TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

20

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

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, 2019 and 2018

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
the accompanying 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, 2019 and 2018 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 ¥110.99
to $1.00, the approximate rate as of March 31, 2019. 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 theaccounts of the Company and its 33 subsidiaries as of March
31, 2019 and 2018. All significant inter-company accounts,transactions and unrealized profits or losses have been eliminated through consolidation procedures.
There are 9 affiliates accounted for using the equity method as of March 31, 2019 and 2018.

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, 2019 and 2018. 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 ofassets.
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 amortized by
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 are­experiencing 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 defined benefit liabilities
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 2019

PAGE

21

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Interview with the CEO

Review of Operations
and Business Outlook

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.
(q) Research and development expenses
Research and development expenses are charged to earnings as incurred and amounted to ¥113,980 million($1,026,946 thousand) and ¥97,103 million for the years
ended March 31, 2019 and 2018, respectively.
(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, 2019.
Tokyo Electron adopted “Partial Amendments to AccountingStandard for Tax Effect Accounting” (ASBJ Statement No. 28,
February 16, 2018) from the beginning of the fiscal year ended
March 31, 2019, and deferred tax assets are classified as“Investments and other assets” and deferred tax liabilities areclassified as “Non-current liabilities”, respectively.
As a result, out of “Deferred tax assets” of ¥50,505 million
presented under “Current assets” as of March 31, 2018,¥44,596 million was reclassified to “Deferred tax assets”
under “Investments and other assets”, and ¥5,908 million

was offset by deferred tax liabilities, which are included in“Other liabilities” under “Non-current liabilities”. Accordingly,
total assets as of March 31, 2018 decreased by ¥5,908 million.

3. Additional Information
Stock delivering schemes linked to medium-term
performance
Tokyo Electron introduced stock delivering schemes(­hereinafter “the Schemes”) as a common global incentive
plan linked to medium-term performance from the fiscal
year ended March 31, 2019. The purpose of the Schemes is toencourage directors and employees to contribute to theGroup’s medium-term performance and enterprise value.
Tokyo Electron adopted the “Practical Solution on
Transactions of Delivering the Company’s Own Stock to
Employees, etc. through Trusts” (PITF No. 30, March 26, 2015)
for the accounting treatment of the Schemes.
1. Executive compensation BIP (Board Incentive Plan) Trust(1) Overview of the transactions
The Executive compensation BIP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation corresponding to the cash conversion value of theCompany’s shares to the directors of the Company and its
subsidiaries (excluding outside directors) based on their position and attainment of performance ­targets in accordancewith the share delivery rules.
(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at thebook value in the trust (excluding ancillary expenses). The
book value and the number of such treasury shares as ofMarch 31, 2019 were ¥674 million ($6,074 thousand) and
34,038 shares, respectively.
2.Share-delivering ESOP (Employee Stock Ownership Plan)
Trust(1) Overview of the transactions
The Share-delivering ESOP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation corresponding to the cash conversion value of theCompany’s shares to the general managers, senior employees
and mid-class employees of the Company and its subsidiaries
based on their position and attainment of performance­targets in accordance with the share delivery rules.

(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at thebook value in the trust (excluding ancillary expenses). The
book value and the number of such treasury shares as ofMarch 31, 2019 were ¥4,274 million ($38,508 thousand) and
215,663 shares, respectively.

5. Securities

4. Accounting Standards Issued but Not yet Adopted  Equity 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”))  Equity securities

(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
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 new­revenue recognition standard 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.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these
new standards on the consolidated financial statements.

Other securities as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Cost

Carrying value¥8,063¥26,834

1,011

1,002

Non-current Securities with carrying value
exceeding acquisition cost
 Securities with carrying value
not exceeding acquisition cost
15

15

Total

¥9,090¥27,853

2018:

Cost

Carrying value¥7,620¥32,293  Equity securities

819

819

  Other

15

15

Total

¥8,455¥33,128

2019:

Cost

Carrying value$72,647$241,777

9,116

9,031

  Other

Millions of yen

Non-current Securities with carrying value
exceeding acquisition cost  Equity securities Securities with carrying value
not exceeding acquisition costThousands of U.S. dollars

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

141

141$81,904$250,950

Held-to-maturity securities classified as current assets are¥215,000 million ($1,937,111 thousand) and ¥286,500 million
as of March 31, 2019 and 2018, respectively.
Reconciliation of held-to-maturity securities as of March
31, 2019 and 2018 to the amounts of short-term investmentsin the consolidated balance sheets are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

Held-to-maturity (current)

¥215,000 ¥286,500$1,937,111

Deposits and low-risk financial instruments with original
maturities of three months
or less(55,000) (170,500)(495,540)

Deposits with original maturities
of more than three months
Short-term investments——¥160,000 ¥116,000—$1,441,571

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

22

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

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
Net loss on devaluation of investment securities was ¥55
million ($496 thousand) and ¥536 million for the years ended
March 31, 2019 and 2018, respectively.
For the year ended March 31, 2019, the Company soldavailable-for-sale securities and recognized the following
gain and loss on sale:
Millions of yen
Amount of sale

Gain on sale

Loss on sale

Equity securities¥1,087

¥768

¥—

Total

¥1,087¥768¥—

Thousands of U.S. dollars
Amount of sale

Gain on sale

Loss on sale

Equity securities$9,795$6,927$—

Total$9,795$6,927$—For the year ended March 31, 2018, the amounts of gain andloss on sale of available-for-sale securities was immaterial.

benefit plan as defined benefit plans, and provide a defined
contribution plan as defined contribution plans for theiremployees. Further, certain consolidated overseas subsidiaries provide defined benefit plans and defined contributionplans 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 resulting from this change wasrecognized and presented in other income (expenses) for theyear ended March 31, 2018 in accordance with the “Accounting
Procedures for Conversion between Different Retirement
Benefit Schemes” (Corporate Accounting Standards
Implementation Guidelines No. 1) and the “Practical Treatment of
Accounting Procedures for Conversion between Different
Retirement Benefit Schemes” (Practical Issues Task Force No. 2).
Defined benefit plans(1) Movement of defined benefit obligations

6. Inventories
Inventories as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019

Finished products

2018¥234,102 ¥220,497

Thousands of
U.S. dollars

2019$2,109,221

2019¥112,992 ¥118,660(7,806)(73,922)¥(9,220)¥(9,161)$(83,073)

Funded status(2,472)

993(22,277)

Unfunded defined benefit
obligations

60,00858,315

540,662

Net defined benefit liabilities
at March 31, 2019 and 2018¥57,535¥59,309$518,385

Net defined benefit liabilities

60,60059,309546,004

Net defined benefit assets(3,065)—(27,618)

Net defined benefit liabilities
at March 31, 2019 and 2018¥57,535¥59,309$518,385

Note: The provision for accrued pension and severance costs for directors andaudit & supervisory board members of ¥374 million ($3,378 thousand)and ¥374 million as of March 31, 2019 and 2018 is not included.

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Service cost

¥5,853¥6,052$52,738

Interest cost

701

963

6,320
(10,380)

26,9052,537(1,237)22,858(35,467)

Prior service cost amortization

338

—

3,050

—

Other

287

388

2,592

—

Total defined benefit costs for the years ended
March 31, 2019 and 2018

¥8,566¥4,765$77,179(1,220)Loss on transfer to defined contribution plan (Note)

—

3,154

—

4,632

—

1,690

The Company and its domestic subsidiaries provide a cash
balance plan and a non-contributory retirement and severance(8,204)

Total(1,400)(3,029)9. Employee Benefits(548,930)(1,152)

2,986

There are no short-term borrowings classified as current
liabilities as of March 31, 2019 and 2018.
As of March 31, 2019 and 2018, Tokyo Electron had unusedlines of credit amounting to ¥126,947 million ($1,143,770
thousand) and ¥126,953 million, respectively.

(53,683)

Expected return on plan assets(3,936)

8. Short-term Borrowings(60,925)

Net actuarial gain (loss)
amortization

Benefits paid

Tokyo Electron did not hold any assets pledged as collateral as of March 31, 2019 and 2018.

Plan assets

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

6,320

Actuarial gain

7. Pledged Assets$526,653

52,7381,082,233

Prior service cost
Decrease by conversion of a part of defined benefit plans
to a defined contribution plan—

Foreign currency exchange
rate changes
Balance at March 31, 2019and 2018(15,946)

(135)

(30)

¥118,461 ¥112,992$1,067,316(2) Movement of plan assets

2019

2018

2019

¥53,683¥67,653$483,676

1,152

1,400

10,380

(6)

526

(61)

Employer contributions

7,403

3,577

66,701

Benefits paid

(1,164)(915)(10,493)—(18,523)—

Balance at April 1, 2018and 2017
Expected return on plan assets
Actuarial gain (loss)

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

(124)

(24)

(1,125)

Other

(16)

(12)

(147)

¥60,925¥53,683$548,930

Balance at March 31, 2019and 2018

2019

2018

Bonds

31%

38%

Life insurance company general account30

25

Equity securities

14

20

Alternative investments (Note)

13

9Cash and cash equivalents

1

1

Other

11

7

Total

100%

100%

Note: Alternative investments mainly consist of hedge funds, real estateand 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.
(8) Actuarial assumptions
The principal actuarial assumptions as of and for the years
ended March 31, 2019 and 2018 are as follows:
2019

2018

Discount rate

0.36%

0.46%

Long-term expected rate of return

2.00%

2.00%

(5) Remeasurements of defined benefit plans

The expected rates of salary increase for the years ended
March 31, 2019 and 2018 are also considered as one of theactuarial assumptions, and are set based on the salary
increase index by age group as of January 1, 2019 and January
1, 2018, respectively.

Millions of yen

Prior service cost

Foreign currency exchange
rate changes(7) Plan assets
1. Plan assets comprise:

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

Thousands of
U.S. dollars

Millions of yen$ (9,151)¥54,677963$3,191,455¥(1,354)¥58,453

6,052

123,573¥(1,015)

2019

701

120,117

2019

2018

5,853

¥354,219 ¥344,071

2018

2019

Service cost

Total

2019

Funded defined benefit
obligations

2019$1,018,040

Thousands of
U.S. dollars

Millions of yen

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

Interest cost

Work in process, raw materials
and supplies

The amounts of change in inventory provision included incost of sales in the consolidated statements of income forthe years ended March 31, 2019 and 2018 were an increase of¥4,031 million ($36,325 thousand) and an increase of ¥173
million, respectively.

Millions of yen

Thousands of
U.S. dollars

2018(6) Accumulated remeasurements of defined benefit plans

Thousands of
U.S. dollars(4) Defined benefit costs

Millions of yen

Balance at April 1, 2018and 2017(3) Reconciliation from defined benefit obligations and plan
assets to net defined benefit liabilities (assets)

Thousands of
U.S. dollars

2019

2018

2019

¥338

¥(1,354)$3,050

Actuarial gain (loss)(396)(5,093)(3,575)Total¥ (58)¥(6,448)$ (525)

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

Defined contribution plans
The contributions of the Company and its subsidiaries tothe defined contribution plans are ¥2,498 million ($22,514
thousand) and ¥1,124 million for the years ended March 31,
2019 and 2018, respectively.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

23

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

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

Financial Section
Investor Information

Investor Information

Notes to Consolidated Financial Statements
10. Income Taxes
Significant components of the deferred tax assets and­liabilities as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019

2018

Thousands of
U.S. dollars

2019

Deferred tax assets

Significant components of the difference between thestatutory and effective tax rates for the years ended March
31, 2019 and 2018 are as follows:
2019

2018

30.62%

30.86%Tax credits(6.52)(6.23)

Difference in statutory tax rates
of subsidiaries(1.11)(1.33)—

1.55

Statutory tax rate in Japan
Adjustments:

Elimination of unrealized profit
in inventories¥25,145¥27,718$226,558

Net defined benefit liabilities

18,751

18,129168,950

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

Net operating loss carryforwards

11,132

10,969100,299

Others, net(0.20)

0.89

Effective tax rate

22.79%

25.74%

Accrued employees’ bonuses

7,766

8,185

69,974

Devaluation of inventories

7,038

4,148

63,412

Accrued warranty expenses

3,846

2,675

34,653

Depreciation

2,710

1,903

24,417

Other

12,664

14,819114,103
802,368

Total gross deferred tax assets

89,05488,550Less valuation allowance(8,535)(8,043)(76,903)

Total deferred tax assets

80,51980,506725,464(7,559)(6,143)(68,112)Deferred tax liabilities
Undistributed earnings ofsubsidiaries
Net unrealized gains on
investment securities(5,747)(7,554)(51,785)

Other(3,474)(4,384)(31,304)

Total deferred tax liabilities(16,781)(18,082)(151,201)

Net deferred tax assets¥63,737¥62,424$574,263

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during theperiod in which temporary differences become deductible
and net operating loss carryforwards are available to be­utilized. 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 principles­generally 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 will realize the benefits of deferred tax assets, netof valuation allowance, as of March 31, 2019 and 2018.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax filing system for corporate tax purposes.

Year ended March 31, 2019
The Company received notification from the National Tax
Agency, Japan (NTA) dated January 24, 2019, that agreement
had been reached through the Mutual Agreement Procedure(MAP) between the NTA and Korean income tax authorities
concerning the transfer pricing adjustments assessed during
prior historical periods relating to the transactions between
the Company and its Korean subsidiary. As a result, ¥862 million ($7,770 thousand) of tax benefit is included in current
income tax expense as the difference between the actual tax
refunds and the estimated amount recorded in prior fiscal
year.
Year ended March 31, 2018
The U.S. federal income tax rate applied to the consolidated
subsidiaries in the U.S. was reduced from 35% to 21% associated with the U.S. tax reform legislation signed into law on
December 22, 2017.
Net deferred tax assets were reduced by ¥3,029 million andincome taxes were increased by ¥3,211 million as of and for theyear ended March 31, 2018 resulting from this tax rate reduction.

11. Other Income (Expenses)

12. Net Assets

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:

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.
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 andretained 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 10, 2019, thedistribution of cash dividends amounting to ¥56,651 million($510,422 thousand) was resolved. Such appropriations havenot been accrued in the consolidated financial statements asof March 31, 2019 since they are recognized in the period inwhich they are resolved at the board of directors’ meeting.
The dividends of ¥56,651 million include ¥86 million($776 thousand) related to treasury stock held by the BIP/
ESOP Trusts.

Goodwill of TEL NEXX, Inc.
Loss onimpairment
Location

Purposeof useAsset
Type

Millionsof yenBillerica, Massachusetts, U.S.A.

Business assets

Goodwill¥925

Tokyo Electron performed an impairment test and recognized loss on impairment of goodwill of TEL NEXX, Inc.,a subsidiary manufacturing semiconductor production­equipment, due to TEL NEXX, Inc.’s reconsideration of its
business plan. Tokyo Electron recognized the difference
between the book value and the recoverable amount of
goodwill as loss on impairment. The recoverable amount wasmeasured as value in use, and was calculated by discounting
future cash flows at a discount rate of 14.0%.
Loss on revision of retirement benefit plan
Effective April 1, 2018, Tokyo Electron and its domestic­subsidiaries converted a part of their defined benefit plans toa defined contribution plan. The loss on revision of retirement
benefit plan of ¥3,154 million resulting from this change wasrecognized and presented in other income (expenses) for theyear ended March 31, 2018 in accordance with the“Accounting Procedures for Conversion between Different
Retirement Benefit Schemes” (Corporate AccountingStandards Implementation Guidelines No. 1) and the“Practical Treatment of Accounting Procedures forConversion between Different Retirement Benefit Schemes”(Practical Issues Task Force No. 2).

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

24

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

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
13. Other Comprehensive Income

A summary of stock options outstanding and exercisable as of March 31, 2019 and 2018 is as follows:
2019

2018

Other comprehensive income for the years ended March 31, 2019 and 2018 is as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Net unrealized gains (losses) on investment securities¥(5,910)¥9,134$(53,255)———(5,910)9,134(53,255)

Tax expense

1,808(2,796)

16,293Sub-total, net of tax(4,102)

6,337(36,962)

Net unrealized gains (losses) arising during the year
Reclassification adjustments
Sub-total, before tax

Net deferred gains (losses) on hedging instruments
Net deferred gains (losses) arising during the year
Reclassification adjustments
Sub-total, before tax

(392)

286

(3,532)

—

—

—

(392)

286

(3,532)

Tax expense

120

(87)

1,081

Sub-total, net of tax

(272)

198

(2,450)(1,170)Reclassification adjustments
Sub-total, before tax
Tax expense
Sub-total, net of tax

(297)

Yen

U.S. dollars

Outstanding at the beginning of year

563,600¥1$0.01

457,500

Granted

219,900

1

0.01

144,700

1

Exercised

94,8001

0.01

38,600

1
—

—

54

—

(242)

(10,548)———(1,170)(242)(10,548)

Remeasurements of defined benefit plans

—

—

—

—

1

0.01

563,600

1

Exercisable at the end of year

129,700

1

0.01

88,800

1

Amounts expensed related to stock options
The amounts expensed related to stock options for theyears ended March 31, 2019 and 2018, are as follows:
Millions of yen

Selling, general andadministrative expenses

Thousands of
U.S. dollars

2019

2018

2019

¥3,618¥1,903$32,601

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, 2019 was ¥16,455 ($148.26) per unit,
which was evaluated as follows:(1) Valuation method used: Black-Scholes model(2) Major underlying assumptions and estimates:(2,933)(5,787)(26,434)

2,875

(660)

25,908Sub-total, before tax(58)(6,448)(525)

Tax expense

(48)

1,953

(432)

Volatility (Note 1)

35.31%

Sub-total, net of tax(106)(4,494)(957)

Expected residual period (Note 2)

5.55 years

Expected dividends (Note 3)¥488 ($4.40) per share

Risk-free interest rate (Note 4)(0.09)%

119

(46)

1,077

Total other comprehensive income¥(5,531)¥1,752$(49,841)

14. 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 219,900 shares of the Company wereauthorized and granted at an exercise price of ¥1 ($0.01) for
the year ended March 31, 2019.

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

Due within one year
Due over one year

Adjustments during the year

Adjustments during the year¥1

688,700

Expired (forfeited)

Reclassification adjustments

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

Yen

Outstanding at the end of year

(10,548)(1,170)Weighted-average
exercise price

Number ofsharesForeign currency translation adjustments
Adjustments during the year

Weighted-average exercise price

Number ofshares14th Stock Acquisition Rights

Notes: 1. Calculated based on the stock price performance for the period­corresponding to the expected residual period (from November 2012
to June 2018).
2. Calculated based on past actual results and forecast of the exerciseof stock options.
3. Based on the dividends paid for the years ended March 31, 2018and 2017.
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.

Total

Thousands of
U.S. dollars

2019

2018

2019

¥ 3,694¥ 3,772$ 33,284

8,577

7,039

77,284¥12,272¥10,811$110,568

16. Fair Value of Financial Instruments
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 on aregular basis.
Short-term investments consist of short term deposits andlow-risk financial instruments and Tokyo Electron trade withhighly-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 accounts­payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through­activities such as implementing cash management plans.
See note 17 for detailed discussion on derivative financial
instruments.

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

25

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

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
Fair value of financial instruments
Carrying amount and estimated fair value of financial
instruments as of March 31, 2019 and 2018 are set out below.
Fair value of financial instruments which is practically difficult
to estimate are excluded.
Millions of yen

2019:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents¥232,634¥232,634

Short-term investments

160,000

159,921	  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 5 for further information by classification of investment
securities.
		Derivatives		  See note 17 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.
Thousands of
U.S. dollars

Millions of yen Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥84 million)
Investment securities

2019

146,886

146,886

26,866

26,866

Liabilities
Trade notes and accounts payable

75,44875,448Derivatives (see note 17)
Hedge accounting not applied
Hedge accounting applied

74

74

(56)

2018:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents¥257,877¥257,877

Short-term investments

116,000

115,966 Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥59 million)
Investment securities

¥971

¥882

$8,749

Other

15

15

141

Total

¥986

¥897

$8,890Unlisted stocks

3. Maturities of financial assets and securities are as follows:

159,510

159,510

32,23032,2302019:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥232,634¥—

Short-term investments

160,000—

Trade notes and accounts receivable

146,971—

108,607108,607

Derivatives (see note 17)
Hedge accounting not applied
Hedge accounting applied

(7)

(7)

335

335

2018:

Within 1 year

After 1 through5 years

Cash and cash equivalents¥257,877¥—

Short-term investments

116,000—

Trade notes and accounts receivable

159,570—

Carrying
amountEstimated
fair value1$2,095,997$2,095,997

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts ($765 thousand)
Investment securities

1,441,571

1,323,420
242,060

1,440,864

1,323,420
242,060

Liabilities
679,780

679,780

Hedge accounting not applied

670

670

Hedge accounting applied

(513)

(513)

Trade notes and accounts payable
Derivatives (see note 17)

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.

2018:

Fair value

Gains(losses)

Sell U.S. dollars

¥ 703

¥18

¥18

Buy U.S. dollars

3,639

(19)

(19)

Buy Chinese yuan

1,515

(0)

(0)

Buy Taiwan dollars

912

0

0

Buy GBP

820

(2)

(2)

Buy EURO

785

(1)

(1)

Buy Singapore dollars

706

(2)

(2)

Total

¥9,084

¥ (7)

¥ (7)

2019:

Contract
amountFair value

Gains(losses)Millions of yen

2019:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥ 1,201¥14¥14

Buy U.S. dollars

11,96753

53

Thousands of U.S. dollars

Buy Chinese yuan

2,720

9

9

Sell U.S. dollars$ 10,823

$127

$127

Buy Taiwan dollars

1,213

(3)

(3)

Buy U.S. dollars

107,828484

484

Buy GBP593

00

Buy Chinese yuan

24,50885

85

Buy EURO

360

0

0

Buy Taiwan dollars

10,932

(27)

(27)

Total

326

(0)

(0)

Buy GBP

5,344

1

1

¥18,383¥74¥74

Buy EURO

3,250

0

0

Buy Singapore dollars
Total

2,944

(0)

(0)

$165,632

$670

$670

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 andpayables denominated in foreign currencies that have been translated by the corresponding contracted rates, are as follows:

Thousands of U.S. dollars

Millions of yen

2019:Within 1 year

After 1 through5 years

Cash and cash equivalents$2,095,997$—

Short-term investments

1,441,571—

Sell U.S. dollars

Trade notes and accounts receivable

1,324,185—

Monetary assets and liabilities in foreign currency (Note)

Thousands of U.S. dollars

2019:

Millions of yen
Contract
amountMillions of yen

Liabilities
Trade notes and accounts payable

1. Derivative financial instruments not designated as hedging
instruments

Buy Singapore dollars

Millions of yen(56)

Millions of yen

2019

2018

Reported amount in balance sheet

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, 2019 and 2018 are as follows:

17. Derivative Financial Instruments
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

2019:

Contract amountContract amount due after 1 year

Thousands of U.S. dollars
Fair value

Contract amountContract amountdue after 1 year

Fair value¥(56)$53,624$—$(513)

Future transactions denominated in a foreign currency¥5,951¥—

Sell U.S. dollars

898

—

—

8,097

—

—

Buy U.S. dollars

61

—

—

550

—

—

¥6,911¥—¥(56)$62,272$—$(513)

Total

Millions of yen

2018:

Contract amountContract amount due after 1 year

Fair value

Future transactions denominated in a foreign currency
Sell U.S. dollars¥11,853¥71¥335

Buy U.S. dollars

156

—

(0)

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

555

—

—

¥12,566¥71¥335

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

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

26

CONTENTS

To Our Stakeholders

Business Overview
and Financial Highlights

Review of Operations
and Business Outlook

Interview with the CEO

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. Segment Information

Millions of yen
Reportable Segment

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 about resources 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 the manufacture of flat panel displays. The FPD production equipment segment principally develops, manufactures, sells such products andprovide services on them.

2018:

Semiconductor
production
equipment

FPD
production
equipment¥1,055,234¥75,068425¥1,130,728——

19,46919,469(19,469)—

1,055,234

75,06819,894

1,150,197(19,469)

1,130,728

Other

Total

Adjustments

Consolidated¥¥1,130,728

Net sales
Sales to external customers
Intersegment sales or transfers
Total

¥

—

Segment profit (loss)

314,602

13,299(57)

327,844(52,601)

275,242

Segment assets

494,964

43,9633,014

541,943

660,853

1,202,796

Depreciation and amortization

20,61911,402701

81

12,185

8,434

Amortization of goodwill

600

—

—

600

—

600

Loss on impairment

925

—

—

925

—

925

16,392935

247

17,57533,722

51,297

Adjustments

Consolidated—$11,516,718

Capital expenditures, including intangible assets

Thousands of U.S. dollars
Reportable Segment

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.
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, 2019 and 2018 is as follows:
Reportable Segment¥1,166,781¥111,261

197¥1,278,240——

18,914

18,914(18,914)—

1,166,781

111,261

19,112

1,297,155(18,914)

1,278,240

Other

Total

Adjustments

Consolidated¥¥1,278,240

Net sales
Sales to external customers
Intersegment sales or transfers
Total

¥

—

Segment profit

326,716

24,241

1,035

351,993(30,484)

321,508

Segment assets

506,92935,722

2,474

545,126

712,501

1,257,627

Depreciation and amortization

14,003873

126

15,002

9,321

24,323

354

—

—

354

—

354

22,633

1,507

198

24,34029,08253,422

Amortization of goodwill
Capital expenditures, including intangible assets

Total

1,780

$11,516,718——

170,420

170,420(170,420)

—

Total

10,512,487

1,002,449

172,200

11,687,138(170,420)

11,516,718

Segment profit

2,943,661

218,408

9,327

3,171,397(274,661)

2,896,735

Segment assets

4,567,342

321,852

22,293

4,911,488

6,419,510

11,330,999

126,166

7,867

1,136

135,169

83,981

219,151

3,197

—

—

3,197

—

3,197

203,925

13,586

1,788

219,300

262,029

481,330

Intersegment sales or transfers

Capital expenditures, including intangible assets

FPD
production
equipment

Other$10,512,487 $1,002,449

Sales to external customers

Amortization of goodwill

Semiconductor
production
equipment

FPD
production
equipment

Net sales

Depreciation and amortization

Millions of yen

2019:

Semiconductor
production
equipment

2019:

$

$

Notes: 1.	“Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenanceand insurance.
2. (1 )	“Adjustments” for segment profit (loss) totaling ¥(30,484) million ($(274,661) thousand) and ¥(52,601) million for the years ended March 31, 2019 and2018, respectively, mainly consists of research and development costs of ¥(15,999) million ($(144,148) thousand) and ¥(22,263) million for the years
ended March 31, 2019 and 2018, respectively, pertaining to the Company’s fundamental research and element research, the loss on revision of retirement
benefit plan of ¥(3,154) million for the year ended March 31, 2018 and other general and administrative costs that do not belong to the reportable segments.
		 (2)	“Adjustments” for segment assets totaling ¥712,501 million ($6,419,510 thousand) and ¥660,853 million as of March 31, 2019 and 2018, respectively,
mainly consist of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
		 (3)	“Adjustments” for capital expenditures totaling ¥29,082 million ($262,029 thousand) and ¥33,722 million for the years ended March 31, 2019 and 2018,
respectively, mainly consist of capital expenditures for buildings not allocated to any of the reportable segments.

Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Net sales

Japan

North America

EuropeSouth Korea

Taiwan

China

Other

Total

¥208,796¥131,954¥93,113¥311,081¥164,912¥307,879¥60,502¥1,278,240

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥131,914 million.
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

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥119,047 million.
Thousands of U.S. dollars

2019:

Net sales

Japan

North America$1,881,220 $1,188,887

Europe$838,939

Note: Net sales of North America include sales in the U.S.A. of $1,188,526 thousand.

South Korea

TaiwanChina$2,802,784 $1,485,830 $2,773,941

Other

Total

$545,113$11,516,718

TOKYO ELECTRON ANNUAL REPORT 2019

PAGE

27

CONTENTS

Business Overview
and Financial Highlights

To Our Stakeholders

Review of Operations
and Business Outlook

Interview with the CEO

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
19. Per-Share Information(2) Net property, plant and equipment by location as of March 31, 2019 and 2018 are as follows:
Millions of yen

2019:

Property, plant and equipment

Japan

Other

Total

¥120,177¥29,891¥150,069

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.

Millions of yen

2018:

Property, plant and equipment

Japan

Other

Total

¥97,610¥28,342¥125,952

Thousands of U.S. dollars

2019:

Property, plant and equipment

Japan

Other

Total

$1,082,779$269,315$1,352,094

The basis for the calculation of net income per share for the fiscal years ended March 31, 2019 and 2018 is as follows:(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:

Name of customer

Related reportable segment

Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

Net income per share of common stock — Basic
Millions of yen

Thousands of
U.S. dollars

2019

2019

¥248,228¥204,371———

Net income pertaining to holders of common stock¥248,228¥204,371$2,236,489

164,000

164,090

Net income attributable to owners of parent
Less components not pertaining to holders of common stockIntel Corporation

Semiconductor production equipment¥199,594$1,798,306

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

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

175,315

1,579,563

Net income per share of common stock — Diluted

SK hynix Inc.

Semiconductor production equipment

174,468

1,571,930

Adjustment of net income attributable to owners of parent——

Micron Technology, Inc.

Semiconductor production equipment

131,821

1,187,687

Increase in number of common stock (Thousands of share)

692

562

692

562

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

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

Related reportable segment

2018

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment¥261,544

Intel Corporation

Semiconductor production equipment

181,053

SK hynix Inc.

Semiconductor production equipment

132,146—

Notes:The shares of the Company held by “Executive compensation BIP Trust” and “Share-delivering ESOP Trust”, which are recorded in “Treasury stock, at cost”
under shareholders’ equity, are included in the treasury stock which is deducted in calculating the per-share information.
The number of treasury shares deducted in the calculation of net assets per share was 249 thousand shares as of March 31, 2019, and the average number oftreasury shares deducted in the calculation of net income per share and fully diluted net income per share was 167 thousand shares in the fiscal year ended
March 31, 2019.

Millions of yen
Name of customer$2,236,489

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

20. Subsequent Events

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2019 and 2018, and unamortizedbalances as of March 31, 2019 and 2018 are as follows:

Share repurchase
At the Board of Directors meeting held on May 27, 2019, the Company resolved to acquire its own shares under the provisionsof its Articles of Incorporation pursuant to paragraph 1, Article 459 of the Companies Act, as follows:

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 354

¥—

¥ 354

Goodwill

1,124

—

1,124

2019:

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 600

¥—

¥ 600

Goodwill

1,699

—

1,699

2018:

Thousands of U.S. dollars
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill$ 3,197$—$ 3,197

Goodwill

10,135—

10,1352019:

1. Reason for acquisition of own shares
The Company intends to acquire its own shares in accordance with its capital policy while taking into account its current cash
position, its base for medium- to long-term revenue growth and growth investment capital.
2. Details of acquisition(1) Type of shares to be acquired: Shares of common stock(2) Total number of shares to be acquired: Up to 14 million shares (Equivalent to 8.5% of outstanding shares excluding treasury stock)(3) Total cost of acquisition: Up to ¥150 billion(4) Period of acquisition: From May 28, 2019 to December 31, 2019(5) Method of acquisition: Acquisition through market transactions on the Tokyo Stock Exchange