ANNUAL REPORT - 住友精密工業株式会社 · SPP has some 15% of the world market for landing...

A N N U A L R E P O R T2 0 1 5（ Y e a r e n d e d M a r c h 3 1 , 2 0 1 5 ）

H y d r a u l i c C o n t r o l s

H e a t C o n t r o l P r o d u c t s

A e r o s p a c e P r o d u c t s

Env i ronmenta l S y s t e m s

M i c r o E l e c t r o n i c s T e c h n o l o g y

M i c r o T e c h n o l o g y

S e n s o r s

F u e l C e l l

Various technical resourcesfunneled into new

operations on fuel cells

Commercial hydraulic equipmentoperations started by applying

hydraulic technology for propellers

First industrial heat exchangersproduced by leveraging aircraft

heat exchanger technology

The development departmentinvestigates and developsnew business operations C o n t e n t s

3

6

7

10

13

15

17

19

37

38

M e s s a g e f r o m t h e P r e s i d e n t

C o n s o l i d a t e d F i n a n c i a l H i g h l i g h t s

S e g m e n t O v e r v i e w

A e r o s p a c e a n d R e l a t e d P r o d u c t s

I n d u s t r i a l P r o d u c t s

C o r p o r a t e G o v e r n a n c e

C S R A c t i v i t i e s

E n v i r o n m e n t a l P r e s e r v a t i o n

C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s

D o m e s t i c a n d O v e r s e a s B a s e s

C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o n

　Notes on forward-looking statements Information provided in this annual report contains certain forward-looking statements concerning performance forecasts and projections made by SPP using information available at present (performance forecasts for fiscal 2015 are the figures announced on April 30) and is subject to various risks and uncertainties. Due to various changes, actual results may vary from those projected in the forward-looking statements.

G r o w t h H i s t o r y▶ Starting with high-precision technology for engineering aircraft equipment, SPP has

extended its business into a broad range of creative areas.

▶ SPP is particularly strong in the precision machining of high-strength metal materials, thermal management, and joining of metal materials.

▶ SPP has some 15% of the world market for landing gear systems used in regional jets.

▶ We boast world-class shares of the markets for plate-fin heat exchangers and LNG vaporizers.

293（62%）

Aerospace and Related Products

178（38%）

IndustrialProducts

Landing Gearsand

Landing GearControl Systems

Heat ControlProducts

Other Products:Micro Technology,

Environmental Systems, etc.

Heat Exchangersfor Aircraft

HydraulicControls

Business Mix (results for f iscal 2014)

Group net sa les ¥47.1 bi l l ion

Aerospace and Re la ted Products

I n d u s t r i a l P r o d u c t s

Fu tu re1900 1950 20001961Foundation of SPP

Start of integratedproduction of propellers

Business expanded intolanding gear and heatexchangers for aircraft

Research intoduralumin

Entry into the environmental systemsmarket with the commercialization

of ozone generators

Introduction of vacuumpump technology

Control taken of aplasma etching

specialist

MEMS manufacturingequipment technology

employed to start sensor business

Start of semiconductor/MEMS manufacturingequipment business

Start of liquid crystalmanufacturing equipment

operations

▶

21

Sustained growth in both revenue and earnings

In global growth markets, we wi l l persistently fol low our

“Two-wheeled Growth Model with an Equal Focus on Qual i ty

and Quantity” to achieve our “Aspirat ion” long-term vision.

Pres ident

Other Industrial Products

Heat Control Products


Enhancing the Management and Business

Foundation to Achieve the “Aspiration”

Long-Term Vision for 2020

In the spring of 2014, SPP formulated the “Aspiration 2020”

long-term vision as well as the “Mid-Term Management Plan

for Fiscal 2014-2016,” the latter being the first three-year

action plan aimed at achieving the long-term goal.

The long-term vision upholds SPP’s aspiration to be a

group that “works with its customers to create value in global

growth markets.” Focusing on “attractive technologies from a

customer perspective” “in SPP’s existing business fields,” it

aims to ensure “growth in terms of both quality and

quantity.” As targets for 2020, therefore, the “Aspiration”

vision eyes consolidated net sales in the range of ¥100 billion

and operating margin of 8%.

The “Mid-Term Management Plan for Fiscal 2014-2016” is

defined as an action plan to strengthen both foundations of

SPP. First, management will be enhanced with a focus on

four pillars: upgrading of corporate governance, best use of

business resources, enhancement of global management

and group management, and optimization of the business

and product portfolio. Secondly, business operations will be

further improved toward four goals: higher productivity,

improved QCD (quality, cost, and delivery), strengthened

supply chain, and enhanced after-sale services.

Challenges Still Remain Despite

Growth in Both Revenue and

Earnings in FY 2014

In fiscal 2014, the first year of the mid-term plan, all members

of the SPP group worked together to secure incoming

orders and increase sales, while at the same time developing

new products and their applications. As a result, the group’s

consolidated net sales rose by 4.7% from the previous fiscal

year to ¥47.13 billion. Due to efforts in promoting sales and

optimizing costs as well as the effects of the weaker yen,

SPP posted a consolidated operating income of ¥1.59

billion, an increase of ¥0.63 billion. An exchange gain,

2008200720062005 2009 2010 2011 2012 2013 2014 2015Forecast

2020

Net Sales(billion ¥)

OperatingIncome(billion ¥)

Growth in existing business fields with a focus on new products

“Aspiration 2020”Consolidated net sales in the range of ¥100 billionOperating margin of at least 8%

OperatingIncome

0

20

40

60

80

100

-1

0

1

3

5

7

9

Increasingoverseas

sales ratioto 50%

Mid-Term Management Plan

Net Sales

Operating Income

2014

520

19

recognized as a non-operating income, helped push up

consolidated ordinary income to ¥2.02 billion.

Consolidated net income, which includes a ¥0.5 billion gain

on the sale of investment securities related to Micro

Technology, was ¥1.45 billion. For fiscal 2014, SPP paid an

annual dividend of ¥7 per share.

Despite achieving growth in both revenue and earnings,

we had mixed results in the first year of the mid-term

plan.

The current mid-term plan has both aspects of “sowing”

and “harvesting.” In the latter, we are to successfully develop

the operations and products we have prepared so far and

thereby help strengthen our direct earning power. On the

“sowing” side, we will foster new “seeds” of growth to

achieve the “Aspiration 2020” vision. In other words, the plan

is aimed at both investment in sustainable growth and the

improvement of financial strength.

Looking back on fiscal 2014 from these perspectives, the

SPP group made good progress on the “sowing” side for

future growth. The Aerospace Products segment developed

global MRO (maintenance, repairs, and overhaul) operations

under partnership with the Lufthansa group. The Heat

Control Products segment won the first major order in

relation to a shale gas project in North America.

We were not as successful on the “harvest” side of

strengthening our earning power from the existing

operations, however. Despite making progress in optimizing

purchase costs, we are left with challenges in improving the

productivity of aircraft landing gear systems and in marketing

of and receiving orders for new products.

Overcoming Short-term Challenges in FY 2015 for FY 2016 and After to Achieve the Long-term Vision

In fiscal 2015, we expect to achieve net sales of ¥55.0 billion

and an operating income of ¥2.0 billion. These figures

represent year-on-year growth in both revenue and

earnings, but fall short of the levels indicated for the current

fiscal year in the Mid-Term Management Plan.

The reason is that it has been taking time to “harvest” the

fruit grown from previously sown “seeds.” For example,

Aerospace and Related Products suffers from a delay in the

planned improvement of productivity to ensure stable supply

of new products. Industrial Products faces a problem with

catalytic reactors for CompactGTL as C-GTL users have

been slow in making decisions on commercialization.

However, our scenario for achieving the “Aspiration” long-term

2015

600

39

2016

680

54

M e s s a g e f r o m t h e P r e s i d e n t

Note: The SPTS business was divested in August 2011 (the graph does not include the results for the transferred business).

3 4

vision remains entirely unchanged. We aim to achieve mid-

to long-term growth with a focus on developing overseas

operations primarily in three fields. SPP’s commercial aircraft

business is expected to grow steadily; our high-value added

heat exchangers and LNG vaporizers boast a strong

competitive edge in international markets; and our Micro

Technology has a distinctive technology to differentiate itself.

Specifically, SPP has already completed two merger and

acquisition projects in fiscal 2015. One is the purchase of a

Canadian surface finishing service provider with the aim of

improving group capacity to supply aircraft landing gear on a

global basis. The other is the acquisition (by our subsidiary

SPP Technologies) of a U.S.-based Thermal Products business

to ensure that Micro Technology can develop operations

overseas and develop new products by leveraging synergy

with existing operations.

We will develop these operations and products to reach the

“harvest” phase as soon as possible and thereby get closer

to achieving our long-term vision. In fiscal 2015, all members

of the group will work together to that end with a focus on

the five areas described below:

(1) Strengthening corporate governance and fast improvement of ROE

Corporate governance is an aspect of management that

investors are particularly concerned with. As part of an

initiative for its enhancement, SPP will have two External

Directors for the first time to make the board of directors more

active and enable it to make swift decisions to strengthen

both our growth strategies and financial foundation.

ROE is another aspect or parameter of management that

investors take keen interest in. SPP will also strive to improve

this parameter fast by speeding up the implementation of

measures to increase earnings.

(2) Improving group productivity with a focus on Aerospace Products

SPP will need to respond to diverse changes in its business

structure, such as increases in the group’s overall overseas

sales ratio and the growing share of private-sector

demand in Aerospace products, as well as a rise in the

consolidated/non-consolidated ratio within the group. To

this end, we will implement fundamental improvement

measures to achieve the initially planned productivity level,

thereby reducing costs and improving profitability further.

To achieve these targets, we have set up a cross-organizational

task force to accelerate the process of resolving fundamental

issues. In addition, we have started an initiative to increase

the value of our human resources even further by helping

employees broaden their perspective to encompass all aspects

of business including production, sales, and technology.

(3) Solid implementation and completion of commercial- production projects and further development

Aerospace Products will steadily work on the commercial-

production of the MRJ1 and HondaJet2, the development

of the orders from Dornier3, and the development of a

heat exchanger for the Rolls-Royce engine to power the

A330 neo aircraft now being developed by Airbus.

Industrial Products will make solid progress in delivering

large orders related to shale gas.

(4) Developing specialty technologies further

SPP’s core competence lies in the precision machining of

high-strength metal materials, thermal management, and

joining of metal materials. Leveraging these strengths, the

company will accelerate the development of EHA aircraft

landing gear systems, ultra-high performance cooling for

aircraft engines, and heat exchangers for the hydrogen

society of tomorrow.

(5) Improving asset efficiency and free cashflow

Improving free cashflow is indispensable for making timely

investments that are necessary to achieve our “Aspiration”

vision for 2020. To this end we will strive to improve our asset

efficiency. Beginning in fiscal 2015, SPP has introduced ROIC

as a new performance management indicator. As the first

step, we have been giving top priority to reducing inventories.

While there are certainly some delays compared with the

initial targets stated in initial Mid-Term Plan, we will strive to

properly achieve our business vision in order to ensure the

sustainable growth of our corporate value.

1: Japan’s first commercial jet being developed by Mitsubishi Aircraft Corporation. SPP is responsible for MRJ’s landing gear system.2: The private jetplane being developed by Honda. Its landing gear system is supplied by SPP.3: A German aircraft manufacturer. Dornier has selected SPP as the supplier of the landing gear system for an amphibious flying boat.

C o n s o l i d a t e d F i n a n c i a l H i g h l i g h t sF o r t h e y e a r s e n d e d M a r c h 3 1 , 2 0 1 5

¥47.13 billion (+ 4.7%) (+ ¥0.63 billion) (+ ¥0.32 billion)

¥1.59 billion ¥1.45 billion

Net sales

Operating income

Operating margin (not including the SPTS business)

Net income

Total assets

Equity ratio

Per share

Net income

Cash dividends

(million ¥)

(million ¥)

(%)

(million ¥)

(million ¥)

(%)

(¥)

(¥)

56,237

5,026

2.0

4,811

80,095

35.0

90.80

8.00

2010

52,296

4,193

1.2

6,695

72,603

45.6

126.37

8.00

2011

40,171

430

1.1

263

75,585

44.1

4.96

7.00

2012

45,032

963

2.1

585

79,948

41.0

11.05

7.00

2013

47,135

1,598

3.4

1,450

81,899

42.4

27.39

7.00

2014

55,000

2,000

3.6

1,000

87,100

41.3

18.89

7.00

2015Forecast

56,237

52,296

40,171

45,03247,135

2010

42,767

2009

48,805

2008

49,903

2007

50,151

2006

40,346

2005 2011 2012 2013 2014

55,000

2015Forecast

▶ Net Sa les・Operat ing Marg in (not including the SPTS business)

80,095

72,60375,585

79,948

2010

81,283

2009

77,674

2008

72,363

2007

67,293

2006

65,166

2005 2011 2012 2013 2014

81,899

87,100

2015Forecast

▶ Tota l Asse ts・Equ i t y Ra t io

Contribution from SPTS*

Net Sales

Operating Margin (not including the SPTS business)

Total AssetsEquity Ratio

Resul ts for F iscal 2014

（million ¥）（%）（%）（million ¥）

4.1

6.3 6.1

-1.7

0.6

2.0

1.21.1

2.1

3.4

43.844.1

39.8

34.2

29.4

35.0

45.644.1

41.042.4

41.3

3.6

N e ts a l e s

Operatingincome

N e ti n c o m e

0

-10,000

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0

-2.5

5

10

15

100

90

80

70

60

50

40

30

20

10

00

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

*SPP Process Technology Systems (SPTS) has been excluded from consolidation since the third quarter of fiscal 2011, following the transfer of the SPTS shares in the first half of that fiscal year.

5 6

Bus iness Pro f i l e

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015（Forecast）

2020

95

117

85

120

90

128

90

176

84

209

100

240Products for public sector

Delivery of components for private-sector applications (Tier 2)

Aiming to be a global Tier 1 supplier

Full-fledged development for the private sector Growing into a landing gear system integrator

Diversifying heat control systems

Starting full-fledged development programs to become a global Tier 1 supplier

Establishing a cycle from the development to commercial-production of heat control systems

12/2014: Wins Dornier Seastar landing gear contract

07/2006: Wins HJ landing gear development contract

Starting commercial-production

Aspiration

Start of commercial-production04/2012: Starts building

Canadian operations

01/2008: Wins MRJ landing gear development contract

Early phase of commercial-production

S e g m e n t O v e r v i e w A e r o s p a c e a n d R e l a t e d P r o d u c t s

Major product lines and SPP’s strengths

QT PumpsHS Pump

Trent 1000®Engine FOHETrent 1000®Engine(Photograph : Courtesy of Rolls-Royce plc.)

Trent 1000®Engine SACOC

Landing Gear Systems

CRJ700/900/1000 Dressed Main Landing Gear AssyImpact absorption during landing

CRJ700/900/1000 Dressed Nose Landing Gear AssySteering of surface movement

CRJ1000 (from Bombardier Web Page)

Heat Management Systems

CX Pump

Hydraulic Control Products

Thermal management and the joining of metal materials are SPP’s specialties here.

High efficiency, compact size, and low weight as well as shapes that help reduce air drag contribute to reducing the fuel consumption and noise of aircraft engines.

Since the 1980s, SPP has supplied heat exchangers for almost all engine series from Rolls-Royce, the famous UK manufacturer of aircraft engines.

Technologies developed for aircraft hydraulic equipment are leveraged to offer hydraulic pumps featuring low consumption, low pulsation, and low noise for various applications such as transport equipment and general industrial equipment.

Under strong partnership with the Haitian group, the world’s largest manufacturer of injection molding equipment, a joint venture has been established to develop business in China.

In 1957, SPP delivered the landing gear system for the T-33 training aircraft to

the former Japanese Defense Agency. Since then, aircraft for the Agency (now

upgraded to a ministry) have almost exclusively been equipped with landing

gear systems from SPP. Today, SPP products account for some 80% of the

landing gear systems installed in the Defense Ministry’s air fleet.

SPP has also been successful in the area of commercial aircraft. In 1997, the

company worked with U.S.-based Menasco to win a landing gear system project

for the CRJ 700 from Bombardier in Canada. SPP landing gear systems currently

have approximately 15% of the world market for regional jets. In addition, the

company has received an order from Mitsubishi Aircraft Corporation for the MRJ

90 landing gear system. With the start of flight services using the Mitsubishi

aircraft, SPP is expected to increase its share of the regional jet market solidly.

Unique Combination of the Precision Machining of High-strength Metal Materials

with Specialized Surface Finishing Ensures Clear DifferentiationDeveloped since the start of propeller production in 1933,

SPP technology for the precision machining of high-strength

metal materials has been highly regarded by our customers. In

J u n e 2 0 1 5 , w e a d d e d f u r t h e r o p e r a t i o n s b y p u r c h a s i n g

a Canadian company engaged in special ized surface finishing

for aircraft components. This purchase has substantial ly

raised SPP’s corporate value, since it makes SPP one of the

few suppliers in the world that are capable of comprehensive

production featuring the unique combination of precision

machining with special ized surface finishing.

SPP Aims to Become a Global Tier 1 Supplier of Landing Gear Systems

for Business-Regional Aircraft

Since our early days, SPP has had the desire to enter the commercial

aircraft market as a global Tier 1 supplier by taking advantage of the

technology it has long developed in public-sector business. To this

end, we have faced the three requirements to be met by a landing

gear system integrator: technological ability, overseas operations,

and MRO. These efforts have ensured continued success. The

orders received in relation to the domestically developed HondaJet

and MRJ aircraft were followed in 2014 by the signing of a landing

gear system contract with Dornier in Germany.Note: A T ier 1 suppl ier concludes d i rect contracts wi th a i rcraf t manufacturers and is

involved in the development and commercia l-product ion of landing gear systems r ight f rom the in i t ia l phase of a i rcraf t pro jects.

Note: MRO stands for maintenance, repai rs, and overhaul .

0

-1,000

-2,000

-3,000

1,000

2,000

3,000

4,000

5,000

Technological development ability as a

Tier 1 supplier

RequirementPrevious Mid-Term Plan

（2011～13）Current Mid-Term Plan（2014～16）

Aspiration 2020（2017～）

Overseas operations

MRO

Purchase of domesticMRO specialist (SPPNECO)Partnership with Lufthansa

for overseas MRO

Foundation ofNorth American subsidiary (SPPCA)

Purchase of CFN

MRJ/HondaJet (HJ)development

Promotion of overseas operations (from Tier 2 to Tier 1)

Start of MRJ/HJ commercial-productionMRJ Roll-Out

HJ’s first flight in Japan Development of new-generation (next-generation and derived) technologies

Wins Dornier contract on Seastar CD 2 landing gear

Expansion of MRO operations

To be utilized also for products for the public sector

To become a Global

Tier 1 Supplier of landing gear

for business-regional aircraft

Net Sales（billion ¥）

0

10

20

30

40

50

Private demandPublic demand

Number of aircraftin service

2013 20332014～33

3,435

Retirements

-2,615

New deliveriesNew deliveries3,508

Number of aircraftin service

4,328

Current SPP share:approx. 15%

SPP’s target as a Tier 1 supplier:CRJ+MRJ+new Tier 1 contracts

Number of aircraft

Projected Demand for Regional Jets wi th 20 to 99 seats (Source: Japan Ai rcraf t Development Corporat ion)

Many years of experience in the design, development, and production technology for landing gear, with a focus on the outstanding precision machining of high-strength metal materials

Involvement in the development projects on the MRJ and HondaJet, both promising products for Japan’s future aviation industry provide opportunities to make technical achievements as a landing gear system integrator.

Purchase of a Canadian specialized surface finishing service provider leads to establishing a production system combining precision machining and specialized surface finishing.

In Japan, SPP took over ANA MRO operations to found a subsidiary in Nagasaki. SPP also works with Lufthansa to strengthen overseas MRO.

7 8

Bus iness Pro f i l e

Note: Some of the share figures indicated above are estimated by SPP.

LNG Vaporizer Heat Exchanger for Air Separation Plant

Silicon Deep Etching System SiO2 Sacrificial Layer Etching System

AOP water treatment systemOzone generator

● Dornier Names SPP Tier 1 Landing Gear Supplier

”Heat/energy sources,” “environment,” and “information-communication

technology” are the keywords that characterize SPP’s Industrial Products. In the

area of heat control, the SPP segment is highly regarded for its LNG vaporizers

and plate-fin heat exchangers.

・SPP open-rack LNG vaporizers have 60% of the world market.

・Our low-temperature industrial heat exchangers dominate the domestic market almost completely and have a 20 to 30% market share worldwide.

・SPP’s element coolers for Shinkansen bullet trains boast the monopoly of the Japanese market.

In the area of information-communication technology, SPP delivers MEMS and

semiconductor manufacturing equipment. Our SiO2 sacrificial layer etching

systems maintain a domestic market share of more than 90%.

S e g m e n t O v e r v i e w I n d u s t r i a l P r o d u c t s

Major product lines and SPP’s strengths


Micro Technology

The segment’s original technology for silicon deep etching systems, which are used for processing MEMS and other electronic devices, makes them the segment’s core product category. SPP and its partner SPTS Technologies accommodate 90% of worldwide demand for these systems. (SPP focuses on the Japanese market.)

Environmental Systems

New Operations | Fuel Cells (SOFCs), Wireless Sensor Networks, High Precision Gyro / MEMS Devices

Ozone generating technology is used as a basis to deliver advanced water treatment systems that are ideal for decomposing persistent substances.

Technology developed for aircraft heat exchangers is applied to industrial equipment

With their high reliability and quality, SPP’s high-performance, compact, and lightweight plate-fin heat exchangers are acclaimed as world-class products.

SPP open-rack LNG vaporizers (ORVs) have a higher share of the world market than any other competitor.

SPP serves Japanese heavy electrical equipment manufacturers as their main supplier of inverter-controlled element coolers for fast trains.

In the fiscal year under review (fiscal 2014), Aerospace and Related

Products achieved net sales of ¥29.32 billion, an increase of 10.1% from

the previous year. Operating income rose by 68.4% to ¥1.35 billion. The

segment posted year-on-year growth in both revenue and earnings,

primarily due to favorable developments in the sale of heat exchangers

for aircraft engines and hydraulic equipment for China. Further positive

contributions came from the purchase of MRO operations for aircraft

landing gear as well as the weaker yen.

In fiscal 2015, the segment anticipates a further increase in net sales to

¥34.0 billion due to expected growth in sales, particularly those of

landing gear systems. The segment’s operating income is expected to

be at a prior-year level of ¥1.35 billion, primarily due to an increase in

fixed costs.

▶ Overview of Business Performance 　 in Fiscal 2014

In November 2014, SPP Canada Aircraft, Inc. (SPPCA), a Canadian

subsidiary of SPP, was selected by Dornier Seawings GmbH in

Germany as a landing gear supplier to equip its new Seastar CD2

amphibious flying boat. For the first time, SPPCA received an order

for landing gear systems as a Tier 1 supplier.

SPP is striving to establish itself as a Tier 1 supplier that takes on

direct delivery of landing gear to global aircraft manufacturers. The

new milestone was a tribute to the various measures SPP had taken

to that end.

In April 2015, SPP and Rolls-Royce in the UK concluded an

agreement that SPP take part in the Rolls-Royce project on the Trent

7000 engine. Under this agreement SPP is to design, develop, and

produce heat exchangers for the engine and provide aftermarket

product support. The Trent 7000 is slated for exclusive use in the

A330 neo, the facelifted variant of the A330 aircraft being developed

by Airbus. The A330 neo is to be put into commercial operation in

2017.

● Involvement in the Development of the Rolls-Royce Trent 7000 Engine

In June 2015, SPP Canada Aircraft, Inc. (SPPCA), a Canadian

subsidiary of SPP, completed the acquisition of Tecnickrome

Aeronautique Inc. (Tecnickrome), a Canadian provider of specialized

surface finishing services for aerospace equipment. Following the

2013 purchase of CFN Precision Ltd., a Canadian manufacturer of

landing gear components, the recent acquisition of Tecnickrome will

significantly enhance the SPP group’s overall capability to provide a

stable supply of products.

● SPP Purchases Tecnickrome

¥29.32 billion

¥1.35 billion

21,80520,493 21,181

26,638

2013

29,329

2014

34,000

2015（Forecast）

201220112010

Net Sales（million ¥）

OperatingIncome

（million ¥）

10,000

0

20,000

30,000

40,000

594

11125

805

2013

1,356

2014

1,350

2015（Forecast）

201220112010

500

1,000

1,500

0

T O P I C S

N e ts a l e s

Operatingincome

9 10

2010 2011 2012 2013 2014 2015（Forecast）

¥18.4billion

¥17.8billion

¥21.0billion

2020

¥50.0billion

0

10

20

30

40

50

-1.0

0.0

1.0

2.0

3.0

4.0

Net sales（billion ¥）

Operating margin（％）

¥17.8 billion

¥0.24 billion

Net Sales（million ¥）

OperatingIncome

（million ¥）

N e ts a l e s

Operatingincome

In the fiscal year under review (fiscal 2014), Industrial Products

achieved net sales of ¥17.8 billion, a drop of 3.2% from the previous

fiscal year. Operating income increased by 53.5% to ¥0.24 billion.

The year-on-year decline in net sales was caused by the

postponement of sales in Micro Technology to the next fiscal year

and a delay in launching operations such as those for environmental

systems in China. Operating income was slightly higher than for the

previous fiscal year due to the positive effects of streamlining and

cost reductions.

In fiscal 2015, the segment expects to post growth in both revenue

and earnings. Its net sales will reach ¥21.0 billion due to an increase

in sales from Micro Technology and other operations. Streamlining

effects will raise the segment’s operating income to ¥0.65 billion.

▶ Overview of Business Performance 　 in Fiscal 2014

S e g m e n t O v e r v i e w I n d u s t r i a l P r o d u c t s

Operating with a focus on vaporizers at LNG receiving terminals,

SPP’s heat exchanger business has made numerous achievements.

SPP has aptly responded to the shale gas revolution currently going

on in North America, and worked to expand its business to cover

liquefiers used at LNG export bases. In February 2014, the company

won a major project for large-sized low-temperature industrial heat

exchangers used in liquefiers at the Cove Point Base in Maryland,

shipping the order in March 2015.

For the mass-production of LNG, most export bases employ heat

exchangers of a type (spiral tube) different from the plate-fin type

adopted by SPP. Depending on the liquefying method, however,

spiral tube products are combined with large-size low-temperature

industrial heat exchangers, which are plate-fin products. SPP will

continue to promote its products in this area to contribute to

ensuring stable energy supply.

● SPP Wins a Heat Exchanger Project for a North American LNG Export Base

In June 2015, SPP Technologies Co., Ltd (SPT), a SPP subsidiary,

purchased the Thermal Products business from SPTS Technologies

UK Ltd. in the UK. Based in Silicon Valley, the business is related to

the heat treat furnaces used in semiconductor manufacturing

processes. To take over the business, SPT established a

wholly-owned new U.S. company named SPT Microtechnologies

USA, Inc.

This purchase allows SPP to expand the Micro Technology

operations conducted mainly by SPT and have an overseas site for

the business. At the same time, the company strives to create

maximum synergy with existing products and technologies to

establish itself as a world-class producer of MEMS and semiconductor

manufacturing equipment and thereby ensure further continued

growth.

● Purchase of a Thermal Products Business

18,365

31,80235,054

18,393

-164

4,181

4,901

157

2013

17,806

2014

21,000

2015（Forecast）

201220112010 2013

241

2014

650

2015（Forecast）

201220112010

*SPP Process Technology Systems (SPTS) has been excluded from consolidation since the third quarter of fiscal 2011, following the transfer of the SPTS shares in the first half of that fiscal year.

Contribution from SPTS（※）

Contribution from SPTS（※）

All Existing Departments Strive for Steady Growth

by Introducing New Products and Opening up New MarketsGlobalization is the keyword for our growth in Industrial Products, too.

In connection with LNG vaporizers, many LNG receiving terminals

are expected to be built in Southeast Asian countries in a few

years. Low-temperature industrial heat exchangers will benefit

from numerous projects being planned on natural gas

liquefaction and downstream petrochemical products worldwide.

Particularly promising are exciting developments triggered by the

shale gas revolution in North America. The European railroad car

market is another promising market that promises solid growth.

To take advantage of these opportunities, SPP will aggressively

capitalize on its sales collaboration and partnerships with local

companies. Specific measures will include the strengthening of

marketing activities in individual regions and the local

implementation of final assembly processes.

In the area of Micro Technology, in June 2015 SPP purchased the

Thermal Products operations of the UK’s SPTS and founded a

new group company in the USA. The new affiliate will allow us to

aggressively develop overseas operations and new products in

the area of Micro Technology.

Issue Initiatives/achievements

Sales promotion to shale gas projects in North America

Prioritized strengthening of marketing activities in North America

Wins several large projects (heat exchangers for an LNG manufacturing base and for an ethylene plant)

Catalytic reactors for CompactGTL

Completion of a new enhanced plant for stainless steel heat exchangers for the high-temperature industry

Purchase of a Thermal Products business by SPP Technologies Co., Ltd.Expansion of Micro Technology business

113

3.5%

2.4%

-0.9%

0.9% 1.3%

3.1%

109 123 124 120

250


250

Other Industrial Products

34

20

21

43

16

22

33

189

30

18

27

189

35

35

20

Aspiration 2020

Growth drivers

Commercialization of products from new businesses

Environmental business in China

Market launch of new MT equipment

Heat exchangers ・Commercial products

for C-GTL・Expansion of

overseas operations

SPTS (transferred business)

Environmental Systems


New Operations

Micro Technology

Operating margin (not including the transferred business)

SPTS business transfer

13

123

Volume ef fectCost reduct ionClearer differentiation

T O P I C S

10,000

20,000

30,000

0

40,000

1,000

0

2,000

-1,000

3,000

4,000

5,000

11 12

Affiliated Companies

Individual business segmentsand indirect department

Business Study Meetings

Responsible Director

Internal AuditingDepartment

ManagementConference

CSRCommittee

AccountingAuditor

Audit & SupervisoryBoard

Audit & SupervisoryBoard Members’ Office

ComplianceCommittee and otherspecial committees

Internal audit

Decision-making Supervision

Appointment/dismissal

Externalaudit


Cooperation

Audit

Monitoringcontrol

President andRepresentative Director

General Meeting of Shareholders

Board of Directors(including two external directors)


Legal AdvisorAdvice

Directors and Audit & Supervisory Board Members (As of June 26, 2015)

■ A u d i t & S u p e r v i s o r y B o a r d M e m b e r s

■ D i r e c t o r s

In charge of Heat Exchangers

In charge of Aerospace, Research

In charge of Industrial Hydraulic, Environmental Systems, Microelectronics Technology, Corporate Environmental Control & Facilities Engineering

In charge of Corporate Planning, Controlling & Treasury, Information Systems

In charge of Project Management･Engineering & Development･Quality Assurance･Thermal Control Systems -Aerospace, Purchasing & Transportation

In charge of Sensor, Wireless Sensor Network & Systems, MEMS & Sensor Systems, Fuel Cell Systems

In charge of Business Strategy Planning･Production･Strategic Procurement -Aerospace

In charge of General Administration, Factory Innovation Center

In charge of TSV System Development, Micro Technology

In charge of Sales & Marketing-Aerospace

Attorney at Law

In charge of Business Strategy Planning･Production･Procurement･Engineering･Quality Assurance -Heat Exchangers

Shinichi MIKIPresident

Yoshihisa NAKAMURAExecutive Vice President

Former Mayor of Amagasaki CityExternal Director, GUNZE LIMITEDExternal Director, PEGASUS SEWING MACHINE MFG. CO., LTD.

Member of the Board, Senior Executive Officer, Daikin Industries, Ltd.

Guntaro KAWAMURAExternal Director

Aya SHIRAIExternal Director

Yoshio TAOKASenior Managing Director　

Kiyotaka NOGISenior Managing Director　

Kazuo SADASenior Managing Director　

Katsuhiko HAMADAManaging Director

Natsuo HASHIMOTOManaging Director

Jun SHIRAISHIDirector

Yoshifumi KAWAKAMISenior Audit & Supervisory Board Member

Shigeki IWASHITASenior Audit & Supervisory Board Member

Ei ichi MORIExternal Audit & Supervisory Board Member

General Manager, Group Companies Planning Division, Nippon Steel & Sumitomo Metal Corporation

Susumu MAEKAWAExternal Audit & Supervisory Board Member

Attorney at Law

Yasumasa NAKANISHIExternal Audit & Supervisory Board Member

Ayumu TAKAHASHIManaging Director

Toshihiro HAYAMIDirector

Akihiko MATSUYUKIDirector

Takayuki KASHIWADirector

C o r p o r a t e G o v e r n a n c e

Corporate Governance

■ O v e r v i e w o f C o r p o r a t e G o v e r n a n c e a t S P PSPP has good corporate governance with the Board of Directors and

the Audit & Supervisory Board. The Board of Directors meet at least

once every month to make decisions on important matters and

supervise the implementation of specific tasks. Management

Conference meetings of the senior management and Business Study

Meetings at individual departments are also held as appropriate to

ensure exhaustive discussion. If necessary, our legal advisor provides

relevant advice. These procedures allow the company to carry out its

operations in a fast and appropriate fashion.

Audit & Supervisory Board members attend meetings of the Board of

Directors and other significant meetings to correctly understand and

supervise the way the company is actually managed. They also utilize

the Audit and Supervisory Board Members' Office to help audit the

internal control system and the risk management structure. Under an

agreement with an accounting auditor, the company conducts

regular audits and, as the need arises, receives professional advice.

■ C o m p l i a n c eTo promote compliance activities, SPP has set up a Compliance

Committee, which is responsible for establishing and maintaining

the company's compliance structure.

In carrying out operations at individual departments, regulations on

organizations, division of duties, and decision-making criteria to

clarify the authorities and responsibilities are defined. Furthermore,

internal audit regulations and regulations on the audit of internal

control of financial reporting are in place. According to these

regulations, the Internal Auditing Department works as an

independent organization directly reporting to the President. It

conducts audits on compliance to legal regulations, operational

efficiency, and the establishment and management of the structure

that is stipulated in the Financial Instruments and Exchange Act for

the internal control of financial reporting. It then reports the results

to the President and Audit & Supervisory Board to ensure the validity

of operations as a whole and the reliability of financial reports.

In addition, a whistle-blowing system is established to upgrade the

compliance structure.

■ R i s k M a n a g e m e n tSPP commits itself to understanding and reducing individual risks

existing in the performance of operations. Starting by identifying

such risks, the company sets up special committees on individual

items and establishes regulations on the examination and activities

conducted by each of the committees. The CSR Committee is

responsible for overall risk management by controlling individual

special committees and having them report their activities.

13 14

Safety and Health Committee

Product Liability Committee

Quality Assurance Committee

Human Rights Committee

Environmental Management Committee

Information Security Committee

Risk Management Committee

Compliance Committee

CSRCommittee

SPP cares about the communities in which it operates. We interact with local

people by making donations to local events and inviting them to our summer

festival. We co-sponsored the autumn festival organized by a nearby facility

providing assisted living/rehabilitation services for the disabled. During the

event our car park was opened for visitors to the facility. In Amagasaki City,

SPP’s hometown, we took part in the municipality’s Next-Generation

Development Project, organizing plant tours for elementary school pupils.

Seihokai, the group of SPP's front-line foremen, spearheads the

annual cleanup of walks and

ditches around the SPP Main

Plant. We also takes part in

Hyogo Prefecture’s “Hyogo

Adopt—Lighting Maintenance

Partners” project, helping

maintain road lighting installed

along a prefectural route.

The SPP group started full-fledged CSR activities in April 2006. Chaired

by the President, the CSR Committee has built a framework for CSR

activities to probe into group management from the CSR perspective.

At the same time, we have established the “Code of Conduct” on the

basis of the “Company Principles.” Copies of a brochure describing our

CSR activities and the above rules and basic ideas are distributed to all

employees to develop a keen CSR awareness.

Particular emphasis is placed on compliance activities. Measures include

education for directors and executives by lawyer lectures and other

programs, maintaining a contact for whistle-blowing and consulting on

legal violations, and distribution of an ethics test sheet and card showing

the whistle-blowing contact to all employees.

CSR Activit ies

Employee Relat ions

The “Regulations on Measures against Natural Disasters” provide for

emergencies caused by natural disasters such as earthquakes and

typhoons. Following procedures stated in these regulations, every

July the company registers equipment likely to cause a hazard during

natural disasters, designates evacuation routes and spaces, and

maintains an emergency contact network. In addition, drills on

responding to an earthquake early warning (EEW) are conducted

regularly—in May and November—to ensure the safety of employees.

Emergencies other than natural disasters are addressed by

establishing the “Crisis Management Regulations.” Cards showing

“Action to Be Taken in Emergencies Such as Earthquakes and

Terrorist Attacks” are provided to all employees to ensure the

fastest possible action and communication in the event of a

disaster.

Measures against natural disasters and other emergencies2

Local contr ibutions2

Social contr ibutions1

Human r ights4To increase employee awareness of human rights and thereby prevent

and eliminate all forms of discrimination, SPP provides relevant

education programs including an annual human rights lecture meeting as

well as educational material distributed to all employees during Human

Rights Week (December 4 to 10). In addition, we strive to take every

opportunity to raise the employee awareness of the need to eliminate

discrimination. Examples include providing education for new employees

(both new graduates and mid-career employees) and having

representatives participate in education programs provided by authorities.

SPP properly addresses harassment—most typically sexual harassment

and workplace bullying—by making separate contacts available for both

men and women.

In the medium term, SPP has the basic policy of hiring 10 to 20 university

and college graduates and 20 to 30 graduates from professional schools

and high schools on a periodical basis. The company also responds

flexibly to the needs to expand operations by recruiting mid-career

employees. (SPP welcomed 41 periodically hired employees in April

2015, after recruiting 24 mid-career employees during fiscal 2014.)

The SPP management also faces up to the challenge of promoting

diversity. Specific measures include positive recruitment of the disabled

(the current employment of 34 persons surpasses the legally required

number of 30) and establishing and improving structures for empowering

women (In fiscal 2015, Amagasaki City approved SPP as a gender

equality promotor). In recent years, the company has also committed to

recruiting foreign employees. A further highlight in fiscal 2015 is the

appointment of a female External Director.

Recruitment plans and diversity commitment1

In addition to committing itself to safety education, SPP holds meetings of

the Safety and Health Committee and monthly ceremonies to pray for safety

at an in-house shrine to improve the safety awareness of all employees.

In 2015, we give priority to three areas: continued implementation of measures

to increase safety sensibility, continued operation of the Occupational Safety

and Health Management System (S-OSHMS), and maintenance and

strengthening of the workplace safety and health management structure.

As part of our commitment toward employee mental health, SPP asks an

external counselor to visit the company twice a month to open a temporary

clinic for consultation on various concerns (such as those over psychological

and physical health, human relationships, and family problems).

Safety, health, and f i re prevention3

Year20132014

2015（As of end of June）

001

711

Accidents resulting in leave Accidents not resulting in leave

Relat ions with Society

In fiscal 2014, SPP provided donations and support for various

educational institutions and cultural/sports initiatives. We took part in the

All Japan Student Indoor Flying Robot Contest as presenter, providing

and presenting winners with extra prizes.

SPP’s biannual blood donation events attracted a total of 227

contributors in fiscal 2014.

Shareholder and Investor Relat ions

IR activit ies and disclosure

SPP conducts active IR activities to help shareholders and investors

better understand our business policies and strategies. More specifically,

these include biannual (spring and autumn) presentations of financial

results for institutional investors and analysts, financial summaries and

annual reports for shareholders, and communication via the SPP website.

We will continue to disclose material facts and other relevant

information in an appropriate

manner via the security exchange,

news media, and our website.

We will remain committed to

upgrading our information disclosure

and ensuring the timeliness and usefulness of IR information.

C S R A c t i v i t i e s

Following the Sumitomo business slogan of “valuing credibility and

ensuring reliability,” the Sumitomo Precision Products group conducts

business on the following company principles. In so doing we

discharge our responsibilities to different stakeholders in ensuring

sustained business development and an increase in corporate value.

Company Principles

1. COMPLIANCE: Complying with laws and regulations, we will conduct all business activities based on the highest ethical standards.

2. CUSTOMER SATISFACTION: Focusing intensely on market demands and clients´ needs, we will continue to offer quality products and services to achieve the highest customer satisfaction possible.

3. CHANGE & CHALLENGE: Responding sensitively to global trends, we will boldly try to fully meet these changes and keep our eyes open to new opportunities that accompany this changing atmosphere.

4. HUMAN RESOURCES: Respect ing our human resources, we wi l l provide a support ive environment that encourages each individual's fulfillment and harmony among all employees.

5. COEXISTENCE WITH SOCIETY: By playing an active role in society, we will promote good citizenship with our community and harmony with the surrounding environment.

“Toward a Promising Future”Sumitomo Precision Products Group will continue to increase i ts g loba l p resence wi th innovative technology, and will pave its way toward a prosperous tomorrow.

15 16

Noise generated from around the landing gear during aircraft landing is measured to conduct a numerical analysis of noise sources which helps improve landing gear design

Source: JAXAhttp://www.aero.jaxa.jp/research/ecat/fquroh/

Environmental Management RepresentativeGeneral Manager of Corporate EnvironmentalControl & Facilities Engineering Department

Corporate Environmental Control &Facilities Engineering Department

Environmental ManagementCommittee

Internal EnvironmentalAuditor

Working Departments

Environmental Management Officer

1. Establish an environmental management system. Set and review environmental objectives and targets under the system to develop and continually improve environmental preservation activities involving all employees.

2. Reduce the environmental impact of individual phases of business operations, for example by preventing environmental pollution.

3. Comply with environmental laws, ordinances, and other requirements.4. Improve the environmental awareness of employees and facilitate

their environmental preservation activities.5. Promote company-wide activities for resources/energy saving and recycling.6. Take advantage of basic technologies that have long been developed

in individual fields including Aerospace, Hydraulic Control, Heat Control, and Industrial Products, and Environmental Systems to promote the development of environmental preservation technologies and products as a means of social contribution.

Purchasing / Research /Corporate Environmental Control &Facilities Engineering Department

Sensor /New Operation Department

Industrial Equipment Systems Department

Heat ExchangersDepartment

AerospaceDepartment

Management andSales Department

As a responsible member of society, we recognize the significant need to

preserve the local and global environment and meet the challenge of

“harmony with the surrounding environment” stated in the company principle

as one of the top priorities in management, through the following actions:

Environmental Pol icy and Environmental Management

To reduce the environmental impact of its operations, SPP strongly commits

itself toward company-wide activities for saving energy and resources.

The resources-saving initiative focuses on recycling activities, including

not only the reuse of metallic waste generated from the production

process, but also the reuse of logistics and packaging materials and the

recycling of paper by meticulous separation.

The energy-saving work is spearheaded by the Energy-Saving

Committee. Individual workplaces are expected to reduce energy use

through stringent control. In addition, they try to make a difference

through small efforts, such as switching to energy-saving equipment,

removal of some lights, and turning off the power to unused equipment.

These activities do not immediately result in a substantial reduction in

company-wide energy usage because, at SPP, energy usage during

manufacturing differs depending on the product. But they do help us in

our efforts to maintain it at certain levels and even reduce it.

In developing new aerospace products, SPP always focuses on weight

savings, because component weight is an important determinant of the

aircraft’s fuel consumption, hence its environmental impact. SPP

development engineers also work actively to reduce noise emissions as

a way of contributing to environmental protection.

Environmental ly-Fr iendly Products


Noise perceived around airports has

long been a problem in selecting

airport locations and is therefore being

controlled increasingly by international

regulations. As a partner to the JAXA FQUROH (Flight demonstration of

QUiet technology to Reduce nOise from High-lift configurations) project, SPP

has been developing a low-noise landing gear system, which features

reduced levels of wind noise during landing. The company aims to have

the new landing gear adopted in next-generation regional jets.

■ Development of a low-noise landing gear system

All hydraulic pumps from SPP not only feature low energy consumption,

but also generate very low levels of noise.

■ Low-consumption and low-noise hydraulic pumps

Efficient, compact, and lightweight, SPP heat exchangers for aircraft

engines help increase aircraft fuel efficiency. Some of them feature

shapes that help reduce air drag, contributing to reducing noise.

■ Heat exchangers for energy-saving aircraft engines

Energy usage GJ（Thousand）

Specificconsumption

2009 2010 2011 2012 2013 2014

Energy usage GJSpecific consumption per ¥million of added value

▶ E n e r g y u s a g e

In the area of heat exchangers, SPP offers many product lines

that help spread clean energy sources and promote the efficient

use of energy by providing support in saving energy and reducing

environmental impact. Environmentally-friendly products account

for half of the SPP heat exchanger lineup.

Heat Exchangers

Natural gas is regarded as friendly

to the environment since it generates

low emissions of CO2 and NOx

and no sulfur oxides during

combustion. SPP develops and

produces equipment that vaporizes

natural gas liquefied for transport

purposes (LNG).

■ LNG vaporizers

Gas produced at oil fields today is mostly

injected back or burned in the atmosphere,

accelerating global warming.

CompactGTL, a partner of SPP, develops plants

for generating synthetic crude oil from associated

gas—an innovative technology that eliminates gas

emissions while at the same time increasing oil production. SPP is responsible

for the development of reactors that support the CompactGTL process.

■ Reactors for oil field-associated gas liquefying plants

■ Development of fuel cells

Here, SPP works on landfill leachate treatment systems using

ozone and energy visualization systems. Fuel cells, which are

drawing enthusiastic attention as an environmentally friendly

power generation technology, are a further area of development

at SPP. Environmentally-friendly products account for some 40%

of SPP offerings in this category.

Other Industr ial Products

QT PumpsHS PumpHeat exchangers for aircraft engines

Committed toward social contributions through its business

activities, SPP offers many environmentally-friendly products,

which are designed to reduce environmental risks, increase the

efficiency of resources and energy use, or facilitate environmental

preservation. The company also strives to develop new environmental

products and technologies.

O2-

e-

ElectrolyteAnode electrode Cathode electrode

e-

hydrogen H2

Water H2O

reformingFuel**Such as utility gas, LP gas, or kerosene

Oxygen O2 air

E n v i r o n m e n t a l P r e s e r v a t i o n

Ini t iat ives for reducing environmental impact

Fuel cells generate electricity in an electrochemical reaction between oxygen from the air and hydrogen extracted from various fuels such as utility gas. With its high generating efficiency, fuel cell technology produces lower CO2 emissions compared with thermal power generation. It improves energy efficiency even further since the heat generated during power generation can also be used as an energy source. Another highlight is that it generates very little noise, sulfur oxides, or nitrogen oxides.

Hydrogen is raising expectations as a clean source of energy since

the gas generates no CO2 emissions during combustion. All-out

national efforts are now under way to build a hydrogen society.

Hydrogen supply infrastructure is the key requirement for a

widespread use of hydrogen fuel cell vehicles. In this connection, SPP

works on the development of heat exchangers for hydrogen stations.

■ Development of heat exchangers for hydrogen stations

■ AOP treatment equipment 　 (landfill leachate treatment system)

■ EcoWizard 　 (energy visualization system)

17 18

0

100

200

300

400

500

600

0

0.2

0.4

0.6

0.8

1.0

1.2

Mil l ions of YenThousands of U.S. Dol lars

(Note 1)

2015 2014 2015


(Note 1)

2015 2014 2015

C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sS u m i t o m o P r e c i s i o n P r o d u c t s C o . , L t d . a n d C o n s o l i d a t e d S u b s i d i a r i e s

C o n s o l i d a t e d B a l a n c e S h e e tM a r c h 3 1 , 2 0 1 5

ASSETS

CURRENT ASSETS:

Cash and cash equiva lents (Note 12)

Notes and accounts receivable (Note 12) :

Trade

Unconsol idated subsid iar ies and associated companies

A l lowance for doubtfu l accounts

Inventor ies (Note 5)

Deferred tax assets (Note 10)

Other current assets

Tota l current assets

PROPERTY, PLANT AND EQUIPMENT:

Land (Note 6)

Bui ld ings and structures (Note 6)

Machinery and equipment

Lease assets (Note 11)

Construct ion in progress

Tota l

Accumulated depreciat ion

Net property, p lant and equipment

INVESTMENTS AND OTHER ASSETS:

Investment secur i t ies (Notes 4 and 12)

Investments in and advances to unconsolidated subsidiaries and associated companies

Intangib le assets:

Goodwi l l

Other intangib le assets

Deferred tax assets (Note 10)

Other assets

A l lowance for doubtfu l accounts

A l lowance for investment loss

Tota l investments and other assets

TOTAL

¥8,968

20,714

216

(9)

25,643

1,068

378

56,978

4,683

19,198

35,566

415

69

59,931

(40,407)

19,524

2,187

1,710

159

712

400

251

(22)

5,397

¥81,899

¥9,832

20,117

916

(8)

22,104

784

1,113

54,858

4,229

18,525

32,806

375

1,017

56,952

(37,676)

19,276

1,834

1,934

175

434

621

1,062

(186)

(60)

5,814

¥79,948

$74,640

172,401

1,798

(75)

213,425

8,889

3,146

474,224

38,976

159,784

296,013

3,454

574

498,801

(336,305)

162,496

18,202

14,232

1,323

5,926

3,329

2,090

(183)

44,919

$681,639

¥13,610

2,461

2,795

5,085

22

251

2,827

1,103

1,310

1,946

31,410

13,364

759

742

134

80

15,079

10,312

11,332

12,965

(95)

696

194

(680)

34,724

686

35,410

¥81,899

¥15,157

2,330

3,134

4,728

77

3,158

2,374

176

1,172

1,641

33,947

10,488

740

1,073

131

337

12,769

10,312

11,332

11,877

(92)

404

(35)

(1,054)

32,744

488

33,232

¥79,948

$113,275

20,483

23,263

42,322

183

2,089

23,529

9,180

10,903

16,196

261,423

111,228

6,317

6,176

1,115

665

125,501

85,826

94,315

107,907

(791)

5,793

1,615

(5,660)

289,005

5,710

294,715

$681,639

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Short- term bank loans (Notes 6 and 12)

Current port ion of long-term debt (Notes 6 and 12)

Payables (Notes 12) :

Trade notes

Trade accounts

Unconsol idated subsid iar ies and associated companies

Construct ion

Other

Income taxes payable

Accrued expenses

Other current l iab i l i t ies

Tota l current l iab i l i t ies

LONG-TERM LIABILITIES:

Long-term debt (Notes 6 and 12)

Deferred tax l iab i l i t ies (Note 10)

L iabi l i ty for ret i rement benef i ts (Note 7)

Asset ret i rement obl igat ions

Other long-term l iab i l i t ies

Tota l long-term l iab i l i t ies

COMMITMENTS AND CONTINGENT LIABILITIES (Note 13)

EQUITY (Notes 6, 8 and 16):

Common stock, authorized, 200,000,000 shares; issued, 53,167,798 shares in 2015 and 2014

Capi ta l surp lus

Reta ined earn ings

Treasury stock - at cost 227,082 shares in 2015 and 222,298 shares in 2014

Accumulated other comprehensive income:

Unreal ized gain on avai lable- for-sa le secur i t ies

Fore ign currency t rans lat ion adjustments

Def ined ret i rement benef i t p lans

Tota l

Minor i ty interests

Tota l equi ty

TOTAL

See notes to consol idated f inancia l statements.

19 20


(Note 1)

Yen U.S. Dol lars

2015 2014 2015


(Note 1)

2015 2014 2015

Thousands of Shares/Mi l l ions of Yen

Common Stock

Shares Amount Capita lSurplus

Reta inedEarnings

Shares Amount

UnrealizedGain on

Available -for-Sale Securities

ForeignCurrency

TranslationAdjustments

DefinedRetirement

BenefitPlans

Tota l Minor i tyInterests

Tota lEqui ty

Treasury StockAccumulated Other

Comprehensive Income

Thousands of U.S. Dol lars (Note 1)

CommonStock

Amount Capita lSurplus

Reta inedEarnings

Amount

UnrealizedGain on

Available -for-Sale Securities

ForeignCurrency

TranslationAdjustments

DefinedRetirement

BenefitPlans

Tota l Minor i tyInterests

Tota lEqui ty

TreasuryStock

Accumulated Other Comprehensive Income


C o n s o l i d a t e d S t a t e m e n t o f I n c o m eY e a r E n d e d M a r c h 3 1 , 2 0 1 5

C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t yY e a r E n d e d M a r c h 3 1 , 2 0 1 5

NET SALES

COST OF SALES (Note 11) Gross prof i t

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 9 and 11) Operat ing income

OTHER INCOME (EXPENSES): Interest and div idend income　 Interest expense　Loss on disposal of property, p lant and equipment　Gain on fore ign currency exchange　Equity in earn ings of associated companies　Provis ion of a l lowance for doubtfu l accounts　Provis ion of a l lowance for investment loss　Gain on sa les of investment secur i t ies Other - net Other income - net

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

INCOME TAXES (Note 10) : Current Deferred Tota l income taxes

NET INCOME BEFORE MINORITY INTERESTS

MINORITY INTEREST IN NET INCOME

NET INCOME

PER SHARE OF COMMON STOCK (Note 2.w): Basic net income Cash div idends appl icable to the year

BALANCE, APRIL 1, 2013

Net income

　Cash div idends, ¥7.0 per share

　Purchase of t reasury stock

　Net change in the year

BALANCE, MARCH 31, 2014

　Cumulative effect of accounting change

BALANCE, APRIL 1, 2014

Net income

　Cash div idends, ¥7.0 per share

　Change in scope of consolidation




¥47,135

36,30910,826

9,2281,598

350(274)(249)

69189

(281)

508100934

2,532

1,290(335)

955

1,577

127

¥1,450

¥27.397.00

53,168

53,168

53,168

53,168

¥10,312

10,312

10,312

¥10,312

¥11,332

11,332

11,332

¥11,332

¥11,662

585

(370)

11,877

(20)

11,857

1,450

(370)

28

¥12,965

(194)

(28)

(222)

(222)

(5)

(227)

¥(80)

(12)

(92)

(92)

(3)

¥(95)

¥329

75

404

404

292

¥696

¥(250)

215

(35)

(35)

229

¥194

¥33,305

585

(370)

(12)

(764)

32,744

(20)

32,724

1,450

(370)

28

(3)

895

¥34,724

¥313

175

488

488

198

¥686

¥33,618

585

(370)

(12)

(589)

33,232

(20)

33,212

1,450

(370)

28

(3)

1,093

¥35,410

¥(1,054)

(1,054)

(1,054)

374

¥(680)


Cumulat ive effect of account ing change

BALANCE, APRIL 1, 2014 (as restated)

Net income

　Cash div idends, $0.06 per share

　Change in scope of consol idat ion




$85,826

85,826

$85,826

$94,315

94,315

$94,315

$98,851

(166)

98,685

12,068

(3,079)

233

$107,907

$(766)

(766)

(25)

$(791)

$3,362

3,362

2,431

$5,793

$(291)

(291)

1,906

$1,615

$272,525

(166)

272,359

12,068

(3,079)

233

(25)

7,449

$289,005

$4,062

4,062

1,648

$5,710

$276,587

(166)

276,421

12,068

(3,079)

233

(25)

9,097

$294,715

$(8,772)

(8,772)

3,112

$(5,660)

¥45,032

35,2559,777

8,814963

168(261)

(17)761

21(163)

(60)

(32)417

1,380

396281677

703

118

¥585

¥11.057.00

Di luted net income per share is not presented because no di lut ive secur i t ies ex ist .


$392,301

302,19790,104

76,80413,300

2,913(2,280)(2,072)

5,751741

(2,339)

4,228832

7,774

21,074

10,736(2,788)

7,948

13,126

1,058

$12,068

$0.230.06

C o n s o l i d a t e d S t a t e m e n t o f C o m p r e h e n s i v e I n c o m eY e a r E n d e d M a r c h 3 1 , 2 0 1 5

NET INCOME BEFORE MINORITY INTERESTS

OTHER COMPREHENSIVE INCOME (Note 14) : Unreal ized gain on avai lable- for-sa le secur i t ies Fore ign currency t rans lat ion adjustments Def ined ret i rement benef i t p lans Share of other comprehensive income in associates Tota l other comprehensive income

COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent Minor i ty interests

¥1,577

292201374

76943

¥2,520

¥2,345175

¥703

75180

98353

¥1,056

¥876180



$13,126

2,4311,6723,113

6327,848

$20,974

$19,5171,457

(APRIL 1, 2014, as previously reported)

(as restated)

(APRIL 1, 2014, as previously reported)

21 22

Mil l ions of Yen

Thousands of U.S. Dol lars

(Note 1)

2015 2014 2015

N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t sY e a r E n d e d M a r c h 3 1 , 2 0 1 5


C o n s o l i d a t e d S t a t e m e n t o f C a s h F l o w sY e a r E n d e d M a r c h 3 1 , 2 0 1 5

OPERATING ACTIVITIES:

Income before income taxes and minor i ty interests

Adjustments for :

Income taxes paid

Income taxes refunded

Depreciat ion and amort izat ion

Amort izat ion of goodwi l l

Loss on disposal of property, p lant and equipment

Increase in a l lowance for doubtfu l accounts

Increase in accrued expenses

Decrease ( increase) in l iab i l i ty for ret i rement benef i ts

Increase in a l lowance for investment loss

Increase in asset ret i rement obl igat ions

Gain on sa les of investment secur i t ies

Gain on fore ign currency exchange

Equi ty in earn ings of associated companies

Changes in assets and l iab i l i t ies, net of ef fects:

Decrease in t rade notes and accounts receivable

Increase in inventor ies

Decrease ( increase) in other current assets

Increase (decrease) in t rade notes and accounts payable

Decrease ( increase) in other current l iab i l i t ies

Other - net

Tota l adjustments

Net cash prov ided by (used in ) operat ing act iv i t ies

INVESTING ACTIVITIES:

Purchases of property, p lant and equipment

Purchase of intangib le assets

Proceeds f rom sales of property, p lant and equipment

Purchases of investments in subsidiaries resulting in change in scope of consolidation

Purchases of investments in consol idated subsid iary

Purchases of investment secur i t ies

Proceeds f rom sales of investment secur i t ies

Payments of loans receivable

Proceeds f rom col lect ion of long-term loans receivable

Other - net

Net cash used in invest ing act iv i t ies

FINANCING ACTIVITIES:

Increase (decrease) in short- term bank loans - net

Proceeds f rom long-term debt

Repayments of long-term debt

D iv idends paid

Payments for sa les and redempt ion by insta l lment payment

Cash div idends paid to minor i ty shareholders

Other - net

Net cash prov ided by f inancing act iv i t ies

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

NET DECREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES

CASH AND CASH EQUIVALENTS, END OF YEAR


1.BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Sumitomo

Precision Products Co., Ltd. (the "Company") have been prepared in

accordance with the provisions set forth in the Japanese Financial

Instruments and Exchange Act and its related accounting regulations and in

accordance with accounting principles generally accepted in Japan

("Japanese GAAP"), which are different in certain respects as to application

and disclosure requirements of International Financial Reporting Standards.

In preparing these consolidated financial statements, certain reclassifications

and rearrangements have been made to the Company's consolidated

financial statements issued domestically in order to present them in a form

which is more familiar to readers outside Japan. In addition, certain

reclassifications have been made in the 2014 consolidated financial

statements to conform to the classifications used in 2015.

The consolidated financial statements are stated in Japanese yen, the

currency of the country in which the Company is incorporated and operates.

The translations of Japanese yen amounts into U.S. dollar amounts are

included solely for the convenience of readers outside Japan and have been

made at the rate of ¥120.15 to $1, the approximate rate of exchange at

March 31, 2015. Such translations should not be construed as

representations that the Japanese yen amounts could be converted into

U.S. dollars at that or any other rate.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidation - The consolidated financial statements as of March 31,

2015, include the accounts of the Company and its thirteen (ten in 2014)

significant subsidiaries (together, the "Group"). SPP Nagasaki

Engineering Co., Ltd., Shinsen Seiki Co., Ltd. and M2M Technologies

Inc. became consolidated subsidiaries during the period.

Under the control and influence concepts, those companies in which the

Company, directly or indirectly, is able to exercise control over operations

are fully consolidated, and those companies over which the Group has

the ability to exercise significant influence are accounted for by the equity

method.

Investments in four (four in 2014) associated companies are accounted

for by the equity method.

Investments in the remaining unconsolidated subsidiary and associated

company are stated at cost. If the equity method of accounting had

been applied to the investments in these companies, the effect on the

accompanying consolidated financial statements would not be material.

The excess of the cost of acquisition over the fair value of the net assets

of an acquired subsidiary at the date of acquisition is being amortized

over a period of 10 years.

All significant intercompany balances and transactions have been

eliminated in consolidation. All material unrealized profit included in

assets resulting from transactions within the Group is also eliminated.

b. Unification of Accounting Policies Applied to Foreign Subsidiaries for

the Consolidated Financial Statements - In May 2006, the Accounting

Standards Board of Japan (the "ASBJ") issued ASBJ Practical Issues

Task Force (PITF) No. 18, "Practical Solution on Unification of Accounting

Policies Applied to Foreign Subsidiaries for the Consolidated Financial

Statements." PITF No. 18 prescribes that the accounting policies and

procedures applied to a parent company and its subsidiaries for similar

transactions and events under similar circumstances should in principle

be unified for the preparation of the consolidated financial statements.

However, financial statements prepared by foreign subsidiaries in

accordance with either International Financial Reporting Standards or

generally accepted accounting principles in the United States of America

tentatively may be used for the consolidation process, except for the

following items that should be adjusted in the consolidation process so

that net income is accounted for in accordance with Japanese GAAP,

unless they are not material: (a) amortization of goodwill; (b) scheduled

amortization of actuarial gain or loss of pensions that has been recorded

in equity through other comprehensive income; (c) expensing capitalized

development costs of R&D; (d) cancellation of the fair value model of

accounting for property, plant and equipment and investment properties

and incorporation of the cost model of accounting; and (e) exclusion of

minority interests from net income, if contained in net income.

c. Unification of Accounting Policies Applied to Foreign Associated

Companies for the Equity Method - In March 2008, the ASBJ issued

ASBJ Statement No. 16, "Accounting Standard for Equity Method of

Accounting for Investments." The new standard requires adjustments to

be made to conform the associate's accounting policies for similar

transactions and events under similar circumstances to those of the

parent company when the associate's financial statements are used in

applying the equity method unless it is impracticable to determine such

adjustments. In addition, financial statements prepared by foreign

associated companies in accordance with either International Financial

Reporting Standards or generally accepted accounting principles in the

United States of America tentatively may be used in applying the equity

method if the following items are adjusted so that net income is

accounted for in accordance with Japanese GAAP, unless they are not

material: (a) amortization of goodwill; (b) scheduled amortization of

actuarial gain or loss of pensions that has been recorded in equity

through other comprehensive income; (c) expensing capitalized

development costs of R&D; (d) cancellation of the fair value model of

accounting for property, plant and equipment and investment properties

and incorporation of the cost model of accounting; and (e) exclusion of

minority interests from net income, if contained in net income.

d. Business Combinations - In October 2003, the Business Accounting

Council issued a Statement of Opinion, "Accounting for Business

Combinations," and in December 2005, the ASBJ issued ASBJ

Statement No. 7, "Accounting Standard for Business Divestitures" and

ASBJ Guidance No. 10, "Guidance for Accounting Standard for

Business Combinations and Business Divestitures." The accounting

standard for business combinations allowed companies to apply the

pooling-of-interests method of accounting only when certain specific

criteria are met such that the business combination is essentially

regarded as a uniting-of-interests. For business combinations that do

not meet the uniting-of-interests criteria, the business combination is

considered to be an acquisition and the purchase method of accounting

is required. This standard also prescribes the accounting for

combinations of entities under common control and for joint ventures.

¥2,532

(412)45

2,46120

249284

29(17)

3(508)

(25)(89)

512(2,998)

83315

(299)23

(324)2,208

(4,453)(118)

(21)(7)

(31)511

(520)546

11(4,082)

(1,599)5,281

(2,299)(370)(201)

(2)(2 )

808

108(958)

9,83294

¥8,968

¥1,380

(355)7

2,1301817

170117

660

3

(265)(21)

68(2,746)

(178)(1,511)

415(72)

(2,137)(757)

(1,170)(128)

15

(708)(320)

(164)3432

(2,409)

8432,337

(2,548)(370)(218)

(5)(3 )36

200(2,930)12,762

¥9,832

$21,074

(3,429)375

20,483166

2,0722,364

241(141)

25(4,228)

(208)(741)

4,261(24,952)

6912,622

(2,489)191

(2,697)18,377

(37,062)(982)

(175)(58)

(258)4,253

(4,328)4,544

92(33,974)

(13,308)43,953

(19,134)(3,079)(1,673)

(17)(17)

6,725

899(7,973)81,831

782$74,640

23 24


In December 2008, the ASBJ issued a revised accounting standard for

business combinations, ASBJ Statement No. 21, "Accounting Standard

for Business Combinations." Major accounting changes under the

revised accounting standard are as follows: (1) The revised standard

requires accounting for business combinations only by the purchase

method. As a result, the pooling of interests method of accounting is no

longer allowed. (2) The previous accounting standard required research

and development costs to be charged to income as incurred. Under the

revised standard, in-process research and development costs (IPR&D)

acquired in the business combination are capitalized as an intangible

asset. (3) The previous accounting standard provided for a bargain

purchase gain (negative goodwill) to be systematically amortized over a

period not exceeding 20 years. Under the revised standard, the acquirer

recognizes the bargain purchase gain in profit or loss immediately on the

acquisition date after reassessing and confirming that all of the assets

acquired and all of the liabilities assumed have been identified after a

review of the procedures used in the purchase price allocation. The

revised standard was applicable to business combinations undertaken

on or after April 1, 2010.

The Group acquired 100% of SPP Nagasaki Engineering Co, Ltd. on April

1, 2014, and accounted for it by the purchase method of accounting.

e. Cash Equivalents - Cash equivalents are short-term investments that are

readily convertible into cash and that are exposed to insignificant risk of

changes in value.

Cash equivalents include time deposits, which mature or become due

within three months of the date of acquisition.

f. Inventories - Inventories are stated at the lower of cost, determined by the

average method for finished goods, semi-finished goods, and work in

process, by the specific identification method for certain work in process,

and by the moving-average method for all raw materials and supplies, or

net selling value.

g. Investment Securities - The standard requires all applicable securities to

be classified and accounted for, depending on management's intent, as

trading securities, held-to-maturity debt securities or available-for-sale

securities. The Group does not have securities in the former two

categories.

Available-for-sale securities, which are not classified as either trading

securities or held-to-maturity debt securities, are reported at fair value,

with unrealized gains and losses, net of applicable taxes, reported in a

separate component of equity.

Nonmarketable available-for-sale securities are stated at cost

determined by the moving-average method. For other-than-temporary

declines in fair value, investment securities are reduced to net realizable

value by a charge to income.

h. Property, Plant and Equipment - Property, plant and equipment are

stated at cost. Depreciation of property, plant and equipment of the

Company and its consolidated domestic subsidiaries is computed

generally by the declining-balance method, while the straight-line method

is principally applied to buildings and lease assets of the Company and

property, plant and equipment of consolidated foreign subsidiaries. The

range of useful lives is principally from 3 to 50 years for buildings and

structures and from 4 to 9 years for machinery and equipment. The

useful lives for lease assets are the terms of the respective leases.

i. Other Intangible Assets - Intangible assets, except for goodwill, are

stated at cost less accumulated amortization, which is computed by the

straight-line method over the estimated useful lives of the assets. The

useful life is principally 5 years for software for internal use.

j. Long-Lived Assets - The Group reviews its long-lived assets for

impairment whenever events or changes in circumstances indicate the

carrying amount of an asset or asset group may not be recoverable. An

impairment loss is recognized if the carrying amount of an asset or asset

group exceeds the sum of the undiscounted future cash flows expected

to result from the continued use and eventual disposition of the asset or

asset group. The impairment loss would be measured as the amount by

which the carrying amount of the asset exceeds its recoverable amount,

which is the higher of the discounted cash flows from the continued use

and eventual disposition of the asset or the net selling price at

disposition.

k. Derivatives and Hedging Activities - The Group uses derivative financial

instruments to manage its exposures to fluctuations in foreign exchange

and interest rates. Foreign exchange forward contracts and interest rate

swaps are utilized by the Group to reduce foreign currency exchange

and interest rate risks. The Group does not enter into derivatives for

trading or speculative purposes.

Derivative financial instruments are classified and accounted for as

follows: (1) all derivatives are recognized as either assets or liabilities and

measured at fair value, and gains or losses on derivative transactions are

recognized in the consolidated statement of income, and (2) for

derivatives used for hedging purposes, if such derivatives qualify for

hedge accounting because of high correlation and effectiveness

between the hedging instruments and the hedged items, gains or losses

on derivatives are deferred until maturity of the hedged transactions.

Interest rate swaps, which qualify for hedge accounting and meet

specific matching criteria are not remeasured at market value but the

differential paid or received under the swap agreements is recognized

and included in interest expense.

l. Allowance for Doubtful Accounts - Notes and accounts receivable,

including loans and other receivables, are valued by providing individually

estimated uncollectible amounts plus the amounts for probable losses

calculated by applying a percentage based on collection experience to

the remaining accounts.

m. Allowance for Investment Loss - Allowance for investment loss provides

for loss from investments to associated companies. The amount is

estimated in light of the financial standings of the associated companies.

n. Retirement Benefits - The Company and its consolidated domestic

subsidiaries have defined benefit retirement plans covering substantially

all of their employees. The Group accounts for the liability for retirement

benefits based on projected benefit obligations and plan assets at the

consolidated balance sheet date.

Effective April 1, 2000, the Company adopted a new accounting

standard for retirement benefits and accounted for the liability for

retirement benefits based on the projected benefit obligations and plan

assets at the consolidated balance sheet date. The projected benefit

obligations are attributed to periods on a straight-line basis. Actuarial

gains and losses are amortized on a straight-line basis over 10 years

within the average remaining service period. Past service costs are

amortized on a straight-line basis over 10 years within the average

remaining service period.

In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting

Standard for Retirement Benefits" and ASBJ Guidance No. 25,

"Guidance on Accounting Standard for Retirement Benefits," which

replaced the accounting standard for retirement benefits that had been

issued by the Business Accounting Council in 1998 with an effective date

of April 1, 2000, and the other related practical guidance, and were

followed by partial amendments from time to time through 2009.

(a) Under the revised accounting standard, actuarial gains and losses

and past service costs that are yet to be recognized in profit or loss

are recognized within equity (accumulated other comprehensive

income), after adjusting for tax effects, and any resulting deficit or

surplus is recognized as a liability (liability for retirement benefits) or

asset (asset for retirement benefits).

(b) The revised accounting standard does not change how to recognize

actuarial gains and losses and past service costs in profit or loss.

Those amounts are recognized in profit or loss over a certain period

no longer than the expected average remaining service period of the

employees. However, actuarial gains and losses and past service

costs that arose in the current period and have not yet been

recognized in profit or loss are included in other comprehensive

income and actuarial gains and losses and past service costs that

were recognized in other comprehensive income in prior periods and

then recognized in profit or loss in the current period are treated as

reclassification adjustments.

(c) The revised accounting standard also made certain amendments

relating to the method of attributing expected benefit to periods, the

discount rate and expected future salary increases.

This accounting standard and the guidance for (a) and (b) above are

effective for the end of annual periods beginning on or after April 1, 2013,

and for (c) above are effective for the beginning of annual periods

beginning on or after April 1, 2014, or for the beginning of annual periods

beginning on or after April 1, 2015, subject to certain disclosure in March

2015, all 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.

The Group applied the revised accounting standard and guidance for

retirement benefits for (a) and (b) above, effective March 31, 2014, and

for (c) above, effective April 1, 2014.

With respect to (c) above, the Group changed the method of attributing

the expected benefit to periods from a straight-line basis to a benefit

formula basis and the method of determining the discount rate from

using the period which approximates the expected average remaining

service period to using a single weighted average discount rate reflecting

the estimated timing and amount of benefit payment, and recorded the

effect of (c) above as of April 1, 2014, in retained earnings. The effects of

adopting the revised accounting standard are immaterial.

o. Research and Development Costs - Research and development costs

are charged to income as incurred.

p. Asset Retirement Obligations - In March 2008, the ASBJ issued ASBJ

Statement No. 18, "Accounting Standard for Asset Retirement Obligations"

and ASBJ Guidance No. 21, "Guidance on Accounting Standard for Asset

Retirement Obligations." Under this accounting standard, an asset

retirement obligation is defined as a legal obligation imposed either by law

or contract that results from the acquisition, construction, development and

normal operation of a tangible fixed asset and is associated with the

retirement of such tangible fixed asset. The asset retirement obligation is

recognized as the sum of the discounted cash flows required for the future

asset retirement and is recorded in the period in which the obligation is

incurred if a reasonable estimate can be made. If a reasonable estimate of

the asset retirement obligation cannot be made in the period the asset

retirement obligation is incurred, the liability should be recognized when a

reasonable estimate of the asset retirement obligation can be made. Upon

initial recognition of a liability for an asset retirement obligation, an asset

retirement cost is capitalized by increasing the carrying amount of the

related fixed asset by the amount of the liability. The asset retirement cost

is subsequently allocated to expense through depreciation over the

remaining useful life of the asset. Over time, the liability is accreted to its

present value each period. Any subsequent revisions to the timing or the

amount of the original estimate of undiscounted cash flows are reflected as

an adjustment to the carrying amount of the liability and the capitalized

amount of the related asset retirement cost.

q. Leases - In March 2007, the ASBJ issued ASBJ Statement No. 13,

"Accounting Standard for Lease Transactions," which revised the

previous accounting standard for lease transactions. The revised

accounting standard for lease transactions was effective for fiscal years

beginning on or after April 1, 2008.

Under the previous accounting standard, finance leases that were

deemed to transfer ownership of the leased property to the lessee were

capitalized. However, other finance leases were permitted to be

accounted for as operating lease transactions if certain "as if capitalized"

information was disclosed in the notes to the lessee's financial

statements. The revised accounting standard requires that all finance

lease transactions be capitalized by recognizing lease assets and lease

obligations in the consolidated balance sheet.

The Company and its consolidated domestic subsidiaries applied the

revised accounting standard effective April 1, 2008.

All other leases are accounted for as operating leases.

r. Bonuses to Directors and Audit & Supervisory Board Members -

Bonuses to directors and Audit & Supervisory Board members are

accrued at the end of the year to which such bonuses are attributable.

s. Construction Contracts - In December 2007, the ASBJ issued ASBJ

Statement No. 15, "Accounting Standard for Construction Contracts"

and ASBJ Guidance No. 18, "Guidance on Accounting Standard for

Construction Contracts." Under this accounting standard, construction

revenue and construction costs should be recognized by the

percentage-of-completion method if the outcome of a construction

contract can be estimated reliably. When total construction revenue,

total construction costs and the stage of completion of the contract at

the consolidated balance sheet date can be reliably measured, the

outcome of a construction contract is deemed to be estimated reliably.

If the outcome of a construction contract cannot be reliably estimated,

the completed-contract method should be applied. When it is probable

that the total construction costs will exceed total construction revenue,

25 26


　 an estimated loss on the contract should be immediately recognized by

providing for a loss on construction contracts.

t. Income Taxes - The provision for income taxes is computed based on the

pretax income included in the consolidated statement of income. The

asset and liability approach is used to recognize deferred tax assets and

liabilities for the expected future tax consequences of temporary

differences between the carrying amounts and the tax of assets and

liabilities. Deferred taxes are measured by applying currently enacted

income tax rates to the temporary differences.

u. Foreign Currency Transactions - All short-term and long-term monetary

receivables and payables denominated in foreign currencies are

translated into Japanese yen at the exchange rates at the consolidated

balance sheet date. The foreign exchange gains and losses from

translation are recognized in the consolidated statement of income.

v. Foreign Currency Financial Statements - The consolidated balance sheet

accounts and revenue and expense accounts of the consolidated foreign

subsidiaries are translated into Japanese yen at the current exchange rate

as of the consolidated balance sheet date except for equity, which is

translated at the historical rate. Differences arising from such translation are

shown as "Foreign currency translation adjustments" under accumulated

other comprehensive income in a separate component of equity.

w. Per Share Information - Basic net income per share is computed by

dividing net income available to common shareholders by the

weighted-average number of common shares outstanding for the period,

retroactively adjusted for stock splits. The number of common shares

used in computing basic net income per share was 52,943 thousand

shares for 2015 and 52,968 thousand shares for 2014.

Diluted net income per share reflects the potential dilution that could occur

if securities were exercised or converted into common stock. Diluted net

income per share of common stock assumes full conversion of the

outstanding convertible notes and bonds at the beginning of the year (or at

the time of issuance) with an applicable adjustment for related interest

expense, net of tax, and full exercise of outstanding warrants (if any).

Diluted net income per share is not disclosed because there were no potentially

dilutive securities outstanding for the years ended March 31, 2015 and 2014.

Cash dividends per share presented in the accompanying consolidated

statement of income are dividends applicable to the respective fiscal

years, including dividends to be paid after the end of the year.

x. Accounting Changes and Error Corrections - In December 2009, the ASBJ

issued ASBJ Statement No. 24, "Accounting Standard for Accounting

Changes and Error Corrections" and ASBJ Guidance No. 24, "Guidance on

Accounting Standard for Accounting Changes and Error Corrections."

Accounting treatments under this standard and guidance are as follows: (1)

Changes in Accounting Policies - When a new accounting policy is applied

following revision of an accounting standard, the new policy is applied

retrospectively unless the revised accounting standard includes specific

transitional provisions, in which case the entity shall comply with the specific

transitional provisions. (2) Changes in Presentation - When the presentation of

financial statements is changed, prior-period financial statements are

reclassified in accordance with the new presentation. (3) Changes in

Accounting Estimates - A change in an accounting estimate is accounted for in

the period of the change if the change affects that period only, and is

accounted for prospectively if the change affects both the period of the change

and future periods. (4) Corrections of Prior-Period Errors - When an error in

prior-period financial statements is discovered, those statements are restated.

y. New Accounting Pronouncements

Accounting Standards for Business Combinations and Consolidated

Financial Statements - In September 2013, the ASBJ issued revised ASBJ

Statement No. 21, "Accounting Standard for Business Combinations,"

revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for

Business Combinations and Business Divestitures," and revised ASBJ

Statement No. 22, "Accounting Standard for Consolidated Financial

Statements." Major accounting changes are as follows:

(a) Transactions with noncontrolling interest - A parent's ownership

interest in a subsidiary might change if the parent purchases or sells

ownership interests in its subsidiary. The carrying amount of minority

interest is adjusted to reflect the change in the parent's ownership

interest in its subsidiary while the parent retains its controlling interest

in its subsidiary. Under the current accounting standard, any

difference between the fair value of the consideration received or paid

and the amount by which the minority interest is adjusted is

accounted for as an adjustment of goodwill or as profit or loss in the

consolidated statement of income. Under the revised accounting

standard, such difference shall be accounted for as capital surplus as

long as the parent retains control over its subsidiary.

(b) Presentation of the consolidated balance sheet - In the consolidated

balance sheet, "minority interest" under the current accounting

standard will be changed to "noncontrolling interest" under the

revised accounting standard.

(c) Presentation of the consolidated statement of income - In the

consolidated statement of income, "income before minority interest"

under the current accounting standard will be changed to "net

income" under the revised accounting standard, and "net income"

under the current accounting standard will be changed to "net

income attributable to owners of the parent" under the revised

accounting standard.

(d) Provisional accounting treatments for a business combination - If the

initial accounting for a business combination is incomplete by the end

of the reporting period in which the business combination occurs, an

acquirer shall report in its financial statements provisional amounts for

the items for which the accounting is incomplete. Under the current

accounting standard guidance, the impact of adjustments to

provisional amounts recorded in a business combination on profit or

loss is recognized as profit or loss in the year in which the

measurement is completed. Under the revised accounting standard

guidance, during the measurement period, which shall not exceed

one year from the acquisition, the acquirer shall retrospectively adjust

the provisional amounts recognized at the acquisition date to reflect

new information obtained about facts and circumstances that existed

as of the acquisition date and that would have affected the

measurement of the amounts recognized as of that date. Such

adjustments shall be recognized as if the accounting for the business

combination had been completed at the acquisition date.

(e) Acquisition-related costs - Acquisition-related costs are costs, such

as advisory fees or professional fees, which an acquirer incurs to

effect a business combination. Under the current accounting standard,

the acquirer accounts for acquisition-related costs by including

them in the acquisition costs of the investment. Under the revised

accounting standard, acquisition-related costs shall be accounted

for as expenses in the periods in which the costs are incurred.

The above accounting standards and guidance for (a) transactions with

noncontrolling interest, (b) presentation of the consolidated balance

sheet, (c) presentation of the consolidated statement of income, and (e)

acquisition-related costs are effective for the beginning of annual periods

beginning on or after April 1, 2015. Earlier application is permitted from

the beginning of annual periods beginning on or after April 1, 2014,

except for (b) presentation of the consolidated balance sheet and (c)

presentation of the consolidated statement of income. In the case of

earlier application, all accounting standards and guidance above, except

for (b) presentation of the consolidated balance sheet and (c)

presentation of the consolidated statement of income, should be applied

simultaneously.

Either retrospective or prospective application of the revised accounting

standards and guidance for (a) transactions with noncontrolling interest

and (e) acquisition-related costs is permitted. In retrospective application

of the revised standards and guidance, the accumulated effects of

retrospective adjustments for all (a) transactions with noncontrolling

interest and (e) acquisition-related costs which occurred in the past shall

be reflected as adjustments to the beginning balance of capital surplus

and retained earnings for the year of the first-time application. In

prospective application, the new standards and guidance shall be

applied prospectively from the beginning of the year of the first-time

application.

The revised accounting standards and guidance for (b) presentation of

the consolidated balance sheet and (c) presentation of the consolidated

statement of income shall be applied to all periods presented in financial

statements containing the first-time application of the revised standards

and guidance.

The revised standards and guidance for (d) provisional accounting

treatments for a business combination are effective for a business

combination which occurs on or after the beginning of annual periods

beginning on or after April 1, 2015. Earlier application is permitted for a

business combination which occurs on or after the beginning of annual

periods beginning on or after April 1, 2014.

The Company expects to apply the revised accounting standards and

guidance for (a), (b), (c) and (e) above from April 1, 2015, and for (d)

above for a business combination which will occur on or after April 1,

2015, and is in the process of measuring the effects of applying the

revised accounting standards and guidance in future applicable periods.

3.CHANGES IN PRESENTATIONS

"Payments of loans receivable" and "Proceeds from collection of long-term

loans receivable" were included in "Other - net" among the investing

activities section of the consolidated statement of cash flows for the year

ended March 31, 2014. Since the amounts increased, such amounts are

separately presented in the investing activities section of the consolidated

statement of cash flows the year ended March 31, 2015. The amounts

included in "Other - net" as of March 31, 2014, were ¥164 million and ¥34

million, respectively.

4.INVESTMENT SECURITIES

The cost and aggregate fair value of available-for-sale securities at March

31, 2015 and 2014, were as follows:

The proceeds, realized gains and realized losses of the available-for-sale

securities which were sold during the year ended March 31, 2015, were as

follows:

5.INVENTORIES

Inventories at March 31, 2015 and 2014, consisted of the following:

6.SHORT-TERM BANK LOANS AND LONG-TERM DEBT

Short-term bank loans bear interest at rates ranging from 0.43% to 6.00%

at March 31, 2015, and from 0.44% to 6.00% at March 31, 2014.

Long-term debt at March 31, 2015 and 2014, consisted of the following:

Equity securities

Cost

¥957

UnrealizedGains

Millions of YenUnrealized

LossesFair Value

¥614 ¥1,571

March 31, 2014

Equity securities

Cost

$8,198

UnrealizedGains

Thousands of U.S. DollarsUnrealized

LossesFair Value

$7,940 $16,138

March 31, 2015

Equity securities

Cost

¥985

UnrealizedGains

Millions of YenUnrealized

LossesFair Value

¥954 ¥1,939

March 31, 2015

Equity securities

Proceeds

¥511

RealizedGains

Millions of YenRealized

Loss

¥508

March 31, 2015

Finished products and semi-finished products

Work in process

Raw materials and supplies

Total

2015

¥5,413

11,678

8,552

¥25,643

¥4,590

10,160

7,354

¥22,104

$45,052

71,178

97,195

$213,425

2014 2015

Millions of Yen Thousands ofU.S. Dollars

Equity securities

Proceeds

$4,253

RealizedGains

Thousands of U.S. DollarsRealized

Loss

$4,228

March 31, 2015

27 28


Annual maturities of long-term debt, as of March 31, 2015, for the next five

years and thereafter were as follows:

The carrying amounts of assets pledged as collateral for long-term bank

loans of ¥3,479 million ($28,955 thousand) and long-term payables of ¥62

million ($516 thousand) at March 31, 2015, were as follows:

The above assets are provided for the factory foundation mortgage.

The above collateralized long-term debt and long-term payables include the

current portion of long-term debt and long-term payables.

Long-term bank loans include syndicate loan agreements amounting to

¥6,600 million ($54,931 thousand) at March 31, 2015. In the event that any

of the following covenants are violated, the Company may lose the benefit of

the term for all the liabilities under these agreements.

These agreements include the following financial restriction provisions:(1) Ordinary income in the consolidated or nonconsolidated statements of

operations should not be negative for two consecutive years on or after

the fiscal year ended March 31, 2012. Ordinary income means income

before income taxes less extraordinary items. The amount of ordinary

income in the consolidated and nonconsolidated statements of

operations for the year ended March 31, 2015, are ¥2,024 million and

¥1,880 million, respectively. (2) The amount of equity in the consolidated balance sheet at the end of

fiscal year should be more than ¥22,500 million.(3) The amount of equity in the nonconsolidated balance sheet at the end of

fiscal year should be more than ¥22,000 million. The amount of equity in

the nonconsolidated balance sheet for the year ended March 31, 2015,

is ¥35,575 million.

7.RETIREMENT BENEFITS

The Company and its domestic consolidated subsidiaries have defined

benefit retirement plans for employees.

Employees terminating their employment are, under most circumstances,

entitled to retirement benefits determined based on the rate of pay at the

time of termination, length of service, and conditions under which the

termination occurs. If the termination is involuntary, caused by retirement at

the mandatory retirement age or caused by death, the employee is entitled

to greater payments than in the case of voluntary termination.

Employees of the Company who retire at the mandatory retirement age are

entitled to receive approximately 50% of their benefits in the form of an

annuity with the balance in a lump-sum payment upon retirement. The

funds for the annuity payments are entrusted to an outside trustee.

(1) The changes in defined benefit obligation for the years ended March 31,

2015 and 2014, were as follows:

(2) The changes in plan assets for the years ended March 31, 2015 and

2014, were as follows:

(3) Reconciliation between the liability recorded in the consolidated

balance sheet and the balances of defined benefit obligation and plan

assets

(4) The components of net periodic retirement benefit costs for the years

ended March 31, 2015 and 2014, were as follows:

Loans from banks and insurance companies, due serially to 2018 with interest rates ranging from 0.45% to 5.13% (2015) and from 0.71% to 5.13% (2014)

Collateralized

Unsecured

Obligation under finance leases

Total

Less current portion

Long-term debt, less current portion

2015

¥3,479

12,005

341

15,825

(2,461)

¥13,364

¥932

11,189

697

12,818

(2,330)

¥10,488

$28,955

99,917

2,839

131,711

(20,483)

$111,228

2014 2015


2016

2017

2018

2019

2020

2021 and thereafter

Total

¥2,461

7,896

1,417

1,211

1,955

885

¥15,825

$20,483

65,718

11,794

10,079

16,271

7,366

$131,711

Thousands ofU.S. Dollars

Millions ofYen

Year Ending March 31

Land

Buildings and structures

Total

¥409

79

¥488

$3,404

658

$4,062


Millions ofYen

Balance at beginning of year (as previously reported)

Cumulative effect of accounting change

Balance at beginning of year (as restated)

Increase due to inclusion of subsidiaries in consolidation

Current service cost

Interest cost

Actuarial losses

Benefits paid

Balance at end of year

2015

¥5,627

30

5,657

224

347

74

240

(767)

¥5,775

¥5,622

5,622

344

83

25

(447)

¥5,627

$46,833

250

47,083

1,864

2,888

616

1,998

(6,384)

$48,065

2014 2015


Balance at beginning of year

Expected return on plan assets

Actuarial gains

Contributions from the employer

Benefits paid

Balance at end of year

2015

¥4,554

137

465

201

(324)

¥5,033

¥3,971

119

276

415

(227)

¥4,554

$37,903

1,140

3,870

1,673

(2,697)

$41,889

2014 2015


Defined benefit obligation

Plan assets

Net liability arising from defined benefit obligation

2015

¥5,775

(5,033)

¥742

¥5,627

(4,554)

¥1,073

$48,065

(41,889)

$6,176

2014 2015


(5) Amounts recognized in other comprehensive income (before income tax

effect) in respect of defined retirement benefit plans for the years ended

March 31, 2015 and 2014:

(6) Amounts recognized in accumulated other comprehensive income

(before income tax effect) in respect of defined retirement benefit plans

as of March 31, 2015 and 2014:

(7) Plan assets

a. Components of plan assets

Plan assets as of March 31, 2015 and 2014, consisted of the following:

b. Method of determining the expected rate of return on plan assets

The expected rate of return on plan assets is determined considering

the long-term rates of return which are expected currently and in the

future from the various components of the plan assets.

(8) Assumptions used for the years ended March 31, 2015 and 2014, were set

forth as follows:

8.EQUITY

Japanese companies are subject to the Companies Act of Japan (the

"Companies Act"). The significant provisions in the Companies Act that

affect financial and accounting matters are summarized below:(a) Dividends

Under the Companies Act, companies can pay dividends at any time

during the fiscal year in addition to the year-end dividend upon resolution

at the shareholders' meeting. For companies that meet certain criteria,

the Board of Directors may declare dividends (except for dividends in

kind) at any time during the fiscal year if the Company has prescribed so

in its articles of incorporation. The Company meets the above criteria.

The Companies Act permits companies to distribute dividends in-kind

(noncash assets) to shareholders subject to a certain limitation and

additional requirements.

Semiannual interim dividends may also be paid once a year upon

resolution by the Board of Directors if the articles of incorporation of the

Company so stipulate. The Companies Act provides certain limitations

on the amounts available for dividends or the purchase of treasury stock.

The limitation is defined as the amount available for distribution to the

shareholders, but the amount of net assets after dividends must be

maintained at no less than ¥3 million.(b) Increases/decreases and transfer of common stock, reserve and surplus

The Companies Act requires that an amount equal to 10% of dividends

must be appropriated as a legal reserve (a component of retained

earnings) or as additional paid-in capital (a component of capital surplus),

depending on the equity account charged upon the payment of such

dividends, until the aggregate amount of legal reserve and additional

paid-in capital equals 25% of the common stock. Under the Companies

Act, the total amount of additional paid-in capital and legal reserve may

be reversed without limitation. The Companies Act also provides that

common stock, legal reserve, additional paid-in capital, other capital

surplus and retained earnings can be transferred among the accounts

with equity 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 treasury stock purchased cannot exceed the

amount available for distribution to the shareholders which is determined

by a specific formula. Under the Companies Act, stock acquisition rights

are presented as a separate component of equity. The Companies Act

also provides that companies can purchase both treasury stock

acquisition rights and treasury stock. Such treasury stock acquisition

rights are presented as a separate component of equity or deducted

directly from stock acquisition rights.

9.SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the years ended March 31,

2015 and 2014, principally consisted of the following:

Debt investments

Equity investments

Cash and cash equivalents

Others

Total

37%

49

4

10

100%

39%

51

4

6

100%

Discount rate

Expected rate of return on plan assets

Expected rate of salary increase

1.5%

3.0%

1.5-2.4%

0.865-1.011%

3.0%

1.5-2.4%

Service cost

Interest cost

Expected return on plan assets

Amortization of prior service cost

Recognized actuarial losses

Others

Net periodic benefit costs

2015

¥347

74

(137)

(6)

350

15

¥643

¥344

83

(119)

(6)

358

4

¥664

$2,888

616

(1,140)

(50)

2,913

125

$5,352

2014 2015


Prior service cost

Actuarial losses

Total

2015

¥6

(575)

¥(569)

$50

(4,786)

$(4,736)

2014 2015


Unrecognized prior service cost

Unrecognized actuarial losses

Total

2015

2015 2014

2015 2014

¥(42)

1,110

¥1,068

¥(48)

1,685

¥1,637

$(349)

9,238

$8,889

2014 2015


29 30


10.INCOME TAXES

The Company and its domestic subsidiaries are subject to Japanese

national and local income taxes which, in the aggregate, resulted in normal

effective statutory tax rates of 35.6％ and 38.0% for the years ended March

31, 2015 and 2014, respectively.

The tax effects of significant temporary differences and loss carryforwards

which resulted in deferred tax assets and liabilities at March 31, 2015 and

2014, were as follows:

A reconciliation between the normal effective statutory tax rates and the

actual effective tax rates reflected in the accompanying consolidated

statement of income for the year ended March 31, 2015, with the

corresponding figures for 2014, is as follows:

New tax reform laws enacted in 2015 in Japan changed the normal effective

statutory tax rate for the fiscal year beginning on or after April 1, 2015, to

approximately 33.0% and for the fiscal year beginning on or after April 1,

2016, to approximately 32.3%. The effect of these changes was immaterial.

At March 31, 2015, certain subsidiaries have expiring tax loss carryforwards

aggregating approximately ¥3,210 million ($26,717 thousand) which are

available to be offset against taxable income of such subsidiaries in future

years. These tax loss carryforwards, if not utilized, will expire as follows:

11.LEASES

Total rental expenses including lease payments under finance lease

agreements that do not transfer ownership of the leased property to the

Group, accounted for as operating lease, were ¥336 million ($2,797

thousand) and ¥317 million for the years ended March 31, 2015 and 2014,

respectively.

12.FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

(1) Group policy for financial instruments

The Group uses financial instruments, mainly long-term debt including

bank loans and convertible bonds, based on its capital financing plan.

Cash surpluses, if any, are invested in low risk financial assets.

Short-term bank loans are used to fund the Group's ongoing operations.

Derivatives are used, not for speculative purposes, but to manage

exposure to financial risks as described in (2) below. (2) Nature and extent of risks arising from financial instruments

Receivables, such as trade notes and trade accounts, are exposed to

customer credit risk. Although receivables in foreign currencies are

exposed to the market risk of fluctuation in foreign currency exchange

Employees' salaries and bonuses

Net periodic retirement benefit costs

Depreciation and amortization

Research and development costs

Goodwill amortization

2015

¥3,018

177

391

1,145

20

¥2,702

203

371

1,097

18

$25,119

1,473

3,254

9,530

166

2014 2015


Deferred tax assets:

Reserve for accrued bonuses

Liability for retirement benefits

Loss on devaluation of inventories

Loss on devaluation of investment securities

Tax loss carryforwards

Other

Less valuation allowance

Total

Deferred tax liabilities:

Roll-over relief on property, plant and equipment

Net unrealized gain on available-for-sale securities

Prepaid pension cost

Other

Total

Net deferred tax assets

2015

¥422

388

289

27

861

762

(1,167)

¥1,582

¥(147)

(318)

(198)

(210)

¥(873)

¥709

¥418

582

213

25

563

465

(799)

¥1,467

¥(140)

(210)

(221)

(231)

¥(802)

¥665

$3,512

3,229

2,405

225

7,166

6,343

(9,713)

$13,167

$(1,223)

(2,647)

(1,648)

(1,748)

$(7,266)

$5,901

2014 2015


Note:

The amounts of net deferred tax assets are shown in the following accounts

in the consolidated balance sheets as of March 31, 2015 and 2014.

Deferred tax assets - current

Deferred tax assets - noncurrent

Long-term liabilities - noncurrent

2015

¥1,068

400

(759)

¥784

621

(740)

$8,889

3,329

(6,317)

2014 2015


Normal effective statutory tax rate

Nontax deductible expenses

Tax rate difference in foreign subsidiaries

Per capita in local tax

Amortization of goodwill

Equity in earnings of associated companies

Change in valuation allowance

Tax credit

Tax on unrealized intercompany profit

Decrease adjustment of deferred tax assets for changing the tax rate

Other - net

Actual effective tax rate

35.6%

0.7

0.1

0.6

0.3

(1.3)

9.6

(8.6)

(0.7)

1.4

0.0

37.7%

38.0%

1.3

(0.2)

1.1

0.5

(0.6)

11.3

(5.9)

(1.1)

3.7

1.0

49.1%

2015 2014

2016

2017

2018

2019

2020

2021 and thereafter

Total

¥49

277

242

188

397

2,057

¥3,210

$408

2,305

2,014

1,565

3,304

17,121

$26,717


Millions ofYen

Year Ending March 31

rates, those risks are hedged by using forward foreign currency

contracts. Investment securities are mainly equity securities and their fair

market value are monitored on a quarterly basis.

Payment terms of payables, such as trade notes and trade accounts, are

less than one year. Although payables in foreign currencies are exposed

to the market risk of fluctuation in foreign currency exchange rates, those

risks are generally hedged by using forward foreign currency contracts.

Maturities of bank loans and lease obligations are less than seven and a

half years after the consolidated balance sheet date. Although a part of

such bank loans and lease obligations are exposed to market risks from

changes in variable interest rates, those risks are mitigated by using

derivatives of interest rate swaps. See Note 13 for more details about

derivatives. (3) Risk management for financial instruments

Credit Risk Management

Credit risk is the risk of economic loss arising from a counterparty's

failure to repay or service debt according to the contractual terms. The

Group manages its credit risk from receivables on the basis of internal

guidelines, which include monitoring payment terms and balances of

major customers by each business administration department to identify

the default r isk of customers at an early stage. Because the

counterparties to derivatives are limited to major international financial

institutions, the Group does not anticipate any losses arising from credit

risk. See Note 13 for more details about derivatives.

Market risk management (foreign exchange risk and interest rate risk)

Foreign currency trade receivables and payables are exposed to market

risk resulting from fluctuations in foreign currency exchange rates. Such

foreign exchange risk is hedged principally by forward foreign currency

contracts. Interest rate swaps are used to manage exposure to market

risks from changes in the interest rates of loan payables.

Investment securities are managed by monitoring market value and the

financial position of issuers on a regular basis.

Derivative transactions entered into by the Group have been made in

accordance with internal policies which regulate the authorization and

credit limit amount by the corporate treasury department.

Liquidity risk management

Liquidity risk comprises the risk that the Group cannot meet its

contractual obligations in full on their maturity dates. The Group manages

its liquidity risk by holding adequate volumes of liquid assets along with

adequate financial planning by the corporate treasury department.(4) Fair value of financial instruments

Fair values of financial instruments are based on quoted prices in active

markets. If a quoted price is not available, other rational valuation

techniques are used instead. See Note 13 for the details of fair value for

derivatives.

(a) Fair value of financial instruments

The above long-term debt includes the current portion of long-term debt.

Cash and cash equivalents and Notes and accounts receivable

The carrying values approximate fair value because of their short maturities.

Investment securities

The fair values are measured at the quoted market price of the stock

exchange for the equity instruments. Fair value information for the

investment securities by classification is included in Note 4.

Short-term bank loans and Payables

The carrying values approximate fair value because of their short maturities.

Long-term debt

The fair values of long-term debt and lease obligations are determined by

discounting the cash flows related to the debt at the Group's assumed

corporate borrowing rate.

Derivatives

Fair value information for derivatives is included in Note 13.

(b) Carrying amount of financial instruments whose fair value cannot be

reliably determined


Notes and accounts receivable


Total

Short-term bank loans

Payables

Long-term debt

Total

CarryingAmount

Millions of YenFair Value

UnrealizedLoss

¥8,968

20,921

1,565

¥31,454

¥(13,610)

(10,980)

(15,825)

¥(40,415)

¥8,968

20,921

1,565

¥31,454

¥(13,610)

(10,980)

(15,834)

¥(40,424)

¥(9)

¥(9)

March 31, 2015




Total


Payables

Long-term debt

Total

CarryingAmount

Millions of YenFair Value

UnrealizedLoss

¥9,832

21,025

1,169

¥32,026

¥(15,157)

(13,471)

(12,818)

¥(41,446)

¥9,832

21,025

1,169

¥32,026

¥(15,157)

(13,471)

(12,831)

¥(41,459)

¥(13)

¥(13)

March 31, 2014




Total


Payables

Long-term debt

Total

CarryingAmount

Thousands of U.S. DollarsFair Value

UnrealizedLoss

$74,640

174,124

13,025

$261,789

$(113,275)

(91,386)

(131,711)

$(336,372)

$74,640

174,124

13,025

$261,789

$(113,275)

(91,386)

(131,786)

$(336,447)

$(75)

$(75)

March 31, 2015

31 32


(5) Maturity analysis for financial assets with contractual maturities

See Note 6 for annual maturities of long-term debt.

13.DERIVATIVES

The Group enters into derivative contracts to hedge market risks such as

foreign exchange and interest rate fluctuations associated with certain

assets and liabilities.

It is the Group's policy to use derivatives only for the purpose of reducing

market risks associated with assets and liabilities. The Group does not hold

or issue derivatives for speculative purposes.

Since all of the Group's derivative transactions are related to qualified

hedges of underlying business exposures, market gain or loss risk in the

derivative instruments is basically offset by opposite movements in the value

of the hedged assets or liabilities.

Derivative transactions entered into by the Group have been made in accordance

with internal policies which regulate the authorization and credit limit amount.

Derivative transactions to which hedge accounting is applied.

The above interest rate swaps which qualify for hedge accounting and meet

specific matching criteria are not remeasured at market value but the

differential paid or received under the swap agreements is recognized and

included in interest expense. In addition, the fair value of such interest rate

swaps in Note 12 is included in that of hedged items (i.e., long-term debt).

The contract or notional amounts of derivatives which are shown in the

above table do not represent the amounts exchanged by the parties and do

not measure the Group's exposure to credit or market risk.

14.OTHER COMPREHENSIVE INCOME

The components of other comprehensive income for the years ended March

31, 2015 and 2014, were as follows:

15.SEGMENT INFORMATION

Under ASBJ Statement No. 17, "Accounting Standard for Segment

Information Disclosures" and ASBJ Guidance No. 20, "Guidance on

Accounting Standard for Segment Information Disclosures," an entity is

required to report financial and descriptive information about its reportable

segments. Reportable segments are operating segments or aggregations

of operating segments that meet specified criteria. Operating segments are

components of an entity about which separate financial information is

available and such information is evaluated regularly by the chief operating

decision maker in deciding how to allocate resources and in assessing

Investments in equity instruments that do not have a quoted market price in an active market

Investments in limited partnerships

Total

2015

¥591

31

¥622

¥620

45

¥665

$4,919

258

$5,177

2014 2015




Total

Due after1 Yearthrough5 Years

Due in1 Yearor Less

Due after5 Yearsthrough10 Years

Due after10 Years

Millions of Yen

¥8,968

20,921

¥29,889

March 31, 2015

Interest rate swaps:(fixed rate payment, floating rate receipt)

ContractAmount

HedgedItem

Long-termdebt

¥2,060 ¥2,030

ContractAmount

Due afterOne Year

FairValue

Millions of YenAt March 31, 2015


ContractAmount

HedgedItem

Long-termdebt

$17,145 $16,896

ContractAmount

Due afterOne Year

FairValue

Thousands of U.S. DollarsAt March 31, 2015


ContractAmount

HedgedItem

Long-termdebt

¥680 ¥660

ContractAmount

Due afterOne Year

FairValue

Millions of YenAt March 31, 2014



Total

Due after1 Yearthrough5 Years

Due in1 Yearor Less

Due after5 Yearsthrough10 Years

Due after10 Years

Thousands of U.S. Dollars

$74,640

174,124

$248,764

March 31, 2015

Unrealized gain on available-for-sale securities:

Gains arising during the year

Reclassification adjustments to profit or loss

Amount before income tax effect

Income tax effect

Total

Foreign currency translation adjustments:

Adjustments arising during the year

Total

Defined retirement benefit plans:

Adjustments arising during the year

Reclassification adjustments to profit or loss

Amount before income tax effect

Income tax effect

Total

Share of other comprehensive income in associates:

Gains arising during the year

Total

Total other comprehensive income

2015

¥908

(508)

400

(108)

¥292

¥201

¥201

¥225

344

569

(195)

¥374

¥76

¥76

¥943

¥117

117

(42)

¥75

¥180

¥180

¥98

¥98

¥353

$7,557

(4,228)

3,329

(898)

$2,431

$1,672

$1,672

$1,873

2,863

4,736

(1,623)

$3,113

$632

$632

$7,848

2014 2015


performance. Generally, segment information is required to be reported

on the same basis as is used internally for evaluating operating segment

performance and deciding how to allocate resources to operating

segments.

1. Description of reportable segments

The Group's reportable segments are those for which separate financial

information is available and regular evaluation by the Company's

management is being performed in order to decide how resources are

allocated among the Group. Therefore, the Group consists of two

segments: aerospace and related products and industrial products.

Aerospace and related products consists of manufacturing propeller

systems, landing gear systems, heat control systems, space equipment,

hydraulic pumps, hydraulic valves and others. Industrial products

consists of manufacturing LNG vaporizers, heat exchangers, ozone

generators, semiconductor equipment and others.

2. Methods of measurement for the amounts of sales, profit, assets and

other items for each reportable segment

The accounting policies of each reportable segment are consistent with

those disclosed in Note 2, "Summary of Significant Accounting Policies."

3. Information about sales, profit, assets, and other items

4. Information about geographical areas

(1) Sales

(2) Property, plant and equipment

Information about property, plant and equipment by geographical

area is not disclosed because Japanese GAAP does not require

such disclosure if total assets in Japan represent more than 90% of

the consolidated amounts.

5. Information about major customers

Information about major customers is not disclosed for the year ended

March 31, 2015, because there is no customer that represents more

than 10% of net sales in the consolidated statement of income.

6. Information about amortization of goodwill

Sales:

Sales to external customers

Intersegment sales or transfers

TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation

Amortization of goodwillInvestment in associated companies accounted for by the equity methodIncrease in property, plant and equipment and intangible assets

Consolidated

Millions of Yen2015

¥47,135

¥47,135

¥1,598

81,899

2,461

20

1,164

2,261

¥9,243

¥47,135

¥47,135

¥1,598

72,656

2,461

20

1,164

2,261

¥17,806

¥17,806

¥242

25,417

1,127

1,164

486

¥29,329

¥29,329

¥1,356

47,239

1,334

20

1,775

ReconciliationsTotalIndustrialProducts

Reportable SegmentAerospace and

Related Products

Sales:



TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation


Consolidated

Millions of Yen2014

¥45,032

¥45,032

¥963

79,948

2,130

18

998

4,754

¥10,780

¥45,032

¥45,032

¥963

69,168

2,130

18

998

4,754

¥18,393

¥18,393

¥157

27,417

904

998

3,493

¥26,639

¥26,639

¥806

41,751

1,226

18

1,261



Related Products

Sales:



TotalSegment profit

(operating income)

Segment assets

Other:

Depreciation


Consolidated

Thousands of U.S. Dollars2015

$392,301

$392,301

$13,300

681,639

20,483

166

9,688

18,818

$76,928

$392,301

$392,301

$13,300

604,711

20,483

166

9,688

18,818

$148,198

$148,198

$2,014

211,544

9,380

9,688

4,045

$244,103

$244,103

$11,286

393,167

11,103

166

14,773



Related Products

¥47,135

Tota l

¥193

Other

¥8,029

Asia

¥3,171

Europe

¥11,643

North America

¥24,099

Japan

Millions of Yen2015

¥45,032

Tota l

¥169

Other

¥5,758

Asia

¥3,744

Europe

¥10,750

North America

¥24,611

Japan

Millions of Yen2014

$392,301

Tota l

$1,606

Other

$66,825

Asia

$26,392

Europe

$96,904

North America

$200,574

Japan


Note: Sales are classified by country or region based on the location of customers.


Goodwill at March 31, 2015

Millions of Yen2015

¥20

159

Aerospace andRelated Products

IndustrialProducts

Elimination/Corporate

¥20

159

Total


Related Segment Name

¥4,530

Millions of Yen

Ministry of Defense

Name of Customer

2014Sales



Millions of Yen2014

¥18

175


IndustrialProducts


¥18

175

Total

33 34


16.SUBSEQUENT EVENTS

(a) Appropriations of Retained Earnings

At the general shareholders' meeting held on June 26, 2015, the

Company's shareholders approved the following appropriations of

retained earnings as of March 31, 2015:

(b) Business Combination(1) Acquisition of stock

On June 4, 2015, SPP Canada Aircraft, Inc. (SPPCA), a wholly-owned

subsidiary of the Company, acquired 100% of the shares of

Tecnickrome Aéronautique Inc. (Tecnickrome), a provider of surface

finishing technologies for the aerospace market based in Quebec,

Canada.

The acquisition enables the Company to provide flexible and

high-value services to our customers throughout North America and

Europe through SPPCA. This will also significantly enhance the

overall capability of the Group, which includes the recently-acquired

CFN Precision Ltd., to provide a stable supply of products. Tecnickrome

will benefit from the opportunity to provide its high-value products to

a broader customer base by expanding its traditional business with

the anticipation of further growth.

The aggregate cost of the acquisition was CA$ 15.5 million and the

value of assets acquired and liabilities assumed has not been

determined.(2) Acquisition of businesses

On June 25, 2015, the board of the Company resolved that SPP

Technologies Co., Ltd. (SPT), a subsidiary of the Company, should

establish a wholly-owned new company in the United States, SPT

USA, Inc., and acquire the Thermal Product (TP) business from SPTS

Technologies UK Limited on June 30, 2015.

The acquisition of the TP business will lead to an expansion of the

Microtechnology business unit operated mainly by SPT, by

generating a synergy effect with the existing SPT products and

technologies, and by obtaining an overseas network.

The aggregate cost of the acquisition was approximately US$ 22

million and the value of assets acquired and liabilities assumed has

not been determined.




$166

1,323


IndustrialProducts


$166

1,323

Total

Appropriations:

Cash dividends, ¥3.5 ($0.03) per share¥185 $1,540


Millions ofYen


I n d e p e n d e n t A u d i t o r ’ s R e p o r tM a r c h 3 1 , 2 0 1 5

35 36

53,167 thousandshares

Ind iv iduals and other33.8%

Financia l Inst i tut ions10.5%

Domest ic Corporat ions

44.8%

Foreign Investors

8.5%

Treasury Stock0.4%

Financia l Instrument Companies

2.0%

Sumitomo Precision Products Co., Ltd.

January, 1961

¥10,311 million

Shinichi Miki

1,709 (Consolidated)

1,118 (Non-consolidated)

1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, Japan

Main Plant (Amagasaki), Shiga Plant, Wakayama Plant (Plant site area：136,844 square meters)

http://www.spp.co.jp

D o m e s t i c a n d O v e r s e a s B a s e sA s o f J u l y 1 , 2 0 1 5

D o m e s t i c

O v e r s e a s

■ Head Office & Main Plant

■ Sumisei Engineering Co., Ltd. （Design, drawing and engineering services） ■ Sumisei Sangyo Co., Ltd. （Sales of all types of materials and machinery parts） ■ Shinsen Seiki Co., Ltd. （Processing of all types of machinery parts）

■ SPP Nagasaki Engineering Co., Ltd （Maintenance, repair and overhaul on aircraft landing gear systems and customer support）

■ Shiga Plant

■ Nagoya Sales Office

■ Tokyo Head Office

■ SPP Technologies Co., Ltd. （Production, sales and support of MEMS/ semiconductor related process tools）

■ Sumisei Hydraulic Systems Co., Ltd. （Production, maintenance and sales of aerospace and hydraulic equipment）

■ Wakayama Plant

■ M2M Technologies Inc. (Solution services utilizing machine to machine communication and cloud computing technology)

■ Sumitomo Precision USA, Inc. （Production and sales of heat exchangers for aerospace）

■ New York Office

■ London Office

■ SPP Canada Aircraft, Inc. （Design, assembly, sales and customer support for Commercial Landing Gear Systems）

■ Sumitomo Precision Shanghai Co., Ltd. （Development and sales of environmental systems）

■ Ningbo SPP Hydraulics Co., Ltd. （Production and sales of QT pumps）

■ Aviocast Inc. （Production and sales of casting products）

■ Silicon Sensing Systems Ltd. （Production and sales of motion sensors）

■ Office & Plant ／ ■ Overseas Office ／ ■ Main Affiliated Company

■ Iruma Plant

■ Tecnickrome Aéronautique Inc. （Surface finishing of aircraft parts）

■ CFN Precision Ltd. （Production and sales of aircraft parts）

■ SPT Microtechnologies USA, Inc. (Manufacture and sales of thermal process furnace equipment etc. and relevant services for semiconductor related device industry)

C o m p a n y P r o f i l e / S t o c k I n f o r m a t i o n

C o m p a n y P r o f i l e ( A s o f M a r c h 3 1 , 2 0 1 5 )

Company Name

Establ ished

Pain- in Capi ta l

Pres ident

Number of Employees

Head Of f ice

Plant

URL

S t o c k I n f o r m a t i o n ( A s o f M a r c h 3 1 , 2 0 1 5 )

F iscal Year

Ordinary Shareholder Meet ing

Record Date

Transfer Agent

Method of Publ ic Not ices

Stock Code

Number of Author ized Shares

Number of Issued Shares

Number of Shareholders

Min imum Trading Uni t

Stock Exchange L ist ing

From April 1 of each year through March 31 of the following year

June

Ordinary Shareholder Meeting: March 31

Year-end Dividends: March 31

Interim Dividends: September 30

1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan

Sumitomo Mitsui Trust Bank, Limited

To be posted on the Company’s Website （http://www.spp.co.jp）

6355

200,000,000

53,167,798

6,082

1,000

Tokyo

▶ Major Shareholders▶ Breakdown of Shareholders

Name of Shareholder

Nippon Steel & Sumitomo Metal Corporation

Masayoshi Yamauchi

Sumitomo Precision Products Co., Ltd. Kyoeikai

Sumitomo Corporation

The Master Trust Bank of Japan, Ltd. (trust account)

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

Japan Trustee Services Bank, Ltd. (trust account)

Sumitomo Mitsui Banking Corporation

BNYM SA/NV FOR BNYM CLIENT ACCOUNT MPCS JAPAN

Tatsuo Yamamoto

21,394

1,014

972

880

859

676

621

543

504

500

Number ofShares

(thousands)

ShareholdingRatio

(%)

40.41

1.92

1.84

1.66

1.62

1.28

1.17

1.03

0.95

0.94

37 38

1-10 Fuso-cho, Amagasaki, Hyogo 660-0891, JapanPhone 81-(0)6-6482-8811 Fax 81-(0)6-6489-5801http://www.spp.co.jp/

ANNUAL REPORT - 住友精密工業株式会社 · SPP has some 15% of the world market for landing...

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Transcript of ANNUAL REPORT - 住友精密工業株式会社 · SPP has some 15% of the world market for landing...