Omron 2007 Annual Report Download

Download and view the complete annual report

Please find the complete 2007 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 85

  • 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
  • 81
  • 82
  • 83
  • 84
  • 85

Annual Report 2007
Year ended March 31, 2007

Table of contents

  • Page 1
    Annual Report 2007 Year ended March 31, 2007

  • Page 2
    PROFILE Omron's core sensing & control technology is creating new value through accurate readings of needed information in all circumstances. Through this, Omron provides products and services that support safety, security, environment and health in a variety of areas including industry, society, ...

  • Page 3
    A BETTER WORLD FOR ALL PHILOSOPHY THROUGH SENSING & CONTROL

  • Page 4
    .... LCD Backlights AEC Automotive electronic components Smart entry Releasing a lock with electromagnetic waves SSB Social systems Traffic management systems Automatic gate HCB Healthcare and medical equipment Home use Digital blood pressure monitor Body composition analyzer Power window switches...

  • Page 5
    ... and set a theme of balancing growth and earnings. That is, based on policies of ensuring profitability through reforms in management structure and ensuring growth through expanding business segments, the more than 100 business units of the Omron Group are working to double total corporate value...

  • Page 6
    ...pillars of business of the same scale as IAB, we are, above all, promoting the expansion of the two segments. 2) In Greater China-which stands out as a major consumer-we are focusing on expanding sales where major manufacturers are building plants. Sales Breakdown by Segment (%) Sales Breakdown by...

  • Page 7
    ...profit or loss (excluding the balance of obligation settled) recognized on the transfer of employee pension fund liabilities in March 31, 2006 is not included in any of "cost of sales", "selling, general & administrative expenses" and "research and development expenses", to enable an easy comparison...

  • Page 8
    ...of Shareholders' Equity to Total Assets 3. EBITDA = Operating income + depreciation and amortization. 4. Free cash flow = Net cash provided by operating activities - net cash used in investing activities. 5. Cash dividends per share represent the amounts applicable to the respective year, including...

  • Page 9
    ... operations together with the Keihanna Technology Innovation Center in Japan, and its purpose is to enhance the development of our core sensing and control technologies. The Omron Group has positioned China as its most important area of focus in our 10 year long-term corporate vision, "Grand Design...

  • Page 10
    ... diligent corporate governance powered by the grounding force of these principles. As we take up the challenge to creatively approach and resolve the new social needs in building sustainable society for the 21st century, we will implement corporate social responsibility (CSR) through our business as...

  • Page 11
    ...give us competitive superiority. We aim to raise business value by 1) expanding sales in China and 2) creating value in new areas centered on core technologies as part of our business segment reforms to set the foundation of our competitive edge in the future. We are also establishing more efficient...

  • Page 12
    ... liquid crystal backlight business, and HCB has improved its position by making a fullfledged entry into the supply market for medical institutions and private medical practices. Despite concerns over steep rises in raw material prices, AEC also lifted its productivity through management efforts and...

  • Page 13
    ... for the full year. At ECB and AEC, the high component ratio of relay and switch products, which were directly affected by the negative effects of price rises in raw materials such as silver and copper, also put pressure on profits. In comparison with the previous year, prices of silver increased 60...

  • Page 14
    ... the Relay Business Improvement Project: a company-wide initiative under my direct control that involved IAB as well as ECB. We have also been promoting improvement in productivity not only in North America but in other areas as well. As a result, AEC's operating income is gradually heading in...

  • Page 15
    ...? IAB's business in Greater China consists largely of the component business, which is conducted through local distributors. We have been working on developing sales channels over the past several years and although we have been able to retain a number of sales distributors and sales staff above...

  • Page 16
    ...(up ¥63.3 billion year on year for the Group overall) for IAB, which acquired a safety equipment manufacturing company, and ECB, which acquired a manufacturer of small-size backlights. We can also expect growth in sales for HCB in blood pressure monitors in Europe and Asia as well as an increase in...

  • Page 17
    ...and Greater China. At home in Japan, we will promote aggressive sales for resolving customer issues in areas such as quality, safety and the environment, and in those areas we will focus particular attention on the automotive, semiconductor, flat panel display and liquid crystal areas with a view to...

  • Page 18
    Q.6 A. Could you please explain your view on profit distribution? Our company policy on profit distribution is that securing internal capital resources is necessary in order to maximize corporate value over the long term. This includes investments in R&D and capital investments. At the same time, ...

  • Page 19
    ...) 2004 2005 2006 77.6 64.6 93.3 SOCIAL SYSTEMS BUSINESS (SSB) 115.2 91.8 105.9 90 80 70 60 50 40 30 20 10 0 2004 IAB SSB ECB HCB 2004 2005 2006 HEALTHCARE BUSINESS (HCB) 2004 50.6 61.1 65.7 2005 2006 BUSINESS DEVELOPMENT GROUP AND OTHER BUSINESSES 2005 AEC Others 26.8 25.9 27.8 2006...

  • Page 20
    ..., traffic signal controllers, road management systems, etc. 2004 2005 2006 Top market share for digital home blood pressure monitors in Japan 8.7 7.6 8.7 15.1% 14.2% 13.2% HCB provides a wide range of health care equipment including blood pressure monitors, digital thermometers and pedometers...

  • Page 21
    ... environmental protection have also become important corporate social responsibilities. In that respect, IAB has been developing its application business to respond to management issues in product quality, safety and environmental friendliness through technology that we have cultivated over the...

  • Page 22
    ... laser light, this is a non-contact sensor for detecting the presence of a human body. A system that achieves both safety and productivity, it has two possible settings: one for shutting down machines and one for monitoring and warning of the proximity of workers to machines. High Speed Accuracy...

  • Page 23
    ...to show promising signs of growth, we will promote the global development of the fiberto-the-home (FTTH) market. BUSINESS RESULTS AND OUTLOOK FOR FISCAL 2007 Outlook for Double-digit Growth in Sales and Profit despite Concerns over Pressure on Earnings In fiscal 2006, ECB recorded net sales of ¥138...

  • Page 24
    ... (ECB) in the Chinese market, one of our priority areas, we are capturing demand for products for consumer electronics and mobile devices and we increased our sales significantly. In addition, the backlight business of Pioneer Precision Machinery Corporation (currently Omron Precision Technology Co...

  • Page 25
    ... for automobile safety and environmental conservation by developing our business for tire pressure monitoring systems and other high-performance component modules, while operating our factories in China to their full potential to meet local procurement needs. Nevertheless, profitability has become...

  • Page 26
    ... anticipate a rise in automobile production in China, India, Central and Eastern Europe, South America and other new markets. Moreover, we expect stronger demand for such strategic products as laser radars, tire pressure monitoring systems and electric power steering controllers in light of expanded...

  • Page 27
    ..., Social Systems Solutions Business Company In response to today's growing needs for security, safety and comfort, SSB is promoting expansion of new business areas by providing solutions that capitalize on the strengths of the Omron Group in services ranging from image sensing, IC card technology...

  • Page 28
    ...IC card mobile solutions business, and launched its ID management solutions business. This business will contribute to increasing the value of cities and local areas by gathering and analyzing ID information of individual people and objects and providing solutions that will promote security & safety...

  • Page 29
    ...(up 9.4%). In particular, we look for continued strong growth in blood pressure monitor sales in China and Russia and body composition analyzer sales in Japan. At the same time, our equipment for medical institutions business is coming up against hospital management efficiency measures driven by 28

  • Page 30
    ... of a new factory in Vietnam, which will begin production in December 2007. At present, HCB has a roughly 50% global share of home-use blood pressure monitors, of which some 97% is manufactured at our factory in China. However, the aging of populations in advanced countries and the rising number of...

  • Page 31
    ... monitoring business as a new business area. In this business, we utilize wireless technology to measure energy consumption of air-conditioning and other equipment, as well as room temperature and humidity, at manufacturing plants and distribution centers, process the measurement results into data...

  • Page 32
    ...of corporate value. Stepping up Patent Applications in the United States and China and Commencing Application Procedures in India Since the Omron Group put in place its long-term management vision GD2010 in 2001, we have accelerated our business development globally and have increased our number of...

  • Page 33
    ... of development. As a result of these efforts, IAB's safety equipment business in fiscal 2008 is anticipating sales of ¥30 billion, which represents a three-fold increase in sales from fiscal 2005. Safety Laser Scanner Safety Mat Programmable Terminal Safety Light Curtain Guard Lock Safety-door...

  • Page 34
    ...welding Laser trimmer Film-thickness sensor, LCD / overlay measurement LCD repair Laser marker Two dimension code reader/RFID Precision laser processing technologies Integration Sensing & control technologies Case 3: Full-fledged entry into the proprietary development and production of Omron...

  • Page 35
    ... precision processing and coating technologies. This acquisition not only enabled ECB to secure a sound customer base in North America but also, the integration of ECB's cost-cutting technology and NHK Spring's high performance technology has placed ECB in a prime position for promoting business...

  • Page 36
    ... multi-light source backlights (high brightness /high-definition) PDAs Digital Cameras Mobile Phones Function Low-End High-End Case 6: Providing a wide range of products for use in the home to medical institutions In June 2005, Omron Healthcare (HCB) acquired Colin Medical Technology Corporation...

  • Page 37
    ... and Monitoring Structure Omron has reduced the number of board members to seven to increase its efficiency and deepen deliberations. Our management monitoring functions are based on separating the duties of corporate management and business execution. The President & CEO is the only director who...

  • Page 38
    ...Omron has set a record in performance. This is proof of the high regard Omron's customers have for its superb expertise in technology. It is also an achievement made possible through growth resulting from Omron's ambitious M&A strategies and a broadening of the company's business domain. As a person...

  • Page 39
    ...Headquarters has established the Corporate Ethics Hotline (a call center was also opened at an outside law firm in fiscal 2005), a whistleblower center to receive reports directly from employees and their families. Also, Omron has also appointed officers or managers in its Group companies to promote...

  • Page 40
    ...among the key CSR issues for Omron in Greater China. In fiscal 2006, corporate ethics officers were assigned Dai Ogihara at each Group company, and Fumihiro Matsuzaki the first promotion conference was held in Shanghai. In addition to manager training, compliance monitoring continued with a focus on...

  • Page 41
    ... should a company earn profits and enjoy sustainable growth. We take pride in being a company underpinned by the corporate core value of working for the benefit of society and we are committed to fulfilling our corporate social responsibility for the sustainable development of society as we live up...

  • Page 42
    ... by social needs through business operations (2) Strengthening legal compliance and corporate ethics (3) Addressing diversity issues (4) Committing to environmental conservation Promoting CSR Activities in China Since 1979 when the company initiated technological exchange with China, Omron has...

  • Page 43
    ...C E R S As of June 21, 2007 DIRECTORS (7 persons), CORPORATE AUDITORS (4 persons) EXECUTIVE OFFICERS (24 persons) Executive Vice President Fumio Tateisi Senior Managing Officers Soichi Yukawa Yutaka Takigawa Managing Officers Koichi Imanaka Yoshinobu Morishita Chairman of the BOD President and...

  • Page 44
    ... of Cash Flows Notes to Consolidated Financial Statements Independent Auditors' Report 55 56 57 58 80 Notes: Financial Highlights, Six-year Financial Summary, Fiscal 2004 Management's Discussion and Analysis (including Business and Other Risks) are unaudited. FINANCIAL HIGHLIGHTS OMRON Corporation...

  • Page 45
    ... Business Automotive Electronic Components Business Social Systems Business Healthcare Business Other Businesses Costs and expenses: Cost of sales Selling, general and administrative expenses Research and development expenses Subsidy from the government Other expenses (income), net Income (loss...

  • Page 46
    ...environment surrounding the Omron Group was favorable for the main product area of factory automation control equipment supported by demand for capital investment, and was solid for business and consumer equipment for IT and digital related products as the electronic parts industry recovered. Growth...

  • Page 47
    ... Japan to accommodate the OSTI: Omron Scientific Technologies, Inc. Business lines: Development, manufacturing, sales, consulting, and service of safety equipment Capital: US$10,000 (wholly owned by OMRON MANAGEMENT CENTER OF AMERICA INCORPORATED) Date shares acquired: September 12, 2006 Location...

  • Page 48
    ... provide for safety and concern for the environment. However, due to soaring raw material prices and the delay in improvements in productivity at North American facilities, the Company recorded an operating loss of ¥1.2 billion (the operatGrowth in Net Sales by Business Segment FY2006 IAB ECB AEC...

  • Page 49
    ...to ¥62.3 billion. North America Net sales in IAB and ECB grew solidly as capital investment remained firm. Also, net sales in AEC grew with the launch of new products in wireless control equipment, power window switches and others. As a result, net sales in North America increased 23.0 percent over...

  • Page 50
    ... inflow increased due to the sale of the land and buildings belonging to the Tokyo head office, our active investment in growth opportunities and our acquisitions of OSTI and OPT led to increased expenditure overall. Cash Flow from Financing Activities Cash flow from financing activities saw a net...

  • Page 51
    ... on its core corporate value of "working for the benefit of society," the Omron Group has declared maximum customer satisfaction to be one of its management philosophies and implements it by providing the best quality products and services based on the Group's motto of quality first. In particular...

  • Page 52
    ... Tokai and Tonankai or directly below the Tokyo area, the Omron Group has identified risks and implemented the necessary safety measures and measures for continuation and early recovery of its businesses. However, the Omron Group's operating bases are located in Japan and around the world, and it is...

  • Page 53
    ...OMRON Corporation and Subsidiaries March 31, 2007 and 2006 Millions of yen Thousands of U.S. dollars (Note 2) ASSETS Current assets: Cash and cash equivalents... other assets: Investments in and advances to affiliates Investment securities (Note 4) Leasehold deposits Deferred income taxes (Note 12)...

  • Page 54
    ...(Note 12) Termination and retirement benefits (Note 9) Other long-term liabilities Minority interests in subsidiaries 1,681 2,006 52,700 830 1,438 1,049 673 67,046 571 1,125 14,246 17,000 446,611 7,034 12,186 Shareholders' equity (Note 10): Common stock, no par value: Authorized: Issued: Capital...

  • Page 55
    ...S TAT E M E N T S O F I N C O M E OMRON Corporation and Subsidiaries Years ended March 31, 2007, 2006 and 2005 Millions of yen Thousands of U.S. dollars (Note 2) 2007 Net sales Costs and expenses: Cost of sales Selling, general and administrative expenses Research and development expenses Subsidy...

  • Page 56
    ... adjustment for net gains on contribution of securities to retirement benefit trust realized in net income Net unrealized gains (losses) Net gains (losses) on derivative instruments: Net losses on derivative instruments designated as cash flow hedges during the year Reclassification adjustment for...

  • Page 57
    ...T Y OMRON Corporation and Subsidiaries Years ended March 31, 2007, 2006 and 2005 Millions of yen Number of common shares issued Common stock Capital surplus Legal reserve Retained earnings Accumulated other comprehensive income (loss) Treasury stock Balance, April 1, 2004 Net income Cash dividends...

  • Page 58
    ...long-term debt (455) Dividends paid by the Company (7,680) Dividends paid to minority interests (9) Acquisition of treasury stock (11,204) Sale of treasury stock 3 Exercise of stock options 594 Net cash used in financing activities (4,697) Effect of exchange rate changes on cash and cash equivalents...

  • Page 59
    ... markets. Passing gates, automated ticket machines, 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-red...

  • Page 60
    ... Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted cash flows...

  • Page 61
    ... has occurred and title and risk 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 applied revised SFAS No. 123, "Share...

  • Page 62
    ...of the country in which the Company is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for convenience of the readers outside of Japan and has been made at the rate of ¥118 to $1, the approximate rate of exchange at March 31, 2007. Such...

  • Page 63
    ... Gross unrealized gains losses Fair value Available-for-sale securities Debt securities Equity securities Total available-for-sale securities $ 157,813 $ 193,737 $ (101) $ 351,449 (*) Cost represents amortized cost for debt securities and acquisition cost for equity securities. $ 21,686 136...

  • Page 64
    ..., OMRON Management Center of America, Inc., a subsidiary of the Company, acquired 100% of the issued common stock of Scientific Technologies Incorporated (now OMRON Scientific Technologies Incorporated, "OSTI") for cash in the aggregate amount of ¥11,667 million ($98,873 thousand). This acquisition...

  • Page 65
    ...Short-Term Debt and Long-Term Debt Short-term debt at March 31 consisted of the following: Millions of yen Thousands of U.S. dollars 2007 Commercial Paper The weighted average annual interest rates 2006 - 2007 0.8% Unsecured debt: The weighted average annual interest rates 2006 3.7% 2007 5.0% Total...

  • Page 66
    ... of the following: Millions of yen Thousands of U.S. dollars 2007 Unsecured debt: The weighted average annual interest rates 2006 - 2007 5.4% Other Total Less portion due within one year Long-term debt, less current portion ¥ 120 ¥ 2006 - 2007 $ 1,017 1,825 1,945 264 ¥ 1,681 1,345 1,345 296...

  • Page 67
    ... under which benefits are calculated based on accumulated points allocated to employees each year according to their job classification and performance. If the termination is involuntary, the employee is usually entitled to greater payments than in the case of voluntary termination. The Company and...

  • Page 68
    ... the net amount recognized in the consolidated balance sheet at that date, is summarized as follows: Millions of yen Termination and retirement benefit ¥ (47,317) $ (400,992) Funded status Unrecognized net actuarial loss Unrecognized prior service benefit Net amount recognized ¥ (65,244) 62,151...

  • Page 69
    ...The expense recorded for the contributory termination and retirement plans included the following components for the years ended March 31: Millions of yen Thousands of U.S. dollars 2007 Service cost, less employees' contributions Interest cost on projected benefit obligation Expected return on plan...

  • Page 70
    ... actual historical returns and current economic trends and conditions. Plan assets The Company's pension plan weighted-average asset allocation (except for assets in retirement benefit trust) by asset category is as follows: 2007 Asset Category Cash Equity Securities Debt Securities Life insurance...

  • Page 71
    ...of the issue price of new shares is required to be recorded as common stock and the remaining net proceeds are required to be presented as additional paid-in capital, which is included in capital surplus. The Corporate Law permits Japanese companies, upon approval of the Board of Directors, to issue...

  • Page 72
    ...stock of the Company to certain directors and executive officers of the Company under a fixed stock option plan. Under the above plan, the exercise price of each option exceeded the market price of the Company's common stock... U.S. dollar Weighted-average exercise price Weighted-average fair value ...

  • Page 73
    ... and equipment Business restructuring expenses Loss on impairment of investment securities and other assets Net gain on sales of investment securities Gain on contribution of securities to retirement benefit trust Net gain on sales of business entities Interest income, net Foreign exchange loss, net...

  • Page 74
    ... Termination and retirement benefits Enterprise taxes Intercompany profits Marketable securities Property, plant and equipment Allowance for doubtful receivables Minimum pension liability adjustment Pension liability adjustment Other temporary differences Tax credit carryforwards Operating loss...

  • Page 75
    ...sales...Data The Company accounts for its net income per share in accordance with SFAS No. 128, "Earnings per Share." Basic net income per share has been computed by dividing net income available to common shareholders by the weighted-average number... Effect of dilutive securities: Convertible bonds, ...

  • Page 76
    ... 158 Ending balance Unrealized gains (losses) on available-for-sale securities: Beginning balance Change for the year Ending balance Net gains (losses) on derivative instruments: Beginning balance Change for the year Ending balance Total accumulated other comprehensive loss: Beginning balance Change...

  • Page 77
    ... for net gains on contribution of securities to retirement benefit trust realized in net income 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 adjustment...

  • Page 78
    ... for net gains on contribution of securities to retirement benefit trust realized in net income 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 adjustment...

  • Page 79
    ... operating lease agreement for its Kyoto head office, including land and a building, with a private company owned by the family of the Company's founder, which includes the Company's chairman and representative director, a director, and certain managing officers. This lease agreement had an initial...

  • Page 80
    ... total sales are concentrated in Japan, are limited due to the large number of wellestablished 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...

  • Page 81
    ..., Osaka 530-0005 Japan Tel: +81 6 4560 6000 Fax: +81 6 4560 6001 www.deloitte.com/jp INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of OMRON Corporation We have audited the accompanying consolidated balance sheets of OMRON Corporation and subsidiaries (the "Company") as of...

  • Page 82
    ... Headquarters Japan Kyoto Head Office Tel: 81-75-344-7000 Fax: 81-75-344-7001 North America OMRON Management Center of America, Inc. (Chicago) Tel: 1-847-884-0322 Fax: 1-847-884-1866 Tokyo Head Office Tel: 81-3-3436-7011 Fax: 81-3-3436-7035 Asia-Pacific OMRON Asia Pacific Pte. Ltd. (Singapore...

  • Page 83
    ... New York Plaza, New York, NY 10004, U. S. A. ADR Holder Contact: JPMorgan Service Center P. O. Box 3408 South Hackensack, NJ 07606-3408 TEL : 1-800-990-1135 FAX : 1-201-680-4604 General E-mail : [email protected] Homepage http://www.omron.co.jp (Japanese) http://www.omron.com (English) Common Stock...

  • Page 84
    ... that correctly addressed the issues of each era include automation control devices as well as public information and traffic control systems. The Optimization Society began around 2005, and Omron is striving to create the "best matching of machines to people" to ensure greater safety, security and...

  • Page 85
    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)