Contents

Annual Report 2016
Year Ended March 31, 2016

NIPRO CORPORATION
Annual Report 2016

Contents

Management Report
01 Profile
02 Consolidated Financial Highlights
03 A Message to Our Shareholders
and Investors

01
ProfileTo Become a Truly Global Comprehensive Medical Care Company
Since its establishment in 1954, Nipro Corporation has expanded its businessfrom glass materials to medical devices and pharmaceutical products, basedon our corporate management philosophy and our concept of technological

07 Board of Directors and Auditors

innovation. We provide products and technologies in a wide range of fields to

Our Businessmeet the needs of patients and the medical treatment frontline.

08 Review of Operations
09 Medical-Related Business
11 Pharmaceutical-Related Business
13 Glass-Related Business

14 Global Activities
15 Our Efforts in Regenerative Medicine
16 Interview with Manabu Kodo

The aim of Nipro now is to become a truly global comprehensive medical carecompany that can fulfill the desire of people of the world, having different
cultures, customs and lifestyles, “to lead a healthy life”. Our mission therefore is
to strive earnestly to create new value from a “user-focused” unwavering
attitude of how to contribute to medical services on a global scale.

17 Research and Development Activities

Nipro’s Strength—A “Trinity” Business Model

20 Status of Corporate Governance

Medical devices, pharmaceuticals and glass products are the three pillars of

Our Financials
22 Financial Review
27 Ten-Year Summary
29 Consolidated Balance Sheets

Nipro’s business. We shall continue to further develop these business areas ina harmonious manner. Nipro’s unique strength of technology and know-how
about medical devices, pharmaceuticals and glass products is manifested tothe maximum extent, for instance, in our combination products like double bag

31 Consolidated Statements of Income

kit and pre-filled syringe.

31 Consolidated Statements ofComprehensive Income

labor saving in clinical practice. It would also enable speedy response to a

32 Consolidated Statements of Changes
in Net Assets

Making full use of this strength would ensure the safety of patients andwide range of emerging needs felt across the world and to seed ideas.

33 Consolidated Statements of Cash Flows
34 Notes to Consolidated Financial
Statements

Medical-Related
Business

50 Report of Independent Auditors
51 Corporate Information

Disclaimer regarding Forward-looking Statements
This report contains forward-looking statements regarding
business indices, strategies and performance representing
the expectations and judgments of the management, basedon information available to the Company and publishable atthe time this report was prepared.
When reading this report, please understand thatforward-looking statements involve potential risks anduncertainties; actual future business performance andforecasts may therefore differ materially from thosecontained in these statements, given the possible
emergence of new factors or changes in economic
circumstances and/or the business environment.



Glass-Related
Business



pages

09-10

Pharmaceutical-Related
Business

page

13



pages

11-12

Contents

NIPRO CORPORATION
Annual Report 2016

02

Management Report

Our Business

Our Financials

Consolidated Financial Highlights
Nipro Corporation and its Consolidated Subsidiaries
Years ended March 31, 2016, 2015, 2014, 2013, and 2012

For the year:
Net sales
Operating income
Net income attributable to shareholders of parent
Capital expenditures
Depreciation and amortization
R&D expenses
At the year-end:
Total assets
Net assets
Per share data (in yen and U.S. dollars):
Net income
		Basic earnings (*3)
		Diluted earnings (*3)
Cash dividends
Equity (*3)

Net Sales

Millions of yen

Thousands of
U.S. dollars

2016

2015

2014

2013

2012

2016

¥366,650
24,205
19,71957,10130,147
10,269¥325,084
16,572
12,47047,69827,6688,646¥300,753
12,2902,861
35,09325,151
7,891¥241,021
11,371
10,23237,997
21,2106,464¥212,013
15,825
4,586
39,525
21,581
5,957$3,253,905
214,812175,000
506,754
267,545
91,134¥708,883
175,508¥695,307
178,810¥619,655
135,961¥579,302
128,763¥499,687
113,951$6,291,116
1,557,579¥  116.2
114.7
33.5
977.6

¥   81.0
—
32.5
988.8

¥   18.2
16.3
30.5
832.1

¥   60.0
54.1
27.5
703.5

¥   35.3
31.0
23.5
643.9

$     1.03
1.02
0.30
8.68

Operating Income(Billions of yen)(Billions of yen)
366.7

400
300.8
300

30

325.1

24.2

241.0

20

212.0

16.6

15.8

200

11.4

12.3

10
100

0

2012

2013

2014

2015

2016

0

2012

Net Income Attributable to Shareholders of Parent

Return on Equity(Billions of yen)

(%)

25

2013

2014

2015

2016

15
11.8

19.7
20

12
8.9

15

8.5

9

12.5
10.2

10

6
4.6

0

4.2

2.9

5

2012

2013

2014

3

2015

2016

0

2.3
2012

2013

2014

2015

2016

Contents

NIPRO CORPORATION
Annual Report 2016

03

Management Report

Our Business

Our Financials

A Message to Our Shareholders and Investors
Results for the fiscal year ended March 31, 2016

F

iscal 2016, which ended March 31, 2016, yielded far-reaching results
thanks to Nipro’s consistent adherence to the thinking that “productcompetitiveness is a manufacturer’s lifeline.” Having not only strengthened oursales structure and improved production efficiency, we were able to bring about
improvements in the integration of sales and production on a global scale.
As a result, net sales grew 12.8% year on year to ¥366.7 billion andoperating income rose 46.1% to ¥24.2 billion, while net income attributable toshareholders of parent totaled ¥19.7 billion, an increase of 58.1% from theprevious fiscal year.
In the Medical-Related business, sales of products related to injection,transfusion and dialysis as well as cardiovascular products remained solid. In
overseas sales, we greatly increased the sales quantity of our own-branddialyzers in all the world’s major regions.
In the Pharmaceutical-Related business, plant utilization rates improved
and there was an increase in revenues due to an increased number ofcontract-manufactured biopharmaceuticals, orally administered drugs andinjectable solutions.
In the Glass-Related business, in addition to concentrating on the needsof global customers and capturing new demand, we promoted the developmentof high value-added products and the improvement of their production
environments in response to demand for injectable formulations with greater
stability and higher quality.
We sold consolidated subsidiary Nipro Diagnostics, Inc. in January
2016. The reason for the sale was that blood glucose self-monitoringproducts were determined to be a difficult field in which to promote
Nipro’s uniqueness. As a result, although there will be a negative
impact on future Nipro revenue, the rate of sales expansion excluding
Nipro Diagnostics will grow and is planned to trend upward steadily.

Developing New Technologies toEnhance Product CompetitivenessYoshihiko Sano
President & Representative Director

Contents

NIPRO CORPORATION
Annual Report 201604

Management Report

ACTIONin 2015-2016

Our BusinessFebruary 10, 2016

March 31, 2016

Japan’s Ministry of Health, Labourand Welfare designates autologous
mesenchymal stem cells from bonemarrow as product subject to“SAKIGAKE (forerunner)
Designation System”

Launched CELLAFORTETM
automated cell culture system forstem cells

Our Financials

2016

November 13, 2015
Construction of Regenerative
Medicine R&D Center (provisionalname) commenced

November 12, 2015
Overseas base established in China

October 29, 2015

Meeting the world’s medical needs

I

n Japan, we are making progress with the introduction of new treatment
methods called online hemodiafiltration (HDF) and internal hemodiafiltration(iHDF), and at the same time Nipro dialyzers and HDF filters with a greater

South American base established in
Ecuadordegree of accuracy are being adopted. I believe this trend will continue in the

October 15, 2015

the introduction of online HDF and iHDF will be further facilitated in step withAcquires rights to sell dialysis
consumables to Mauritius

September 11, 2015
Launched MightySatTM Rx fingertip
pulse oximeter

September 4, 2015
Consolidated U.S. company
Infraredx, Inc.
India sales subsidiary Nipro Medical(India) Pvt. Ltd. opens head office

May 7, 2015
Pharmaceutical production plant in
Vietnam commences operations

years to come. In the fiscal year ending March 31, 2017, it is anticipated thatreimbursement price revisions, and the expectations are that there will befurther expansion in the sales of our products. With regard to generic drugs, wegreatly increased outsourced manufacturing and the number of products as aresult of focusing on upgrading production systems capable of providing
consistent quality.
Overseas, we are making headway in the building of a sales network for
medical equipment in emerging markets, including China and India, and thereby
are bringing about an increase in our share of those markets. With regard to
our own-brand dialyzer-related products, there were significant increases insales quantity in all the major regions of the world, and plant production andshipments could not keep pace with demand. There is a sudden increase indemand for dialysis-related products in emerging economies, and we willdevelop and expand our production facilities in the coming years in anticipationof ongoing sales expansion.

Initiatives for growthAt Nipro, we are concentrating our efforts on developing and expanding
our business base. In the fiscal year under review, we implemented a raftof measures.
In Japan, we commenced sales in April 2015 of the anti-thrombotic

2015

catheters, clinical diagnostic agents and other products that we had acquired
from Unitika Ltd. Overseas, we expanded and upgraded our sales structure, forexample by establishing Nipro Medical (India) Pvt. Ltd., and acquired the
Boston, U.S.-based advanced medical equipment development company,

Contents

NIPRO CORPORATION
Annual Report 201605

Management Report

Our Business

Our Financials

Infraredx, Inc.
From the production perspective, having received approvals andauthorizations from the Vietnamese Ministry of Health and Japan’s drug
management authorities, Nipro Pharma Vietnam Co., Ltd. commenced thecommercial production of injectables. In Japan, we installed a new dialyzer
production line at our Odate plant and invested in a number of other facilities,
including new plants for Zensei Pharmaceutical Industries Co., Ltd. and Nipro
Patch Co., Ltd., and in the Regenerative Medicine R&D Center. At the Nipro Odate
plant, Nipro Medical Industries Co., Ltd., Nipro (Thailand) Corporation Limited andNipro (Shanghai) Co., Ltd. we established product quality maintenance units—
separate from the existing quality assurance (QA) departments and serving as
implementation sections that target zero

Net Sales Results and Plan (For the years ended March 31)

customer complaints—and thereby enhanced our(Billions of yen)

1,000.0

systems in this manner, I consider that we are

800

well placed to successfully achieve our already600

stated target of ¥500 billion in consolidated

500.0

400
195.9

212.0

241.0

300.8

325.1

sales by fiscal 2021. Accordingly reaffirming our

366.7

longer term target of recording consolidated

2000

QA systems.
By enhancing our business base and1,000

sales of ¥1 trillion by fiscal 2031, I will be
2011

2012

2013

2014

2015

2016

2021

2031

formulating management strategies anddeveloping and expanding our business base to

those ends.

Management policies and outlook for fiscal 2017T

he management policies for the current fiscal year cover four themes:
focus our strengths on developing new products and accelerate thedevelopment of new technologies; strengthen the market competitiveness of
our existing products; achieve the goals of zero defects and the world’s leading
safety measures in hospitals and other medical settings; and further strengthen
our overseas plants’ capability to generate profits and have them go into theblack by matching our production and sales systems.
Underpinning Nipro’s business are the way in which we take the user’s
viewpoint in global markets and create high value-added products that
outperform those of other companies, including in terms of safety, to enable us
to respond to needs on the medical treatment frontline. Based on this concept,
we provide our customers with products that are more competitive and services
that are better and thus we have continued to grow. Having restated our aim torecord consolidated sales of ¥1 trillion, we will need to further expand ourbusiness. For that reason, we need to accelerate product development and work
to further strengthen an increased production system.

Contents

NIPRO CORPORATION
Annual Report 201606

Management Report

Our Business

Our Financials

With regard to the results for the current fiscal year, despite the fall in sales
associated with the exclusion of Nipro Diagnostics from the scope of consolidationand the negative impact of exchange rate fluctuations, I believe that we can achieve
growth of approximately 10% in sales excluding these impacts.

Building a robust organizationUpholding “willingness” as our corporate credo, Nipro works to maintain aworkplace environments in which all its employees can work withmotivation and encourages the creation of organizations that possess a senseof unity between sales and production and are thus better capable ofresponding to user needs.
In 2016, with the aim of supporting a balance between work andchildrearing, we launched the setting up of childcare facilities on businesssites. We are also committed to continuing to build a remuneration system that
distributes profits in accordance with work achievements. At the parent
company level, we are about to complete the remuneration system, and theplan is to promote its introduction at all Nipro Group companies in the years
ahead. Forming a mechanism linked to the overall maximization of employee
motivation, I believe that this remuneration system will be the greatest weapon
in improving Nipro’s competitiveness in the years ahead.

To our shareholders

R

eturning profits to shareholders is one of Nipro’s key business policies.
Having improved its profit ratio, Nipro would like to distribute larger

dividends among its shareholders. For the fiscal year under review, Nipro paid a
dividend of ¥33.50 per share, an increase of ¥1 per share compared with theprevious fiscal year.
Up to now, Nipro has worked to reinforce its business base to sustain its
growth as a global medical manufacturer. Consequently, I feel that we areapproaching cruising speed for revenue growth. Looking ahead to achieving
the Company’s target ¥1 trillion in consolidated sales by the fiscal 2031, we
will redouble our efforts to conduct product development to enable us to meetuser needs and thus supply products that display enhanced competitivenesswhen compared with those of other companies.
We sincerely appreciate the ceaseless support and encouragement of ourshareholders as we pursue these goals.
July 2016

Yoshihiko Sano
President & Representative Director

Contents

NIPRO CORPORATION
Annual Report 2016

07

Management Report

Our Business

Our Financials

Board of Directors and Auditors

Front row, from left: Makoto Sato, Yoshihiko Sano, Kazuo Wakatsuki
Back row, from left: Yoshiko Tanaka, Kyoetsu Kobayashi, Kiyotaka Yoshioka, Minako Oomizu, Toshiaki Masuda

Representative Director

Managing Directors

Yoshihiko Sano
President & Representative Director

Makoto Sato
Kazuo Wakatsuki
Kiyotaka Yoshioka
Toshiaki Masuda
Kyoetsu Kobayashi

Directors
Akihiko Yamabe
Mitsutaka Ueda
Tsuyoshi Yamazaki
Hideo Okamoto
Masanobu Iwasa
Yozo Sawada
Kimihito Minoura
Hideto Nakamura
Yasushi Kutsukawa

Standing Statutory Auditor
Masayuki Ito
Itsuo Akasaki
Kazuhiko Sano
Akio Shirasu
Hiroshi Yoshida
Hiroshi Sudoh
Takeo Kikuchi
Kenichi NishidaToyoshi Yoshida

Kouki Hatakeyama
Yasushi Ohyama
Kenju Fujita
Takehito Yogo
Yoshiko Tanaka(External Director)
Minako Oomizu(External Director)

Takayuki Nomiya

Statutory Auditors
Kazumichi Irie
Masayoshi Hasegawa

Contents

NIPRO CORPORATION
Annual Report 201608
Our Business

Management Report

Our Financials

Review of Operations

Medical-Related Businesspages 9-10

Glass-Related Businesspage 13

Pharmaceutical-Related Businesspages 11-12

Contents

NIPRO CORPORATION
Annual Report 201609
Our Business

Management Report

Our Financials

Medical-Related Business
Others

10.5%

Infusion Products

6.5%‌Catheter Products

10.5%‌Diabetic Products

13.1%

Overseas
Domestic

Sales
Composition

60.3%
39.7%

Renal Products

43.9%‌Injection Products

15.5%

Note: This‌chart does not include the sales of pharmaceutical products, etc. The total sales amount of this chart is 215.3 billion yen.

In this business market segment, Nipro engages in the development, manufacture and saleof injection-infusion, artificial organ and cell-culture related products, as well as the sale ofmedical equipment for renal treatment, diabetes and generic drugs on a global basis.
Financial Results for Fiscal 2016
Net Sales

Operating Income(Billions of yen)(Billions of yen)

300

30

250

272.2
237.8

28.2

20

150

15

100

10

50

5

¥272.2 billion. Operating income grew 18.4% to ¥28.2 billion.
nutrition, renal, and vascular products remain strong. Sales of

20.4
200

Medical-Related Business increased 14.5% year on year to
In Japan, sales and profits of injection-infusion, enteral

23.8

25

221.4

I

n the fiscal year ended March 31, 2016, net sales in the

hemodiafilter and dialysis machines in the renal products
category were especially robust. Sales of cardio vascularsurgery products experienced a recovery.
Overseas, sales volumes of dialyzers, bloodlines and otherrenal products grew substantially in major regions all over theworld. In India, where market expansion is expected, steps weretaken to establish Nipro Medical (India) Pvt. Limited and to

0

2014

2015

2016

0

2014

2015

2016

expand the Group’s sales structure. On the production side,
factories in India, China (Hefei), Indonesia and Bangladesh
helped to stabilize and increase production and sales.

Contents

NIPRO CORPORATION
Annual Report 201610
Our Business

Management Report

Strategy and Outlook for Fiscal 2017

Our Financials

For generic drugs, we will continue to pursue synergies incollaboration with the Medical Device Business and its sales

I

teams. Along with our continuous

n the Medical-Related Business, along with dialyzers andother renal products, we aim to expand our market share insuch fields as artificial heart-lung and vascular products.

effort to develop new products, wewill maintain our focus on cultivating
various sales channels including

In Japan, where healthcare reimbursement pricing

universities, major hospitals, retailreforms occurred in 2016, we are focusing more on

pharmacy groups, wholesalers andhemodiafilters and dialyzers that are less affected by this

distribution partners.

repricing.
In overseas markets, we are promoting the expansion of
our sales networks especially in India and are conducting
aggressive marketing activities in other countries. By the endof March 31, 2017, we expect to see an increase in both

Surdial™-X offers the user the flexibility to set up
treatments tailored to the patient’s needs; its slim
and ergonomic design takes up less space on theward or dialysis unit giving more space to thepatient and the operator.

domestic and overseas sales through sales promotions.

GlobalStrategy

Leveraging Brand forLong-Term GrowthN

Surdial™-X

ipro has identified efforts to secure profitable operations by strengthening earnings at its overseas plants and optimizing
its production and sales structure as a key policy in 2016.

Against this backdrop, overseas sales continue to expand steadily, while the Nipro brand is becoming increasingly

recognized worldwide.

Sales by region
Year-on-year growth of Nipro brand products
America

18.8

Europe
% UP

19.6

China
% UP

25.1

% UP

Asia

26.9

% UP

Contents

NIPRO CORPORATION
Annual Report 201611
Our Business

Management Report

Our Financials

Pharmaceutical-Related Business‌External drugs

72 items‌Injectable drugs

267 items

The numberof contract
manufacturing
products

Oral drugs

349 items

Nipro, as one of the leading CDMO* companies in the world, manufactures various
pharmaceuticals including oral drugs, injectables and external preparations, which aresupplied to 84 pharmaceutical companies in Japan.
* Contract Development and Manufacturing Organization

Financial Results for Fiscal 2016
Net Sales

Operating Income(Billions of yen)(Billions of yen)

75

15

I

the Pharmaceutical-Related business, compared with theprevious fiscal year, net sales increased 8.5%, to ¥62.3 billion,

62.3

12.1

57.4

and operating income rose 14.3%, to ¥12.1 billion.
We took steps to supply CDMO services. This included the

10.6

51.5
50

n the fiscal year from April 1, 2015 to March 31, 2016, in

contract manufacturing of existing products as well as contract10

development from the formulation design of oral drugs and

8.0

external preparations. We also undertook contract development
drawing on the strengths of our development and manufacturing
25

5

capabilities in direct pharmaceutical containers including vials,
syringes and bags. Furthermore, we provided a broad range ofservices including life-cycle management support in an effort to

0

2014

2015

2016

0

2014

2015

2016

deliver added value and increase differentiation.
In recent years, products produced in the Nipro Group’s
pharmaceutical plants have been supplied to 13 countries
mainly in Asian and European markets. This in turn has helped
to increase overseas sales.

Contents

NIPRO CORPORATION
Annual Report 2016

Management Report

12
Our Business

Strategy and Outlook for Fiscal 2017

Our Financials

As a key pharmaceutical plant initiative, we will install an
ultra-high-speed tableting machine at the new Izumi Plant ofAs one of the top pharmaceutical contract manufacturing

Zensei Pharmaceutical Industries Co., Ltd. in order to enhanceorganizations in Japan, we will further enhance

production efficiency and will also place a high-performance

production capacity as well as quality assurance systems thatcut packaging machine in the new Odate Plant of Nipro Patchalso comply with the standards of overseas advanced

Co., Ltd. with the aim of increasing production capacity.
In addition, the manufacturing facility for lyophilized vials

countries. In addition, we will further strengthen the production
capacity of our overseas sites to increase the supply of

owned and operated by Nipro Pharma Vietnam Co., Ltd. has

pharmaceuticals to the world market.

been approved for pharmaceutical contract manufacturing byWith regard to pharmaceutical containers and devices

Vietnam’s Ministry of Health and the Ministry of Health,related to the preparation and administration ofLabour and Welfare of Japan. Operations will commence frompharmaceuticals, we will continue to develop and supply

July 2016 with products supplied to the Japanese Market.

products that offer safety and convenience.

Upgrading andExpanding Pharmaceutical
Manufacturing Base

GlobalStrategyN

ipro recognizes the urgent need to build a global sales channel network and gain a competitive advantage with respect toproduct costs while upgrading and expanding its production capacity in line with the rapid growth in its pharmaceuticalbusiness. Working to further boost its supply system, the Company has expanded its pharmaceutical manufacturing base in
Odate City, Akita Prefecture, and established a manufacturing subsidiary in Vietnam.
Odate Plant

Vietnam Plant

As the only company within the Nipro Group involved in external preparations, Nipro
Patch Co., Ltd. constructed a new plant in the Niida Industrial Park in Odate City, Akita
Prefecture and commenced the manufacture of mainly solvent-type tapes in May 2016.
Looking ahead, steps will be taken to produce other formulation products including
external preparations with plans to supply products to other countries than Japan
beginning with European countries and the US.

Nipro Pharma Vietnam Co., Ltd., a pharmaceutical manufacturing subsidiary of the Nipro
Group located in Hai Phong City, commenced commercial production in April 2015.
Following the ampoule formulation facility, operations commenced at a lyophilized vial
formulation facility in July 2016.

Contents

NIPRO CORPORATION
Annual Report 201613
Our Business

Management Report

Our Financials

Glass-Related Business
China

13.7%
Domestic 14.5%‌India

3.1%

Sales
Composition‌America‌Europe

26.5%

42.2%

Nipro has undertaken the manufacture and sale of glass products mainly for medical
products since its foundation. Effective from fiscal 2017, the Glass-Related Business has
been renamed the Pharma Packaging Business.
Financial Results for Fiscal 2016Net sales of the Glass-Related Business increased 7.9%
year on year to ¥32.2 billion. In the fiscal year underreview, the Company incurred an operating loss of ¥1.6 billion.
This was, however, and improvement of ¥1.3 billion comparedwith the previous fiscal year.
In Japan, Nipro reported strong sales growth mainly intube glass, vials and pre-filled syringes. Overseas, results werealso firm. Despite the effects of subdued buying bypharmaceutical manufacturers due mainly to amendments to
the Good Manufacturing Practice (GMP) by the State Food andDrug Administration (SFDA) in China, vial and ampoule sales
grew in other emerging markets such as India and Russia.

VIALEX™ offers tubing vials of
unprecedented surface quality withsurface hydrolytic resistance levels
only known with molded glass

Net Sales

Operating Loss

(Billions of yen)(Billions of yen)

40

3
32.2
2

29.8
30

27.6
1

20

Strategy and Outlook for Fiscal 2017

0

I

–1
10

–1.6
–2

–2.2
–2.9

0

2014

2015

2016

–3

2014

2015

2016

n fiscal 2017, plans are in place to improve the quality as
well as manufacturing efficiency of sites all over the world.
In addition to glass containers, we will also expand our
product lineup of such items as rubber stoppers and plastic
containers while improving profitability in Japan and overseas
with the aim of securing a turnaround to operating profit.

Contents

NIPRO CORPORATION
Annual Report 201614
Our Business

Management Report

Our Financials

Global Activities

Net Sales by Region (For the years ended March 31)
0

50

2016

72.4

2015
2014

100

46.2

62.7
56.9

America

Asia

Nipro PhamaPackaging Germany GmbH

200

250

44.6

42.9
40.4

Europe

150

350

203.5

37.4
28.5

300

400

366.7
325.1

182.1
300.8

174.9

Domestic

PT. Nipro Indonesia JAYA

Nipro Europe N.V.

Nipro Medical Corporation(Billions of yen)Contents

NIPRO CORPORATION
Annual Report 2016

Management Report

15
Our Business

Our Financials

Our Efforts in Regenerative Medicine
An increasing number of companies are working on the development of regenerative
medicine using stem cells, such as iPS cells. Nipro has recognized the regenerative
medicine and cell therapy field as a future pillar in its medical business. One of Nipro’s
subsidiaries, Cell Science & Technology Institute, Inc., has been constructing a new factoryin Yamagata Prefecture to meet the growing demand for culture medium and its higher
quality requests. We are also working together with Sapporo Medical University to develop
regenerative medicines for stroke and spinal cord injuries.

Construction of the Regenerative
Medicine R&D CenterIn collaboration with Sapporo Medical University, Nipro has
been developing regenerative medicines that use

mesenchymal stem cells* derived from the patient’s bone

Designated Items under the Sakigake
Designation SystemThe regenerative medicines for treating spinal cord injuries,
under development by Nipro and Sapporo Medical

University, were designated in February 2016 by the Ministry ofmarrow to treat cerebral infraction and spinal cord injuries. In

Health, Labor and Welfare’s Sakigake Designation System*.

December 2015, Nipro began construction on theThis is the first regenerative medicine which received such

Regenerative Medicine R&D Center on a site next to Sapporo

designation in Japan. Items designated under this system are

Medical University.

fast-tracked for approval in about six months, which normally

At the initial step of this new therapy, a small amount oftakes around a year, making it possible to release the productbone marrow from the patient is collected. Next, the collected

into the market much more quickly.

stem cells are multiplied by 10,000 by cell culturing. These cells* The Sakigake Designation System is a system designed to facilitate the commercializationof cutting-edge medicines and medical equipment in Japan before the rest of the world.

are then injected back into the patient to improve motor
function of the paralyzed areas.
The Regenerative Medicine R&D Center will become adevelopment base for cell therapies (regenerative medicinesand related products).
* Mesenchymal stem cells: stem cells with the ability to differentiate into nerves, bloodvessels, etc.

Conceptional Drawing of the
Regenerative Medicine R&D
Center

Contents

NIPRO CORPORATION
Annual Report 2016

Management Report

16
Our Business

Our Financials

Interview with Manabu Kodo
How would you define Nipro’s iMEP?
Nipro’s iMEP, the institute for MEdical Practice, is a state-of-the-art training facility for health professionals.
iMEP was founded in October 2014, in Minami-Kusatsu City, Shiga Prefecture. In recent years, there has
been an increase in the minimum skill levels required for health care personnel. This is why our company
built the iMEP training facility. Through iMEP, our company provides realistic simulations of hospital rooms, acineangiography room, and an operation room, all of which are equipped with the latest medical equipment
and facilities. In addition, we also host and hold seminars and simulation-based training to discuss thecurrent topics of interest within the healthcare industry and clinical practice.

Manabu Kodo
Head of iMEP and Medical Technology Division
for Planning, Development & Marketing

Could you please tell us more about iMEP and Nipro’s product development?
Through the training conducted at iMEP, our company is able to getfamiliarizing ourselves with the entire medical procedure, from beginning

feedback directly from our users, and in turn apply that knowledge toto end, we are also able to see the importance of the surrounding

our future product development. For example, say there is a difference

details such as the individual packaging of the product. Moreover, iMEP

with the specifications and design of the medical equipment we use foris located within the same premises as our Product Research andtraining and the equipment manufactured by our competitors; theDevelopment Department, R&D Laboratory, Pharmaceutical Researchdifference in specifications would naturally have an effect on theInstitute, and our Production Technology Center. From the most basic

outcome of the procedure. We are thus able to see the effect theexperiments to advanced testing at the frontline of the medical field,

difference makes, and it will give us some insight, some hints on how toplanning, preparation, production, and verification are carried out at each

improve the specifications of future medical equipment. This isstage. It all amounts to a greatly beneficial R&D environment where

especially true in the case of disposable medical equipment. By

people unite and work together at all times.

What does the future hold for iMEP?
The defining characteristic of iMEP is that it is a place where thebelieve that it is necessary to strengthen the collaboration between all

trainees can receive a wide range of medical training. They cankinds of scientific societies and training organizations. Nowadays,

participate in lectures, training to boost their skills, simulation-based

people are realizing that it is essential to continue training even after

training, and so on, all at one time. In addition to learning the basics ofqualifying as a healthcare provider. It is predicted that there will be a

medical education, training is essential. Clinical skills, medical

further increase in the number of educational facilities in Japan overassessment capabilities, and teamwork between medical staff fromthe next decade, but each facility can only provide a limited education

various fields all require integrated training. In addition, in terms of

to each individual. This is why I believe it is important that we build a

medical economics, it is very likely that the medical industry will shiftglobal, educational environment that connects all of these facilities.

from hospitals to personal homes with home nursing. It is necessary

In regards to medical training, the important role that companies

for providers of training facilities like Nipro to not only maintainlike Nipro play lies behind our connection to the development andenriching learning environments, but also to develop new and suitable

innovation of medical equipment. With its simulation training rooms, its

simulators to keep up with an ever-evolving industry as medical

ability to receive and relay feedback from the users to the industry,equipment and technologies improve.

and its significant contribution to the development of new and superior

Development serves an important role in both the fulfillment of
so-called “hard” aspects like medical equipment and devices, and in“soft” aspects such as educators and educational systems. I personally

medical equipment, it is my belief that our facility, iMEP, has animportant mission to fulfill.

Contents

NIPRO CORPORATION
Annual Report 201617
Our Business

Management Report

Our Financials

Research and Development Activities

The Nipro Group is involved in and serves a central role in the research and development of
medical devices and pharmaceuticals at the Nipro Life Science Site located in Minami
Kusatsu, Shiga Prefecture.
R&D activities of the different business segments are described below.

1. Medical-Related BusinessNipro has been conducting research and development in the following fields, with the Research and Development Laboratory playing a pivotal
role. The expenses of research and development conducted by this business segment were ¥5.6 billion (approximately US$56 million).

Cell Drug Division
Nipro has been developing automated cell culture systems for cell drugs (regenerative medical
products) and IPS/ES cells through ongoing research projects with industry, academia, andgovernment in the field of stem cell therapy.
With cell pharmaceuticals, Nipro has entered into a licensing agreement with Sapporo
Medical University with the objective of making autologous bone marrow cells into
pharmaceutical products for practical use in regenerative treatment of cerebral infarction andspinal cord injuries. In February 2016, this was designated a “SAKIGAKE (forerunner)
Designation System” by Japan’s Ministry of Health, Labour and Welfare.

Medical Devices Division
With transfusion products, SAFETOUCH ® Manifold P, a connector which can be used to pump
the optimal multiple dosages in operating rooms and ICUs, was added to our SAFETOUCH ®
transfusion system lineup, a needleless connection system.
For dialysis products, in order to prevent foaming at the time of the liquid replacement ofblood circuits, we began development and sales of cyclone chambers in which replacement
liquid enters the chamber from the side.
With anesthesia products, a 150 mL model was added to our lineup of Surefuser ®A, apressurized infusion instrument that can perform more precise chemical injections through theuse of pressure from stable balloon contractions. This 150 mL model is suitable for the epidural,

Contents

NIPRO CORPORATION
Annual Report 201618
Our Business

Management Report

Our Financials

subcutaneous and vein administration of an analgesic and local anesthetic, and especially usefulfor the 46-hour administration of fluorouracil.

Diagnostic and Testing Products Division
Nipro released an improved genetic testing drug that can more rapidly and easily detectrifampicin-resistant tuberculosis. “Genoscholar ®/NTM+MDR-TB,” which can detect tuberculosis,
drug-resistant tuberculosis, and non-tuberculous mycobacteriosis at the same time, has been
recommended by the World Health Organization (WHO).

Functional Pharmaceutical Containers Division
SAFETECT ®

Nipro has also received permission to manufacture and sell devices used for tympanic
membrane regeneration within the field of otolaryngology, as well as nerve fixation within thefield of brain surgery. In addition, Nipro has completed the registration process for the transfer
needle, SAFETECT ®, a component for pre-filled syringes with a safety mechanism.

Circulatory and Interventional Products Division
As a product to treat coronary diseases like acute myocardial infarction or coronary artery
occlusion by percutaneous coronary intervention (PCI), Nipro DCA (directional coronary
atherectomy) catheter, ATHEROCUT ® was approved for manufacture and distribution in 2014.
This device helps to cut lesions, as well as remove atheromas from narrowed or occluded
coronary arteries, by means of a small embedded rotary cutter. After receiving feedback fromATHEROCUT ®

cardiologists, we improved the product to focus on user friendliness and safety, and haverelaunched the product in the market.
As a product for percutaneous peripheral intervention (PPI) therapy on peripheral bloodvessels, we are aiming to distribute “FINESTREAM ® S ” by 2016, a PTA balloon catheter used
for balloon dilation of stenosed peripheral arteries that features better balloon flexibility than thecurrent FINESTREAM ® P.

Surgery Division
By utilizing the processing technology of reabsorbing materials, we are continuing to develop an
implantable medical device that includes the nerve regeneration inducing tubes, RENERVE ®,FINESTREAM ® S

and pericardium regeneration auxiliary material for regeneration medicine.

Artificial Organs Division
Nipro developed a disposable centrifugal pump, BIOFLOAT ® and the device that drives it. This
pump delivers long-term durability and reduced hemolysis based on non-contact bearings thatutilize dynamic pressure floatation technology. This device was developed for cardiac surgery,and Nipro applied for permission to start manufacture of the product in April 2015.
In the field of hemocatharsis, we aim to spread the advantages of powder formulations ofdialysis solutions overseas by using our knowledge accumulated in Japan. First, we received
marketing approval of a powder formulation suitable for India and started distribution of theContents

NIPRO CORPORATION
Annual Report 201619
Our Business

Management Report

Our Financials

formulation. In addition, in order to accommodate regional differences, we developed a versionof the device that dissolves the powder formulation quantitatively and simply, and started
distribution of the device to Latin America and India.

Pain Treatment Device Division
As a new business started in 2016, we are researching and developing magnetic treatment
devices that take into account biorhythms useful in treating chronic pain, mood disorder andother afflictions. In addition, numerous improvements have been made to product prototypes.

2. Pharmaceutical-Related Business
The following research and development activities are carried out with the Pharmaceutical Research Center playing a pivotal role. The
research and development expenses for this business segment in the fiscal year were ¥4.7 billion (approximately US$47 million).

Injectable Drugs
We have been actively pursuing the development of formulations for injection kits that haveexcellent usability in medical practice, in addition to our normal vial or ampoule formulations.

Oral Drugs
In addition to the development of general oral agents, we engage in the development of valueadded formulations that employ innovative methods. In order to enhance discernibility at the
medical frontline, we are also creating formulations compatible with tablet printing and are
putting in place a lineup of tablets with printed names.

External Use Products
While also keeping an eye on overseas markets, we have continued to work on the developmentof tapes and hydrogel patches that are hypoallergenic, thin and lightweight and have goodtackiness and stretchability.
We are developing microneedles, a new concept of percutaneous absorption formulation
Lewprorelin Acetate for Injection Kit“injectable drug plastered on the skin” that can relieve patients’ pain and may be more effective.

Generic Anti-Cancer Drugs and Biosimilars
From the next fiscal year and beyond, we will continue to develop oral and injectable anti-cancer
generic drugs.
Within the field of biosimilars, Nipro plans to rapidly develop products based oncollaboration with partners, who have excellent active pharmaceutical ingredients at areasonable price and quantity.

Contents

NIPRO CORPORATION
Annual Report 2016

Management Report20
Our Business

Our Financials

Status of Corporate Governance1. Corporate Governance System(1) ‌Corporate Governance System and Reasonsfor Adoption
Nipro Corporation has an established corporate governancesystem including organizations for the Meeting of Shareholders
and directors as required under the Companies Act, in addition toa Board of Directors, auditors, Board of Auditors and an
Accounting Auditor. Nipro has also established internal
committees such as the Operational Risk Management
Committee. This committee continuously maintains close
coordination with external parties such as the company attorney,
to enable effective monitoring and supervision of the efficiency
and propriety of operations across the Company as a whole.

(2) Internal Control Systems
Nipro strives to make business units the foundation of its internal
control system for the Nipro Group as a whole. Nipro’s directors
and auditors, as well as representatives of each of the major
companies of the Group, hold a Group management meeting on amonthly basis. These meetings are used to report on the progressof business activities, decide key operating matters, anddeliberate on pending matters. To build awareness of compliancewith laws, regulations and corporate ethics among executives andemployees, Nipro establishes, and promotes awareness toward,
the “Nipro Code of Practice.”(3) Risk Management System
Nipro has established risk management regulations and a system
for managing business and other specific risks. Its purpose is torecognize and capture risks that could have a material impact on
business operations, in an appropriate and comprehensive
manner. Nipro has also established an Operational Risk
Management Committee to ensure cross-sectional management
across all Group companies. The committee endeavors to further
strengthen risk management systems to prevent, avoid and learn
from risks and crises. Nipro has also established a Sanction
Committee, chaired by the President, which endeavors to ensure
sound business management through the appropriate handling of
sanctions. Nipro produced the Disaster Prevention and Crisis
Management handbook and distributed it to each employee
within the Nipro Group. Nipro tries hard to keep employees fully
informed about taking calm and appropriate action when facedwith disasters and about reassessing and renewing business
continuity plans as appropriate.

(4) ‌Basic Structure of Corporate Governance and Risk
Management

Meeting of Shareholders
Election

Accounting
Auditor(Auditors)
Board ofAuditors(Directors)
Board ofDirectors

Committees[Decision-making]Accounting
Audit

Operational
Audit

Supervision of
Directors’
executionof duties

President

Third Party(i.e., lawyer,
accountant)

Director withresponsibility
for operation

Operational
Risk
Management
Committee

Division General Manager,
Manager, Assistant Manager

Conceptual Diagram of Corporate Governance

2. Internal and Statutory Auditing(1) Internal Auditing
Nipro has established the Internal Audit Division, consisting of the
Audit Office and the Overseas Audit Office, and conducts audits ofaccounting and other operations based on internal audit protocols.

(2) Statutory Auditing
For each statutory audit, auditors attend key meetings such as
those of the Board of Directors, in accordance with the auditing
policy and roles determined by the Board of Auditors. Auditors
receive performance reports from directors and employees, andare able to request further explanation when necessary, andinspect key documents. Auditors also undertake other auditing
duties such as investigating the state of operations and assets inContents

NIPRO CORPORATION
Annual Report 2016

Management Report

21
Our Business

Our Financials(4) ‌Mutual Collaboration between Outside Audits andInternal, Statutory and Accounting Audits, and theRelationship between Internal Control Divisions

key places of business. Board of Auditors meetings are held
regularly, or as necessary, in order to exchange views and holddiscussions.

The outside directors attend meetings of the Board of Directors
and supervise our management based on their extensive
knowledge and management experience from an independent
standpoint. The outside auditors carry out auditing activities
including attending key meetings such as meetings of the Boardof Directors in accordance with the audit policy and roles
determined by the Board of Auditors. They are able to access
reports via the full-time auditors or directly from directors andemployees, and inspect key documents. The outside auditors also
attend periodic or occasional meetings of the Board of Auditors
to contribute to discussions and exchange opinions from an
objective and independent viewpoint. The outside auditors strive
to facilitate a smooth audit service through close collaboration
with employees of the Audit Office, the full-time auditors, auditorsof subsidiaries and the accounting auditor.

3. Outside Directors and Outside Auditors(1) Outside Directors and Outside Auditors
Two of the directors are outside directors and two of the threeauditors are outside auditors. Two of the outside directors andone of the outside auditors are designated as independent
directors.

(2) ‌Policy and Criteria for Independence from the Filing
Company in the Election of Outside Directors andOutside Auditors
Nipro determines the criteria for the independence of outside
directors and outside auditors as a part of separate corporate
governance guidelines taking into consideration the provisions
stipulated under the Financial Instruments and Exchange Act. In
the event that either case does not fall within the scope of thiscriteria, outside directors and outside auditors are deemed to be
independent from the Company and that there is no possibility ofa conflict of interest with general shareholders.

4. Accounting Audits
Name of Accounting Auditor: Hibiki Audit Corporation
Names of Certified Public Accountants conducting the Audit:
Kazuhiro Bando,
Takashi Kinoshita,
Miho Ishihara(3) ‌Approach to the Election of Outside Directors andOutside Auditors
Close coordination with the outside directors and the full-time
auditors, employees of the Audit Office and assigned staff from the
management section of the head office (as needed) ensuressufficient cover to implement the supervision and the audit function
and role as required by the current corporate governance system.

Support Staff for Audits:
Certified Public Accountants: 12
Other staff: 4

Remuneration paid to Directors and Auditors
Millions of yen
Total amount of
remuneration

Directors

Total amount of remuneration by type
Annualremuneration

Bonus

Retirement benefits

Number of eligible
corporate officers

¥570

¥134

¥390

¥46

28

Auditors excluding external auditors

7

7

—

—

1

External auditors

11

11

—

—

4

Thousands of U.S. dollars
Total amount of remuneration by type
Total amount of
remuneration

Directors

Annualremuneration

Retirement
benefits

Bonus

Number of
eligible
corporate
officers$5,058$1,189$3,461$408

28

Auditors excluding external auditors

62

62

—

—

1

External auditors

98

98

—

—

4

Contents

NIPRO CORPORATION
Annual Report 2016

22

Management Report

Our Financials

Our Business

Financial Review
Overview

sales to net sales decreased by 1.0 percentage points compared

During the period under review, a shift to a full-fledged recovery

with the previous fiscal year to 68.4%.

failed to take shape on account of the economic slowdown in

As a result, gross profit increased by 16.39% compared with

China, the decline in crude oil prices, the increase in interest rates

the previous fiscal year to ¥115.9 billion (US$1,028.4 million).

in the U.S., and other developments. There is even greater
uncertainty regarding Japan’s economy for various reasons,Selling, General and Administrative Expenses

including the impact of the Chinese economy, the economic

Selling, general and administrative expenses increased by 10.5%

slowdown in developing countries, as well as growing instability

compared with the previous fiscal year to ¥91.7 billion (US$813.6

throughout the world, the source of which is the Middle East.

million), mainly due to an increase in labor costs and research andLooking at exchange rates, the yen was weak during the first halfdevelopment expenses.

of the year and increased thereafter. This prevented the economy
Operating Income

from achieving a full-fledged recovery.
Under these circumstances, the Nipro Group worked to

As a result of the aforementioned factors, operating income

improve operating results through continued efforts to expand sales

increased by 46.1% compared with the previous fiscal year to

and reduce costs while placing the greatest priority on user safety.

¥24.2 billion (US$214.8 million). The ratio of operating income to
net sales increased by 1.5 percentage points to 6.60%, mainly

Consolidated Business Results

due to the increased income from the Medical-Related Business.

Relevant quantitative data for the period under review has been
converted at the rate of US$1.00 = ¥112.68 (the rate of

Other Income (Expenses)

exchange as of March 31, 2016).

We recorded other income of ¥2.1 billion (US$18.5 million), ¥1.3
billion lower compared with other income in the previous fiscal

Net Sales

year. In the period under review, we recorded ¥7.2 billion (US$63.7

In the year ended March 31, 2016, consolidated sales increased

million) in foreign exchange losses, while we reported ¥4.9 billion

by 12.8% compared with the previous fiscal year to ¥366.7 billion

in foreign exchange gains in the previous period.

(US$3,253.9 million).
Income before Income Taxes
Cost of Sales

As a result of the factors outlined above, income before income

The cost of sales increased 11.2% compared with the previous

taxes increased by 32.0% compared with the previous fiscal year

fiscal year to ¥250.8 billion (US$2,225.5 million). This increaseto ¥26.3 billion (US$233.3 million).

corresponded to the increase in net sales, and the ratio of cost of(Years ended March 31)

Net Sales

Operating Income(Billions of yen)(Billions of yen)

400

366.7

Income Before Income Taxes(Billions of yen)
24.2

25

30

26.3

325.1
300.8

20

300
212.0

15
11.4

200

100

0

2012

2013

2014

2015

2016

24

16.6

15.8

241.0

18

12.3

12.9

10

12

5

6

0

2012

2013

19.9

18.1

2014

2015

2016

0

11.0

2012

2013

2014

2015

2016

Contents

NIPRO CORPORATION
Annual Report 2016

23

Management Report

Our Financials

Our Business

Income Taxes

Net Sales by Geographic Segment

Income taxes, including deferred taxes, decreased by ¥0.3 billion,Japan

or 4.1%, compared with the previous fiscal year to ¥6.8 billion

In Japan, net sales increased by11.7% compared with the(US$60.4 million). The effective tax rate was 25.9%, lower thanprevious fiscal year to ¥203.5 billion (US$1,805.7 million) mainly

the rate of 35.4% for the previous fiscal year. This decrease isdue to firm sales in the Medical-Related business.

mainly due to adjustments to the Company’s consolidated
accounts to reflect the gain on sales of shares of subsidiaries andAmerica

associates in connection with Nipro Diagnostics, Inc.

In America, net sales increased by 15.6% compared with theprevious fiscal year to ¥72.4 billion (US$642.7 million) due to the

Net Income (Loss) Attributable to Non-controlling Interests

stable expansion of sales Nipro brand dialysis products.

Net loss attributable to non-controlling interests amounted to ¥0.2
Europebillion (US$2.1 million).

In Europe, net sales increased by 7.7% compared with the
Net Income Attributable to Shareholders of Parent

previous fiscal year to ¥46.2 billion (US$409.6 million) due to the

Net income attributable to shareholders of parent increased bysound sales of dialysis products.

58.1% compared with the previous fiscal year to ¥19.7 billion(US$175.0 million). Net income per share increased to ¥116.2

Asia(US$1.03) from ¥81.0 for the previous fiscal year. Return on

In Asia, net sales increased by 19.3% compared with the previous

equity increased 3.3 percentage points to 11.8% from 8.5% forfiscal year to ¥44.6 billion (US$396.0 million) mainly because of

the previous fiscal year because of the higher net income. In thethe sales increase at new plants.

period under review, the Company recorded a gain on sales ofshares of subsidiaries and associates and a gain on investments in

Financial Position

capital of subsidiaries and associates totaling ¥15.7 billion

Total assets as of March 31, 2016 stood at ¥708.9 billion(US$139.1 million) in connection with Nipro Diagnostics, Inc. and(US$6,291.1 million), an increase of ¥13.6 billion (US$120.5

Shanghai Nissho Vacuum Flask Refill Co., Ltd.

million) compared with the end of the previous fiscal year. Of thistotal, current assets increased by ¥17.8 billion while noncurrent
assets decreased by ¥4.2 billion. The main reason for the increasein current assets was the increase in cash and deposits of ¥13.8
billion. The decrease in noncurrent assets largely reflected thedecrease in deferred income taxes of ¥4.0 billion.
(Years ended March 31)

Net Income Attributable to Shareholders of Parent

Capital Expenditures(Billions of yen)(Billions of yen)

25

Total Assets(Billions of yen)
57.1

60
19.7

20

45

15

800

47.7
39.5

38.0

600
35.1

579.3

695.3

708.9

2015

2016

619.7

499.7

12.5
10.2

30

400

15

200

10
4.6
5

0

2.9

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

0

2012

2013

2014

Contents

NIPRO CORPORATION
Annual Report 201624

Management Report

Our Financials

Our BusinessTotal liabilities as of March 31, 2016 stood at ¥533.4 billion

Staff(US$4,733.5 million), up ¥16.9 billion (US$149.8 million)

The total number of employees as of the end of the period undercompared with the end of the previous fiscal year. Current

review increased by 1,090 compared with the end of the previous

liabilities decreased by ¥26.3 billion and long-term liabilities

fiscal year, to 24,243. Employees in Japan increased by 615, toincreased by ¥43.1 billion. The principal reason for the decrease

7,013, and the number of overseas employees increased by 475,

in current liabilities was the decrease in short-term bank loans ofto 17,230.

¥36.2 billion. The main cause for the increase in long-term
Basic Policy on Distribution of Profit

liabilities was the increase in long-term debt of ¥42.1 billion.
Total net assets as of March 31, 2016 stood at ¥175.5 billion

At Nipro, we have been paying dividends to shareholders by(US$1,557.6 million). This was ¥3.3 billion (US$29.3 million) lower

positioning the return of profits as an important management

than the balance as of the end of the previous fiscal year.

policy. Retained earnings will be actively invested in the research

Shareholders’ equity increased by ¥13.8 billion. Accumulated

and development division, in addition to the sales division andother comprehensive income decreased by ¥15.4 billion. As a

production division, as a part of efforts to expand the businessresult, the equity ratio decreased by 0.7 of a percentage pointbase and promote long-term business development. Throughcompared with the end of the previous fiscal year, to 23.4%.

these means, we will ensure stable profits and achieve continued
growth.

Cash Flow
Net cash provided by operating activities amounted to ¥29.9

Risk Factors

billion (US$265.7 million). The major cash inflows were net

The following are risks that may have an effect on the Nipro

income and depreciation and amortization.

Group’s operational results and/or financial condition. The items

Net cash used in investing activities came to ¥16.5 billion

concerned were determined as of March 31, 2016.

(US$146.6 million). The principal cash outflow was purchase of(1) Risks Related to Product Safety

property, plant and equipment.
Net cash used in financing activities amounted to ¥3.6 billion

The Nipro Group brings all of its capabilities to bear in ensuring(US$32.2 million). The major cash outflow was repayment of long-product safety in the design, development and manufacturing ofterm loans.

medical devices and pharmaceutical products. There are still risks,

As a result, cash and cash equivalents stood at ¥112.0 billion(US$993.8 million) as of March 31, 2016.

however, such as accidental defects or adverse effects that could
result in damages to a third party and our being sued for liability.

(Years ended March 31)

Net Assets

Basic Earnings per Share

(Billions of yen)

(yen)

200

178.8

150

128.8

175.5

136.0

Number of Employees(Thousand)
116.2

120

23.2

24.2

19.3
14.6

114.0

15

60.0
100

60
10

35.3
50

0

21.8

20

81.0

90

25

30

2012

2013

2014

2015

2016

0

18.2

2012

2013

2014

5

2015

2016

0

2012

2013

2014

2015

2016

Contents

NIPRO CORPORATION
Annual Report 2016

25

Management Report

Our Financials

Our Business(4) Risks Related to Changes in Sale Prices

To cover these risks, we therefore maintain general liability
and product liability insurance. In the unlikely event of a successful

The products sold by the Nipro Group include some that areclaim in excess of the insurance coverage, however, there could

affected on an irregular two-year basis by price reductions under

be a material adverse effect on our operational results and/or

the Japanese payment system for medical care, drug prices andfinancial condition.

reimbursement prices for medical materials and supplies.
Moreover, should measures to hold down medical costs also(2) Risks Related to Supplier Concentration

become pervasive worldwide, resulting in intensified competition

The Nipro Group procures materials and parts for its operations

between corporations and leading to prices falling to a greaterfrom a large number of suppliers. Some key materials or parts may

degree than anticipated, there could be a material adverse effectbe obtained only from a single supplier or a limited group of

on our operational results and/or financial condition.

suppliers. If circumstances at any of these suppliers make it
impossible for us to acquire a sufficient quantity of materials or(5) Risks Related to Changes in Prices of Raw Materials

parts to meet our production needs in a timely and cost-effective

The products manufactured by the Nipro Group include some thatmanner, there could be a material adverse effect on ourare made from petrochemical products such as plastics. Should

operational results and/or financial condition.

the cost of raw materials such as petrochemicals rise, there could
be a material adverse effect on our operational results and/or(3) ‌Risks Related to Changes in Government Healthcare

financial condition.

Policies
The business sector to which the Nipro Group belongs is(6) Risks Related to Overseas Expansion

intimately connected with the healthcare system and is subject to

The Nipro Group maintains manufacturing bases and sales offices

the regulations laid out by government organizations, including thearound the world for the production and supply of its products.

National Health Insurance System and the Pharmaceutical Affairs

Should there be unexpected revisions to legal regulations or

Law. Should circumstances arise in which we are unable topolitical or economic changes in these countries or regions, there

respond to changes in the environment brought about by

could be a material adverse effect on our operational results and/

unforeseeable wholesale changes in government healthcare

or financial condition.

policies, there could be a material adverse effect on ouroperational results and/or financial condition.

(Years ended March 31)

Equity Ratio

Return on Assets

Return on Equity

(%)

(%)

(%)

50

5

40

4

15
11.8
3.5

3.2
30
22.0

24.1
20.7

23.4

8.9

3
2.1

8.5

9

2.5

20.2

12

2.1

20

2

6

10

1

3

4.2
2.3

0

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

Contents

NIPRO CORPORATION
Annual Report 2016

Management Report

26
Our Business

Our Financials(7) Risks Related to Intellectual Property(11) Risks Related to Controls on Personal Information

The Nipro Group owns numerous patents and trademarks, and

The Nipro Group has established strict precautions to protect themaintains various proprietary rights for the products it

confidentiality of personal information in our possession. However,

manufactures. Additionally, we take all possible measures to avoid

if due to unforeseen events or an accident this personal

infringing the patents and proprietary rights of any third party, andinformation is leaked outside the Group, causing a loss of trust or

to avoid breaching any license agreements we have concluded

customers, there could be a material adverse effect on ourconcerning technologies. Nevertheless, if an unanticipated claim

operational results and/or financial condition.

for damages were to be made by a third party and the defense of
the Nipro Group were to be rejected, there could be a material(12) Risks Related to Fund Raising

adverse effect on its operational results and/or financial condition.

The Nipro Group relies on debt finance in the form of loans fromfinancial institutions or issuance of corporate bonds and(8) Risks Related to Environmental Regulationscommercial paper, etc., to raise business and investment funds. If

The Nipro Group believes it has taken adequate precautions to

due to turmoil in financial markets, there is a reduction in lending

comply with applicable regulations in the course of its businessfrom financial institutions or a significant downgrade of our credit

activities. Should our activities cause an unforeseen environmental

rating by credit rating agencies, we may not be able to raise theproblem, however, with a claim for damages made against us,

necessary funds when we need them on acceptable terms. At thethere could be a material adverse effect on our operational results

same time, we may incur restrictions on our fund raising

and/or financial condition.

capabilities or see an increase in the cost of fund raising. Any ofthese occurrences could have a material adverse effect on our(9) Risks Related to Exchange Rate Fluctuations

operational results and/or financial condition.

The Nipro Group, including its overseas subsidiaries, carries out its
foreign currency transactions primarily in US Dollars and Euros,(13) Risks Related to M&A and Business Alliances

but calculates financial statements for its overseas subsidiaries

The Nipro Group conducts M&A activities and enters into businessusing Japanese Yen for the purpose of producing consolidated

alliances to reinforce its business base. Prior to concluding thesefinancial statements. Fluctuations in exchange rates may therefore

deals, we carry out a thorough investigation of the target company.

have a material adverse effect on our operational results and/or

However, should any problems arise such as the discovery offinancial condition.

unrecognized liabilities or should the development of the acquired
business not proceed as planned, there could be a material(10) Risks Related to Investment Value

adverse effect on our operational results and/or financial

The Nipro Group’s assets include investments in stocks and othercondition.

securities. These investments have been made for purposes suchas building good business relationships with the issuers of such(14) Other Risks

securities, or for gathering useful information for the development

Fires, earthquakes, acts of terrorism, wars, epidemics, or otherof new products or new business opportunities. Should the value

unforeseen man-made or natural disasters affecting areas orof these investments decline significantly owing to fluctuations infacilities where the Nipro Group conducts its business activities

the stock market, circumstances at an issuer, or a change in the

may cause a delay or interruption in production, sales, distribution,accounting methods used to deal with these investments, thereor provision of services. Should such a delay or interruption be

could be a material adverse effect on our operational results and/extended, there could be a material adverse effect on ouror financial condition.

operational results and/or financial condition.

Contents

NIPRO CORPORATION
Annual Report 2016

27

Ten-Year Summary
Nipro Corporation and its Consolidated Subsidiaries
Years ended March 31

Millions of yen
2016

2015

2014

2013

Income Statement Data:
Net sales
Medical-Related (*1)
Pharmaceutical-Related (*1)
Glass-Related (*1)
Other (*1)
Store (*1)
Cost of sales
Selling, general and administrative expenses
Operating income
Medical-Related (*2)
Pharmaceutical-Related (*2)
Glass-Related (*2)
Other (*2)
Store (*2)
Income before income taxes
Net income attributable to shareholders of parent
Capital expenditures
Depreciation and amortization
R&D expenses¥    366,650
272,168
62,26632,18432—
250,773
91,672
24,20528,204
12,060(1,618)61—
26,285
19,71957,10130,147
10,269¥    325,084
237,777
57,372
29,830105—
225,525
82,987
16,572
23,813
10,553(2,889)131—
19,90812,47047,69827,6688,646¥    300,753
221,363
51,50827,611
271—
213,22175,242
12,29020,436
8,013(2,183)
216—
12,891
2,861
35,09325,1517,891¥    241,021
169,971
66,212
4,603
235—
175,31454,336
11,371
14,287
3,988
601
222
—
18,060
10,23237,997
21,2106,464

Balance Sheet Data:
Total assets
Property, plant and equipment—net
Working capital
Current liabilities
Long-term liabilities
Common stock
Capital surplus
Net assets¥    708,883
223,757
115,970
252,148
281,227
84,398—
175,508¥    695,307
220,195
71,945
278,402
238,095
84,398635
178,810¥    619,655
191,594
45,405
250,715232,979
84,398689
135,961¥    579,302
174,70374,216
213,758
236,781
84,398
636
128,763
Yen

Per Share Data:
Basic earnings (*3)
Diluted earnings (*3)
Cash dividends
Equity (*3)¥      116.2
114.7
33.5
977.6

¥       81.0
—
32.5
988.8

¥       18.2
16.3
30.5
832.1

¥       60.0
54.1
27.5
703.5

Number of common shares issued
Number of employees

171,459,479
24,243

171,459,479
23,153

171,459,479
21,826

171,459,479
19,327

Selected Data and Ratios:
Equity ratio (*4) (%)
Return on assets (*4) (%)
Return on equity (*4) (%)
Price earnings ratio (*4) (times)

23.4
3.5
11.8
9.2

24.1
2.5
8.5
14.1

20.2
2.1
2.3
51.0

20.7
2.1
8.9
14.0

(*1) Effective the fiscal year ended March 31, 2011, the Company has adopted ASBJ Statement No. 17 “Accounting Standard for Disclosures about Segment of an Enterprise and RelatedInformation” (March 27, 2009) and ASBJ Guidance No. 20 “ Guidance on Accounting Standard for Disclosures about Segment of an Enterprise and Related Information” (March 21,2008). Net sales and operating income for the period for the fiscal year ended March 31, 2010 have been restated to show what the Group’s result would have been if the new
accounting standards had been applied in that year. Before the fiscal year ended March 31, 2009, net sales and operating income have been stated in compliance with previous
accounting rules. In addition, the corporate reorganization was conducted effective on October 1, 2012 in order to enforce Pharmaceutical-Related business and build a strong
cooperative relationship among Medical-Related, Pharmaceutical-Related and Glass-Related businesses. As a result of this reorganization, some business divisions included in GlassRelated business were changed to Pharmaceutical-Related business. The segment information is presented as if the aforementioned reorganization had been conducted at the
beginning of the financial year 2012, and the presentation for the prior financial years are not restated.
(*2) Operating income at the operating segment level is not adjusted for intra-segment transactions. See Note 15. “Segment Reporting” to the consolidated financial statements.

Contents

NIPRO CORPORATION
Annual Report 2016

28

Millions of yen

Thousands of
U.S. dollars(Note 1)
2016

2012

2011

2010

2009

2008

2007

¥    212,013
145,082
59,715
6,954
262—
149,253
46,935
15,825
17,078
4,940
454
230
—
11,022
4,586
39,525
21,581
5,957¥   195,943
132,817
38,00524,704417—
137,768
40,95017,225
18,437
1,658
2,701
88
—
7,432
2,456
23,323
21,244
4,977¥   177,830
118,517
34,52824,338447—
126,145
33,591
18,09419,923
2,102
3,103
64
—
13,872
7,253
15,20918,421
4,846¥   175,945
112,970
52,726
9,554
695—
124,396
36,774
14,775
16,209
4,082
1,772
4
—
9,379
4,531
33,142
18,1095,352¥   172,113
111,084
48,754
11,437838—
123,108
35,32813,677
15,830
3,271
1,890
13
—
8,260
4,454
25,90015,054
6,194¥   184,363
97,30042,152
12,9191,019
30,973
132,142
39,16813,053
14,334
3,298
1,865
151
270
16,776
8,555
23,093
12,4704,461$3,253,905
2,415,406
552,592
285,623284—
2,225,532
813,561
214,812250,302
107,029(14,359)541—
233,272
175,000
506,754
267,545
91,134¥    499,687
145,679
61,346
189,090
196,646
84,398636
113,951¥   476,510
128,506
40,621
176,401
191,071
28,66329,973109,038¥   383,397
124,20941,725
138,204
129,122
28,66329,973116,071¥   330,641
126,739
46,070114,796
119,285
28,66329,97396,560¥   349,302
118,81253,911
108,835
120,923
28,66329,975
119,544¥   336,660
104,882
43,128104,105
105,535
28,66329,973127,020$6,291,116
1,985,774
1,029,197
2,237,735
2,495,802
749,006—
1,557,579
U.S. dollars(Note 1)¥       35.3
31.0
23.5
643.9

¥      19.4
17.4
50.0
839.7

¥     114.4
114.1
53.0
1,802.3¥      71.4—
32.0
1,498.5¥      70.2—
37.5
1,861.8¥     134.7—
80.0
1,979.2

171,459,479
14,56663,878,505
12,017

63,878,505
9,939

63,878,505
9,354

63,878,505
9,020

63,878,505
8,807

22.0
3.2
4.2
17.5

22.4
4.0
2.2
42.5

29.8
5.1
6.9
15.8

28.7
4.3
4.2
21.5

33.8
4.0
3.7
24.8

37.3
3.9
7.2
17.1

$     1.03
1.02
0.30
8.68

(*3) Effective the fiscal year ended March 31, 2012, the Company has adopted ASBJ Statement No. 2 “Accounting Standard for Earnings per Share” (June 30, 2010), ASBJ Guidance No. 4“Guidance on Accounting Standard for Earnings per Share” (June 30, 2010) and ASBJ PITF No. 9 “Practical Solution on Accounting for Earnings per Share” (June 30, 2010). In
addition, the Company split one share of common stock into two shares on October 1, 2011 based on a resolution at the board of directors’ meeting held on August 27, 2011. In
accordance with this adoption, equity per share, basic earnings per share and diluted earnings per share are calculated on the assumption that the two-for-one stock split of common
stock was conducted at the beginning of the fiscal year ended March 31, 2011. Before the fiscal year ended March 31, 2010, each amount has been stated in compliance with previous
accounting rules.
(*4) Equity ratio is the ratio of the sum of the total shareholders’ equity and accumulated other comprehensive income to total assets at the period end. Return on assets is the ratio of
operating income for the period to average of total assets during the period. Return on equity is the ratio of net income for the period to average of the sum of total shareholders’ equity
and accumulated other comprehensive income during the period. The price earnings ratio is the ratio of the closing price of the Company’s shares listed on the First Section of the Tokyo
Stock Exchange on the last trading day in March of each year to the basic earnings per share.

Contents

NIPRO CORPORATION
Annual Report 201629

Consolidated Balance Sheets
Nipro Corporation and its Consolidated Subsidiaries
As of March 31, 2016 and 2015

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

AssetsCurrent assets:¥ 111,978¥ 98,199$   993,770

Time deposits (over three months)

14,69014,672

130,369

Trade notes and accounts receivable (Note 5)

113,236

114,477

1,004,934(983)(2,783)(8,724)

102,702102,476

911,448

Cash and cash equivalents

Allowance for doubtful receivables
Inventories (Note 3)
Deferred income taxes (Note 4)

6,380

6,964

56,621Other current assets

20,115

16,342

178,514

Total current assets

368,118

350,347

3,266,932

Property, plant and equipment (Note 5):¥ 21,124¥ 22,027

187,469

Buildings and structures

184,038

174,138

1,633,280

Machinery and equipment

267,281258,590

2,372,036

Construction in progress

27,644

31,243245,332

500,087

485,998

4,438,117

Accumulated depreciation(276,330)(265,803)(2,452,343)

223,757

220,195

1,985,774

Goodwill

28,87726,364

256,274

Other intangible assets

16,03618,005

142,315

Total intangible assets

44,91344,369398,589Land

Property, plant and equipment—net

Intangible assets (Note 5):

Investments and other assets:
Investment in unconsolidated subsidiaries
and an affiliate accounted for by the equity method

2,799

5,764

24,840Investment securities (Note 6)

56,01958,313

497,151

Lease deposits

1,472

1,356

13,064

Deferred income taxes (Note 4)

3,948

7,900

35,037

Other assets

7,857

7,063

69,729Total investments and other assets
Total
The accompanying notes are an integral part of these statements.

72,09580,396

639,821¥ 708,883¥ 695,307$ 6,291,116

Contents

NIPRO CORPORATION
Annual Report 201630

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

Liabilities and net assets
Current liabilities:¥ 46,062¥ 82,248$  408,786

Current portion of long-term debt (Notes 5 and 9)

82,05081,952

728,168

Trade notes and accounts payable

56,18551,751

498,624

Accrued income taxes

4,266

3,508

37,859Accrued expenses

22,691

22,508201,376

Short-term bank loans (Notes 5 and 9)

—

—

—

Commercial paper (Note 9)

10,00010,00088,747

Notes and accounts payable for plant and equipment

22,05911,760195,767

Other current liabilities

8,835

14,67578,408

Total current liabilities

252,148

278,4022,237,735

2,380,866

Allowance for loss on clearance of businessLong-term liabilities:
268,276

226,214

Net defined benefit liability (Note 10)

5,017

3,841

44,524

Deferred income taxes (Note 4)

1,985

2,162

17,616Long-term debt (Notes 5 and 9)

Other long-term liabilities

5,949

5,878

52,796

Total long-term liabilities

281,227

238,095

2,495,802

84,39884,398749,006—

635—

Retained earnings

73,06858,886

648,456

Less cost of common shares of treasury stock(1,475)(1,687)(13,090)

155,991

142,232

1,384,372(3,347)(2,311)(29,703)

(12)

39

(107)

Foreign currency translation adjustments

14,187

27,870125,905

Remeasurements of defined benefit plans

(821)

(171)

(7,286)

Commitments and contingent liabilities (Note 11)
Net Assets (Note 14):
Common stock
Authorized: 400,000,000 shares
Issued: 171,459,479 shares
Capital surplus(1,666,187 shares in 2016 and 1,899,861 shares in 2015)
Total shareholders’ equity
Unrealized gain (loss) on available-for-sale securities
Deferred gains or losses on hedges

Accumulated other comprehensive income
Non-controlling interests
Total net assets
Total
The accompanying notes are an integral part of these statements.

10,00725,42788,809

9,510

11,151

84,398

175,508

178,810

1,557,579¥708,883¥695,307$6,291,116

Contents

NIPRO CORPORATION
Annual Report 201631

Consolidated Statements of Income
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

¥366,650
250,773
115,877¥325,084
225,525
99,559$3,253,905
2,225,532
1,028,373

Selling, general and administrative expenses (Notes 16 and 17)
Operating income

91,672
24,20582,987
16,572

813,561
214,812

Other income (expenses):
Interest and dividend income
Interest expense
Loss (gain) on sale and disposal of property, plant and equipment—net
Exchange gain (loss)
Equity in loss of an affiliated company
Gain on sale of subsidiaries and affiliates’ stocks
Loss on impairment of fixed assets
Loss (gain) on step acquisitions
Other loss—net
Income before income taxes

2,182(4,501)(310)(7,182)(95)
15,6740(2,239)(1,449)26,285

2,679(4,067)
857
4,923
(168)
3,403
(66)
—
(4,225)
19,90819,365(39,945)(2,751)(63,738)(843)
139,1020(19,870)(12,860)
233,272

Income taxes (Note 4):
Current
Deferred

2,110
4,697

8,349
(1,253)18,72541,684

Net income

19,47812,812

172,863(241)¥ 19,719

342¥ 12,470(2,137)$  175,000

Yen

U.S. dollars(Note 1)¥   81.0—
32.5$     1.03
1.02
0.30

Millions of yen

Thousands of
U.S. dollars(Note 1)

Net sales
Cost of sales
Gross profit

Net income (loss) attributable to non-controlling interests
Net income attributable to shareholders of parent

Amounts per common share:
Basic earnings
Diluted earnings
Cash dividends¥  116.2
114.7
33.5

The accompanying notes are an integral part of these statements.

Consolidated Statements of Comprehensive Income
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

Net income
Other comprehensive income:Unrealized gain (loss) on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted
for using equity method
Comprehensive income
Comprehensive income attributable to:Shareholders of the parent
Non-controlling interests
The accompanying notes are an integral part of these statements.

2016

2015

2016

¥ 19,478¥12,812$ 172,863(1,036)(51)(13,861)
(655)

5,134
1
14,656187(9,194)(453)(123,012)(5,813)(1)¥ 3,8741¥32,791(9)$ 34,382

4,298
(424)

32,196665

38,144(3,762)

Contents

NIPRO CORPORATION
Annual Report 201632

Consolidated Statements of Changes in Net Assets
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015
Thousands
Outstanding
number ofshares ofcommonstock

Balance at March 31, 2014
Cumulative effects of changes inaccount policies
Balance at March 31, 2014
Net income
Increase (decrease) in retained
earnings due to inclusion of new
subsidiaries in consolidation
Cash dividends
Purchase of treasury stock
Disposal of treasury stock
Decrease of retained earnings(Other)Other net change during
the year
Balance at March 31, 2015
Net income
Increase (decrease) in retained
earnings due to inclusion of new
subsidiaries in consolidation
Cash dividends
Purchase of treasury stock
Disposal of treasury stock
Decrease of retained earnings(Other)Other net change during
the year
Balance at March 31, 2016

Total
net assets

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

171,459¥84,398689¥52,568¥(18,000)¥119,655¥(7,444)¥ 38 ¥ 13,535¥(357) ¥ 5,772 ¥10,534¥135,961

171,459¥84,398¥689

98¥52,666
12,470¥(18,000)

98¥119,753
12,470¥(7,444)¥ 38 ¥ 13,535¥(357) ¥ 5,772 ¥10,534

98¥136,059
12,470(325)(4,992)
(54)

(932)

(1)
16,314(1)
171,459

84,398635

58,886
19,719(1,687)—(5,371)

171,459
Thousands
Outstanding
number ofshares ofcommonstock

Balance at March 31, 2015
Net income
Increase (decrease) in retained
earnings due to inclusion of new
subsidiaries in consolidation
Cash dividends
Purchase of treasury stock
Disposal of treasury stock
Decrease of retained earnings(Other)Other net change during
the year
Balance at March 31, 2016

Millions of yen
Unrealized
RemeasureDeferred
Foreign
Accumulated
Total gain (loss)
ments
Nongains orcurrency
other comshareholders’ on availableof defined
controlling
losses on translationprehensive
equityfor-salebenefitinterests
hedges adjustments
incomesecurities
plans

171,459¥84,398

Common
stock

—

—

(635)

(166)

¥ —

¥73,068

CapitalsurplusRetainedearnings$749,006 $ 5,635 $522,595
175,000(4)216¥ (1,475)

Treasurystock

171,459—(5,635)(1,473)$749,006 $The accompanying notes are an integral part of these statements.

— $648,456(325)(4,992)(1)
15,328(1)(1)—
142,232
19,7195,133(2,311)

1
39

14,33527,870

(35)
1,917

186
(171)

19,65525,427617
11,151

20,272
178,810
19,719—(5,371)(4)
216—(5,371)
(4)
216

(801)

(801)

¥155,991(1,036)¥(3,347)(51) (13,683)¥(12) ¥ 14,187(650) (15,420) (1,641)¥(821) ¥ 10,007 ¥ 9,510(17,061)¥175,508

Thousands of U.S. dollars (Note 1)
Unrealized
RemeasureDeferred
Foreign
Accumulated
Total gain (loss)
ments
Nongains orcurrency
other comTotal
shareholders’ on availableof defined
controlling
losses on translationprehensive
net assets
equityfor-salebenefitinterests
hedges adjustments
incomesecurities
plans$(14,972) $1,262,264 $(20,509) $ 346 $ 247,338
175,000—(47,666)—(325)(4,992)(1)
15,328$(1,518) $ 225,657 $ 98,962 $1,586,883
175,000—(47,666)
(35)
1,917

—
(47,666)
(35)
1,917

(7,108)(7,108)—(9,194) (453) (121,432) (5,769) (136,848) (14,564) (151,412)$(13,090) $1,384,372 $(29,703) $(107) $ 125,905 $(7,286) $ 88,809 $ 84,398 $1,557,579

Contents

NIPRO CORPORATION
Annual Report 201633

Consolidated Statements of Cash Flows
Nipro Corporation and its Consolidated Subsidiaries
For the years ended March 31, 2016 and 2015

Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of goodwill
Loss on impairment of fixed assets
Equity in profit of an affiliated company
Allowance for doubtful receivables
Gain (loss) on sales of available-for-sales securities
Gain on sale of investment in consolidated subsidiaries
Loss on step acquisitions
Provision for deferred taxes
Exchange loss (gain)
Loss on devaluation of marketable securities
Loss (gain) on sale and disposal of property, plant and equipment—net
Other, net
Changes in operating assets and liabilities:
Trade receivables
Inventories
Other current assets
Lease deposits
Trade payables
Accrued income taxes
Other, net
Total adjustments
Net cash provided by operating activities
Investing activities:
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of available-for-sale securities
Purchase of investments in unconsolidated subsidiaries
Proceeds from sales of available-for-sale securities
Purchases of investments in consolidated subsidiaries resulting in change
in scope of consolidation
Proceeds from investments in consolidated subsidiaries resulting in change
in scope of consolidation
Proceeds from sales of investments in consolidated subsidiaries resulting
in change in scope of consolidation
Payments for transfer of business
Deposits (Over three months)
Other, net
Net cash used in investing activities
Financing activities:
Net increase (decrease) in short-term loans
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from issuance of bonds
Repayment of bonds
Proceeds from disposal of treasury stock
Proceeds from sales of treasury shares
Cash dividends paid
Payments from changes in ownership interests in subsidiaries that do not resultin change in scope of consolidation
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents of newly consolidated subsidiary, beginning of period
Cash and cash equivalents, end of period
The accompanying notes are an integral part of these statements.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2015

2016

¥ 19,719¥ 12,470$ 175,000

30,147
3,687
—
95
1,023
289
(15,674)
2,239
4,697
1,645
80
310
(348)

27,668
5,837
66
169
1,292
(426)
—
—
(1,254)(2,801)
1
(857)
252

267,545
32,721
—
843
9,079
2,565
(139,102)
19,87041,684
14,599710
2,751(3,088)(5,681)(6,705)(9,795)
(101)
6,162
332
(2,187)
10,21529,934(6,766)(8,120)
5,502
(79)
1,147
(6,800)681
15,512
27,982(50,417)(59,505)(86,928)(896)
54,686
2,947(19,409)90,655
265,655(38,086)
(746)
(513)
—
1,114

(38,772)3,749(2,048)(1,225)
11,520(338,001)(6,621)(4,553)
—
9,886

—

(754)

—

383

—

3,399

19,512
—
(989)
2,811
(16,514)—(1,400)898(1,682)(29,714)173,163—(8,777)
24,947(146,557)(32,858)
105,370(66,012)
24,967(27,840)215(16)(5,385)

3,210
83,331(52,384)
2,983(4,715)213(2)(5,008)(291,605)
935,126(585,836)
221,574(247,071)
1,908
(142)
(47,790)(1,600)(474)(3,633)—(1,030)(26,598)(14,199)(4,207)(32,242)

3,218
13,00598,199773¥ 111,977

1,785
26,65170,892656¥ 98,119

28,559115,415
871,4866,860$ 993,761

Contents

NIPRO CORPORATION
Annual Report 201634

Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The financial statements of Nipro Corporation (“the Company”) and its
consolidated domestic subsidiaries have been prepared in accordancewith the provisions set forth in the Financial Instruments and Exchange
Law of Japan and its related accounting regulations, and in conformity
with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements ofInternational Financial Reporting Standards. Effective from the year ended
March 31, 2009, the Company has adopted the “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF No. 18) and as a result, theaccounts of consolidated overseas subsidiaries are prepared in accordance with either International Financial Reporting Standards or generally
accepted accounting principles in the United States, with adjustments forthe specified five items as applicable.
In preparing the accompanying consolidated financial statements,

certain reclassifications have been made to the consolidated financial
statements issued domestically, in order to present them in a form which
is more familiar to readers outside Japan. However, no adjustment has
been made which would change the financial position or the results ofoperations presented in the original financial statements. In addition, thenotes to consolidated financial statements include additional information
which is not required under generally accepted accounting principles andpractices in Japan.
The financial statements presented herein are expressed in Japanese
yen and, solely for the convenience of the reader, have been translated
into United States dollars at the rate of ¥112.68=US$1, the approximate
exchange rate on March 31, 2016. These translations should not be
construed as representations that the Japanese yen amounts have been,
could have been, or could in the future be, converted into U.S. dollar
amounts at that or any other rate.

2. Summary of Significant Accounting Policies(a) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and the significant subsidiaries and affiliated company accounted forby the equity method.
Investments in unconsolidated subsidiaries are stated at cost and theequity method is not applied for the valuation of such investments since
they are considered immaterial in the aggregate.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profits included in
assets resulting from transactions within the Company and its consolidated subsidiaries have been eliminated. The difference between the costof investments in subsidiaries and affiliates and the equity in their net
assets at the dates of acquisition is amortized on a straight-line basis over
five to twenty years.
All accounts herein have been presented on the basis of the 12months ended March 31, 2016 for the Company and for consolidated
domestic subsidiaries, and December 31, 2015 for all consolidated overseas subsidiaries.
Adjustments have been made for any significant intercompany transactions which took place during the period between the end of the­accounting period of the consolidated overseas subsidiaries and that of
the Company.
(b) Translation of Foreign Currencies
Balance sheets of consolidated overseas subsidiaries are translated into
Japanese yen at the current exchange rates as of the balance sheet date
except for shareholders’ equity, which is translated at the historical rates.
Income statements of consolidated overseas subsidiaries are translated
into Japanese yen at the average exchange rates for the period. Resulting
translation adjustments are shown as “Foreign currency translation adjustments” in the “Accumulated other comprehensive income” section of net
assets.
(c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, readily available deposits and short-term highly liquid investments with original maturities ofthree months or less.

(d) Allowance for Doubtful Receivables
An allowance for possible losses from trade notes and accounts receivable, loans and other receivables is provided based on the actual rate ofpast bad debts and the uncollectible amounts of certain individual
receivables.
(e) Inventories
Inventories are stated principally at the lower of average cost or net realizable value.
(f) Property, Plant and Equipment
Depreciation of property, plant and equipment of the Company and its
consolidated domestic subsidiaries is computed principally by the­declining-balance method. The straight-line method is applied to buildings
acquired by the domestic companies after April 1, 1998, and is principally
applied to the property, plant and equipment of consolidated overseas
subsidiaries.
(g) Intangible Assets
Amortization of intangible assets, including software for the Company’s
own use, is computed by the straight-line method over the estimateduseful life of the asset.
Goodwill is amortized on a straight-line basis over the period theCompany benefits from its use. If the amount is not significant, it is expensed when incurred.
(h) Investment Securities
Investment securities are classified and accounted for, depending on
management’s intent, as follows:i)	held-to-maturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity, arestated at amortized cost.
ii)	available-for-sale securities, which are not classified as the aforementioned securities, are stated at fair value. Unrealized gains andlosses, net of applicable taxes, are reported as “Accumulated othercomprehensive income” of net assets.
Non-marketable available-for-sale securities are stated at cost determined by the average method.
For other-than-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.

Contents

NIPRO CORPORATION
Annual Report 2016(i) Allowance for Loss on Clearance of Business
The Company has withdrawn from retail business and a provision for
anticipated losses of sales of related fixed assets is provided.
(j) Employees’ Retirement and Severance Benefits
Method of Attributing Expected Benefit to Periods
In calculating retirement benefit obligation, the estimated amount of
retirement benefit is attributed to the periods on the benefit formula basis.
Accounting Method of Actuarial Gains and Losses and Prior Service
Costs
Prior service costs are amortized on the straight-line basis over a certain
period (mainly 5 years) which is within the average of the estimatedremaining service years of the employees when they occur.
Actuarial gains and losses are amortized on the straight-line basis overa certain period (mainly 5 years) which is within the average of the estimated remaining service years of the employees commencing from thefollowing year in which they arise.
(k) Derivatives
Derivatives are stated at fair value, with changes in fair value included in
net income or loss for the period in which they arise, unless derivatives
are used for hedging purposes. Please see (m) Hedge Accounting below.
(l) Leases
Finance leases, except for certain immaterial leases, are capitalized in thebalance sheet. Amortization of finance lease assets is calculated by thestraight-line method over the lease period assuming no residual value.
The Company and its consolidated domestic subsidiaries account for
certain finance leases as operating leases, which do not transfer ownership to the lessee and existed prior to April 1, 2008.
(m) Hedge Accounting<Method of hedge accounting>
The deferral hedge accounting method is applied in principle. The
allocation method is applied to currency swaps and the exceptional
accounting method is applied to interest rate swaps when certain
hedging criteria are met.
<Hedge instrument and hedge items>(Hedging instruments) (Hedged items)
Currency swap
Short-term and long-term debt
denominated in foreign currency
Interest rate swap
Interest on short-term and long-term debt
<Hedge policy>
The Company uses currency swaps and interest rate swaps to reduce
currency exposure and interest volatility risk.
<Method for assessing hedge effectiveness>
Hedge effectiveness is not assessed for currency swaps which meets
certain criteria of the allocation method and interest rate swaps whichmeet certain criteria of the exceptional accounting method.
(n) Income Taxes
The provision for income taxes is computed based on income for financial
statement purposes. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes.

35(o) Amounts per Common Share
Basic earnings per share is computed by dividing net income available tocommon shareholders by the weighted-average number of commonshares outstanding for the period. Diluted earnings per share reflect thepotential dilution that could occur if securities were exercised or converted into common stock. Diluted earnings per share of common stock
assume full conversion of the outstanding convertible notes and bonds atthe beginning of the year (or at the time of issuance) with an applicableadjustment for related interest expense, net of tax, and full exercise ofoutstanding warrants.
(p) Changes in Accounting Policy
Application of Accounting Standards for Business Combinations
Effective beginning of the fiscal year ended March 31, 2016, the Company applied “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, September 13, 2013), “Accounting Standard for consolidated financial statements (ASBJ Statement No. 22, September 13,2013), and “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013).
Any differences arising from the movement of ownership interest in a
subsidiary are recorded as a change in capital surplus as long as theparent company retains control over the subsidiary, and acquisition-related
expenses are recorded as expenses when occurred.
Also, for business combinations conducted from the beginning of the
fiscal year, the Company changed to the method to reflect the revisions to
the allocated amount to acquisition cost determined by provisional accounting treatment in the consolidated financial statements for the fiscal
year of the acquisition date.
In addition, the presentations of some items of net income werechanged, and the presentation of ‘minority interests’ was changed to‘non-controlling interests’. The consolidated financial statements for theprevious fiscal year were reclassified to reflect the subject changes inpresentation.
In the consolidated cash flow statement for the fiscal year ended
March 31, 2016, cash flow regarding the acquisition and/or sales ofsubsidiaries’ stocks without changing the scope of consolidation is described in the section of “Financing activities”. Cash flow regarding acquisition-related expenses arising from acquisition of subsidiaries withchanges in the scope of consolidation or the expenses arising from acquisition and/or sales of subsidiaries’ stocks without changes in the scope of
consolidation are described in the section of “Operating activities.”
For the application of Accounting Standards for Business Combinations and other standards, the Company follows the transitional treatmentprescribed in Article 58-2 (4) of Accounting Standard for Business Combinations, Article 44-5 (4) of Accounting Standard for consolidated financial statements, and Article 57-4 (4) of Accounting Standard for Business
Divestitures, applying from the beginning of the fiscal year ended March
31, 2016 and going forward.
As a result, capital surplus decreased ¥635 million (US$5,636 thousand) and retained earnings decreased ¥111 million (US$986 thousand)at the end of the fiscal year under review. Operating income and ordinary
income increased ¥55 million (US$489 thousand), and income before
income taxes and minority interests increased ¥51 million (US$453
thousand), respectively. The impact on amounts per share is described in
the relevant section.

Contents

NIPRO CORPORATION
Annual Report 2016(q) Accounting Standard Issued but not yet Effective
Implementation Guidance on Recoverability of Deferred Tax Assets
On December 28, 2015, the ASBJ issued “Implementation Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26). The
ASBJ basically continues to apply the framework used in “Audit Treatmentof Judgments with Regard to Recoverability of Deferred Tax Assets”(Audit Committee Report No. 66, Japanese Institute of Certified Public
Accountants), where an entity is classified into one of five categories
according to certain criteria and the recoverability of deferred
tax assets is assessed based on the entity’s assigned category. However,the ASBJ reflected necessary changes in the guidance regarding thefollowing accounting treatments:(1) Treatment is clarified for entities that do not meet the criteria for anyof the five categories.
(2) Criteria for classifying entities as “Category 2” or “Category 3” ischanged from ordinary income to taxable income in the absence ofinfrequent or unusual events.

36(3) For “Category 2” entities, deferred tax assets attributable to deductible
temporary differences for which scheduling the timing of the reversals
is not possible are considered to be realizable if certain conditions are
met. Under Audit Committee Report No. 66, deferred tax assets are
considered to be realizable to the extent not exceeding the amountbased on a scheduling of future reversals of temporary differences.
(4) For “Category 3” entities, the future period of estimated taxable income can be estimated in excess of five years if certain conditions are
met. Under Audit Committee Report No. 66, the future estimableperiod is generally limited to five years.
(5) For entities classified as “Category 4,” they can be treated as­“Category 2” or “Category 3” if certain conditions are met and such
entities can use the methods of measurement of deferred tax assets
stipulated in “Category 2” or “Category 3.” The Company and its domestic subsidiaries will adopt the guidance effective from the beginning of the fiscal year ended March 31, 2017. At present, theCompany is in the process of evaluating the impact on the consolidated financial statements of the adoption of this implementation
guidance.

3. Inventories
Inventories consisted of the following:
2016

Finished goods and merchandise
Raw materials
Work in process
Packing and otherTotal¥ 68,683
19,164
10,168
4,687¥102,702

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016$609,540
170,074
90,23841,596$911,448¥ 67,413
18,90812,150
4,005¥102,476

4. Income Taxes
The Company and its domestic subsidiaries are subject to several taxes based on income which, in aggregate, resulted in a normal statutory tax rate of
approximately 33% and 35.4% for the years ended March 31, 2016 and 2015, respectively.							The significant components of deferred tax assets and liabilities were as follows:

Deferred tax assets
Tax loss carryforwards
Intercompany profits
Valuation loss on inventories
Allowance for bonuses to employees
Sales allowance
Loss on impairment of fixed assets
Excess of allowance for doubtful accounts over tax allowable amounts
Net defined benefit liability
Accrued enterprise taxes
Unrealized loss on available-for-sale securities
Goodwill
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Unrealized gain on available-for-sale securities
Revaluation reserve for land
Revaluation reserve for intangible assets
Revaluation reserve for fixed assets—other
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities) (*1)

2016Millions of yen
2015

Thousands of
U.S. dollars (Note 1)2016¥ 6,411
2,552
1,312
1,017
282
88
1,201
1,479
283
2,084
1,023
2,497
¥20,229(8,048)¥12,181¥ 9,429
2,409
953
873
242
93
1,528
1,144
237
1,797
1,671
3,919
¥24,295(6,121)¥18,174$ 56,896
22,648
11,644
9,026
2,503
781
10,65813,1252,511
18,495
9,079
22,160$179,526(71,424)$108,102

409
676
238
1,228
1,308
¥ 3,859¥ 8,322

452
676
1,222
1,717
1,782
¥ 5,849¥12,325

3,630
5,999
2,112
10,898
11,608$ 34,247$ 73,855(*1) The current portion of Deferred Tax Liabilities for the year ended March 31, 2016 is ¥21 million (US$187 thousand) and is accounted for as “Others” of Current Liabilities.

Contents

NIPRO CORPORATION
Annual Report 2016

37

Reconciliation of the differences between the statutory tax rates and the effective income tax rates was as follows:
2016

33.0%
1.8
(0.4)
—
0.9
0.4
(3.4)
—
11.2
(19.9)
2.3
25.9

Statutory tax rate
Expenses not deductible for tax purposes
Non-taxable dividend income
Loss in subsidiaries
Effect of tax rate change
Amortization of goodwill
Tax credits primarily for research and development costs
Tax loss carryforwards
Valuation allowance
Adjustment procedure for consolidation of gain on sales of subsidiaries and affiliates’ stocks
Other
Effective income tax rate

2015

—%
—
—
—
—
—
—
—
—
—
—

*Adjustment of deferred tax assets and liabilities following the change in the statutory tax rates“Act on Partial Revision of the Income Tax Act” (Law No. 15, 2016) and “Revision of the Local Tax Law” (Law No. 13, 2016) were passed by the National Diet on March 29, 2016.
Accordingly, the statutory tax rate for calculating deferred tax assets and liabilities for this fiscal year under review (limited to those to be eliminated on and after April 1, 2016) has beenchanged from 32.2% of the previous fiscal year to 30.8% for those which are expected to be recovered or paid from April 1, 2016 to March 31, 2018 and to 30.6% for those which are
expected to be recovered or paid on and after April 1, 2018.
As a result, net deferred tax assets decreased ¥329 million (US$2,920 thousand), while income taxes deferred increased ¥228 million (US$2,023 thousand) and the valuation difference on available-for-sale securities increased ¥101 million (US$896 thousand).

5. Pledged Assets
The following assets were pledged as collateral:
2016

Buildings and structures
Machinery and equipment
Land
Trade notes receivable
Other
Total

¥ 9,473
359
3,372
109
6,674
¥19,987

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥14,503
3,684
4,227
6,699
19,325¥48,438$ 84,070
3,186
29,925967
59,230$177,378

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016

The above assets were pledged against the following liabilities:
2016

Short-term bank loans
Current portion of long-term debt
Long-term debt
Total

¥1,223
1,521
3,286¥6,030¥ 3,007
1,289
5,730¥10,026$10,854
13,49829,162$53,514

2016

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥54,288—¥54,288¥ 1,731¥56,019¥56,623—¥56,623¥ 1,690¥58,313$481,789—$481,789$ 15,362$497,151

6. Investment Securities
Investment securities as of March 31, 2016 and 2015 consisted of the following:

Non-current:
Marketable:
Marketable equity securities
Investment trust funds and other
Subtotal
Non-marketable securities
Total

Contents

NIPRO CORPORATION
Annual Report 201638

The carrying amounts and aggregate fair values of marketable securities for investments as of March 31, 2016 and 2015 were as follows:

Available-for-sale securities
Equity securities
Debt securities and other
Total

Available-for-sale securities
Equity securities
Debt securities and other
Total

Available-for-sale securities
Equity securities
Debt securities and other
Total

Cost

Unrealized gain

Unrealized loss

Millions of yen
2016
Fair Value¥59,717—¥59,717¥7,382—¥7,382¥12,811—¥12,811¥54,288—¥54,288

Cost

Unrealized gain

$529,970—$529,970$65,513—$65,513

Thousands of U.S. dollars (Note 1)
2016
Unrealized loss
Fair Value$113,694—$113,694$481,789—$481,789

Cost

Unrealized gain

Unrealized loss

Millions of yen
2015
Fair Value¥60,771—¥60,771¥8,208—¥8,208¥12,356—¥12,356¥56,623—¥56,623

Proceeds from sales of securities and gross realized gains or losses on those sales for the years ended March 31, 2016 and 2015 were as follows:
2016

Proceeds
Gains on sales
Losses on sales¥1,114—289

Millions of yen
2015¥11,520
3,403
2,977

Thousands of
U.S. dollars (Note 1)
2016$9,886—2,565

7. Financial Instruments(1) Circumstances on financial instruments(a) Policy for financial instruments
The Company and its consolidated subsidiaries manage the temporary
surplus funds by deposits with banks that have a high level of safety.
Based on capital investment planning and financing planning, the­Company and its consolidated subsidiaries raise funds for business­operation with bank loans, commercial paper, corporate bonds, and­issuing convertible bond-type corporate bonds with a warrant of booking
new stocks.
(b) Details and risk of financial instruments and its risk
management
Receivables such as trade notes and accounts receivable are exposed tocustomer’s credit risk. Receivables denominated in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange
rates.
In order to reduce the customer’s risk, the Company monitors the dues
and balances by customer in accordance with the Company’s credit administration regulations.
Investment securities are exposed to market fluctuation risk, butmainly consist of equity of the companies which conduct business with
the Company. The Company periodically reviews the market price of suchsecurities.
Payables such as trade notes, accounts payable and accounts payable
other are due within 1 year.

Payables denominated in foreign currency are exposed to the risk offluctuation in foreign currency exchange rates.
Short-term loans payable are mainly borrowed to raise operating
capital and long-terms loans payable are mainly borrowed to make capital
expenditures. A part of long-term loans with the floating interest rate has
the risk of interest rate fluctuation, but the Company and its consolidated
subsidiaries use interest rate swaps to solidify the interest rate. For someof the loans denominated in foreign currency, the Company and its consolidated subsidiaries use currency swaps to hedge the currency fluctuation risk.
Bonds and commercial paper are mainly issued to raise the funds forthe retirement of bonds.
Lease obligations are mainly for capital expenditures, free from­interest-rate risk because the interest rate is fixed.
Payables, loans and bonds are exposed to liquidity risk, but the­Company and its consolidated subsidiaries manage the risk by establishing cash planning.
(c) Supplemental information on fair values of financial instruments
Fair values of financial instruments include values based on market priceand reasonably estimated values when market price is not available.
Because variable factors are counted in the estimation, the estimatedvalues may vary by adopting different assumptions.

Contents

NIPRO CORPORATION
Annual Report 2016

39(2) Fair values of financial instruments
The book values, fair values and the differences between them as of March 31, 2016 and 2015 are as follows (Financial instruments for which the market value is extremely difficult to determine are not included as described in remark 2.):

Cash and cash equivalents, time deposits
Trade notes and accounts receivable,
net of allowance for doubtful receivables
Investment securities
Assets total
Trade notes and accounts payable
Short-term bank loans, current portion of
long-term debt, and commercial paper
Other notes and account payable (*1)
Long-term debt
Convertible bondLease obligations (*2)
Liabilities total

Fair value¥—¥112,871¥112,871¥—

112,253
54,288¥293,209¥ 56,185

¥
¥

—
—
—
—

111,693
56,623¥281,187¥ 51,751

111,693
56,623¥281,187¥ 51,751

¥
¥

—
—
—
—

138,11234,063242,990
25,0004,088¥500,438

—
—
286
—
89
¥375

174,200
23,440226,214—3,956¥479,561

174,200
23,440224,599—
3,768¥477,758

—
—
1,615
—
188
¥1,803

Book value

Fair value¥126,668

112,253
54,288¥293,209¥ 56,185
138,11234,063
243,276
25,0004,177¥500,813

Book value

Cash and cash equivalents, time deposits
Trade notes and accounts receivable,
net of allowance for doubtful receivables
Investment securities
Assets total
Trade notes and accounts payable
Short-term bank loans, current portion of
long-term debt, and commercial paper
Other notes and account payable (*1)
Long-term debt
Convertible bondLease obligations (*2)
Liabilities total

Book value

Millions of yen
2015
Difference¥126,668

Millions of yen
2016
Difference

Thousands of U.S. dollars (Note 1)
2016
Fair value
Difference$1,124,139$1,124,139$—

996,210
481,789$2,602,138$  498,624

996,210
481,789$2,602,138$  498,624

$
$

—
—
—
—

1,225,701
302,299
2,158,999
221,867
37,070$4,444,560

1,225,701
302,299
2,156,461
221,867
36,280$4,441,232

—
—
2,538
—
790
$3,328(*1) This is included in accrued expenses and notes andaccounts payable for plant and equipment on the balance
sheet.
(*2) This is included in other current liabilities and otherlong-term liabilities on the balance sheet.

Remark 1 Methods used to calculate fair values of financial instruments and the details of securities<Assets>• Other notes and account payable• Cash and cash equivalents, time deposits and trade notes and accounts
Because the settlement periods of the above items are short and theirreceivablefair values are almost the same as their book values, the relevant book
Cash and cash equivalents and trade notes and accounts receivable arevalues are used.
stated at the relevant book value because the settlement periods are• Long-term debt and convertible bondshort and the fair values are almost the same as the book value.
The fair value of long-term debt is calculated by applying a discount rate
• Investments securities
to the total of principal and interest. The discount rate is based on the
Equity securities are stated at market value. See Note 6. “Investment
assumed interest rate if a similar new loan was entered into.
securities” for the detailed information by classification.
• Lease obligation<Liabilities>
The fair value of lease obligations is calculated by applying a discount• Trade notes and accounts payable and short-term bank loans and currate to the total of principal and interest. The discount rate is based onrent portion of long-term debt and commercial paper
the assumed interest rate if a current lease transaction was renewed.
Because the settlement periods of the above items are short and theirfair values are almost the same as their book values, the relevant bookvalues are used.
Remark 2

Financial instruments for which the fair value is extremely difficult to determine
2016

Unlisted equity securities¥4,273

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016$37,922¥7,454

Because these items have no market value and are difficult to estimate the future cash flow and it is extremely difficult to determine their fair values, they are not included in investment
securities above.

Remark 3

Planned redemption amounts after the balance sheet date for monetary receivables with maturity dates are as follows:

Cash and cash equivalents, time deposits
Trade notes and accounts receivable

2016
Within 1 year

Millions of yen
2015
Within 1 year

Thousands of
U.S. dollars (Note 1)
2016
Within 1 year

¥126,668
112,253¥112,871
111,693$1,124,139
996,210

Contents

NIPRO CORPORATION
Annual Report 201640

Remark 4 Planned repayment amounts after the balance sheet date for monetary payables with maturity dates
Planned repayment amounts after the balance sheet date for monetary payables with maturity dates at March 31, 2016 are as follows:
Millions of yen
2016
Within 1 year

Trade notes and accounts payable
Short-term bank loans, current portion of long-term debt, and commercial paper
Other notes and account payable
Long-term debt
Convertible bondLease obligations
Total¥ 56,185
138,11234,063——
1,045¥229,405

Within 1 year

Trade notes and accounts payable
Short-term bank loans, current portion of long-term debt, and commercial paper
Other notes and account payable
Long-term debt
Convertible bondLease obligations
Total$  498,624
1,225,701
302,299——9,274$2,035,898

Over 1 year but
within 2 years

¥

—
—
—
73,594—877¥74,471

Over 1 year but
within 2 years

$

—
—
—
653,124—
7,783$660,907

Over 2 years but
within 3 years

¥

—
—
—
38,581—
767¥39,348

Over 2 years but
within 3 years

$

—
—
—
342,394—
6,807$349,201

Over 3 years but
within 4 years

Over 4 years but
within 5 years

¥

—
—
—
48,331—
657¥48,988¥———
21,75925,000418¥47,177

Over 5 years

¥

—
—
—
61,011—
413¥61,424

Thousands of U.S. dollars (Note 1)
2016
Over 3 years but Over 4 years but
within 4 years
within 5 years
Over 5 years

$

—
—
—
428,923—5,831$434,754$———
193,104
221,867
3,710$418,681$———
541,454—3,665$545,119
Millions of yen
2015

Within 1 year

Trade notes and accounts payable
Short-term bank loans, current portion of long-term debt, and commercial paper
Other notes and account payable
Long-term debt
Convertible bondLease obligations
Total¥ 51,751
174,200
23,440——828¥250,219

Over 1 year but
within 2 years

¥

—
—
—
72,307—931¥73,238

Over 2 years but
within 3 years

¥

—
—
—
63,797—564¥64,361Over 3 years but
within 4 years

Over 4 years but
within 5 years

¥

—
—
—
22,784—463¥23,247¥———
34,035—768¥34,803

Over 5 years

¥

—
—
—
33,291—
402¥33,693

8. Derivatives
The Company and its consolidated subsidiaries had the following derivatives contracts outstanding at March 31, 2016 and 2015.

(1) Derivatives for which hedge accounting has not been applied.
(a) Currency related
Type of Derivative

Transaction other than market transaction

NDF

Contract amountOver 1 year out-of-contract amountMillions of yen
2016
Fair Value

¥350

¥—

¥(1)

Thousands of U.S. dollars (Note 1)
Type of Derivative

Transaction other than market transaction

NDF

Contract amountOver 1 year out-of-contract amount2016
Fair Value$3,106$—$(9)
Millions of yen

Type of Derivative

Transaction other than market transaction

NDF

Fair value is based on information provided by a financial institution at the end of the fiscal year.

Contract amountOver 1 year out-of-contract amount2015
Fair Value

¥—

¥—

¥—

Contents

NIPRO CORPORATION
Annual Report 201641(b) Interest related
Type of Derivative

Transaction other than market transaction

Contract amountOver 1 year out-of-contract amountMillions of yen
2016
Fair Value

¥66

¥—

¥—

¥18

¥—

¥(1)

Interest rate option
Interest rate swap
To receive variable/To pay fixed

Thousands of U.S. dollars (Note 1)
Type of Derivative

Transaction other than market transaction

Interest rate option
Interest rate swap
To receive variable/To pay fixedContract amountOver 1 year out-of-contract amount2016
Fair Value

$586

$—

$—

$160

$—

$(9)
Millions of yen

Type of Derivative

Transaction other than market transaction

Contract amountOver 1 year out-of-contract amount2015
Fair Value

¥73

¥ —

¥0

¥40

¥20

¥(2)

Interest rate option
Interest rate swap
To receive variable/To pay fixed

Fair value is based on information provided by a financial institution at the end of the fiscal year.

(2) Derivatives for which hedge accounting has been applied.
(a) Currency related
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Principle method
Allocation method of forward foreign exchange contract, etc.

Currency swap
Currency swap

Account receivables
Long-term loans

Contract amount¥  371¥1,125

Millions of yen
2016
Over 1 year out-of-contract amount
Fair Value

¥ —
¥54

¥(11)
(*1)

Thousands of U.S. dollars (Note 1)
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Principle method
Allocation method of forward foreign exchange contract, etc.

Currency swap
Currency swap

Account receivables
Long-term loans

Contract amountOver 1 year out-of-contract amount2016
Fair Value$3,293$9,984

$ —
$479

$(98)
(*1)

Millions of yen
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Principle method
Allocation method of forward foreign exchange contract, etc.

Currency swap
Currency swap

Account receivables
Long-term loans

Contract amountOver 1 year out-of-contract amount2015
Fair Value¥  337¥1,196¥—¥1,125¥36(*1)(*1) The fair value of interest rate swap to which the exceptional accounting method is applied and the fair value of forward foreign exchange contract, etc., to which the allocation method isapplied are included in the fair value of long-term loans in Note 9. “Financial Instruments” because such interest rate swap and forward foreign exchange contract, etc., are accounted for
as a single item with the corresponding long-term loans.

(b) Interest related
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Contract amountPrinciple method
Exceptional accounting method for interest rate swap

Interest rate swap
Interest rate swap

Long-term loans
Long-term loans¥  138¥2,222Millions of yen
2016
Over 1 year out-of-contract amount
Fair Value

¥ 70
¥725

¥4
(*1)

Thousands of U.S. dollars (Note 1)
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Contract amountOver 1 year out-of-contract amount2016
Fair Value

Principle method
Exceptional accounting method for interest rate swap

Interest rate swap
Interest rate swap

Long-term loans
Long-term loans$ 1,225$19,720$  621$6,434$35(*1)

Millions of yen
Method of hedge accounting

Type of Derivative

Principal Hedge Item

Contract amountOver 1 year out-of-contract amount2015
Fair Value

Principle method
Exceptional accounting method for interest rate swap

Interest rate swap
Interest rate swap

Long-term loans
Long-term loans¥  212¥2,719¥  140¥2,222¥7(*1)(*1) The fair value of interest rate swap to which the exceptional accounting method is applied and the fair value of forward foreign exchange contract, etc., to which the allocation method isapplied are included in the fair value of long-term loans in Note 7. “Financial Instruments” because such interest rate swap and forward foreign exchange contract, etc., are accounted for
as a single item with the corresponding long-term loans.

Contents

NIPRO CORPORATION
Annual Report 201642

9. Short-Term Loans and Long-Term Debt
Short-term loans comprised overdrafts and promissory notes.
The weighted-average interest rates of short-term bank loans for the years ended March 31, 2016 and 2015 were 0.7878% and 0.8568%, respectively.
The weighted-average interest rates of commercial paper for the years ended March 31, 2016 and 2015 were 0.069% and 0.1112%, respectively.
Long-term debt comprised the following:2016

2.04% unsecured bonds due 20180.877% unsecured bonds due 2016 (*1)
0.83% unsecured bonds due 2016 (*1)
1.09% unsecured bonds due 2018
0.61% unsecured bonds due 2019 (*1)
0.57% unsecured bonds due 2020
0% unsecured bonds due 2021
0.64% unsecured bonds due 2016 (*1)
0.30%~0.86% unsecured bonds due 2019 (*1) (*2)
Long-term bank loans due through 2074, with weighted-average interest rate of 1.0198%
for the year ended March 31, 2016, and of 1.1039% for the year ended March 31, 2015
Less current portion of long-term debt
Total

¥ 10,000
—
—
—
—
4,000
1,200
[400]
3,000
25,0001,000[1,000]
1,392
[862]

Millions of yen
2015

304,734(82,050)¥268,276[2,262]Thousands of
U.S. dollars (Note 1)2016¥ 10,000
20,000[20,000]
6,000[6,000]
4,000
1,600
[400]
3,000
—
1,000
—
2,832
[1,440]$   88,747————
35,49810,650[3,550]26,624
221,867
8,875[8,875]
12,353[7,650]259,734(81,952)¥226,214[27,840]

2,704,420(728,168)$2,380,866[20,075](*1) [] is the amount of the current portion of bonds.
(*2) This is the total amount of the bonds Goodman Co., Ltd. issued.
In March 2008, the Company issued ¥10,000 million (US$88,747 thousand) of 2.04% unsecured bonds due 2018.
In March 2011, the Company issued ¥20,000 million (US$177,494 thousand) of 0.877% unsecured bonds due 2016.
In March 2013, the Company issued ¥6,000 million (US$53,248 thousand) of 0.83% unsecured bonds due 2016.
In March 2013, the Company issued ¥4,000 million (US$35,498 thousand) of 1.09% unsecured bonds due 2018.
In March 2014, the Company issued ¥2,000 million (US$17,749 thousand) of 0.61% unsecured bonds due 2019.
In March 2015, the Company issued ¥3,000 million (US$26,624 thousand) of 0.57% unsecured bonds due 2020.
In January 2016, the Company issued ¥25,000 million (US$221,867 thousand) of 0% unsecured bonds due 2021.
In April 2011, Nipro Pharma Corporation issued ¥1,000 million (US$8,875 thousand) of 0.64% privately placed bonds due 2016.
From November 2010 to February 2014, Goodman Co., Ltd. issued ¥4,424 million (US$39,262 thousand) of 0.30% and 0.86% unsecured bonds due from 2015 to 2019.

The aggregate annual maturities of long-term debt outstanding at March 31, 2016 are as follows:
Millions of yen
2016

2016
2017
2018
2019 and thereafter
Total¥ 82,050
73,594
38,581
156,101¥350,326

Thousands of
U.S. dollars (Note 1)
2016$  728,168
653,124
342,394
1,385,348$3,109,034

As is customary in Japan, long-term and short-term bank loans are made under general agreements which provide that additional securities and guarantees for present and future indebtedness will be given under certain circumstances at the request of the bank.
In addition, the agreements provide that the bank has the right to offset cash deposits against any long-term and short-term bank loan that becomes due, and in case of default and certain
other specified events, against all other loans payable to the bank.

Contents

NIPRO CORPORATION
Annual Report 2016

43

10. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have defined benefit pension plans and unfunded retirement benefit plans, and a defined contribution
pension plan for employees.
Certain consolidated subsidiaries have recorded liabilities for retirement benefit and assets for a retirement benefit based on the simplified method.

(1) Defined Benefit Plans(a) The reconciliation of beginning and ending balances of the benefit obligation (excluding the defined benefit plans applied based on thesimplified method) are as follows:
2016

Obligation at April 1
Cumulative effects of changes in accounting policies
Restated balance
Service cost
Interest cost
Actuarial gains and losses
Prior service cost
Benefit payments
Increasing by change from the simplified method to the principle method
Decreasing by sale of subsidiary shares
Other (foreign currency translation adjustments, etc.)
Obligation at March 31¥11,467—
11,467
835
129
701
7
(409)
1,195
(326)
(45)
¥13,554

Millions of yen
2015¥11,003(150)
10,853
664
151
199
—
(374)

(26)
¥11,467

Thousands of
U.S. dollars (Note 1)
2016$101,766—
101,766
7,410
1,145
6,221
62
(3,630)10,605(2,893)(399)$120,287(b) The reconciliation of beginning and ending balances of the fair value of the plan assets (excluding the defined benefit plans applied basedon the simplified method) is as follows:
2016

Fair value of plan assets at April 1
Expected return on plan assets
Actuarial gains and losses
Company contribution
Benefit payments
Increasing by change from the simplified method to the principle method
Decreasing by sale of subsidiary shares
Other (foreign currency translation adjustments, etc.)
Fair value of plan assets at March 31¥8,339
156
(269)
633
(212)
617
(174)
(7)
¥9,083

Millions of yen
2015¥7,577
131
305
508
(206)
—
—
24
¥8,339Thousands of
U.S. dollars (Note 1)
2016$74,006
1,384(2,387)
5,618(1,881)
5,475(1,544)(62)$80,609(c) T he reconciliation of beginning and ending balances of liabilities for retirement benefit applied based on the simplified method is as follows:2016

Liabilities for retirement benefit at April 1
Beginning balance of newly consolidated subsidiary
Retirement benefit cost
Retirement payments
Contribution for the plan
Increasing by change from the simplified method to the principle method
Other (foreign currency translation adjustments, etc.)
Liabilities for retirement benefit at March 31

¥ 573
—
136
(22)
(6)
(346)
(40)
¥ 295

Millions of yen
2015

¥519
10
183
(20)
(83)
(36)
¥573

Thousands of
U.S. dollars (Note 1)
2016$ 5,085
—
1,207
(195)
(53)
(3,071)(355)$ 2,618(d) The reconciliation of ending balance of the benefit obligation and the fair value of the plan assets, and liabilities and assets for retirement
benefit are as follows:
2016

Benefit obligation on funded scheme
Plan assets¥12,642(9,126)¥ 3,516

Benefit obligations on non-funded scheme
Net assets (liabilities) on the consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net assets (liabilities) on the consolidated balance sheet¥ 1,248
4,764
5,017
(253)
¥ 4,764(*) Including the defined benefit plans applied based on the simplified method

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥11,748(8,999)¥ 2,749$112,194(80,990)$ 31,204¥   952
3,701
3,841
(140)
¥ 3,701$ 11,075
42,27944,524(2,245)$ 42,279

Contents

NIPRO CORPORATION
Annual Report 201644(e) The breakdown of net pension and severance costs is as follows:2016

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service obligation
Retirement benefit cost based on the simplified method
Increasing by change from the simplified method to the principle method
Other
Total

¥  835
129
(156)
40
55
136
231
—
¥1,270Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016

¥ 664
151
(131)
34
53
183
—
5
¥ 959

$ 7,410
1,145(1,384)
355
488
1,207
2,050
—
$11,271

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016(f) Remeasurements of defined benefit plans (Other Comprehensive Income)The breakdown of the items recorded in adjustments to defined benefit plans are as follows:
2016

Prior service cost
Actuarial gains and losses
Total¥  (7)(930)¥(937)—
306¥306$   (62)(8,253)$(8,315)

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥(g) Remeasurements of defined benefit plans (Accumulated Other Comprehensive Income)The breakdown of the items recorded in adjustments to defined benefit plans are as follows:
2016

Unrecognized prior service cost
Unrecognized actuarial loss
Total¥  (173)(1,003)¥(1,176)¥(221)(18)¥(239)$ (1,535)(8,901)$(10,436)(h) Items concerning the pension assets
1. Breakdown of the pension assets
The ratios of the plan assets are as follows:
Bonds
Equities
Cash and deposits
General account
Others
Total

2016

2015

41%
21%
0%
33%
5%
100%

38%
25%
0%
31%
6%
100%

(*) Including the defined benefit plans applied based on the simplified method

2. Setting of the long-term expected rate of return
The long-term expected rate of return is to be determined considering the current and future allocation of plan assets, and the current and expectedlong-term rate of return from the diverse assets composing the plan assets.
(i) Calculation basis of actuarial methods
The main calculation basis of actuarial methods at the end of the period is as follows:
Discount rate
Expected long-term rate of return
Assumed wage increase rate

2016

2015

Primarily 0.2%
Primarily 1.5%
Primarily 6.5%

Primarily 0.8%
Primarily 1.5%
Primarily 6.6%

(2) Defined Contribution Retirement Plans
The amounts of necessary contributions to defined contribution retirement plans within the Company and consolidated subsidiaries were ¥542 million(US$4,810 thousand).

Contents

NIPRO CORPORATION
Annual Report 201645

11. Commitments and Contingent Liabilities
The Company and its consolidated subsidiaries had the following commitments and contingent liabilities:

Liabilities for guarantees
Export drafts discounted
Trade notes receivable discounted
Total

2016

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016

¥101
—
¥101

¥ 13
169
¥182

$896
—
$896

12. Stock Options
The stock options outstanding as of March 31, 2016 and 2015 were as follows:
Consolidated subsidiary (Goodman Co., Ltd.)
2016
April 27, 2006
at board of directors’ meeting

November 25, 2005
at board of directors’ meeting

Persons granted
Class andnumber of shares
Grant date
Exercise period
Terms for vestingSpecified term ofyears before vesting

Directors of Goodman Co., Ltd: 4
Employees of Goodman Co., Ltd: 348
Others: 4
878,500 shares of common stockof Goodman
December 5, 2005
From December 6, 2005 toAugust 31, 2015
None

Employees of Goodman Co., Ltd: 6

None

2015
April 27, 2006
at board of directors’ meeting

November 25, 2005
at board of directors’ meeting

Employees of Goodman Co., Ltd: 67,000 shares of common stockof Goodman
April 28, 2006
From April 28, 2006 to
August 31, 2015
None

Directors of Goodman Co., Ltd: 4
Employees of Goodman Co., Ltd: 348
Others: 4
878,500 shares of common stockof Goodman
December 5, 2005
From December 6, 2005 toAugust 31, 2015
None

None

None

None

7,000 shares of common stockof Goodman
April 28, 2006
From April 28, 2006 to
August 31, 2015
None

In addition to the aforementioned information of the stock options outstanding, the stock option activity is as follows:
Consolidated subsidiary (Goodman Co., Ltd.)
November 25, 2005
at board of directors’ meeting

2016
April 27, 2006
at board of directors’ meeting

November 25, 2005
at board of directors’ meeting

2015
April 27, 2006
at board of directors’ meeting

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

253,000———
253,000

2,000
—
—
—
2,000

253,000———
253,000

2,000
—
—
—
2,000

November 25, 2005
at board of directors’ meeting

Yen
2016
April 27, 2006
at board of directors’ meeting

November 25, 2005
at board of directors’ meeting

U.S. dollars (Note 1)
2016
April 27, 2006
at board of directors’ meeting¥2,169——¥2,415
—
—

$19
—
—

$21
—
—

November 25, 2005
at board of directors’ meeting

Yen
2015
April 27, 2006
at board of directors’ meeting¥2,169——¥2,415——

Non-vested shares
At the beginning of the year
Granted during the year
Forfeited and expired during the year
Vested during the year
At the end of the year
Vested shares
At the beginning of the year
Vested during the year
Exercised during the year
Forfeited and expired during the year
Unexercised at the end of the year
The number of stock options were converted into that of common stocks.

Exercise price
Average stock price at exercise
Fair value price at the grant date

Exercise price
Average stock price at exercise
Fair value price at the grant dateContents

NIPRO CORPORATION
Annual Report 201646

13. Business Combination
1. Business combination by acquirement
At the Board of Directors’ meeting dated September 4, 2015, Nipro­Corporation determined that Infraredx, Inc. (hereafter “Infraredx”), an
equity-method application affiliated company of Nipro Corporation, would
become a wholly owned subsidiary of Goodman USA, Inc. and merge with
Nipro Vascular USA Corporation, which was newly established for the
purpose of this merger as a wholly owned subsidiary of Goodman USA,
Inc. On October 1, 2015, Infraredx merged as the surviving company with
Nipro Vascular USA Corporation.
(1) Outline of the business combination
1 Outline of the acquired company
Company name:Infraredx, Inc.
Business:	Development, manufacture andsale of medical equipment
2 Reason of acquisition
We believe that a 100% acquisition is preferable to make promptand flexible decisions from a middle- and long-term perspective
under the consistent business policies of our group. In addition, it isexpected to expand “TVC Imaging System”, the company’s first-inclass product, in the Japanese market, which is considered as thecenter of the global market of intravascular ultrasound (IVUS), as
well as to establish and expand our sales network in overseas.
3 Date of business combination
October 1, 2015
4 Legal form of the business combination
Absorb-type of merger
5 Company name after combination
No Change
6 Ratio of voting
Ratio of voting before business combination:
25.06%
Ratio of voting acquired on business combination day:
74.94%
Ratio of voting after business combination:
100.00%7 Foundation for decision of acquired company
We decided Nipro Vascular USA Corporation should be the combination company, based on the “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13, 2013) andthe “Guidance on Accounting Standard for Business Combinations
and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, September 13, 2013).
(2) Performance period of combination company on the financialbalance sheets
From October 1, 2015 to March 31, 2016
(3) Acquisition cost and breakdown of each kind of counter valueCounter value (actual value of
Nipro Vascular USA Corporation, etc.)¥0 million ($0 thousand)Acquisition cost
¥0 million ($0 thousand)(4) Amount and details of main acquisition-related expenses
Cost of advisory, etc.
¥183 million ($1,625 thousand)(5) Balance between acquisition cost of acquired company and total
amount of costs per each transaction¥2,238 million ($19,862 thousand)Loss on step acquisitions(6) Amount of goodwill, reason of occurrence, and amortization
method and period
1 Amount of goodwill¥6,579 million ($58,387 thousand)2 Reason of occurrence
excess earning power of future business deployment
3 Amortization method and period
Straight-line method for the period in which expected return on
investment will affect(7) Received assets and liabilities
Current assets¥926 million ($8,218 thousand)Non-current assets¥8,457 million ($75,054 thousand)Total amount of assets¥9,383 million ($83,272 thousand)Current liabilities
Total amount of liabilities¥9,383 million ($83,272 thousand)¥9,383 million ($83,272 thousand)

2. Trading under common control(1) Outline of trading1	Company name and business at the time of the businesscombination
Nipro Corporation	Manufacture and sale of Medical equipment,
pharmaceuticals and pharma packaging
Nipro Europe Group Companies N.V. Holding company in Europe
2 Date of business combination
December 22, 2015
3 Legal form of the business combination		
Stock of subsidiaries contributed in kind
4 Others“We have contributed in kind to Nipro Europe Group Companies
N.V. stock of subsidiaries, intending to strengthen the overseas
business structure in Europe through Nipro Europe Group­Companies N.V.
In this trade, the targeted of subsidiaries are as follows:• Nipro Europe N.V.
• Nipro Pharmapackaging International N.V.
• Nipro Pharmapackaging France S.A.S.
• Nipro Pharmapackaging Germany GmbH.”(2) Implemented accounting treatment
This merger was processed as a transaction under common control,
based on the “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, September 13, 2013) and the “Guidance on­Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10, Sep­
tember 13, 2013).

3. Business divestitures(1) Outline of business divestitures1	Purchaser company
Sinocare Group2	Contents of divested business
Consolidated subsidiaries
Nipro Diagnostics, Inc. (NDI)
Business	Development, manufacture and saleof diabetes products
3 Reason of business divestitures
We acquired Home Diagnostics, Inc. (currently, NDI) of the USA in
March 2010 and entered the worldwide business of self-monitoringof blood glucose. Since then, sales have increased stably. However,
the global business environment for such products, such as in North
America, has deteriorated and reorganization in the market is now
apparent.
Under such circumstances, we considered various measures
such as focusing on continuous product development and investment, before deciding to transfer the shares of NDI to Sinocare
Group, a company focusing on examination-related products suchas blood glucose meters, especially in China. We believe that purchasing products from a group company and selling them is more
effective for reducing our burden and expanding our business.
4	Date of business divestitures 7th January 2016
			
January 7, 20165	Legal form and others	Stock transfer paid in properties
such as cashContents

NIPRO CORPORATION
Annual Report 201647(2) Implemented accounting treatment
1	The amount transfer loss
Gain on sales of subsidiaries’ and affiliates’ stocks
			¥14,072 million ($124,885 thousand)2	Appropriate book values of assets and liabilities
Current assets¥14,437 million ($128,124 thousand)Non-current assets¥15,790 million ($140,132 thousand)Total amount of assets¥30,227 million ($268,256 thousand)Current liabilities
Non-current liabilities
Total amount of liabilities¥14,560 million ($129,216 thousand)¥2,549 million ($22,622 thousand)¥17,109 million ($151,838 thousand)3	Accounting treatment
	We allocated the difference between consolidated book value andsale value to “extraordinary income” as Gain on sales of subsidiaries
and affiliates’ stocks(3) Reported segment in which the divested business included
Medical segment(4) Appropriate amount concerning divested business in Profit andloss statement
Sales amount¥18,078 million ($160,437 thousand)Operating losses¥4,128 million ($36,635 thousand)

14. Net Assets
The significant provisions in the Corporate Law of Japan (the “Corporate
Law”) that influence financial and accounting matters are summarized
below:(a) Dividends
Under the Corporate Law, 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 suchas (1) having the board of directors, (2) having independent auditors, (3)having the board of corporate auditors, and (4) the service period of thedirectors is prescribed as one year rather than the normal term of two
years by its articles of incorporation, the board of directors may declare
dividends (except for dividends in kind) if the company has prescribed soin its articles of incorporation. The Company’s present system meets thefirst three criteria but the two-year service period of the directors does
not meet the fourth criterion.
Interim dividends may also be paid once a year by the resolution of theboard of directors if the articles of incorporation of the company stipulate
so. The Company’s articles of incorporation contain such a stipulation, andit pays an interim dividend semi-annually by the resolution of the Board of
Directors.
The Corporate Law provides certain limitations on the amounts available for dividends or the purchase of treasury stock.

(b) I ncreases / Decreases and Transfer of Common Stock, Reserveand Surplus
The Corporate Law requires that an amount equal to 10% of dividends
must be appropriated as legal reserve (a component of retained earnings)
or as additional paid-in capital (a component of capital surplus) dependingon the equity account charged upon the payment of such dividends until
the total of the aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock.
Under the Corporate Law, the total amount of additional paid-in capitaland legal reserve may be reversed without limitation.
The Corporate Law also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained earnings canbe transferred among the accounts under certain conditions by the resolution of the shareholders’ meeting.
The Company’s legal reserve, which is included in retained earnings,
amounted to ¥3,215 million (US$22,532 thousand) as of March 31,
2016, and its additional paid-in capital, which is included in capital surplus, amounted to ¥635 million (US$5,635 thousand) as of March 31,
2016.

15. Segment Reporting
Outline of Reportable Operating Segments
Applied ASBJ Statement No.17 “The Revised Accounting Standard forDisclosures of Segments of an Enterprise and Related Information”, thereportable operating segments are components of an entity for which
separate financial information is available and such information is evaluated regularly by the board of directors in deciding how to allocate management resources and in assessing performance.
The Company currently operates its business on a stand-alone basiswith the divisional organization and evaluates the performance of sales
and manufacturing of each division regardless of their products. Accordingly, the Company has three reportable operating business segments
according to the divisions (Medical-Related business, PharmaceuticalRelated business and Glass-Related business), which are divided mainlyby their products.

Medical-Related
The domestic division sells injection and infusion products, artificial organ
products, highly functional products, dialysis products, diabetic products
and pharmaceuticals such as generic and kit products. In the global business division, head office plays the central role, placing overseas sales
and manufacturing bases for medical equipment and sales injection andinfusion products, artificial organ products and diabetic products.
Pharmaceutical-Related
The pharmaceutical division sells containers for combination products(injectable kit products) and Pharmaceutical-Related products consigned
by other pharmaceutical companies. Domestic subsidiaries sell and manufacture injectable drugs, oral drugs and combination products.
Glass-Related
The MP Glass division sells glass for vials and ampoules for medical use,glass for thermos bottles and glass for lighting. Overseas subsidiaries
manufacture and sell tube glass and glass for vials and ampoules for
medical use.

Contents

NIPRO CORPORATION
Annual Report 2016

48

Business segment information for the years ended March 31, 2016 and 2015 was as follows:

Net sales:
OutsideIntersegment
Total
Operating income (loss)
Identifiable assets
Other items
Depreciation and amortization
Amortization of goodwill
Capital expenditures

Net sales:
OutsideIntersegment
Total
Operating income (loss)
Identifiable assets
Other items
Depreciation and amortization
Amortization of goodwill
Capital expenditures

Net sales:
OutsideIntersegment
Total
Operating income (loss)
Identifiable assets
Other items
Depreciation and amortization
Amortization of goodwill
Capital expenditures

Reportable Segment
GlassTotal
RelatedMedicalRelated

PharmaceuticalRelated¥272,168
1,737
273,905
28,204¥338,889¥ 62,266
8,815
71,081
12,060¥154,304¥32,184874
33,058(1,618)¥66,812¥ 15,133
2,649
24,549¥  9,327
5
21,277¥ 3,403
1,033
6,095

Other
(*1)

Total

¥366,618
11,426
378,044
38,646¥560,005

¥32
39
71
61
¥55

¥366,650
11,465378,115
38,707¥560,060¥—(11,465)(11,465)(14,502)¥148,823¥366,650—
366,650
24,205¥708,883¥ 27,863
3,687
51,921———¥ 27,863
3,687
51,921¥  2,284—
5,180¥ 30,147
3,687
57,101

Reportable Segment
GlassTotal
RelatedMedicalRelated

PharmaceuticalRelated$2,415,406
15,4152,430,821
250,302$3,007,535$  552,592
78,230630,822
107,029$1,369,400$285,623
7,757
293,380(14,359)$592,936$  134,301
23,509217,865$   82,774
44
188,827$ 30,201
9,168
54,091

PharmaceuticalRelated¥237,777
1,535
239,31223,813¥350,870¥ 57,372
8,401
65,773
10,553¥137,570¥29,830775
30,605(2,889)¥70,176¥ 13,357
3,912
14,486¥  9,569
4
17,854¥ 3,023
1,921
8,429

Thousands of U.S. dollars (Note 1)
2016
Consolidated
Adjustment
financial(*2)
statements

Other
(*1)

Total

$3,253,621
101,4023,355,023
342,972$4,969,871

$284
346
630
541
$488

$3,253,905
101,748
3,355,653
343,513$4,970,359$—(101,748)(101,748)(128,701)$1,320,757$3,253,905—
3,253,905
214,812$6,291,116$  247,276
32,721
460,783———$  247,276
32,721
460,783$   20,269—
45,971$  267,545
32,721
506,754

Reportable Segment
GlassTotal
RelatedMedicalRelated

Adjustment(*2)

Millions of yen
2016
Consolidated
financialstatements

Other
(*1)

Total

¥324,979
10,711
335,690
31,477¥558,616

¥105
34
139
131
¥ 55

¥325,084
10,745335,829
31,608¥558,671¥—(10,745)(10,745)(15,036)¥136,636¥325,084—
325,084
16,572¥695,307¥ 25,949
5,837
40,769¥¥ 25,949
5,837
40,769¥  1,719—
6,929¥ 27,668
5,837
47,698———Adjustment(*2)

Millions of yen
2015
Consolidated
financialstatements(*1) “Other” is the business segment which is not included in the reportable segment and consists of real estate income and sales by headquarters.
(*2) Adjustment is as follows:• Adjustments for operating income ended March 31, 2016 and 2015 include ¥(1,070) million (US$(9,496) thousand) and ¥(3.041) million of adjustment for unrealized gain and¥(13.432) million (US$(119,205) thousand) and ¥(11,994) million of corporate cost, respectively. Corporate cost consists primarily of sales, general and administrative expenses andresearch and development costs which do not belong to the reportable segment.
• Adjustments for Identifiable assets ended March 31, 2016 and 2015 include ¥(10,777) million (US$(95,643) thousand) and ¥(10,933) million of elimination of inter-segment transaction and ¥159,599 million (US$1,416,392 thousand) and ¥147,569 million of corporate assets, respectively. Corporate assets consisted primarily of cash and deposits, investment
securities, assets for development and assets for the management division of head office which do not belong to the reportable segment.
• Adjustments for depreciation and amortization ended March 31, 2016 and 2015 are for corporate assets. Depreciation and amortization and Capital expenditures include long-term
prepaid expenses.
• Adjustment for capital expenditures is an increase in corporate assets.

Contents

NIPRO CORPORATION
Annual Report 201649

Loss on impairment of fixed assets and Unamortized balance of goodwill by business segment were as follows:
Millions of yen
2016

Loss on impairment of
fixed assets
Unamortized balance of
goodwill

Loss on impairment of
fixed assets
Unamortized balance of
goodwill

Reportable Segment
GlassTotal
RelatedMedicalRelated

PharmaceuticalRelated

0

¥—

¥

—

23,718

9

5,150

¥

Other

Total

MedicalRelated

PharmaceuticalRelated¥     0¥—¥     0¥     0¥—28,877—28,877

19,83713

Reportable Segment
GlassTotal
Related

¥

Other

Total

66

¥    66¥—¥    66

6,514

26,364—26,364

Thousands of U.S. dollars (Note 1)
2016
Reportable Segment
Other
Total
GlassTotal
RelatedMedicalRelated

PharmaceuticalRelated0$ —$     —

$      0$—$      0210,49080

45,704

256,274—

256,274$

Millions of yen
2015

Net sales and Property, plant and equipment for each area were as follows:

Net sales
Property, plant andequipment

Net sales
Property, plant andequipment

Japan

America

EuropeAsia

Millions of yen
2016
Total

Japan

America

EuropeAsia

Millions of yen
2015
Total

¥203,462¥72,416¥46,156¥44,616¥366,650¥182,149¥62,662¥42,874¥37,399¥325,084

125,709

9,586

14,68573,777

223,757

108,211

19,664

12,96579,355

220,195

Thousands of U.S. dollars (Note 1)
2016
Europe
Asia
Total

Japan

America$1,805,662$642,670$409,620$395,953$3,253,905

1,115,628

85,073130,325

654,748

1,985,774

16. Selling, General and Administrative Expenses
Significant components of selling, general and administrative expenses for the years ended March 31, 2016 and 2015 were as follows:

2016

Salaries
Freight charges¥22,230
8,205

Millions of yen
2015¥19,397
7,358

Thousands of
U.S. dollars (Note 1)
2016$197,284
72,817

17. Research and Development Expenses
Research and development expenses for the years ended March 31, 2016 and 2015 were ¥10,269 million (US$91,134 thousand) and ¥8,646 million,
respectively.

18. Supplemental Disclosures of Cash Flow Information
Supplemental information related to the Consolidated Statements of Cash Flows was as follows:

Cash paid during the year for:
Interest
Income tax

2016

Millions of yen
2015

Thousands of
U.S. dollars (Note 1)
2016¥4,506
4,780¥ 3,989
16,979$39,989
42,421

Contents

NIPRO CORPORATION
Annual Report 2016

Report of Independent Auditors

50

Contents

NIPRO CORPORATION
Annual Report 2016

51

Corporate Information (As of March 31, 2016)
Date of Establishment
July 8, 1954

Principal Shareholders

Head Office
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan
Telephone: +81-6-6372-2331
Facsimile: +81-6-6375-0669
http://www.nipro.co.jp/english/
Tokyo Office
4-3-4 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan
Telephone: +81-3-5684-5611
Facsimile: +81-3-5684-5610
Number of Employees
Parent Company �����������������������������������������������������������������������������������������������������������������������������������������������
Consolidated subsidiaries �����������������������������������������������������������������������������������������������������������������������
Total ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������
Common Stock
Authorized
IssuedOutstanding
Number of Shareholders

3,190
21,05324,243400,000,000 shares
171,459,479 shares
170,509,592 shares
62,260

Number of
Shares Held(in thousands)

Percentage ofTotal Sharesin Issue (%)

Nippon Electric Glass Co., Ltd. ����������������������������������������������������������������������������������������� 24,003
Japan Trustee Services Bank, Ltd. ������������������������������������������������������������������������������� 17,492
Resona Bank Limited ��������������������������������������������������������������������������������������������������������������� 5,360
The Master Trust Bank of Japan, Ltd ������������������������������������������������������������������������� 4,633
Trust & Custody Services Bank, Ltd. ��������������������������������������������������������������������������� 4,074
STATE STREET BANK AND TRUST COMPANY 505223 ����������������� 2,150
Kazumi Sano ������������������������������������������������������������������������������������������������������������������������������������� 1,910
Mizuho Bank, Ltd. ������������������������������������������������������������������������������������������������������������������������� 1,566
Trust & Custody Services Bank, Ltd. as trustee for Mizuho Bank, Ltd.
Retirement Benefit Trust Account re-entrusted   by Mizuho Trust and Banking Co., Ltd. ������������������������������������������������������������ 1,442
JP Morgan Chase Bank 385151 ��������������������������������������������������������������������������������� 1,278
Total ������������������������������������������������������������������������������������������������������������������������������������������������������������ 63,909

14.00
10.20
3.13
2.70
2.38
1.25
1.11
0.91
0.84
0.75
37.27

Stock Price Range (Tokyo Stock Exchange)
(Yen)
1,600
1,400

Stock Listing
Tokyo Stock Exchange,
Ticker Code: 8086

1,200

Transfer Agent
Mizuho Trust & Banking Co., Ltd., Head Office
Stock Transfer Agency Dept.
1-2-1, Yaesu, Chuo-ku, Tokyo, 103-8670, Japan

800

1,000

600
400

12

2014

3

6

9

12

2015

3

6

9

12

2016

Major Group Companies (As of June 30, 2016)
Area
Domestic

Overseas

CountryJapan

Name
Nipro Medical Industries Co., Ltd.
Goodman Co., Ltd.
Nipro Pharma Corporation
Zensei Pharmaceutical Industries Co., Ltd.
Nichihos Co., Ltd.
Cell Science & Technology Institute, Inc.
ThailandNipro (Thailand) Corporation Limited
Nipro Sales (Thailand) Co., Ltd.
China
Nipro (Shanghai) Co., Ltd.
Nipro Trading (Shanghai) Co., Ltd.
Chengdu Pingyuan Nipro Pharmaceutical Packaging Co., Ltd.
Jilin Nipro Jiaheng Pharmaceutical Packaging Co., Ltd.
Anyang Nipro Changda Pharmaceutical Packaging Co., Ltd.
Nipro Medical (Hefei) Co., Ltd.
Singapore
Nipro Asia Pte Ltd.
India
Nipro India Corporation Private Limited
Nipro PharmaPackaging India Private Limited
Nipro Tube Glass Limited
Nipro Medical (India) Pvt. Ltd.
Bangladesh Nipro JMI Co., Ltd.
Nipro JMI Pharma Ltd.
Indonesia
PT. Nipro Indonesia JAYA
UAE
Nipro Middle East FZE
BrazilNipro Medical Ltda.
U.S.A.
Nipro Medical Corporation
Nipro PharmaPackaging Americas Corporation
Belguim
Nipro Europe N.V.
Nipro PharmaPackaging Belgium N.V.
FranceNipro PharmaPackaging France S.A.S.
Germany
Nipro PharmaPackaging Germany GmbH
Switzerland Nipro Pharma Glass AG

Principal business
Manufacturing and marketing of medical devices
Manufacturing and marketing of medical devices
Manufacturing and marketing of pharmaceuticals
Manufacturing and marketing of pharmaceuticals
Management of dispensing pharmacies and marketing of pharmaceutical products
Development and manufacture of cell culture media
Manufacturing and marketing of medical devices
Marketing of medical devices
Manufacturing and marketing of medical devices
Marketing of medical devices
Manufacturing and marketing of glass products
Manufacturing and marketing of glass products
Manufacturing and marketing of glass products
Manufacturing and marketing of medical devices
Marketing of medical devices
Manufacturing and marketing of medical devices
Manufacturing and marketing of medical glass products
Manufacturing and marketing of medical glass products
Marketing of medical devices
Manufacturing and marketing of medical devices
Manufacturing and marketing of pharmaceuticals
Manufacturing and marketing of medical devices
Marketing of medical devices
Manufacturing and marketing of medical devices
Marketing of medical devices
Manufacturing and marketing of medical glass products
Marketing of medical devices
Manufacturing and marketing of medical glass products
Manufacturing and marketing of medical glass products
Manufacturing and marketing of medical glass products
Business management

3

NIPRO CORPORATION
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan
Telephone: +81-6-6372-2331
Facsimile: +81-6-6375-0669
http://www.nipro.co.jp/en