TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

23

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Innovation Drives the Evolutionof Semiconductors

Corporate Governance

Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Eleven-Year Summary
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Independent Auditor’s Report

Financial Section
Investor Information

Investor Information

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2018 and 2017

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated financial statements ofTokyo Electron Limited (hereinafter “the Company”) and its
subsidiaries (hereinafter collectively referred to as “Tokyo
Electron”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act
of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The Company uses financial statements prepared by foreign subsidiaries in accordance with International Financial
Reporting Standards or U.S. generally accepted accounting
principles for the preparation of the consolidated financial
statements, together with adjustment for certain items which
are required to be adjusted in the consolidation process.
The accompanying consolidated financial statements havebeen restructured and translated into English from the statutory
Japanese language consolidated financial statements. Some supplementary information included in the statutory Japanese language consolidated financial statements is not presented in theaccompanying consolidated financial statements.
The amounts in the consolidated financial statements andassociated notes shown in millions and thousands of yen;
thousands of U.S. dollars; and thousands of shares as of andfor the years ended March 31, 2018 and 2017 are truncated at
the nearest unit. Accordingly, totals do not necessarily agreewith the sum of the corresponding individual amounts.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥106.24
to $1.00, the approximate rate as of March 31, 2018. The
translation should not be construed as a representation that
the Japanese yen amounts shown could be converted into
U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accountsof the Company and its 33 and 35 subsidiaries as of March 31,2018 and 2017, respectively. All significant inter-company
accounts, transactions and unrealized profits or losses havebeen eliminated through consolidation procedures.
There are 9 and 8 affiliates accounted for using the equity
method as of March 31, 2018 and 2017, respectively.

The fiscal year-end of all entities is March 31, except for 3
consolidated foreign subsidiaries. Financial statements provisionally closed for the period ending March 31 are used for
those subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the year-end rates, except
for those hedged by forward exchange contracts, which aretranslated at the contracted rates. Resulting exchange gains
and losses are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries aretranslated into Japanese yen at the rates of exchange in
effect at the balance sheet date, except for shareholders’equity accounts, which are translated at the historical rates.
Revenue and expense accounts of foreign subsidiaries aretranslated at average rates of exchange in effect during theyear. Resulting translation adjustments are presented in net
assets as a component of accumulated other comprehensive
income in the consolidated balance sheets.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash, short term
deposits and low-risk financial instruments with original
maturities of three months or less.
(d) Short-term investments
Short-term investments consist of short term deposits
and low-risk financial instruments with original maturities ofmore than three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security and classifies those securities as trading securities, held-to
maturity debt securities or other securities. Tokyo Electron
has no trading securities as of March 31, 2018 and 2017. Heldto-maturity debt securities are stated mainly at amortizedcost. Other securities with market prices are valued at fairvalue at the balance sheet date. The differences between thebook value and fair value of other securities, net of applicable
income taxes, are presented in net assets as a component ofaccumulated other comprehensive income. Other securities
without market prices are valued at cost using the weightedaverage method.
The cost of sold securities is calculated using the weighted
average method.

(f) Inventories
Inventories are stated at the lower of cost, determined byprincipally the specific identification method, or net realizablevalue, which is defined as selling price less estimated additional manufacturing costs and estimated direct selling expenses.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of buildings, machinery and equipment of theCompany and its domestic subsidiaries is computed using
the declining-balance method, except for buildings acquiredsince April 1, 1998 and facilities attached to buildings andstructures acquired since April 1, 2016 which are depreciatedusing the straight-line method, based on the estimated useful lives of assets. Foreign subsidiaries mainly apply thestraight-line method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment
are as follows:   Buildings
2 to 60 years   Machinery and equipment
2 to 17 years(h) Intangible assets (excluding goodwill)
Intangible assets are amortized by the straight-line method over their estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortizedby the straight-line method over a period not exceeding
20 years.
(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets
held for use in the business and idle assets.
If the carrying value of a fixed asset is impaired, a loss isrecognized based on the amount by which the carrying value
exceeds its recoverable amount, being the higher of the net
selling price or the value in use of the assets. Net selling priceis determined using the fair value less disposal costs andvalue in use is based on the total amount of discounted cash
flows estimated to be generated from the continuing use of
the individual assets or the asset group and the disposal of
the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experience ofbad debts with respect to ordinary receivables, and an estimate of uncollectible amounts determined by reference tospecific doubtful receivables from customers which are experiencing financial difficulties.
(l) Employee benefits
The Company and its domestic subsidiaries provide
defined benefit plans for their employees. Expected benefits
are attributed to accounting periods by the benefit formulabasis. Prior service costs are charged to earnings ona straight-line basis, beginning from the fiscal year in which
they are incurred, over a fixed number of years (4 years)
within the average remaining years of service of employees
when the changes occur. Actuarial differences are charged toearnings on a straight-line basis, beginning from the following fiscal year after they are incurred, over a fixed number ofyears (4 years) within the average remaining years of serviceof employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of theCompany and its domestic subsidiaries is calculated in accordance with internal regulations.
The Company and certain domestic subsidiaries decided to
discontinue the payment of severance pay for directors andaudit & supervisory board members after April 1, 2005, and at
the general shareholders’ meeting in June 2005, it was
resolved that the severance pay for directors and audit &supervisory board members until March 31, 2005 would be
paid at the termination of their service and the decision
regarding the payment amount for each director and audit &supervisory board member was delegated to the board of
directors and audit & supervisory board members. The accruals for severance costs for directors and audit & supervisoryboard members are included in Net liability for defined benefits in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty,
and Tokyo Electron accrues estimated warranty costs when
product revenue is recognized. Estimated after-sale repair
expenses over warranty periods are accrued based on the historical ratio of actual repair expenses to corresponding sales.
(n) Derivatives and hedge accounting
The Company and certain subsidiaries make use of derivatives in order to manage certain risks arising from adverse
fluctuations in foreign currency exchange rates. The amountof derivatives is limited to the extent of foreign currency
assets, liabilities and actual orders, and Tokyo Electron does
not trade in derivatives for speculative purposes.

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

24

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
Derivatives are carried at fair value in the consolidated balance sheet with changes in unrealized gain or loss charged or
credited to earnings, except for those which meet the criteria
for hedge accounting. Unrealized gains or losses on hedging
instruments, net of taxes, are reported in net assets as
a component of accumulated other comprehensive income(loss). Receivables and payables hedged by qualified forward
foreign exchange contracts are translated at the corresponding foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on
temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and theamounts used for income tax purposes and net operating
loss carryforwards. Deferred tax assets and liabilities aremeasured using the enacted tax rates and laws which are
expected to be in effect when net operating loss carryforwards and temporary differences are expected to be realized.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)production equipment is principally recognized at the time of
the customer confirmation of set-up and testing of products.
Revenue from equipment not requiring substantial installation is recognized at the time of shipment. Service revenue
maintenance is recognized ratably over the term of themaintenance contract.

acquired since April 1, 2016 from the declining-balance method to the straight-line method, starting from the fiscal year
ended March 31, 2017.
The effect of this change on the consolidated financial
statements is immaterial.

4. Additional Information
The Company and its domestic subsidiaries adopted“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)
from the year ended March 31, 2017.

5. Accounting Standards Issued but Not yet Adopted“Implementation Guidance on Tax Effect Accounting” (ASBJ
Guidance No. 28, February 16, 2018)“Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26 (revised 2018), February
16, 2018)(1) Overview
The above guidance was revised with regard to the treatment of taxable temporary differences for investments in
subsidiaries within the context of non-consolidated financial
statements, and to clarify the approach to determining
recoverability of deferred tax assets in a company which iscategorized as ‘Type 1’ according to the guidance.

Customers” (IFRS 15 published by IASB, Topic 606 publishedby FASB) in May 2014. IFRS 15 is effective for annual reporting
periods beginning on or after 1 January 2018 and Topic 606 is
effective for annual reporting periods beginning after
December 15, 2017.
Considering the above circumstances, the AccountingStandard Board of Japan (ASBJ) also developed a new revenue recognition and issued Statement No.29 together with
Guidance No.30.
ASBJ’s basic policy in developing the new revenue recognition standards is to first incorporate the core principle of IFRS
15 in the light of improving the international comparability offinancial statements and then add additional alternative
treatments to the extent that international comparability
would not be significantly impaired where any business practices operated in Japan need to be considered.
(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2022.

(r) Reclassifications
Certain reclassifications have been made to the prior year’s
consolidated financial statements to conform with the presentation used for the year ended March 31, 2018.

3. Change in Accounting Policies and Adoption of
New Accounting Standards
Year ended March 31, 2017
In accordance with the revision to the JapaneseCorporation Tax Act, the Company and its domestic subsidiaries adopted the “Practical Solution on a change in depreciation method due to Tax Reform 2016” (ASBJ Practical Issues
Task Force No. 32, June 17, 2016) and changed the depreciation method for facilities attached to buildings and structures(2) Effective date
Effective from the beginning of the fiscal year ending
March 31, 2019.
(3) Effects of the application of the guidance
The Company and its consolidated domestic subsidiaries
are currently in the process of determining the effects of thisnew guidance on the consolidated financial statements.

6. Securities“Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 30, 2018 (hereinafter, “Statement No.29”))“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No. 30, March 30, 2018
(hereinafter, “Guidance No.30”))(1) Overview
The International Accounting Standards Board (IASB) andthe U.S. Financial Accounting Standards Board (FASB) collaborated on a project to develop a single, comprehensive revenue recognition model and jointly issued new revenue
recognition standards “Revenue from Contracts with

Millions of yen
Cost

Carrying value¥7,620¥32,293

Non-current Securities with carrying value
exceeding acquisition cost  Equity securities

Carrying value$71,730$303,971

7,714

7,714

Non-current Securities with carrying value
exceeding acquisition cost  Equity securities Securities with carrying value
not exceeding acquisition cost  Equity securities

141

141

$79,587$311,827  OtherTotal

Held-to-maturity securities classified as current assets are¥286,500 million ($2,696,724 thousand) and ¥244,500 million as of March 31, 2018 and 2017, respectively.
Reconciliation of held-to-maturity securities as of March
31, 2018 and 2017 to the amounts of short-term investmentsin the consolidated balance sheets are as follows:

2018(3) Effects of the application of the standards
The Company and its consolidated subsidiaries are currently in the process of determining the effects of these newstandards on the consolidated financial statements.

2018:

Cost

Thousands of
U.S. dollars

Millions of yen

Other securities as of March 31, 2018 and 2017 are as follows:(q) Research and development expenses
Research and development expenses are charged to earnings as incurred and amounted to ¥97,103 million ($914,000
thousand) and ¥83,800 million for the years ended March 31,2018 and 2017, respectively.

Thousands of U.S. dollars

2018:

2018

2017

Held-to-maturity (current)

¥286,500 ¥244,500

Deposits and low-risk financial instruments with original
maturities of three months
or less(170,500)

Deposits with original maturities
of more than three months
Short-term investments$2,696,724(93,500) (1,604,856)——¥116,000 ¥151,000—$1,091,867

Net loss on devaluation of investment securities was ¥536
million ($5,049 thousand) and ¥105 million for the years
ended March 31, 2018 and 2017, respectively.
For the years ended March 31, 2018 and 2017, the amountsof gain and loss on sale of available-for-sale securities wereimmaterial.

7. Inventories Securities with carrying value
not exceeding acquisition cost

Inventories as of March 31, 2018 and 2017 are as follows:  Equity securities

819

819

  Other

15

15

Total

¥8,455¥33,128

2017:

Cost

Millions of yen

2018

Finished products

2017¥220,497 ¥152,629

Thousands of
U.S. dollars

2018$2,075,465

Work in process, raw materials
and supplies

123,573

83,626

1,163,154

Non-current

Total

¥344,071 ¥236,256$3,238,620 Securities with carrying value
exceeding acquisition cost

The amounts of change in inventory provision included incost of sales in the consolidated statements of income forthe years ended March 31, 2018 and 2017 were an increase of¥173 million ($1,635 thousand) and a decrease of ¥3,060 million, respectively.

Millions of yen  Equity securities

¥7,183Carrying value¥22,704 Securities with carrying value
not exceeding acquisition cost  Equity securities
Total

——¥7,183¥22,704

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

25

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
8. Pledged Assets(2) Movement of plan assets

Tokyo Electron did not hold any assets pledged as collateral as of March 31, 2018 and 2017.

9. Short-Term Borrowings

Thousands of
U.S. dollars

Millions of yen

Balance at April 1, 2017and 2016
Expected return on plan assets
Actuarial gain

2017

2018

¥67,653¥62,549$636,798

1,400

1,266

13,186

526

540

4,960

Increase by transfer

10. Employee Benefits

Foreign currency exchange
rate changes

(24)

84

(227)

Other

(12)

(6)

(119)

¥53,683¥67,653$505,301

Employer contributions

3,577

2,940

33,678Benefits paid

(915)

(1,011)(8,616)(18,523)—(174,359)

—

1,289

—

The Company and its domestic subsidiaries provide a cash
balance plan and a non-contributory retirement and severance benefit plan as defined benefit plans for their employees. Further, certain consolidated overseas subsidiaries
provide defined benefit plans for their employees.
Effective April 1, 2018, Tokyo Electron and its domestic subsidiaries converted a part of their defined benefit plans toa defined contribution plan. The loss on revision of retirement
benefit plan of ¥3,154 million ($29,690 thousand) resulting
from this change was recognized and presented in otherincome (expenses) for the year ended March 31, 2018 inaccordance with the “Accounting Procedures for Conversion
between Different Retirement Benefit Schemes” (Corporate
Accounting Standards Implementation Guidelines No. 1) andthe “Practical Treatment of Accounting Procedures forConversion between Different Retirement Benefit Schemes”(Practical Issues Task Force No. 2).

Balance at March 31, 2018and 2017

Defined benefit plans(1) Movement of defined benefit obligations

Note: The provision for accrued pension and severance costs for directors andaudit & supervisory board members of ¥374 million ($3,529 thousand)and ¥374 million as of March 31, 2018 and 2017 is not included.
Thousands of
U.S. dollars

Millions of yen

2018

Balance at April 1, 2017and 2016
Service cost(3) Reconciliation from defined benefit obligations and plan
assets to liability (asset) for defined benefits
Thousands of
U.S. dollars

Millions of yen

2018

2017

6,052

6,080

56,967

2,675

2,168

25,186

2,186

1,515

20,583

Other

14,535

12,600136,815

Total gross deferred tax assets

88,55078,038

833,490

Net actuarial loss that is yet tobe recognized (before tax)

(7,806)(2,712)(73,482)

Less valuation allowance(8,043)(9,808)(75,711)

Total¥(9,161)¥(2,712)$(86,229)

Total deferred tax assets

80,506

68,229757,778(7,554)(4,757)(71,105)

Deferred tax liabilities(7) Plan assets
1. Plan assets comprise:

Net unrealized gains on
investment securities¥51,007$558,255

Other

7

3

55,825558,255

Total

100%

100%

—

(4,818)—¥59,309¥51,007$558,255

Thousands of
U.S. dollars

2018

2017

2018

¥6,052¥6,080$56,967

963

772

9,066

(1,400)(1,266)(13,186)

Benefits paid

(3,029)(2,708)(28,517)

Prior service cost

1,690

—

15,915

Net actuarial gain (loss)
amortization(1,237)291(11,649)$1,063,557

Accrued warranty expenses
Accrued enterprise taxes

3

Interest cost

¥112,992 ¥118,660

77,051
39,0499

Expected return on plan assets

Balance at March 31, 2018and 2017

4,977
3,995

1

9,066

—

8,185
4,148

9

43,601(65)

Accrued employees’ bonuses
Devaluation of inventories

Cash and cash equivalents

772—

103,254

Alternative investments (Note)(3,075)Other

15,402548,899

963

Loss on transfer to defined contribution plan (Note)

10,969(170,201)(4) Defined benefit costs(288)$(12,747)

170,648

Net operating loss carryforwards$587,577

59,309101—$260,900

18,102(17,282)¥59,309(30)¥¥19,276

18,129¥50,947

Net liability for defined benefits

Foreign currency exchange
rate changes¥(1,354)2018¥27,718

Net liability for defined benefits(18,082)

Net liability for defined benefits
at March 31, 2018 and 2017—

Prior service cost that is yet tobe recognized (before tax)

2017

Elimination of unrealized profit
in inventories¥62,424

54,899(150,100)Millions of yen

2018

2018

Total deferred tax liabilities

58,315—

Thousands of
U.S. dollars

2017

Net deferred tax assets

Unfunded defined benefit
obligations

1,327(6) Accumulated remeasurements of defined benefit plans

2018

Deferred tax assets

20

9,355

—

Note: Prior service cost and actuarial loss for the year ended March 31, 2018
include the reclassification adjustments of ¥336 million ($3,167 thousand)and ¥240 million ($2,263 thousand), respectively associated with the conversion of a part of defined benefit plans to a defined contribution plan.

Thousands of
U.S. dollars

Millions of yen

26(3,892)(15,946)$(60,695)

20

993

Increase by transfer¥3,86925

Funded status

Other¥(6,448)

Equity securities(505,301)

Total defined benefit costs for the years ended
March 31, 2018 and 2017$(12,747)

Life insurance company general account(67,653)

4,632

Decrease by conversion of a part of defined benefit plans
to a defined contribution plan

(47,947)

Total

—

Other

(53,683)

Actuarial gain (loss)

Interest cost

3,869

39%

Plan assets

Service cost¥

(5,093)

2017$514,657$1,116,912¥(1,354)38%¥63,761

Millions of yen¥118,660 ¥116,228

Prior service cost
Actuarial gain (loss)

Significant components of the deferred tax assets and­liabilities as of March 31, 2018 and 2017 are as follows:

2018¥54,677

Net liability for defined benefits
at March 31, 2018 and 2017

2018

Bonds

Funded defined benefit
obligations

Net asset for defined benefits

2017

Undistributed earningsof subsidiaries

2018

2017

2018

Thousands of
U.S. dollars

Millions of yen

2018

2018

There are no short-term borrowings classified as current
liabilities as of March 31, 2018 and 2017.
As of March 31, 2018 and 2017, Tokyo Electron had unusedlines of credit amounting to ¥126,953 million ($1,194,971 thousand) and ¥126,944 million, respectively.

Decrease by conversion of a part of defined benefit plans
to a defined contribution plan

11. Income Taxes(5) Remeasurements of defined benefit plans

388

290

3,654

¥4,765¥6,168$44,852

3,154—

29,690Note: Loss on revision of retirement benefit plan was recognized in otherincome (expenses) for the year ended March 31, 2018.

(8) Actuarial assumptions
The principal actuarial assumptions as of and for the years
ended March 31, 2018 and 2017 are as follows:
2018

2017

Discount rate

0.46%

0.71%

Long-term expected rate of return

2.00%

2.00%

The expected rates of salary increase for the years ended
March 31, 2018 and 2017 are also considered as one of theactuarial assumptions, and are set based on the salary
increase index by age group as of January 1, 2018 and January
1, 2014, respectively.

(5,197)(57,828)(7,327)(41,267)

Net deferred tax assets are included in the consolidatedbalance sheets as of March 31, 2018 and 2017 as follows:
Thousands of
U.S. dollars

Millions of yen

Note: Alternative investments consist of hedge funds and insurance-linked
securities

2. Long-term expected rate of return
Current and target asset allocations, and historical andexpected returns on the various categories of plan assets
have been considered in determining the long-term expected
rate of return.

(6,143)(4,384)

2018

2017

2018

Current assets¥50,505¥36,892$475,385

Investments and other assets

17,846

19,128167,979———(5,926)(5,073)(55,788)

Other current liabilities
Other non-current liabilities

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the period in which temporary differences become deductible and net operating loss carry forwards are available to be
utilized. For assessment of the realizability of deferred tax
assets, management considers the scheduled reversal ofdeferred tax liabilities, future estimated taxable income, tax
planning strategies and level of net operating loss carryforwards, if any, in accordance with accounting principles generally accepted in Japan.
Based on the level of historical taxable income and future
estimated taxable income over the periods which the temporary differences are deductible and net operating loss carryforwards are available to be utilized, management believes

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

26

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
Tokyo Electron will realize the benefits of deferred tax assets,
net of valuation allowance, as of March 31, 2018 and 2017.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax filing system for corporate tax purposes.
Significant components of the difference between thestatutory and effective tax rates for the years ended March
31, 2018 and 2017 are as follows:
2018

2017

30.86%

30.86%Tax credits(6.23)(8.41)

Effect of enacted changes in tax rates
on net deferred tax assets

1.55

—

Difference in statutory tax rates
of subsidiaries(1.33)(0.11)

Others, net

0.89

0.37

Effective tax rate

25.74%

22.71%

Statutory tax rate in Japan
Adjustments:

Year ended March 31, 2018
The U.S. federal income tax rate applied to the consolidated
subsidiaries in the U.S. is reduced from 35% to 21% associatedwith the U.S. tax reform legislation signed into law on December
22, 2017.
Net deferred tax assets were reduced by ¥3,029 million($28,519 thousand) and income taxes were increased by ¥3,211
million ($30,233 thousand) as of and for the year ended March
31, 2018 resulting from this tax rate reduction.
Year ended March 31, 2017
The Company received notification from the National Tax
Agency, Japan (NTA) dated February 14, 2017, that agreement
had been reached through the Mutual Agreement Procedure(MAP) between the NTA and U.S. income tax authorities concerning the transfer pricing adjustments assessed during priorhistorical periods relating to the transactions between the
Company and its U.S. subsidiary. As a result, ¥405 million of tax
benefit is included in current income tax expense as the difference between the current tax refunds and the estimatedamount recorded in the prior year.

12. Other Income (Expenses)
Loss on impairment of property, plant and equipment,
goodwill and other assets
For the year ended March 31, 2018, the following loss on
impairment was recognized:

Goodwill of TEL NEXX, Inc.
Loss on impairment
Location

Purposeof useAsset
Type

Billerica,
Massachusetts, U.S.A.

Business
assetsGoodwill

Millions of yen

Thousands of
U.S. dollars¥925$8,714

Tokyo Electron performed an impairment test and recognized loss on impairment of goodwill of TEL NEXX, Inc.,a subsidiary manufacturing semiconductor production equipment, due to TEL NEXX, Inc.’s reconsideration of its businessplan. Tokyo Electron recognized the difference between thebook value and the recoverable amount of goodwill as loss
on impairment. The recoverable amount was measured asvalue in use, and was calculated by discounting future cash
flows at a discount rate of 14.0%.
Loss on disaster
Loss on disaster of ¥7,521 million for the year ended March
31, 2017 represents the actual and estimated expenses relating to the recovery of buildings, production and development
facilities as well as the disposal of inventories caused by the
impact of the Kumamoto earthquake in 2016.
Loss on revision of retirement benefit plan
Effective April 1, 2018, Tokyo Electron and its domestic subsidiaries converted a part of their defined benefit plans toa defined contribution plan. The loss on revision of retirement
benefit plan of ¥3,154 million ($29,690 thousand) resulting
from this change was recognized and presented in otherincome (expenses) for the year ended March 31, 2018 inaccordance with the “Accounting Procedures for Conversion
between Different Retirement Benefit Schemes” (Corporate
Accounting Standards Implementation Guidelines No. 1) andthe “Practical Treatment of Accounting Procedures forConversion between Different Retirement Benefit Schemes”(Practical Issues Task Force No. 2).

In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of
additional paid-in capital and legal reserve must be set aside
as additional paid-in capital or legal reserve. Legal reserve is
included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in
capital used to eliminate or reduce a deficit generally requirea resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve
may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.

The Company is subject to restriction of dividends basedon the Japanese Corporate Act, which restricts the amount ofdividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings to shareholders on dates other than the mid-term andyear-end, by a resolution of the board of directors in accordance with Japanese laws and regulations.
At the board of directors’ meeting held on May 11, 2018, thedistribution of cash dividends amounting to ¥56,947 million($536,026 thousand) was resolved. Such appropriations havenot been accrued in the consolidated financial statements asof March 31, 2018 since they are recognized in the period inwhich they are resolved at the board of directors’ meeting.

14. Other Comprehensive Income
Other comprehensive income for the years ended March 31, 2018 and 2017 is as follows:

2018

2017

2018

¥9,134¥4,152$85,979—(6)—

Sub-total, before tax

9,134

4,146

85,979Tax expense(2,796)(1,271)(26,322)

Sub-total, net of tax

6,337

2,875

59,6572,692

Net unrealized gains on investment securities
Net unrealized gains arising during the year
Reclassification adjustments

Net deferred gains (losses) on hedging instruments
Net deferred gains arising during the year

286

15

Reclassification adjustments

—

—

—

Sub-total, before tax

286

15

2,692

Tax expense

(87)

(4)

(823)

Sub-total, net of tax

198

10

1,869

Adjustments during the year

(297)

(933)

(2,803)

Reclassification adjustments

54

—

516

(242)

(933)

(2,286)

Foreign currency translation adjustments

Sub-total, before tax

—

—

—

(242)

(933)

(2,286)

Adjustments during the year

(5,787)

3,578(54,478)

Reclassification adjustments

(660)

291

(6,217)(6,448)

3,869(60,695)

Tax expense

1,953(1,187)

18,386Sub-total, net of tax(4,494)

2,682(42,308)

Tax expense

13. Net Assets
Net assets comprises four subsections, which are shareholders’ equity, accumulated other comprehensive income,share subscription rights and non-controlling interests.
Under Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the boardof directors, designate an amount not exceeding one half ofthe price of the new shares as additional paid-in capitalwhich is included in capital surplus.

Thousands of
U.S. dollars

Millions of yen

Sub-total, net of tax
Remeasurements of defined benefit plans

Sub-total, before tax

Share of other comprehensive income of associates accounted for using the equity method
Adjustments during the year
Total other comprehensive income

(46)

114

(436)

¥1,752¥4,750$16,494

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

27

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
15. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since theyear ended March 31, 1999. The options under the plans vest
immediately or over three-year period with restriction on
exercise up to three years after the date of grant, and havean exercise period of seventeen years from the date on
which the options become exercisable.
Options to purchase 144,700 shares of the Company wereauthorized and granted at an exercise price of ¥1 ($0.01) for
the year ended March 31, 2018.

A summary of stock options outstanding and exercisable as of March 31, 2018 and 2017 is as follows:
2018

2017

Weighted-average exercise price

Number ofsharesYen

U.S. dollars

Number ofshares

Weighted-average
exercise price
Yen

Outstanding at the beginning of year

457,500¥1$0.01

305,500¥1

Granted144,700

1

0.01

194,400

1

Exercised

38,6001

0.01

42,400

1

—

—

—

—

—

Expired (forfeited)
Outstanding at the end of year

563,600

1

0.01

457,500

1

Exercisable at the end of year

88,8001

0.01

127,400

1

Short-term investments consist of short term deposits
and low-risk financial instruments and Tokyo Electron tradewith highly-rated financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests inlisted companies exposed to equity market risks. Conditions,
including market prices, for these investment securities aremonitored on a regular basis.
Trade payables, which consist of notes and accounts payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through activities such as implementing cash management plans.
See note 18 for detailed discussion on derivative financial
instruments.

Millions of yen

Selling, general andadministrative expenses

Thousands of
U.S. dollars

2018

2017

2018

¥1,903¥1,141$17,921

Valuation method of fair value per unit of stock options
Fair value as of the grant date for stock options granted forthe year ended March 31, 2018 was ¥13,158 ($123.85) per unit,
which was evaluated as follows:(1) Valuation method used : Black-Scholes model(2) Major underlying assumptions and estimates:
13th Stock Acquisition Rights

Volatility (Note 1)

39.97%

Expected residual period (Note 2)

11.5 years

Expected dividends (Note 3)¥294.5 ($2.77) per share

Risk-free interest rate (Note 4)

0.12%

Notes: 1. Calculated based on the stock price performance for 11.5 years(from December 2005 to June 2017).
2. Calculated on the assumption that the share subscription rights
would be exercised at the mid-point of the exercise period.
3. Based on the dividends paid for the years ended March 31, 2017and 2016.
4. Based on Japanese government bond yield corresponding to the
expected residual period.

(3) Method of estimating the number of vested stock options
It is not necessary to estimate the number of vested stock
options as the rights to exercise stock options are vested
immediately when granted.

Fair value of financial instruments
Carrying amount and estimated fair value of financial
instruments as of March 31, 2018 and 2017 are set out below.
Fair value of financial instruments which is practically difficult
to estimate are excluded.

Future minimum lease payments on non-cancelable operating leases are as follows:
Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

Due within one year

¥ 3,772¥3,554$ 35,505

Due over one year

7,039

6,272

66,255¥10,811¥9,827$101,761

Total

Carrying
amountEstimated
fair value1

Cash and cash equivalents¥257,877¥257,877

Short-term investments

116,000

115,966

159,510

159,510

32,23032,2302018:

Assets Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥59 million)

16. Leases

Policy for financial instruments
Tokyo Electron limits its fund management to short-termbank deposits and low-risk financial instruments.
Trade receivables, which consist of notes and accounts
receivable, are exposed to credit risk in the event of non-­performance by the counterparties. Execution and management of credit risk, maturity and receivable balance areconducted pursuant to the internal management rules for
credit control. Credit risk of major customers is assessed ona regular basis.

Cash and cash equivalents$2,427,314$2,427,314

Short-term investments

1,091,867

1,091,549

1,501,419

1,501,419

303,375

303,375

1,022,284

1,022,284

Assets Trade notes and accounts receivable, net of allowance for
doubtful accounts ($563 thousand)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)

Investment securities
Trade notes and accounts payable

108,607108,607

(7)

(7)

335

335

Hedge accounting not applied

Notes: 1.	Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes andaccounts receivable and trade notes and accounts payable.
 The carrying amounts approximate fair value because of the shortmaturity of these instruments.
		 Investment securities
	  The fair values of marketable securities are based on quoted market prices.
		  See note 6 for further information by classification of investment
securities.
Derivatives		  See note 18 for detailed discussion on derivative financial­instruments.
2. The following financial instruments are not included in the above as
they do not have quoted market prices and therefore it is consideredextremely difficult to measure their fair value.

2018

¥882

¥1,399

15

14

141

Total

¥897

¥1,414$8,451Millions of yen

Cash and cash equivalents¥164,366¥164,366

Short-term investments

151,000

151,060

Trade notes and accounts receivable

Assets2018:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥257,877¥—

Short-term investments

116,000—

159,570—

Millions of yen

133,794

133,794

22,70422,704

Liabilities
79,217

79,2172017:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥164,366¥—

Short-term investments

151,000—

Trade notes and accounts receivable

133,858—

Thousands of U.S. dollars

Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied$8,3093. Maturities of financial assets and securities are as follows:

Estimated
fair value1

Trade notes and accounts payable

2018

2017

Other

Unlisted stocks

Carrying
amountInvestment securities

Thousands of
U.S. dollars

Millions of yen

Millions of yen Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥63 million)

(70)
3,154

Reported amount In balance sheet

Derivatives (see note 18)
Hedge accounting applied

(70)
3,154

Hedge accounting not applied

Liabilities

2017:

17. Fair Value of Financial Instruments

Estimated
fair value1

2018:

Hedge accounting applied

Millions of yen

Amounts expensed related to stock options
The amounts expensed related to stock options for theyears ended March 31, 2018 and 2017, are as follows:

Thousands of U.S. dollars
Carrying
amount

(306)

(306)

49

49

2018:

Within 1 year

After 1 through5 years

Cash and cash equivalents$2,427,314$—

Short-term investments

1,091,867—

Trade notes and accounts receivable

1,501,982—

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

28

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
18. Derivative Financial Instruments

19. Segment Information

Thousands of U.S. dollars

Tokyo Electron is subject to risk from adverse fluctuations
in foreign currency exchange rates in its operating andfinancing activities. The Company and certain subsidiaries
enter into forward foreign exchange contracts in order tohedge such risks, but do not enter into such transactions for
speculative purposes. The Company implements a ratio analysis of the total cumulative cash flow fluctuations to assess
effectiveness of hedging for all derivative transactions,
except for transactions where the critical terms of the hedging instrument and hedged item match and the Company
could conclude that changes in fair value or cash flows are
expected to completely offset. Execution and managementof all derivative transactions are conducted pursuant to theinternal management rule.
The estimated fair values of the derivative financial instruments as of March 31, 2018 and 2017 are as follows:
1. Derivative financial instruments not designated as hedging
instruments
Millions of yen

2018:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars$ 6,622

$172

$172

Buy U.S. dollars

34,257

(184)

(184)
(4)

Buy Chinese yuan

14,265(4)

Buy Taiwan dollars

8,591

8

8

Buy GBP

7,727

(20)

(20)

Buy EURO

7,396

(18)

(18)

Buy Singapore dollars

6,646

(24)

(24)

$85,506$ (70)$ (70)

Total

Note: The fair values are based on the quoted forward foreign exchange rates.

2. Derivative financial instruments designated as hedging
instruments
The contract amounts of forward foreign exchange contracts, entered into to hedge future transactions and receivables and payables denominated in foreign currencies thathave been translated by the corresponding contracted rates,
are as follows:
Millions of yen

2018:

Contract
amountThousands of U.S. dollars

Fair value

Contract
amountFair value

Future transactions denominated ina foreign currency

2018:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars

¥ 703

¥18

¥18

Sell U.S. dollars¥11,853¥335$111,575$3,156

156

(0)

1,474

(2)

Buy U.S. dollars

3,639

(19)

(19)

Buy U.S. dollars

Buy Chinese yuan

1,515

(0)

(0)

Buy Taiwan dollars

912

0

0

Monetary assets and liabilities in foreign
currency (Note)
Sell U.S. dollars

Buy GBP

820

(2)

(2)

Buy EURO

785

(1)

(1)

Buy Singapore dollars

706

(2)

(2)

¥9,084

¥ (7)

¥ (7)

Total

Total

555

—

5,230

—

¥12,566¥335$118,280$3,154Contract
amountFair value

Buy Chinese yuan

404

(0)

(0)

Buy EURO

71

(0)

(0)

Buy U.S. dollars
Total

Buy Singapore dollars
Total

42

(0)

(0)

¥10,379¥(306)¥(306)(19,469)

1,130,728

Depreciation and amortization

11,402701

81

12,1858,434

20,619(0)

Amortization of goodwill

600

—

—

600

—

600

Loss on impairment

925

—

—

925

—

925

16,392935

247

17,57533,722

51,297

Capital expenditures, including intangible assets
130

1,150,197

(0)

¥50

1

Sell U.S. dollars

19,894275,242¥4,117

Monetary assets and liabilities in foreign
currency (Note)

75,0681,208,705

Sell U.S. dollars

4

Total

(52,601)

Sell Korean won

0—

1,055,234¥1,130,728—

666,762(353)

4(19,469)¥

327,844¥   430

19,469541,943

(353)

668

¥1,130,728

19,469¥(57)¥   43

2,013

Sales to external customers

3,014

589

Buy U.S. dollars

425—

Consolidated

13,299¥ 6,532

Buy Taiwan dollars¥75,068—

Total

Net sales

43,963

Sell U.S. dollars

340¥1,055,234

Other

Eliminations
andCorporate

314,602

Sell Korean won

Buy U.S. dollars

FPD
production
equipment

494,964

Fair value

(0)

2018:

Semiconductor
production
equipment

Segment profit (loss)

2017:

(0)

Millions of yen

Segment assets

Future transactions denominated ina foreign currency

Gains(losses)

55

Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2018 and 2017 is as follows:

Intersegment sales or transfers

Millions of yen

Contract
amountSell Singapore dollars

Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are generally consistent with those applied for the preparation of
the consolidated financial statements. Intersegment sales or transfers are determined by negotiation between the Tokyo
Electron group companies considering current market prices. Assets in common use have not been allocated to each reportablesegment, while costs associated with those assets have been allocated to reportable segments on a systematic basis.

Reportable Segment

2017:

Millions of yen

General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
financial information is available and the operating result is regularly reviewed by management to make decisions about­resources to be allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo
Electron identifies as a reportable segment, “semiconductor production equipment (SPE)” and “flat panel display (FPD)­production equipment”.
Products of the SPE segment consist of coater/developers, etch systems, deposition systems, cleaning systems used in wafer
processing, wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segmentprincipally develops, manufactures, sells such products and provide services on them.
Products of the FPD production equipment segment consist of coater/developers and etch/ash systems used in the­manufacture of flat panel displays. The FPD production equipment segment principally develops, manufactures, sells such­products and provide services on them.

—

127

—

¥4,717¥49

Note: The fair value of these derivative financial instruments, which is based on
the quoted foreign exchange rates, is included in the carrying value ofhedged assets and liabilities.

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

29

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Financial Section
Investor Information

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Independent Auditor’s Report
Consolidated Subsidiaries

Investor Information

Notes to Consolidated Financial Statements
Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2018 and 2017 are as follows:

Millions of yen
Reportable Segment

2017:

Semiconductor
production
equipment

FPD
production
equipment

Other

Eliminations
andCorporate

Total

Consolidated

Net sales
Sales to external customers
Intersegment sales or transfers¥749,893¥49,387438¥799,719——¥

14,372

14,372¥—¥799,719(14,372)—

Millions of yen

2018:

Net sales

Japan

North America

EuropeSouth Korea

Taiwan

China

Other

Total

¥148,760¥119,257¥96,948¥378,496¥174,636¥164,344¥48,283¥1,130,728

Note: Sales are classified in countries or regions based on location of customers.

Total

749,893

49,387

14,810814,091(14,372)

799,719

Segment profit

182,709

4,618

82

187,410(38,294)

149,116

2017:

Segment assets

374,51327,494

2,646

404,654552,792

957,447

Net sales

8,694

418

89

9,202

8,670

17,872

Amortization of goodwill

631

—

—

631

—

631

Loss on impairment

362

—

—

362

—

362

10,881

562

472

11,917

10,34722,264

Millions of yen
Japan

North America

EuropeSouth Korea

Taiwan

China

Other

Total

¥101,122¥101,566¥59,998¥145,216¥233,754¥115,126¥42,935¥799,719

Note: Sales are classified in countries or regions based on location of customers.

Depreciation and amortization

Capital expenditures, including intangible assets

Thousands of U.S. dollars

2018:

Japan

Net sales

North America$1,400,233 $1,122,532

Europe$912,543

South Korea

TaiwanChina$3,562,658 $1,643,794 $1,546,914

Other

Total

$454,473$10,643,151

Thousands of U.S. dollars(2) Net property, plant and equipment by location as of March 31, 2018 and 2017 are as follows:

Reportable Segment

2018:

Semiconductor
production
equipment

FPD
production
equipment

Other

Eliminations
andCorporate

Total

Millions of yen
Consolidated

Net sales

Property, plant and equipment$9,932,551$706,597

4,001$10,643,151   —$10,643,151——

183,255

183,255(183,255)

—

Total

9,932,551

706,597

187,256

10,826,406(183,255)

10,643,151

Segment profit (loss)

2,961,247

125,179(542)

3,085,884(495,121)

2,590,762

Segment assets

4,658,932

413,81428,376

5,101,123

6,275,998

11,377,121

Sales to external customers
Intersegment sales or transfers

2018:

$

$

107,331

6,603

764

114,699

79,389194,088

Amortization of goodwill

5,652

—

—

5,652

—

5,652

Loss on impairment

8,714

—

—

8,714

—

8,714

154,292

8,804

2,332

165,429

317,414482,844

Capital expenditures, including intangible assets

Notes: 1.	“Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services,
facility maintenance and insurance.
2. (1) “ Eliminations and Corporate” segment loss totaling ¥52,601 million ($495,121 thousand) and ¥38,294 million for the years ended March
31, 2018 and 2017, respectively, includes corporate expenses not allocated to any reportable segments. The corporate expenses consistof the Company’s research and development costs of ¥22,263 million ($209,561 thousand) and ¥17,830 for the years ended March 31,2018 and 2017, respectively, pertaining to fundamental research and element research, not allocated to any of the reportable segments,
the loss on revision of retirement benefit plan of ¥3,154 million ($29,690 thousand) for the year ended March 31, 2018 and the loss on
disaster of ¥7,521 million for the year ended March 31, 2017.
(2) “ Eliminations and Corporate” segment assets totaling ¥666,762 million ($6,275,998 thousand) and ¥552,792 million as of March 31, 2018and 2017, respectively, consist mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of thereportable segments.
(3) “ Eliminations and Corporate” capital expenditures totaling ¥33,722 ($317,414 thousand) and ¥10,347 million for the years ended March 31,2018 and 2017, respectively, consist mainly of capital expenditures for buildings, machinery and equipment not allocated to any of thereportable segments.

Other

Total

¥97,610¥28,342¥125,952

Japan

U.S.A.

Other

Total

¥77,407¥11,228¥11,805¥100,441

Millions of yen

2017:

Property, plant and equipment

Thousands of U.S. dollars

2018:

Depreciation and amortization

Japan

Property, plant and equipment

Japan

Other

Total

$918,772$266,777$1,185,550(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:
Millions of yen

Thousands of
U.S. dollars

2018

2018

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment¥261,544$2,461,829

Intel Corporation

Semiconductor production equipment

181,053

1,704,197

SK hynix Inc.

Semiconductor production equipment

132,146

1,243,846

Name of customer

Related reportable segment

Note: The amounts include sales to the customer and its subsidiaries.
Millions of yen
Name of customer

Related reportable segment

2017

Intel Corporation

Semiconductor production equipment

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

127,621

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

112,151

Micron Technology, Inc.

Semiconductor production equipment

84,111

Note: The amounts include sales to the customer and its subsidiaries.

¥143,488

TOKYO ELECTRON ANNUAL REPORT 2018

PAGE

30

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

Innovation Drives the Evolutionof Semiconductors

Corporate Governance

Financial Review
Consolidated Eleven-Year Summary
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Notes to Consolidated Financial Statements
Independent Auditor’s Report
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Consolidated Subsidiaries

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2018 and 2017, and­unamortized balances as of March 31, 2018 and 2017 are as follows:
Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 600

¥—

¥ 600

Goodwill

1,699

—

1,699

2018:

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 631

¥—

¥ 631

Goodwill

3,376

—

3,376

2017:

Thousands of U.S. dollars
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill$ 5,652$—$ 5,652

Goodwill

15,998—15,9982018:

20. Per-Share Information
Net income per share and net assets per share are computed based on the weighted-average number of shares of common
stock outstanding during each year. Net income-diluted per share is computed based on the weighted-average number ofshares of common stock outstanding during each year after incorporating the dilutive potential effect of shares of common
stock to be issued upon the exercise of stock options.
Dividends per share has been presented on an accruals basis and include, in each fiscal year ended March 31, dividends
approved or to be approved after March 31 but applicable to the year then ended.
The basis for the calculation of net income per share for the fiscal years ended March 31, 2018 and 2017 is as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2018

2017

Net income (loss) per share of common stock - Basic¥204,371¥115,208———

Net income pertaining to holders of common stock¥204,371¥115,208$1,923,674

Weighted-average number of shares of common stock outstanding (thousands)

164,090

164,054

Net income attributable to owners of parent
Less components not pertaining to holders of common stock$1,923,674

Net income (loss) per share of common stock - Diluted
Adjustment of net income attributable to owners of parent——

Increase in number of common stock (Thousands of share)

562

446

562

446

Increase in number of share subscription rights (Thousands of share)—

Financial Section
Investor Information

Investor Information