[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

1. Financial Results for the Fiscal Year Ended March 31, 2013: Reference(1)Analysis of Business Performance<1>Overview of the Fiscal Year Ended March 31, 2013[1]Overview of Business Results
During the fiscal year, a number of trends were observed in the global healthcare market, including urgent
efforts to control national healthcare costs in developed countries in Europe and North America.
Specifically, the United States Congress proposed to curtail public health expenditures as a measure to
reduce the national debt, while European countries continued to cut back on government expenditures
owing to concerns over credit uncertainty. In this context, expectations are growing for excellent medical
products with medical cost efficiency that can improve the total profitability of medical services.
Meanwhile, healthcare markets are continuing to expand in emerging countries such as China, India andBrazil.
In Japan, the Ministry of Health, Labour and Welfare is planning to submit a proposal to the National Diet
for revisions to the Pharmaceutical Affairs Law as one of the current administration’s growth strategies.
The revisions are expected to incorporate measures to simplify and accelerate review and approval process
for medical products.
Under these circumstances in the global healthcare market, the Terumo Group intends to leverage its
strengths to capitalize on the expanding new opportunities for growth.
The Terumo Group’s Cardiac & Vascular Business segment was considerably affected by a revision to
drug price standard set under the National Health Insurance system in Japan. Nevertheless, sales ofinterventional systems products which have excellent medical cost efficiency rose strongly outside thecountry on a local currency basis. Meanwhile, the Blood Management Business segment was affected by ademand coordination that occurred in the previous fiscal year, but sales recovered from the first half of the
fiscal year under review. The General Hospital Business segment performed strongly in Japan even thoughsales from the successive release of new products from the second half of the fiscal year have yet tocontribute significantly to overall financial results.
The Terumo Group is presently carrying out its mid-term management plan with the goal of becoming acompany with a global presence. The Group’s main achievements under the plan in the fiscal year are as
follows:●

In the Cardiac & Vascular Business segment, Terumo launched sales of Misago stent for treating
peripheral artery disease in Japan. Peripheral artery disease is a condition in which arteries in the legs
become clogged up with cholesterol and other fatty substances, causing bloodflow to worsen. Cases
have been increasing in recent years as as a result of the aging of society and lifestyle diseases.
Endovascular intervention employing stents are expected to become more widespread in the future
because they place less burden on the patient’s body. In addition, Terumo constructed a new
manufacturing plant in Costa Rica to produce neurovascular intervention devices. The plant is
manufacturing stents and coils and supplying these products globally.

●In the Blood Management Business segment, Terumo acquired a leading distributor of blood-related
products in Poland’s growing market with a view to leveraging the firm’s marketing capabilities.
Looking forward, Terumo is projecting double-digit sales growth in Poland as demand for automatedblood component collection systems grows and the country proceeds to adopt automated blood
component processing system as well as technologies for pathogen reduction. This acquisition has
given Terumo a foothold to expand its business in Eastern European markets, which are expected to
grow in the future.

●

In the General Hospital Business segment, Terumo sold off its home oxygen therapy system businessand home infusion pump business in the home healthcare field to Air Water Inc. on February 28,－

1 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

2013. The home healthcare field includes chronic stage medical facilities, for which the market isforecast to expand in the future. The Company is continuing to improve and promote its business inthis field by broadening its product lineups in such areas as nutritional infusions, peritoneal dialysis,
diabetes treatment, and pain management.
Owing to the above initiatives in the fiscal year under review, Terumo’s consolidated financial results are
as follows:(Unit: millions of yen)FYE Mar. 2012 FYE Mar. 2013
Results
Results

Changes (%)
Change (%)(Constantcurrency basis)

Net Sales

386,686

402,294

4.0

2.8

Gross Profit

204,639

205,688

0.5

(0.7)

Operating Income

63,04953,216(15.6)(15.7)

Ordinary Income

59,164

51,376(13.2)-Net Income

24,16747,014

94.5-

Net sales
Compared to the previous fiscal year, net sales increased 4.0% to 402.3 billion yen.
(Unit: millions of yen)
Geographic segments

FYE Mar. 2012 FYE Mar. 2013
Results
Results

Changes (%)
Change (%)(Constantcurrency basis)

Japan

190,469

185,913

(2.4)

(2.4)

Europe71,76575,3945.1

6.5

Americas79,07087,940

11.2

6.3

Asia and others

45,38153,04516.9

12.5

196,217

216,380

10.3

7.8

Total of Outside of JapanNet sales in Japan amounted to 185.9 billion yen, a year-on-year decrease of 2.4%. This was mainly due tothe considerable impact of the government’s revision to drug price standard on the Cardiac & VascularBusiness segment, as well as weaker performance than forecast at the beginning of the fiscal year in the
General Hospital Business segment and Blood Management Business segment. In contrast, net sales
outside Japan increased 10.3% year on year to 216.4 billion yen, mainly due to continuously robust sales
in the interventional systems business, and a sales recovery in the Blood Management Business segment.

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2 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

Gross profit
Gross profit edged up 0.5% year on year to 205.7 billion yen. Terumo benefited from a shift toward highly
profitable products, but negative factors included the downward pressure on prices and expenditures for
improving a quality management system at a U.S. subsidiary.
Operating income
Operating income amounted to 53.2 billion yen, a decrease of 15.6% compared to the previous fiscal year.
This was mainly due to increased research and development expenditures as well as selling, general andadministrative expenses, which included investments intended to foster business growth.
Ordinary income
Ordinary income was favorably affected by foreign exchange gains resulting from the depreciation of theyen, however, interest payments for loans was a negative factor. Consequently, ordinary income fell
13.2% year on year to 51.4 billion yen.
Net income
Net income rose 94.5% year on year to 47.0 billion yen, mainly owing to a decrease in corporate taxes
resulting from the reorganization of subsidiaries.
Net sales results by business segment are as follows.
As of the beginning of the first quarter of the current fiscal year, Terumo integrated its Consumer
Healthcare Business into the General Hospital Business segment, thereby reorganizing the businesssegments in its financial reports from four segments to three: the General Hospital Business, Cardiac &Vascular Business, and Blood Management Business.
(Unit: millions of yen)FYE Mar. 2012 FYE Mar. 2013
Results
Results

Business Segments

General HospitalBusiness

Cardiac & VascularBusiness

Blood Management
Business

Change(%)

Changes (%)(Constantcurrency basis)

Net Sales

154,279

157,8112.3

1.8(Japan)124,229

126,931

2.2

2.2(Overseas)

30,05030,8802.8

0.2

Net Sales

160,605

169,737

5.7

3.8(Japan)53,05046,161(13.0)(13.0)(Overseas)

107,555

123,575

14.9

12.1

Net Sales

71,80074,745

4.1

2.6(Japan)13,18912,821

(2.8)

(2.8)

(Overseas)

58,611

61,924

5.7

3.8

General Hospital Business
In Japan, earnings in this segment increased compared to the previous fiscal year on the back ofcontinuously steady sales of electrolyte infusion solutions, which have increased in price, semi-solid
nutritious foods for the chronic care market, as well as contrast media and commissioned business services
in the Drug and Device (D&D) business. Meanwhile, sales outside Japan increased in China and other
Asian countries, but declined in the Americas and Europe.
As a result of these factors, net sales in the General Hospital Business segment totaled 157.8 billion yen,up 2.3% compared to the previous fiscal year.

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3 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

Cardiac & Vascular Business
In Japan, the revision of drug price standard had a major impact on sales of products in the interventional
systems lineup, causing a year-on-year decrease. Sales of the Nobori drug-eluting coronary stent also fell
considerably compared to the previous fiscal year as a result of the release of new products by threecompetitors.
In contrast, sales of interventional systems continued to be strong in all regions outside Japan. In North
America in particular, by leveraging penetration of TRI (transradial coronary intervention treatment for
approaching the coronary artery from the blood vessels in the wrist), sales continuously grew at doubledigit rate on a local currency basis. In China, where procedural cases continue to rise, sales were up about
30% year on year on a local currency basis.
As a result of the above, net sales in the Cardiac & Vascular Business segment amounted to 169.7 billion
yen, an increase of 5.7% compared to the previous fiscal year.
Blood Management Business
In Japan, Terumo significantly increased its market share for automated blood component collection
systems, but the segment was affected by a demand coordination that occurred in the previous fiscal year.
Consequently, sales decreased year on year.
Outside Japan, demand for blood transfusions declined owing to the economic recession in North
America, however, sales of therapeutic apheresis systems continued to expand, driving up overall results.
Owing to the factors above, net sales in the Blood Management Business segment increased 4.1% year on
year to 74.7 billion yen.
[2]Research and Development
Terumo released the following products in the fiscal year under review: Misago stent for treating
peripheral artery disease; LUNAWAVE OFDI intravascular imaging system; Terufusion Infusion Pump, asmart infusion system; Terufusion Syringe Pump SS; SurFlo V3 intravenous catheter; and NANOPASS
Needle II 34G. In addition, it commenced clinical trials of an adhesion barrier product in Europe in August
2012.
Terumo is working to further globalize its R&D Headquarters with a view to capitalize on demand for
medical care generated by the establishment of healthcare infrastructure in various countries, particularly
emerging nations.

[3]Capital Expenditure
Terumo expanded production lines at its Ashitaka Factory for the purpose of boosting production of its
lineup of interventional systems products, for which sales continue to increase globally. The Company
also expanded production lines at its Fujinomiya Factory for making total parenteral nutrition solutions
that employ new safety containers. Terumo invested in its Kofu Factory to increase production of
NANOPASS, needle for pen injector. Finally, the Company acquired a site and commenced constructionof its newly planned Yamaguchi Factory.
Outside Japan, Terumo invested in expanding its factory in the Philippines in order to boost production ofsyringes and needles, and its factory in Vietnam to transfer production of interventional system products.
Furthermore, Terumo BCT acquired a site for a new factory in the southern part of Vietnam, and has
begun construction of the facilities. In addition, Terumo undertook capital expenditures for improvements
and upgrades in order to improve quality, productivity, and product competitiveness.
As a result of these initiatives, capital expenditure amounted to 32.2 billion yen in the fiscal year.
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4 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference<2>Outlook for the Fiscal Year Ending March 31, 2014
In developed countries in Europe and North America, Terumo aims to continue expanding sales of its
minimally invasive medical products. In emerging countries, the Company is working to respond to
expanding markets by strengthening locally based operations via its holdings companies in China andother Asian countries, and its local subsidiaries in Russia and countries in South and Central America.
Furthermore, Terumo is proceeding to reorganize its global production system by expanding existing
factories in the Philippines and Vietnam, and constructing new factories in southern Vietnam andYamaguchi Prefecture, Japan.
In the General Hospital Business segment, Terumo is working to increase sales of products that featureadded functions designed to prevent medical errors or the chance of infection. These included SurFlo V3,
an intravenous catheter released in the fiscal year, and Smart Infusion Systems equipped with theCompany’s originally developed IT functions. Furthermore, Terumo is continuously working toproactively expand business and accelerate initiatives including strategic partnerships worldwide in its
Drug & Device (D&D) business, which combines pharmaceutical products and medical devices toincrease added value.
In the Cardiac & Vascular Business segment, Terumo intends to enhance its global lineup of products
compatible with transradial coronary intervention (TRI). This interventional treatment for approaching thecoronary artery from the blood vessels in the wrist contributes to improved medical cost efficiency. Alsoin the current fiscal year, Terumo aims to expand sales of Misago stent for treating peripheral arterydisease, a product that has already been released in Japan. The Company will work to increase sales of allof its interventional systems products in China and other emerging countries in Asia, South America andother regions where procedural cases are steadily growing. Finally, Terumo plans to enhance its productlineup outside the coronary artery field with neurovascular and peripheral-vascular applications.
In the Blood Management Business segment, Terumo is pursuing continuous sales expansion of its
therapeutic aspheresis systems worldwide. Moreover, under the “Terumo BCT” brand, the Company isstriving to further boost sales by globally developing a broad range of product lineups to respond to
demand for the collection of both whole blood and blood components through its sales network spanningfrom emerging to developed countries.
By means of these initiatives, Terumo is aiming to realize its financial projections for the fiscal year
underway and achieve continuous growth in profits going forward.
Forecast for the fiscal year ending March 31, 2014
(Unit: millions of yen)FYE Mar. 2013

FYE Mar. 2014

Results

Forecast

Net Sales

402,294

Operating Income

53,216

Operating Income
Rates

Changes

Changes (%)

460,000

57,70514.3

70,00016,783

31.5

13.2%

15.2%

Ordinary Income

51,37667,50016,123

31.4

Net Income

47,01442,000(5,014)(10.7)

Exchange rates in the fiscal year ended March 31, 2013:
1 US dollar = 83 yen; 1 euro = 107 yen
Projected exchange rates in the fiscal year ending March 31, 2014:
1 US dollar = 95 yen; 1 euro = 123 yen－

5 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference(2)Analysis of Financial Condition<1> Overview of Assets, Liabilities and Net Assets
As of March 31, 2013, total assets amounted to 771.0 billion yen, an increase of 78.5 billion yen comparedto March 31, 2012. The main factors for this increase were acquisitions of property, plant and equipment,
increased market valuation of available-for-sale securities, and the impact of favorable foreign currency
exchange rates.
Total liabilities amounted to 333.1 billion yen, a decrease of 6.9 billion yen compared to March 31, 2012.
This was mainly attributed to a repayment of 9.5 billion yen in loans.
Net assets amounted to 437.9 billion yen, an increase of 85.4 billion yen. This was mainly the result of anincrease in retained earnings of 38.7 billion yen, a valuation difference on available-for-sale securities of
7.5 billion yen, and a foreign currency translation adjustment.
<2> Overview of Cash Flows(Unit: millions of yen)FYE Mar. 2012

FYE Mar. 2013

Changes

56,20050,270(5,930)(247,182)(31,293)

215,888

182,982(22,340)(205,322)

73,79375,165

1,371

Net cash provided by (used in)operating activities
Net cash provided by (used in)investment activities
Net cash provided by (used in)financing activities
Cash and cash equivalents at end of
periodNet cash provided by operating activities amounted to 50.3 billion yen. Main items in the fiscal year underreview included income before income taxes of 52.3 billion yen, depreciation and amortization of 24.6
billion yen, and amortization of goodwill of 8.0 billion yen. In addition, income taxes paid amounted to24.3 billion yen.
Net cash used in investment activities totaled 31.3 billion yen. The main component was 25.7 billion yen
in expenditures for the purchase of property, plant and equipment.
Net cash used in financing activities amounted to 22.3 billion yen. The main item was a net decrease in
short-term loans payable of 42.0 billion yen.
Reference: Cash flow related financial indicatorsFYE Mar. 2012
Shareholders’ equity ratio (%)
Shareholders’ equity ratio based onmarket value (%)

50.9

56.7

198.2

108.4

99.7

0.0

3.4

3.6

771.7

83.2

37.8

ratio (years)

Formulas1:－

FYE Mar. 2013

79.8

Interest-bearing liabilities to cash flow
Interest coverage ratio (times)

FYE Mar. 20136 －

[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

Shareholders’ equity ratio: shareholders’ equity divided by total assets
Shareholders’ equity ratio (%) based on market value2: market capitalization of stock divided by total
assetsInterest-bearing liabilities to cash flow ratio3: interest-bearing liabilities divided by cash flow
Interest coverage ratio4: cash flow divided by interest payments
Notes:
1. All calculations are based on consolidated financial data.
2. Market capitalization of stock is calculated by multiplying the closing price of stock at the end of the
fiscal year by the total number of stocks issued at the end of the fiscal year excluding treasury stock.
3. Cash flow is the amount of “net cash provided by (used in) operating activities” recorded in the
consolidated statement of cash flows. Interest-bearing liabilities are the sum of all debt for which interestis paid among the liabilities recorded in the consolidated balance sheets.
4. Interest payments are the amount of “interest expenses paid” recorded in the consolidated statements ofcash flows.
(3)Basic Policy for Returning Profits to Shareholders and Dividends in the Fiscal Year under Review andCurrent Fiscal YearTo ensure higher profitability and sustainable growth, the Terumo Group undertakes appropriate andproactive reinvestment of profits while working to enhance its corporate value. The Company believes that
this approach serves the interests of its shareholders and increases its investment value. Terumo’s basic policy
for returning profits to shareholders is to steadily increase dividend payments with the aim of a dividend
payout ratio of 30% over the medium to long term.
In the fiscal year under review, Terumo plans to pay an annual dividend of 44 yen per share, an increase of 5
yen compared to the previous fiscal year. Having already paid an interim dividend of 22 yen per share, theCompany plans to pay a year-end dividend of 22 yen per share to attain the planned amount.
In the fiscal year ending March 31, 2014, Terumo plans to pay an annual dividend of 58 yen per share(including an interim dividend of 29 yen per share).
(4) Business Risks
The following risk factors could negatively impact Terumo’s operating results and financial position.
●Changes in Government Healthcare Policies
In the healthcare industry, governments continue to restrain healthcare costs and implement other reforms
intended to raise the quality of healthcare both in Japan and overseas. Large and unforeseen changes ingovernment healthcare policy to which Terumo cannot respond could affect the Company’s operating results
and financial position.
●Market Price Fluctuations
As part of its measures to restrain healthcare costs in Japan, the Japanese government enacts biennial revisions
to government reimbursements for drugs, medical treatment, and medical equipment covered by the national
health insurance scheme. In addition, intense competition and innovations in technology both in Japan andoverseas could serve to greatly lower prices and adversely affect the Company’s operating results andfinancial position.
●Raw Material Price Fluctuations
Many of the raw materials Terumo uses for product manufacture are plastics and other materials derived frompetrochemicals. A steep rise in the price of resources worldwide could increase the price of raw materials andadversely affect the Company’s operating results and financial position.
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7 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference●Exchange Rate Fluctuations
Because Terumo’s headquarters is located in Japan, all financial accounts of overseas subsidiaries areconverted from constant currencies into Japanese yen for the preparation of consolidated financial statements
and other purposes. Exchange rate fluctuations therefore influence the conversion of those accounts into yen
and result in either a gain or a loss for the Company. We are coping with these fluctuations with structural
methods, such as by transferring production to overseas factories and importing raw materials, along with theutilization of contracts to hedge against exchange rate volatility for trade receivables. However, it is possiblethat unexpected exchange rate fluctuations could impact the Company’s operating results and financial
position.
●Risks Associated with Overseas Operations
Terumo supplies products to more than 160 countries. It is possible that in the markets Terumo serves,recessions with a resulting contraction in demand, unanticipated political instability, or the sudden impositionof government regulations in those countries could impact the Company’s operating results and financial
position.
●Quality Control
Terumo manufactures its products based on stringent quality control principles that are in accordance withgood manufacturing practice (GMP) standards for pharmaceuticals and medical equipment and with the ISO
quality management system standards. However, it is conceivable that the quality of our products could bequestioned if complications occur during the use of the products. In addition, even in cases where medical
accidents are clearly not a direct result of the Company’s products, we are taking preventative measures andcountermeasures in the event that any possible risks to our products occur in the future. Such occurrences
could lead to a decrease in sales or rise in costs, which would affect the Company’s operating results andfinancial position.
●Legal Proceedings
Terumo faces the risk of being involved in lawsuits, disputes, and other types of legal proceedings both inJapan and overseas. The Company strives to minimize legal risks through such measures as continuous
research efforts on the part of the Legal, Intellectual Property, and other departments and a system of internal
checks. Reports on the risk management structure are provided to the Board of Directors and the Board of
Corporate Auditors as needed. However, if the Company were sued by a third party for damages or an
injunction against sales or any other major legal action were taken, it could affect the Company’s operating
results and financial position.
● Other Risks
Other factors that could impact Terumo’s operating results and financial position include changes in tradepractices, terrorism, war, natural disasters, epidemics, or the worldwide spread of new strains of influenza.
Disclaimer
Information related to forward-looking statements, such as forecasts of financial performance, contained in
documents disclosed by the Company is based on available information and certain assumptions deemed
rational at the time of disclosure. Accordingly, it should be noted that actual results may differ from those
forecasts on projections due to various factors. Factors affecting actual results include, but are not limited to,changes in economic conditions surrounding Terumo, fluctuation in foreign exchange rates, and the state ofcompetition.

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8 －[Terumo Corporation] Financial Results for the Fiscal Year Ended March 31, 2013: Reference

2. Management Policies(1)Basic Policies of the Company’s Management
Corporate Mission: Contributing to Society through Healthcare
Since its founding in 1921, Terumo has striven to contribute to medical progress and improve the safety ofhealthcare while constantly working to develop and promote medical devices and pharmaceutical products
tailored to the needs of the healthcare market based on this corporate mission.
Corporate Vision: Terumo’s unique technology makes medical treatment kinder and gentler
Embodying the Company’s corporate mission, this vision provides guidance for the Terumo Group to help
patients, medical professionals and all people around the world who hope for good health by making
medical treatment kinder and gentler, such as shortening treatment periods and alleviating pain.
Five Statements: Open Management, Enhanced Value, Safety and Reliability, Respect for Our Associates, andCorporate Citizenship
These statements represent the basic principles underlying the standards for conduct and decision-making
in the Terumo Group’s business activities.
Guided by these management policies, the Terumo Group is working to raise its corporate value andmaximize profits for shareholders by enhancing its position as a leading company in Japan’s healthcare
industry as well as improving its brand value and increasing its share of the global market.
(2) Medium- to Long-Term Corporate Management Strategies
Terumo’s new four-year mid-term management plan went into effect in April 2013, and will be presented tothe public in May of this year. The plan aims to increase sales by providing valuable products and services
that are based on needs in the healthcare market, and ensure sustainable and profitable growth by means ofinitiatives that effectively employ management resources and cut costs.
(3) Challenges Confronting the Company
The global medical device market is facing a time of transformations. With the stronger pressure to control
costs for healthcare in developed countries, medical devices must not only demonstrate good performance andquality but also contribute to making healthcare more economical. Meanwhile, the development of healthcare
infrastructure in emerging countries is rapidly driving up demand. In Japan, the need for chronic stage
healthcare is increasing and the market for products and services targeting the elderly is growing. To respondto these diverse needs, Terumo is flexibly combining strategies tailored for each specific market as it
continuously works to improve its performance.

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