock Balance, April...

  • Page 53
    ... the Company ...Dividends paid to minority interests ...Acquisition of treasury stock...Sale of treasury stock ...Exercise of stock options ...Net cash used in financing activities ...Effect of Exchange Rate Changes on Cash and Cash Equivalents ...Net Increase (Decrease) in Cash and Cash Equivalents...

  • Page 54
    ...markets. Passing gates and automated ticket machines and electronic panels and terminal displays for traffic information and monitoring purposes are also supplied for the domestic market. Healthcare Business sells blood pressure monitors, digital thermometers, body-fat monitors, nebulizers and infra...

  • Page 55
    ... that includes the enactment date. Product Warranties A liability for the estimated warranty related cost is established at the time revenue is recognized and is included in other current liabilities. The liability is established using historical information including the nature, frequency, and...

  • Page 56
    ... of loss has transferred, the sales price is fixed or determinable, and collectibility is probable. These criteria are met when products are received by customers or services are performed. Stock-Based Compensation The Companies account for stock-based awards to employees using the intrinsic value...

  • Page 57
    ... 2005 Finished products ...Work-in-process ...Materials and supplies ...Total ...¥ 38,893 10,882 18,810 ¥ 68,585 2004 ¥ 34,983 15,725 19,633 ¥ 70,341 2005 $ 363,486 101,701 175,794 $ 640,981 4. Marketable Securities and Investments Available-for-sale securities are recorded at fair value...

  • Page 58
    .... In accordance with the agreement, the Company transferred Automated Teller Machines and other information equipment businesses to the joint venture called Hitachi-Omron Terminal Solutions Corp. ("HOTS") and was given a 45% interest in exchange for the transferred assets and liabilities on October...

  • Page 59
    ... assets subject to amortization: Software...Other ...Total ...Intangible assets not subject to amortization at March 31, 2005 and 2004 were immaterial. Aggregate amortization expense related to intangible assets was ¥4,827 million ($45,112 thousand), Estimated amortization expense for the next...

  • Page 60
    ... requests. As is customary in Japan, the Company and domestic sub- ¥ 10,503 697 535 191 136 273 ¥ 12,335 $ 98,159 6,514 5,000 1,785 1,271 2,551 $ 115,280 sidiaries maintain deposit balances with banks with which they have short- or long-term borrowings. Such deposit balances are not legally or...

  • Page 61
    ... capital lease agreements. The Companies have operating lease agreements primarily involving offices and equipment for varying periods. Leases that Years ending March 31 expire generally are expected to be renewed or replaced by other leases. At March 31, 2005, future minimum rental payments...

  • Page 62
    ... the reconciliation of beginning and ending balances of the benefit obligations and the fair value of the plan assets Millions of yen Thousands of U.S. dollars 2005 Change in benefit obligation: Benefit obligation at beginning of year ...Service cost, less employees' contributions ...Interest cost...

  • Page 63
    ...determined by estimating the future rate of return on each category of plan assets considering actual historical returns and current economic trends and conditions. Plan assets The Company's pension plan weighted-average asset allocation by asset category is as follows: Asset Category 2005 20.0% 15...

  • Page 64
    ... which is included in capital surplus. The Code permits Japanese companies, upon approval of the Board of Directors, to issue shares to existing shareholders without consideration as a stock split. Such issuance of shares generally does not give rise to changes within the shareholders' accounts. The...

  • Page 65
    ... fair value of shares reissued on the effective date of acquisition. The loss was charged directly to retained earnings. Stock Options The Company has authorized the grant of options to purchase common stock of the Company to certain directors and officers of the Company under a fixed stock option...

  • Page 66
    ...Company was developed for use in estimating the fair value of fully tradable options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. It is management...

  • Page 67
    ... investment securities...Net loss (gain) on sales of business entities...Voluntary early retirement program ...Other, net...Total...The Companies assessed the potential impairment of certain long-lived assets in consideration of future alternate uses, including disposal by sale. As a result, certain...

  • Page 68
    ...rate was reduced from 42.0% to 41.0% effecThe approximate effect of temporary differences and tax credit and loss carryforwards that gave rise to deferred tax balances at March 31, 2005 and 2004 were as follows: Millions of yen 2004 42.0% 1.0 - 1.0 - (0.6) (0.1) 0.3 (0.3) 43.3% 2003 42.0% 7.7 - 38...

  • Page 69
    ... credit carryforwards...Operating loss carryforwards ...Subtotal...Valuation allowance...Total ...The total valuation allowance increased by ¥150 million ($1,402 thousand) in 2005 and decreased by ¥1,230 million and ¥1,226 million in 2004 and 2003, respectively. As of March 31, 2005, the Company...

  • Page 70
    ... 31, 2003, the assumed exercise of stock options, giving effect to the incremental shares, was antidilutive and has been excluded from the computation. 14. Supplemental Information for Cash Flows Supplemental cash flow information for the years ended March 31, 2005, 2004 and 2003 was as follows...

  • Page 71
    ... of U.S. dollars 2005 Foreign currency translation adjustments: Beginning balance ...Change for the year ...Ending balance ...Minimum pension liability adjustments: Beginning balance ...Change for the year ...Ending balance ...Unrealized gains (losses) on available-for-sale securities: Beginning...

  • Page 72
    ...) ¥23,566 ¥(34,546) Thousands of U.S. dollars 2005 Before-tax amount Tax (expense) benefit Net-of-tax amount...losses (gains) on sales realized in net income ...Net unrealized losses ...Net gains (losses) on derivative instruments: Net gains (losses) on derivative instruments designated as cash flow...

  • Page 73
    ... are applied to current market information to estimate fair value. The Companies do not use derivatives for trading purposes. Changes in the fair value of foreign exchange forward contracts and foreign currency options designated and qualifying as cash flow hedges are reported in accumulated other...

  • Page 74
    ... the Company's founder, which includes the Company's chairman and representative director, a director, and certain managing officers. This lease agreement has an initial non-cancelable lease term to 2020 and requires a monthly rental payment of ¥106 million ($991 thousand) and a security deposit of...

  • Page 75
    ... are concentrated in Japan, are limited due to the large number of well-established customers and their dispersion across many industries. The Company normally requires customers to deposit funds to serve as security for ongoing credit sales. Guarantees The Company provides guarantees for bank loans...

  • Page 76
    ... balance sheets of OMRON Corporation and subsidiaries (the "Companies") as of March 31, 2005 and 2004, and the related consolidated statements of income, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2005, all expressed...

  • Page 77
    ... Asia Pacific Pte. Ltd. (Singapore) Phone: 65-6835-3011 Fax: 65-6835-2711 P.T. OMRON Electronics (Indonesia) Phone: 62-21-8370-9555 Fax: 62-21-8370-9550 OMRON Electronic Components Sdn. Bhd. (Malaysia) Phone: 60-3-7623-6300 Fax: 60-3-7665-0078 Electronic Components Business Industrial Automation...

  • Page 78
    ...-3-5489-9310 Research and Development Keihanna Technology Innovation Center Phone: 81-774-74-2000 Fax: 81-774-74-2001 Automotive Electronic Components Business OMRON Iida Co., Ltd. Phone: 81-44-829-1641 Fax: 81-44-813-6415 Industrial Automation Business OMRON Izumo Co., Ltd. Phone: 81-853-22-2212...

  • Page 79
    Corporate and Stock Information (As of March 31, 2005) Head Office Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan Phone: 81-75-344-7000 Fax: 81-75-344-7001 Date of Establishment May 10, 1933 Ticker Symbol Number 6645 Industrial Property Rights Number of patents: 2,645 (Japan) 1,882 (...

  • Page 80
    100% Recycled-content level Shiokoji Horikawa, Shimogyo-ku, Kyoto 600-8530, Japan Phone: 81-75-344-7000 Fax: 81-75-344-7001 Homepage: http://www.omron.co.jp (Japanese) http://www.omron.com (English)