TOKYO ELECTRON

Oct 29, 2014

Consolidated Financial Review
for the Second Quarter Ended September 30, 2014
Company name:
URL:
Telephone number:
Stock exchange listing:Tokyo Electron Limited
http://www.tel.com(03) 5561-7000
Tokyo Stock Exchange 1st Section (Code 8035)

Notes: 1. The accompanying financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Japan.
2. Amounts are rounded down to the nearest million yen.

1. Financial highlights for the six months ended September 30, 2014
Six months ended
September 30, 2013 September 30, 2014
Net sales (Millions of yen)
254,500
294,273
Operating income (Millions of yen)
(1,822)
30,115
Ordinary income (Millions of yen)
588
31,773
Net income (Millions of yen)
2,476
20,016
Net income per share (Yen)
13.82
111.68Fully diluted net income per share (Yen)
13.79
111.42Comprehensive income:Six months ended September 30, 2014: 23,321 million yen
Six months ended September 30, 2013: 8,789 million yen(1) Operating results (Cumulative)(2) Financial position
As ofMarch 31, 2014
Total assets (Millions of yen)
Net assets (Millions of yen)
Equity ratio (%)
Equity: 594,160 million yen (as of September 30, 2014)
578,091 million yen (as of March 31, 2014)

828,591
590,613
69.8

As of
September 30, 2014
801,310595,876
74.1

2. Dividends
Year ended
March 31, 2014
1Q-end dividend per share (Yen)
2Q-end dividend per share (Yen)
3Q-end dividend per share (Yen)
Year-end dividend per share (Yen)Annual dividend per share (Yen)

25.00
25.00
50.00

Year ending
March 31, 2015
10.00
30.00
-

Note: The effective date of the business combination with Applied Materials, Inc. has not yet been
determined despite this merger having been announced because it is conditional upon the approval
from the relevant authorities in Japan, the U.S., and other countries subject to competition laws. Given
these circumstances, we will not disclose estimates for dividends after the third quarter ending
December 31, 2014.

1

TOKYO ELECTRON

3. Earnings forecasts for the year ending March 31, 2015
While we have not yet disclosed full-year earnings forecast for the fiscal year ending March 31, 2015 since
the effective date of the business combination still remains undetermined, the TEL Group is expected toachieve net sales of 304 billion yen and operating income of 43 billion yen in the second half.

4. Others(1)

Important changes in subsidiaries: None
(Changes on specific subsidiaries with changes in scope of consolidation)(2)

Changes in accounting principles, accounting estimation and restatement
1. Changes in accounting policies along with changes in accountins standards: Yes
2. Other changes of accounting policies besides number 1 above: None
3. Changes in accounting estimation: None
4. Restatement: None(3)

Number of shares issued and outstanding (common stock)
1. Number of shares issued and outstanding (including treasury stock)
As of September 30, 2014:

180,610,911 shares

As of March 31, 2014:

180,610,911 shares

2. Number of shares of treasury stock
As of September 30, 2014:

1,359,423 shares

As of March 31, 2014:

1,408,950 shares

3. Average number of shares outstanding
Six months ended September 30, 2014: 179,222,274 shares
Six months ended September 30, 2013: 179,187,591 shares

Notification of the status of quarterly financial review procedures:This quarterly financial report is outside the jurisdiction of auditing procedures outlined in the Financial Instruments andExchange Act and remain incomplete at the time of announcing this report.
Explanations on the appropriate use of earnings forecast:
The performance forecast and estimate stated in this Financial Review are based on certain assumptions judged to bereasonable at the present time in light of information currently available. Consequently, actual operating results may differ
substantially from the projections in this Financial Review.
The company plans to hold a financial meeting for analysts and investors on Wednesday Oct 29, 2014. The supplementarymaterials to these financial reports that will be handed out at this meeting will be posted simultaneously on our company
website.

2

1. Qualitative Information on Financial Results for the Current Quarter(1) Description of Operating Results

Global economy during the first half of the current fiscal year generally remained on a gradual recovery
trend, while the Japanese economy on the whole also shows moderate recovery despite the impact of theconsumption tax hike.
In the electronics industry, the primary area of the Tokyo Electron (TEL) Group’s business activities, theelectronic components market still remained robust, thanks to an increase in demand for semiconductors
supported by the launch of the new smartphones, along with the expansion of the low-priced smartphonemarket primarily in China, besides the positive developments such as the soaring demand for servers fordata centers due to the growing popularity of crowd computing and the use of big data.
Under such circumstances, the Group’s consolidated results (cumulative) for the first half of the current
fiscal year were net sales of 294,273 million yen (a year-on-year growth of 15.6%), operating income of30,115 million yen (a year-on-year operating loss of 1,822 million yen), ordinary income of 31,773 million
yen (a year-on-year ordinary income of 588 million yen); and in addition, the net income for the first half ofthe current fiscal year stood at 20,016 million yen (a year-on-year growth of 708.2%).

The overview of each business segment is as described below.
TEL sold part of the shares held in Tokyo Electron Device Ltd. in April and May of this year. This resulted inTokyo Electron Device Ltd. being switched from a consolidated subsidiary of the group to an affiliate
accounted for under the equity method, and the Electronic Components and Computer Networks segment
overseen by the company and its subsidiaries being removed from segments reported from the first quarterof the current fiscal year. The 15.6% year on year increase in consolidated net sales mentioned abovereflects the impact of removing Tokyo Electron Device Ltd. from consolidated range.

(i) Semiconductor Production Equipment
Capital investment in facilities among semiconductor manufacturers remained strong, supported by therobust demand for electronic components such as DRAM and NAND flash memory, on the back of thefunctional sophistication and solid sales of smartphones along with the growing demand for servers for data
centers. Consequently, net sales to external customers in this segment for the first half of the current fiscal
year were 272,626 million yen (a year-on-year growth of 40.0%).

(ii) Flat Panel Display (FPD) Production Equipment
The market for FPD production equipment remained strong, due to the growing demand for small to
medium-sized flat panel displays used primarily for smartphones, along with ongoing capital investment in3

facilities for manufacturing large-sized flat panel displays in China. As a result, net sales to externalcustomers in this segment for the first half of the current fiscal year were 19,029 million yen (a year-on-year
growth of 102.6%).

(iii) Photovoltaic Panel (PV) Production Equipment
While we have ceased new sales activities for PV production equipment, sales entries for work in progress
to fulfill existing orders and other factors resulted in net sales to external customers in this segment of 2,325
million yen (a year-on-year loss of 29.3%) for the first half of the current fiscal year.

(iv) Others
Net sales to external customers in this segment were 292 million yen (a year-on-year growth of 13.2%) for
the first half of the current fiscal year.

(For reference)

Consolidated Operating Results（ Millions of yen）
FY2014
1H

Net Sales
Semiconductor Production Equipment
Japan
U.S.
EuropeKorea
TaiwanChina
S.E.Asia
FPD Production Equipment
PV Production Equipment
Electronic Components & Computer Networks
OthersOperating Income (Loss)
Ordinary Income
Net Income (Loss)
Note:

254,500
194,773
33,23344,817
13,57528,86456,059
9,635
8,587
9,393
3,288
46,786258(1,822)588
2,476

FY20142H
357,670
284,068
43,19159,546
16,06044,53874,19239,261
7,277
18,923517
53,939221
34,02734,898(21,885)

Offset elimination has been carried out on the dealing between segments.

4

FY2015
1H

1Q

2Q

294,273272,626
39,50567,696
24,72037,14676,80820,981
5,768
19,0292,325

151,325
136,126
13,42133,79012,53022,451
38,456
13,911
1,565
13,9291,102

142,948
136,500
26,08433,906
12,18914,69538,352
7,069
4,202
5,099
1,223

292
30,11531,77320,016167
17,06916,913
11,835125
13,045
14,8608,181

Production and Order Performance
1. Production（ Millions of yen）
FY2014
1H

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment
Total
Note:

FY20142H

185,142
10,815
3,358
199,316

FY20151H

284,943
25,232517
310,693247,355
10,4532,272
260,081

1Q

2Q

124,318
7,419
1,081
132,818

123,037
3,033
1,191
127,262

1. Amounts are based on sales prices.
2. The above amounts do not include consumption taxes.

2. Orders Received（ Millions of yen）
FY2014
1H

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment
Electronic Components & Computer Networks
Others
Total

Note:

FY20142H

249,031
20,843
2,286
48,607258
321,026

FY20151H

297,901
20,493
2,017
54,533
221
375,167

1Q

2Q

279,771
19,130550

137,297
14,280541

142,474
4,849
8

292
299,744167
152,286

125
147,457

1. Offset elimination has been carried out on the dealing between segments.
2. The above amounts do not include consumption taxes.

3. Orders Backlog（ Millions of yen）
FY2014
1H

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment
Electronic Components & Computer Networks
OthersTotal
Note:

196,081
27,449FY20142H

7,494
16,606

209,91429,0198,994
17,200247,632

265,129

FY2015
1Q

2Q

211,085
29,371
8,433

217,059
29,121
7,219

248,889

253,399

1. Offset elimination has been carried out on the dealing between segments.
2. The above amounts do not include consumption taxes.

(2) Description of Financial Conditions(i) Financial Conditions
Current assets at the end of the second quarter of the current fiscal year were 593,210 million yen, down
28,282 million yen compared to the end of the previous fiscal year. The major factors influencing this result

5were a 27,019 million yen decrease in trade notes and accounts receivable, a 25,990 million yen decrease
in inventories, a 7,704 million yen decrease in cash and deposit, a 6,805 million yen decrease in accrued
consumption and other taxes and a 38,679 million yen increase in short-term investments included insecurities.
Tangible fixed assets decreased by 707 million yen from the end of the previous fiscal year, to 111,636
million yen.
Intangible fixed assets decreased by 1,888 million yen from the end of the previous fiscal year, to 27,667
million yen.
Investment and other assets increased by 3,596 million yen from the end of the previous fiscal year, to68,795 million yen.
As a result, total assets decreased by 27,281 million yen from the end of the previous fiscal year, to 801,310
million yen.
Current liabilities were down 24,799 million yen compared to the end of the previous fiscal year, to 145,710
million yen. The major factors causing the decrease were a 13,782 million yen decrease in trade notes andaccounts payable and an 11,531 million yen decrease in short-term borrowings associated with the removalof Tokyo Electron Device Ltd. from consolidated accounting.
Long-term liabilities were down 7,744 million yen compared to the end of the previous fiscal year, to 59,723
million yen.
Net assets were up 5,262 million yen compared to the end of the previous fiscal year, to 595,876 million yen.
The main factors were an increase due to reported quarterly net income of 20,016 million yen, a decreaseof 10,650 million yen in minority interests from the removal of Tokyo Electron Device Ltd. from consolidated
accounting and other facts, and a decrease as a result of the payment of 6,272 million yen in both year-end
dividends for the previous fiscal year and quarterly dividends for the first quarter of the current fiscal year.
The equity ratio was 74.1%.

(ii) Cash Flow
Cash and cash equivalents at the end of the second quarter of the current consolidated fiscal year
increased by 120,274 million yen compared to the end of the previous fiscal year, to 225,071 million yen.
The combined balance including a 74,049 million yen in time deposits and short-term investments withperiods to maturity or redemption of at least three months that are not included in cash and cash
equivalents was 299,121 million yen, up 30,974 million yen from the end of the previous fiscal year. The
overall situation regarding cash flow during the second quarter of the current fiscal year was as described
below.
Cash flow from operating activities was positive 43,338 million yen, up 43,555 million yen compared to thesame period of the previous fiscal year. The main positive factors were 29,101 million yen in net income
before income taxes, 9,737 million yen in depreciation and amortization, a 5,327 million yen decrease in6

trade notes and accounts receivable and a 5,186 million yen decrease in inventories. The main negative
factors were the payment of income taxes of 15,302 million yen and a 6,535 million yen decrease inaccounts payable.
Cash flow from investing activities was positive 85,358 million yen, compared to positive 7,148 million yen in
the same period of the previous fiscal year. The primary positive factor was 89,303 million yen associatedwith a decrease in short-term investments. The primary negative factor was 6,597 million yen in paymentsfor purchase of tangible fixed assets.
Cash flow from financing activities was negative 6,458 million yen, compared to positive 1,102 million yen in
the same period of the previous fiscal year. This was primarily the result of the payment of 6,272 million yen
in dividends.

(3) Description of Financial Estimates Information such as Consolidated Performance Forecasts
While we have not yet disclosed full-year earnings forecast for the fiscal year ending March 31, 2015 since
the effective date of the business combination still remains undetermined, the TEL Group is expected toachieve net sales of 304 billion yen and operating income of 43 billion yen in the second half. For
information, estimated full-year earnings combining the actual results for the first half and the expectation
for the second half amount to net sales of 598.2 billion yen and operating income of 73.1 billion yen.

Note: The financial forecasts and estimates stated in this announcement are based on certain assumptions judged to bereasonable by the Company in light of information currently available concerning economic conditions in Japan and overseas,fluctuations in foreign exchange rates, and other factors that may have an impact on performance. The company does notpromise that the forecasts or estimates will be accurate.
They are therefore susceptible to the impact of many uncertainties, including market conditions, competition, the launching of
new products (and their success or failure), and global conditions in the semiconductor related industry. Consequently, actual
sales and profits may differ substantially from the projections stated in this announcement.

7

TOKYO ELECTRON

Consolidated Balance Sheet(Millions of yen)
As ofMarch 31, 2014

As of
September 30, 2014ASSETS
Current assets
Cash and deposit

56,34548,641

Trade notes and accounts receivable

129,032

102,012Securities

211,800

250,480

Merchandise and finished goods

114,289

84,279Work in process

38,07440,952

Raw materials and supplies

15,912

17,053

Others57,53850,602

Allowance for doubtful accounts
Total current assets
Long-term assets
Tangible fixed assets
Intangible fixed assets
Goodwill(1,502)(813)

621,492593,210112,344

111,636

9,400

8,990

Others

20,155

18,677

Total intangible fixed assets

29,556

27,667

Others

67,06570,674

Allowance for doubtful accounts(1,866)(1,878)

Total investments and other assets

65,19968,795Investments and other assets

Total long-term assets
Total assets

8207,099

208,100

828,591

801,310

TOKYO ELECTRON(Millions of yen)
As ofMarch 31, 2014

As of
September 30, 2014

LIABILITIESCurrent liabilities
Trade notes and accounts payable

53,667

Short-term borrowings

11,531

39,885-

Income taxes payable

14,014

11,032

Accrued warranty expenses

10,072

10,778Other allowance

8,642

7,813

Others72,581

76,200Total current liabilities

170,509145,710Long-term liabilities
Other allowance

582

374

Net defined benefit liability

53,44849,026

Others13,436

10,322

Total long-term liabilities

67,46859,723237,978

205,434

Common stock

54,961

54,961

Capital surplus

78,02378,023Retained earnings

436,174448,647

Total liabilities
NET ASSETS
Shareholders' equity

Treasury stock
Total shareholders' equity(9,478)(9,146)559,679

572,484

5,592

5,555

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Translation adjustments

60

75

5,777

9,976

Remeasurements of defined benefit plans

6,981

6,068

Total accumulated other comprehensive income

18,411

21,675

Subscription rights to shares

1,643

1,487

Minority interests

10,878227

Total net assets

590,613595,876

828,591

801,310

Total liabilities and net assets

9

TOKYO ELECTRON

Consolidated Statement of Income(Millions of yen)Six months ended
September 30, 2013

Six months ended
September 30, 2014

Net sales

254,500

294,273

Cost of sales

174,453

186,825

Gross profit

80,046

107,448

38,44034,951

Selling, general & administrative expenses
Research and development expenses
Others43,42842,381

Total selling, general & administrative expenses

81,86977,333(1,822)

30,115

Operating income (loss)
Non-operating income
Interest income

677

551

Revenue from grants

907

478

Others

2,397

1,233

Total non-operating income

3,981

2,264

1,338

535

Non-operating expenses
Foreign currency translation loss
Others

232

69

1,570

605

588

31,773

79

120

-

54

Others18-

Total unusual or infrequent profit

98

175

Total non-operating expenses
Ordinary income (loss)
Unusual or infrequent profit
Gain on sale of fixed assets
Gain on sale of investment securities

Unusual or infrequent loss
Loss on impairment
Loss on sales of subsidiaries' stocks
Expenses for restructuring of business bases
Others

873

-

-

1,609

-

698

135

540

Total unusual or infrequent loss

1,009

2,848

Income (loss) before income taxes(321)

29,101

Income taxes(2,903)

9,058

Income (loss) before minority interests

2,582

20,042

Minority interests

105

26

Net income (loss)

2,476

20,016

10

TOKYO ELECTRON

Consolidated Statement of Comprehensive Income(Millions of yen)Six months ended
September 30, 2013

Six months ended
September 30, 2014

2,582

20,042

Valuation difference on available-for-sale securities

368

(37)

Deferred gains or losses on hedges

65

81

5,773

4,178

Remeasurements of defined benefit plans

-

(892)

Share of other comprehensive
income of associates accounted for using equity method

-

(51)

Income (loss) before minority interests
Other comprehensive income

Translation adjustments

Total other comprehensive income
Comprehensive income

6,206

3,278

8,789

23,321

8,619

23,280169

40(Breakdown)Comprehensive income attributable to owners
Comprehensive income attributable to minority interests

11

TOKYO ELECTRON

Consolidated Cash Flow

(Millions of yen)Six months ended
Six months ended
September 30, 2013 September 30, 2014

Cash flow from operating activities
Income (loss) before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in accrued pension and severance costs
Increase (decrease) in net defined benefit liability
Loss (gain) on sales of subsidiaries' stocks
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in accounts payable
Decrease (increase) in prepaid consumption tax
Increase (decrease) in customer advances
OthersSubtotal
Receipts from interest and dividends
Interest paid
Income taxes (paid) refund
Net cash generated by operating activities(321)
12,7492,139
1,474(16,352)(20,314)
9,058
7,529
8,201
(6,975)(2,811)
2,262
(39)
371
(217)

29,101
9,737
544
757
1,609
5,327
5,186
(6,535)
4,740
4,343
2,861
57,671984(15)(15,302)43,338(48)
13,984(5,246)(1,356)
1

89,303(6,597)
(128)
1,084

-

1,726

(186)
7,148

(28)
85,3584,101
2,000(4,658)
(339)
1,102

(6,272)(186)(6,458)(2,158)5,875
85,313(1,963)
120,274
104,797(1,206)-89,982225,071

Cash flow from investing activities
Decrease (increase) in time deposits
Decrease (increase) in short-term investments
Payment for purchase of tangible fixed assets
Payment for purchase of intangible fixed assets
Proceeds from sale of investment securities
Proceeds from sale of subsidiaries resulting in change in scope of
consolidation
OthersNet cash used in investing activities

Cash flow from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Dividends paid
OthersNet cash generated by financing activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents from changes
in accounting periods at consolidated subsidiaries
Cash and cash equivalents at end of period

12

TOKYO ELECTRON

Segment Information(i) Overview of reportable segments
The reportable segments by the company provide separate financial information pertaining to the various
segments of the company, which is reviewed periodically by the management to evaluate corporate
performance as well as make decisions about the allocation of management resources.
The corporate structure consists of product and service segments based on business units (BUs), andthe reportable segments are as follows: Semiconductor Production Equipment, Flat Panel Display (FPD)
Production Equipment, and Photovoltaic Panel (PV) Production Equipment.
The Semiconductor Production Equipment segment consists of coaters/developers, plasma etchsystems, thermal processing systems, single wafer deposition systems, cleaning systems used in wafer
processing, wafer probers used in the wafer testing process and other semiconductor production
equipment, and we are engaged in the development, manufacturing, sales and provision of maintenanceservices, etc. for such products.
The FPD Production Equipment segment consists of coaters/developers, plasma etch/ash systems usedin the manufacturing of flat panel displays, and we are engaged in the development, manufacturing, sales
and provision of maintenance services, etc. for such products.
The PV Production Equipment segment consisted of photovoltaic panel production equipment used in the
manufacturing of thin film silicon photovoltaic panels, and we were engaged in the development,
manufacturing, sales and provision of maintenance services, etc. for such products. However, we havescaled down our business structure of the PV production equipment, by halting development, production,and sales activities for this business and limit operations to support for equipment already delivered as ofthe end of March, 2014.
(ii) Net sales and income (loss) in reportable segments
Six months ended September 30, 2014

(Millions of yen)

Reportable Segments
Semiconductor
Production
Equipment

FPD Production
Equipment

PV Production
Equipment

OthersTotal

Net sales

272,626

19,029

2,325

5,682

299,663

Segment
income (loss)

60,644(612)(7,728)653

52,957

Eliminations

Consolidated Total

Net sales(5,390)294,273

Segment
income (loss)(23,856)

29,101

Notes:
1.

The "Others" is all other businesses segment which are not included in the reported businesssegments, such as the transportation of products, etc. of the Tokyo Electron Group
companies, equipment leasing and insurance, etc.

2.

The eliminations of segment income or loss amounting to 23,856 million yen includes
corporate expenses pertaining to the corporate account which are not allocated to any specificreportable segments. The corporate account expenses are mainly R&D expenses of 8,146
million yen, pertaining to fundamental research and element research conducted by thecompany, and business combination expenses of 6,107 million yen, not related to any of thereportable segments.

3.

Segment income (loss) is adjusted against income before income taxes in consolidated statement of income.

13

TOKYO ELECTRON

Segment Information(iii)

Items Related to Changes in Reportable Segments
In conjunction with the change of Tokyo Electron Device Limited (TED) from a
consolidated subsidiary to an equity-method affiliate, from the first quarter of thecurrent fiscal year, the“Electronic Components and Computer Networks” handled by
TED and its subsidiaries has been eliminated from the reportable segment, andinvestment profit or loss on equity method relating to TED has been included insegment income or loss adjustment amounts.

(iv)

Impairment losses on fixed assets and goodwill, etc. in reportable segments
Significant impairment losses related to fixed assets: None
Significant changes in goodwill amount: None
Significant income related to negative goodwill: None14