RA n n u a l

R e p o r t

2003
Year Ended March 31, 2003

Our quest is for wholesome life:
medical supplies for the world population

Contents
1 Profile
2 Consolidated Financial Highlights
3 To Our Shareholders

ProfileOur quest is for wholesome life:
medical supplies for the world population

7 Special Issues:
Now and Future Nipro Group
15 Global Network
17 Review of Operations
27 Board of Directors and Auditors
28 Financial Section
49 Report of Independent Certified
Public Accountants on The Consolidated
Financial Statements
50 Corporate Information

Glass tube business started and supermarket business entered
We started business as a glass and instruments distributor dealing in glass tubes
for ampoules and tablet bottles in 1954 under the name of Nippon Glass Shoji Co., Ltd.
Since then, we have become a world leader in successfully developing an automatedprocessing machine of ampoules and thermos bulbs, and we have begun the
manufacturing of ampoules, small light bulbs, among other products. In 1977,
we changed our name to Nissho Corporation, and then we entered the supermarket
business, which was rapidly growing at the time. A stable earning capacity served
as the driving force behind the creation of our next new business.

The quest to become the world’s leading dialyzer manufacturer
with the medical equipment brand “NIPRO”
In 1965, we entered into the medical equipment business, backed by our technicalcapabilities, product development abilities and sales expertise, which have been augmented
through the manufacturing and sales of glass and instruments. Under our proprietary brand,“NIPRO,” we released safe, sophisticated and user-friendly medical equipment into the market,
including dialysis-related products and infusion lines. Among them, our dialyzers(a medical equipment used in dyalysis treatment) earned a strong reputation both domesticallyand abroad. Currently, dialyzers are the pillars of our growth, serving as our flagshipproduct with a large share in the global market.

To become the world leader in two areas:
Development of artificial organs and manufacturing of injection drugs
In 2001, we absorbed a domestic sales subsidiary and renamed ourselves as Nipro
Corporation, which features our globally recognized brand name, “NIPRO.” In June 2001,
Nipro spun off the supermarket division into a separate company and took otherrestructuring measures from which it launched the integrated administration of R&D,
production and sales with medical and pharmaceuticals businesses at its core. Currently,
Nipro Group is actively engaged in R&D in leading-edge technologies such as regenerative
medicine. We aim to become the world’s leading company in two areas: in artificial organs,including artificial kidneys (dialyzers), and in injection drugs.

MedicalPharmaceutical

Foward-looking Statement
Projections of operating results and changes
in the operating environment are based on
information available to management at
the time this report was prepared. As such,these projections entail risks and uncertainties.
Readers should be aware that actual results
and events may differ substantiallyfrom these projections.

1

Glass & Materials

Supermarket

Consolidated Financial Highlights
Nipro Corporation and its consolidated subsidiaries
Years ended March 31.
Thousands of
U.S. dollars

Millions of yen

2003

2002

2003

For the year:
Net sales ........................................................................................
Operating income ............................................................................
Net income .....................................................................................
Capital expenditures ........................................................................
Depreciation and amortization ..........................................................
R&D expenses ................................................................... . . . . . . . . . . . . .

¥ 180,370
14,8995,078
20,7758,767
2,328¥ 171,217
14,435
5,842
17,166
7,215
2,553$ 1,500,582
123,951
42,246
172,837
72,937
19,368At year-end:
Total assets .....................................................................................
Total shareholders’ equity .................................................................

¥ 252,848
83,533¥ 245,403
76,099$ 2,103,560
694,950

Per share data (in yen and U.S. dollars):
Net income:Basic ...........................................................................................
Diluted ........................................................................................
Cash dividends ...............................................................................
Shareholders’ equity ........................................................................

¥

84.3
78.5
32.0
1,310.7

¥

$

104.4
92.4
47.0
1,343.7

0.70
0.65
0.27
10.90

The U.S. dollar amounts in this report represent translations of Japanese yen,for convenience only, at the rate of ¥120.20=U.S.$1, the approximate exchange rate on March 31, 2003.
Certain reclassifications have been made to the 2002 amounts to conform with the 2003 presentation.

Net Sales(Millions of yen)

Net Income(Millions of yen)
5,842

6,000

200,000

Return on Equity(%)
10

180,370
171,217

5,078
5,000

8.0
8

152,072
150,000

141,635 143,700
6.4

4,000

3,401

6

5.1
100,000

3,000

2,621
4.0
4
2,000

1,793
2.7

50,000
2
1,000

0

0

1999 2000 2001 2002 2003

01999 2000 2001 2002 2003

1999 2000 2001 2002 2003

Annual Report 2003

2

To Our Shareholders

Annual Overview
Revenue increases despite recession

Minoru Sano President

In enterprise management, Nipro Group has run its
business by balancing stability with growth. While
the Japanese economy remains trapped in recession,
our business has expanded, not contracted.
In fiscal 2002, the year ended March 31, 2003,
consolidated net sales amounted to 180,370 million yen(a year-on-year increase of 5.3%), consolidated
operating income 14,899 million yen (a year-on-yearincrease of 3.2%) and consolidated net income 5,078
million yen (a year-on-year decrease of 13.1%).
The number of orders for dialyzers-our medical
division’s flagship product-from OEM clients fell;
however, the medical division expanded sales throughother sales routes. Furthermore, the pharmaceuticaland supermarket division performed well. As a result,
we could meet projected net sales.
The volume of orders for dialyzers, which was
decreasing at one stage, is now recovering, and it isexpected to stabilize within fiscal 2003. As for thebusiness performance of each division in specific terms,
please refer to page 17 onwards.

Nipro Group expands outsourced productionof injection drugs, following the amendmentof the Pharmaceutical Affairs Law
Based on the approval of the amendmentof the Pharmaceutical Affairs Law in July 2002,

Nipro Group aims to become
the world’s leading manufacturerof artificial organs and injection drugs

3the approval of pharmaceutical products for which
an application must be filed to the Ministry of Health,Labour and Welfare, will change from drug
manufacturing approval to drug sales approval.
As a result, major pharmaceutical companies,
who want to concentrate their business resources ondeveloping new drugs, are expected to actively
outsource production in the future. In particular,
we expect a new outsourced production market todevelop, especially for injection drugs.
Nipro invested capital in Hishiyama
Pharmaceutical Co., Ltd. (currently known as
Nipro Pharma Corporation) in 1988, and it has
actively invested in the pharmaceuticals business.
In April 2002, we began operations at the Nipro
Pharma’s Odate factory, which is slated to become
the center for outsourced production. Initially, the factory
started manufacturing “SUBPACKTM-B” substitution
fluids for HF (hemofiltration) and HDF (hemodiafiltration),
followed by the commencement of outsourced
production of double-bag kits for penicillin antibiotics
in December 2002. It also plans to produce various
kinds of double-bag kits and pre-filled syringes.

Nipro Group develops, manufacturesand sells marketable products
In retrospect, our business performance in fiscal 2002
revealed that the sales force has improved as a whole.
In April 2001, we changed our company name to
Nipro Corporation, with medical and pharmaceuticals

businesses at the core, and launched the integrated
administration of R&D, manufacturing and sales.
This has further improved our structure for developing
and producing what the market demands, and in fiscal
2002, we have produced a series of new products.
The effects of restructuring became apparent in fiscal
2001 and fiscal 2002, in which product development
and improvement progressed and we managed to
improve our product lineup, especially in areas related
to dialysis, circulatory systems and kit products
for injection drugs. Consequently, we boosted ourcompetitiveness and expanded sales.

Outlook
Nipro Group to expand business focusing on two areas:
Development of artificial organs
and manufacturing of injection drugs
In fiscal 2003, the Group is expected to post recordhigh profits group-wide. To achieve this, we will promote
the development of various organs and tissues,
such as artificial hearts, artificial pancreas, artificial
blood and artificial skin, and we will concentrate on
the outsourced production business for injection drugs.
While our Group has the dialyzer (artificial kidney),which is a globally competitive product, we are also
marketing injection drugs, based on our policy todevelop and manufacture competitive products in
the global market. We plan to establish injection drugs

Nipro Pharma’s Odate factory

Annual Report 2003

4

To Our Shareholders

and artificial organs as our core business.
Unlike oral medication, injection drugs areadministrated using syringes, catheters and othermedical equipment. Year by year, the form of injection
drugs has been shifting towards kits (which combine
drugs with dosing equipment) to prevent medical
malpractice and reduce the workload of medical staff.
In addition to the ability of formulation research,
Nipro group’s strength lies in its technologies to develop
and manufacture materials for medical equipment
such as plastic, rubber and glass. In the future, we will
promote the advancement of injection drugs, suchas adding accident-prevention functions and long-acting
drugs, and to become the world’s leading manufacturerof injection drugs.
While we have already invested approximately
10,000 million yen in Nipro Pharma’s Odate factory,
we plan to spend another 13,000 million yen over the
next two or three years to expand the production line.
In the near future, we hope that Nipro Pharma
Corporation can become a pharmaceuticalmanufacturer capable of generating 100,000 million yen
in annual sales.
In the glass and material division, we are struggling
due to the changes in medical containers. However,
we will proactively expand our market by improving
the quality of glass tube materials for LCD backlightbulbs, which have performed well in the market,

5

and developing laminated rubber closures.
In the supermarket division, our supermarket
business has been continuously generating stableprofits since its spin-off two years ago. We intend tocontinue to improve customer satisfaction and create
valuable products to secure stable profits. In the drug
store business, we launched 16 new stores in fiscal
2002, where we spectacularly increased both net sales
and earnings. We plan to open 25 stores in fiscal 2003,
and further expand our presence.

Implementing new sliding wage scale
system for each division
We have clearly defined our profit sharing scheme withshareholders, management and employees, upholding
the sliding wage scale system at the core of the company’s
management. From fiscal 2003 onwards, we will apply
a new profit sharing scheme that is more stringent thanthe existing one. Up until now, even when our businessproduced losses, we paid ordinary employees a bonus
equivalent to two months pay, while we paid management
including the President no bonus. However, from now on,
we will shift to a new sliding wage scale system for eachdivision, in which ordinary employees will also be held
responsible for business performance. When our businessproduces losses, we will pay employees no bonus, and wewill cut the monthly salary of management anddepartment/section managers. The sliding wage scalesystem will make every employee responsible
for boosting business performance, to return profits toshareholders and to further contribute to society
through taxes.

Towards high growth, making greater strideswe take on challenges inleading-edge technologies
Nipro Group’s goals are to achieve “300,000 million
yen in consolidated net sales, 20,000 million yen inconsolidated recurring income and 10% return on
equity (ROE) in 2010.” While we expect our businessperformance in the medical equipment field-including
dialyzers-to improve year by year, we believe
the outsourced production of injection drugs will
drive our future growth. In the future, the outsourced
production business for injection drugs is expected tostart contributing fully to our business performance,
and it is expected to enter a period of high growth.
Furthermore, we are progressing steadily in appliedresearch on recombinant human serum albumin,
and we are progressing in R&D in regenerative
medicine. We are preparing for clinical trial of many ofour products. (Please refer to pages 9-10 for thedetails.) The Ministry of Health, Labour and Welfare iscurrently pending approval for recombinant humanserum albumin, and we are currently expanding its
applications and developing its uses. We also hoperegenerative medicine will contribute to our businessperformance in the near future, such as pericardial
regeneration membrane, vascular prosthesis and nerveregeneration bridge.
In the year ending March 31, 2004, we will be
investing in our R&D and production capacities,
improving the accountability structure of each businessdivision based on the sliding wage scale system, striving
to improve our profitability and making concerted efforts
to secure stable long-run profits for shareholders.
We would like to ask for your continued support of
Nipro Group.

Minoru Sano
President

Annual Report 2003

6

Special Issues: Now and Future Nipro Group
Boosting competitiveness by reflecting
medical industry needs
Nipro Group’s restructuring has further strengthened
its ability to promptly develop and provide products
for the market based on the integrated administrationof R&D, manufacturing and sales. On a quarterly basis,
we hold a Development Conference where we discussand decide the future directions for R&D. Numerous
individuals attend the conference, and our employees
participation is voluntary, regardless of title and division,
including the President, officers, and membersof the Research & Development Laboratory,
the Pharmaceutical Research Center,

Marketing

We absorbed the domestic sales subsidiary in April 2001, which hasenabled us to canvass the opinions of medical staff directly. We talkto doctors and nurses in target departments, and make use of thisinformation to develop safer, more convenient and user-friendly
products. We are also increasing our market share and sales
channels by mustering our collective strengthand taking advantage of our extensive product lineup.

Research &Development

Manufacturing

Because of restructuring in April 2001, the functions of the Research& Development Laboratory and the Pharmaceutical Research Center
developed further as “manufacturer research institutes,” which hasenabled them to engage in R&D activities that further contribute tocorporate profits. These institutes liaise with sales and manufacturing
divisions on a daily basis. We advocate development policies thatare relevant to recent developments, and we make efforts toaccelerate and improve the efficiency of R&D.

Our production division has been shifting production overseas
for about 20 years. To ensure consistent quality, regardless of where
the products are manufactured, our domestic and overseas medical
equipment factories have conformed to ISO 9001 and EN 46001
standards since 1995. By working in tandem with the R&D division,
our quality and prices have won over the market through quality
improvement and cost reduction.

We demonstrate powerfulsynergy effects by coordinating
R&D, manufacturing and sales
7Intellectual Property Department, Sales Department,
Administration Department and factories. We also
hold a monthly Progress Conference on individual
R&D themes, which is also open to anyone from R&D,
manufacturing and sales to exchange information
with one another. The sales division identifies the needsof medical staff, and then we release products basedon the information generated at these conferences
and through daily liaison efforts. This helps to expand
our product lineup, boost competitiveness inthe market, as well as increase sales and market share.
The integrated administration of R&D,
manufacturing and sales became markedly

apparent in fiscal 2002.
Pre-filled syringes, substitution fluids for HF
and HDF “SUBPACKTM-B” and other products
reflecting the requests of medical staff contributed
significantly to our business performance. As weare constantly developing new products and improving
existing products for the market, our accomplishments
in fiscal 2003 should exceed those in fiscal 2002.
Our distinctiveness and biggest strength lies in our
structure, which makes it possible to develop,
manufacture and sell all types of products tailored to
the needs of medical staff.

Major New Products in fiscal 2002

Embryo transfer catheter,
NIPRO ET Cath

Thrombus vacuum aspiration catheter,
NIPRO TVACTM System

Catheter for temporary blood access,
BLOODMAXTM HC (Heparin coating type)

Intravenous catheter withneedlestick injury prevention,
NIPRO SAFETOUCH R Cath

Balloon catheter for vascular occlusion,
NIPRO Occlusion Catheter

Substitution fluids for HF and HDF,SUBPACKTM-B(liquid-and-liquid double-bag kits)

Annual Report 2003

8

Special Issues: Now and Future Nipro GroupWe conduct extensive R&D in both
medical and pharmaceutical fields
Based on the premise that research and development(R&D) improves long-term corporate competitiveness,
we are making significant efforts in R&D activities witha long-term perspective. We own two research institutes,
namely, the Research & Development Laboratory
and the Pharmaceutical Research Center, which playa central role in undertaking R&D activities in the fieldsof medical equipment and pharmaceutical products.
The Research & Development Laboratory is solely incharge of R&D relating to medical equipment, which covers
from the research of materials such as plastic, glass andrubber to the development of production technologies
and manufacturing facilities. Backed by an industrial
designer, the Laboratory develops safety devices
and containers for kit products for medical needs,
and it conducts research on In-Vitro Diagnostic (IVD)
products and medical equipment for circulatory organs.
It is also in charge of R&D in the field of regenerative

medicine, including pericardial regeneration membraneand nerve-regeneration bridge. (Please refer to page 10 for
the research findings in the field of regenerative medicine.)
The Pharmaceutical Research Center is largely
responsible for the R&D of Nipro Group’s pharmaceuticalproducts. The present mission of the Center is to develop
injection drugs to expand its outsourced production, and todevelop other products that meet the needs of modern
society such as kit products and low-dose tablets. It also
develops pharmaceutical products for kidney disease.
On the other hand, the Center is developing recombinant
pharmaceutical products, including the applicationof recombinant human serum albumin, which is being
manufactured by Bipha Corporation, in which Nipro has
an equity stake. (Please refer to page 10 for the appliedresearch of recombinant human serum albumin.) As ourabilities in developing pharmaceutical products anddesigning prescriptions have been recently recognized,
co-development with other pharmaceutical companies
has increased significantly.

Actively investing in R&D
for future growth9

Recombinant Human Serum Albumin Field

Regenerative Medicine Field

Application in Continuous Ambulatory
Peritoneal Dialysis (CAPD)

Pericardial Regeneration Membrane

Continuous Ambulatory Peritoneal Dialysis (CAPD) is an excellent
method of treatment in terms of quality of life in that it enables patients tobe treated at home. However, after several years of continual treatment,
the dialysis effects deteriorate and peritoneal sclerosis occurs.
Furthermore, patients lose approximately 70% of the albumin that is
generated daily in the body during treatment. CAPD fluid, which contains
albumin, has a double effect: it prevents both the occurrence of peritoneal
sclerosis and the loss of albumin from the living body. We have alreadycompleted basic research in this field, and we have acquired patentrights in the U.S.

Application in Artificial Blood
Artificial blood (artificial oxygen carrier) subject to conventional researchuses hemoglobin derived from human blood. Hemoglobin is dependenton blood donations for raw materials, which have several problems
such as the possibility of infection. The new artificial oxygen carrier,which is not derived from human blood, is useful and safe. Throughcollaboration with universities, Nipro is promoting the developmentof new artificial oxygen carrier composed of recombinant humanserum albumin and synthesized porphyrin.

Pericardial Regeneration Membrane refers to the membrane covering
the exterior of organs in the thoracic cavity, for example, the heart,and abdominal cavity. The Pericardial Regeneration Membrane supplements
this when it is damaged by surgery. It prevents the adhesion with otherorgans and tissue, and it gradually decomposes while helping cells
regenerate, and is eventually absorbed into the body. We will release clinical
trials at a university hospital in Japan in 2004.

Nerve-regeneration Bridge
These are proprietary biodegradable materials shaped in the formof pipes. When embedded between nerves that have been severedin accidents, among other incidents, the nerve cells grow by using
the nerve-regeneration bridge as a platform, which enables nerves toreconnect again. In joint research with a university, we have alreadysucceeded in repairing damaged nerves measuring 35 mm in animal
experiments. We plan to start clinical trials in 2004.

Nerve-regeneration Bridge

Application in Drug Delivery System (DDS)
Human blood contains a large amount of albumin, whichtransports various substances and also bonds and carries drugs.
We are conducting research on DDS preparations that are capableof controlling the retention of drugs in blood and their distribution inorgans by taking advantage of such albumin properties. We are
currently conducting research with universities on drug carriers
using albumin.

Artificial Organs Field
Left Ventricular Assist Devices
Through technical alliance establishedwith Thoratec Corporation, USA, Nipro
has been promoting the introductionof implantable left ventricular assist
devices in Japan. The devices have
proven its effectiveness in more than
3,000 cases in the world to be
implantable for a significant timeeven over 3 years, depending on
individuals. Nipro are currently running clinical trials at the six institutes inJapan and has a plan to release the devices in 2004.

Artificial Blood Vessels (Vascular Prosthesis)
These are biodegradable materials that promote the growth of vascularendothelial cells, which are shaped in the form of pipes. These materials
have antithrombotic functions until the vascular endothelial cells cover
the vascular endothelium. They do not lead to thrombotic infarct, unlike
conventional artificial blood vessels made of synthetic materials,
and they are absorbed into the body after the regeneration of blood vessels.
We successfully developed products with a smaller diameter than we haveever developed before, and we are currently conducting experiments.

Insulin Pump

Cultured Skin Substitutes

As a joint venture with Insulin Pump
Technologies Inc., Nipro establisheda firm (70% funded by Nipro) dedicatedto the development and sales of diabetesrelated products that promote
the development of a compact,
wearable continuous insulin infusion
system. The system administers insulin
continually from the tip of an indwelling
needle inserted into the body. We successfully developed an insulin infusion
pump and a syringe for the pump, both of which have been approved by
the U.S. Food and Drug Administration (FDA). The system is due to bereleased in 2003. We are working on the commercialization of artificial
pancreas by applying this technology.

We succeeded in the development and mass-production of culture
substrates using biodegradable materials. Based on our unique
technologies for using umbilical cord blood cells, we placed dermis cells
and epidermis cells separated from human tissue on the substrates,
and we cultured bi-layered skin composed of epidermis and dermis.
The cultured skin substitute can be used whenever necessary if stored ina freezer. We are currently conducting experiments.

Research into Cross-species Transplants
In the organ transplant field, cross-species transplantation is attracting
a great deal of attention. However, immunological rejection is a major issue
to consider. In 2001, we established a research institute based on a joint
private-public initiative where we conduct R&D on animals to provide
organs for transplant purposes through genetic engineering.

Annual Report 2003 10

Special Issues: Now and Future Nipro Group

Boosting production capacity to expand
outsourced production businessfor injection drugs
Based on the amendment of the Pharmaceutical
Affairs Law, we will enforce a drug sales approvalsystem-similar to that of Western countries-in Japan
from 2005 onwards. This will enable companies to takeon complete outsourced production. In light of this turnof events, Nipro has strived to boost the production
capacity of its consolidated subsidiary, Hishiyama
Pharmaceutical Co., Ltd. (currently known as Nipro
Pharma Corporation), and developed a outsourced
production center through the acquisitionof an approximately 195,500-square-meter blockof land in Odate City, Akita Prefecture. The Odate
factory acquired a license to manufacture
pharmaceutical products in May 2002, and it began
the manufacture of “SUBPACKTM-B” substitution fluidsfor HF and HDF. In December 2002, the factorycommenced outsourced production liquid-and-powder
double-bag kits for penicilin antibiotics.
Nipro Pharma’s Odate factory is adjacent to
Nipro’s Odate factory, which is the main factoryfor kit products, and it engages in production basedon an integrated process, from the manufacturingof materials and containers to the filling and packaging
of preparations. As the production line is developed inhouse, we are able to implement an efficient line-design
and take a flexible approach, which is tailored tothe manufactured product, by coordinatingthese two factories.
Nipro’s policy is to transform Nipro Pharma
Corporation into the world’s leading injection drugs
manufacturer-a policy for which we are focusing ourefforts on. Odate factory’s spacious environment canincrease future productive capacity, and it can fully meetoutsourced production needs for all types of injection
drugs. In fiscal 2003, which will be the first year since
the company name changed to Nipro Pharma
Corporation, we have started the productionof liquid-and-powder double-bag kits for cephem
antibiotics and will start the production of liquid-andliquid double-bag kits for intravenous hyper-alimentation.
We also have plans to manufacture pre-filled syringe
preparations and to construct a line for outsourced
production.

Our consolidated subsidiaryhas begun operation of its new factorywith the aim of becoming the world’s
leading injection drugs manufacturer

11

Nipro Pharma’ Odate factory’s spacious environment can increase future productive capacity,and it can fully meet outsourced production needs for all types of injection drugs.

Annual Report 2003 12

Special Issues: Now and Future Nipro Group

Our aim is to acquire 30% of the market
share for injection drug kits by combining
the Group’s technologies
The injection drugs market in Japan generates 1,800
billion yen, which has been stable over the past decade.
However, there have been changes in the breakdownof products: the percentage of kit products, which
combine drugs with injection devices, has been
increasing year by year. The percentage of injection
drugs produced as kits is expected to further increase
to prevent medical malpractices and to reduce
the workload of medical staff. Within the next few years,
we will convert all injection drugs that can be produced
as kits, such as pre-filled syringes and double-bag kits.
As major pharmaceutical companies are also promoting
the shift towards kits, in an effort to boost
the competitiveness of their injection drugs and extend
the lifecycle of products, the industry is focused on
the kit technology of Nipro Group, the pioneerof kit products.
The administration of injection drugs involves
the use of injection syringes, catheters, injection needles
and other medical equipment. A number of problems
exist in administration: the preparation of drugs is time
consuming and laborious; errors can occur during

the processing or administration of drugs; drugs may
become contaminated by foreign matter during
preparation; and there is no assurance thatthe preparation work can be undertaken in perfectly
sterile conditions.
The solution to these problems is the useof kit products. The ability to develop pharmaceuticalproducts and design prescriptions, as well as
the ability to develop medical equipment, is vital tothe development of kit products. Only the Nipro
Group develops and manufactures materials for kit
products in-house, including materials such as
plastic, glass and rubber. We have a competitive
advantage in developing and manufacturing kit
products; or more specifically, our ability to utilize
technologies for developing and manufacturing
pharmaceutical products. We are aiming at a 30%
share in the kit products market for injection drugsby boosting the production capacity of Nipro
Pharma’s Odate factory and by increasing
outsourced production.
In addition to kit products, we also manufacture
injection drugs in glass and plastic ampoules,
as well as in vials. We have the facilities to manufacture
all types of injection drugs on a contract basis.

Our objective is to increase
the market share of kit productsthat contribute to more advanced,
value-added injection drugs

13kit product refers to an injection drug product in which a drug
Kit Products A(withspecial container) is combined with the injection device.

Double-bag
Kits(liquid-and-powder)Half-type
Kit
This is a kit product that enables the user to dissolve powdereddrugs easily and safely. It is easier to handle and requires shorter
processing time than conventional dissolving methods.

This is a bag-type kit product, which combines powdered drugs
with a dissolving solution. Drugs can be dissolved
quickly by pressing the bag once in completely sterile conditions.

Pre-filled
Syringe

Full-type
Kit

This is a syringe product already filled with the required
injectable. Nipro group can manufacture the syringe in either
glass or plastic depending on they type of drug to be used.
Pre-filled syringes are available in a range of capacities
and forms.

This is a kit product that combines a vial containing
powdered drugs with dissolving solution in perfectly sterile
conditions. It is designed to adapt to a range of drug vial
sizes, and it can be disposed of separately after use.

Other Injection Drugs
Nipro group also undertakes the complete manufacturingof non-kit products, including conventional injection drugs incontainers as well as empty containers. We manufacture
injection drugs in glass ampoules-whose use have been on
the decline in recent years-in a range of colors, forms
and capacities according to demand. This manufacturingexpertise is based on our rich experience dating back to
the company’s foundation. In recent years, becauseof the benefits in terms of safety and emergency care,
plastic ampoules have gradually replaced injection drugs inglass ampoules. We manufacture injection drugs in plastic
ampoules with varying capacities based on an integrated
system from the development of resin materials. We also
manufacture numerous injection drugs in vials, utilizing ourtechnologies for manufacturing injection drugs, as well as
glass and rubber containers and plugs.

Benefits of adopting Injection Drug Kits
1. Ensures sterile conditions (closed system)

5. Prevents medical accidents

2. Prevents contamination by foreign matter
3. Makes processing (dissolving, mixing,
among other processes.) easier and more accurate

6. Reduces medical costs (energy-saving, reduction in disposalof residual drugs, reduction of instruments, among other things.)

4. Prevents nosocomial infections

8. Helps improve quality of medical care

7. Can be used for home medical care

Annual Report 2003 14

Global Network
Forging ahead with optimally locatedproduction & sales by expanding the sales
network and improving the production capacity
Nipro is one of the very few general manufacturersof dialysis-related products in the world, and we havethe prominent market share in the field. Our global market
share for diabetes-related products exceeds 60%,
including OEM, and we have won worldwide acclaim
for our technical capabilities and quality. In expanding
market share, our network of bases plays a significant role.
Currently, we have a total of 30 manufacturing and sales
bases in 21 countries, consisting of 11 local corporations,which includes branches and representative offices in
the U.S., Europe and Asia.
Nipro’s overseas sales strategy is to aggressively
promote the NIPRO Brand and improve our own sales
network, while expanding the OEM business. In the year
ending March 2003, we strengthened the sales
structure so that each sales base can take the initiativein tapping potential markets, which will secure thefinancial independence of each and every local
corporation. Our sales bases undertake sales activities
that are closely tailored to their respective markets,and they promote sales of proprietary products withpowerful local distributors. Moreover, in April 2003, we
restructured the organization to delegate authority tolocal corporations to give them full control of local
marketing, which had previously been placed undercentralized management in Japan. Restructuring has
enabled us to make adjustments to NIPRO-branded
products and OEM products in the market enabling
greater flexibility in sales operations.
For overseas production, Nipro is actively expanding
the production capacity of its manufacturing bases toadapt to the expansion of the global market, and to meetdomestic market needs with price competitivenessand high quality products. Currently, overseas factories
produce approximately 50% of products for the Japanesemarket. We are also planning to start producing dialyzers
overseas in the near future. Based on this strategy, inthe year ending March 2003, we expanded the Nipro(Shanghai) Co., Ltd. factory, and rebuilt the Nipro (Thailand)
Corporation., Ltd. warehouse. Furthermore, in June 2003,
we completed the construction of a medical equipment
factory with a floor space of 45,000 square meters, which
will be one of the largest in Thailand.

By spreading the NIPRO brand,
we produce and sell products
worldwide

15

Europe
5
1
2

4
3

18

6

16 19
15 17

9

11
8

10

20 30

Asia

13
14

27
23
26

7

24

12

America

25
28 29
22 21

EuropeAsia

America

1 Nipro Europe N.V.

7 Nipro Asia Pte. Ltd.

20 Nipro Medical Corporation

2 Nipro Europe N.V. Spain Branch

8 Nipro Asia Pte. Ltd. India Branch

21 Nipro Medical Corporation

3 Nipro Europe N.V. Italy Branch

9 Nipro Asia Pte. Ltd. New Delhi Office

4 Nipro Europe N.V. Holland Branch

10 Nipro Asia Pte. Ltd. Chennai Office

5 Nipro Europe N.V.

11 Nipro Asia Pte. Ltd. Dubai Branch

Moscow Representative Office
6 Nipro Europe N.V.

Turkey Representative Office

12 Nipro Asia Pte. Ltd. Melbourne Branch
13 Nipro (Thailand) Corporation Ltd.
14 Nipro (Thailand) Corporation Ltd.

Bangkok Sales Office
15 Fuzhou Nipro Co., Ltd.

El Salvador Branch
24 Nipro Medical Corporation

Ecuador Branch
25 Nipro Medical Corporation

Peru Branch

16 Nipro (Shanghai) Co., Ltd.
17 Nipro Trading (Shanghai) Co., Ltd.

27 Nipro Medica de Mexico

Beijing office
Sales bases

Chile Branch
23 Nipro Medical Corporation

26 Nipro Medical Panama S.A.

18 Nipro Trading (Shanghai) Co., Ltd.

Manufacturing bases

Argentina Branch
22 Nipro Medical Corporation

19 Shanghai Nissho Vacuum

Flask Refill Co., Ltd.

S.A. de C.V.
28 Nipro Medical Ltda.
29 Nipro Medical Ltda.

Sao Paulo Branch
30 Nipro Diabates Systems, Inc.

Annual Report 2003 16

Review of Operations

MedicalDivision
Medical division net sales ratio (% of total net sales)

42.1%

17

The year in review
Expanded sales in the domestic market
through wide product range
For domestic business, the environment wasdifficult as hospitals and clinics were increasingly
reluctant to make purchases and Moreover,price competition intensified further, because of
the National Health Insurance (NHI) price revisionin April 2002. However, the division regarded
this as an opportunity to expand market
share by promoting sales combined with related
products, utilizing its extensive product lineup,
instead of selling products individually. Particularlyin the dialysis business, the division expanded its
share through its ability to offer comprehensive rangeof products including for dialyzers (artificial kidneys) as
well as necessary equipment and drugs. Also,
such comprehensive proposals has helped the hospitals
and clinics improve the efficiency of their management.
The domestic medical division’s new marketing
perspective increased profits through market share
expansion in the year ended March 31, 2003.

Net Sales(Millions of yen)

Implemented sales strategies adapted to changes
in the global dialysis-related products market
International business suffered from the decline
in trading volume with OEM clients, while sales of
NIPRO-branded products increased throughaggressive marketing by each country’s sales base.
Sales increased dramatically for diabetes-related
products, safety blood collection needles and so on,
because of increased demand. On the other hand, forconventional general-purpose medical equipment, thedivision outsourced production overseas and strived to
improve its competitiveness. However, as “single use”
became rapidly widespread in the entire dialysis market,
sales were affected by the sharp drop in prices
associated with the increase in the quantity.
As a result, sales generated by the medical
division as a whole, combining domestic andinternational businesses, totaled 76,009 million yen(a year-on-year decrease of 2.0%).

80,00064,73065,71866,413

1999

2000

2001

77,57276,0092002

2003

60,00040,00020,0000(Years ended March, 31)

Dialyzer
Nipro has been well-known as one of the leading
dialyzer manufacturers for many years. The mainfunctions of the dialyzers are to maintain body
fluid balance and remove from blood not only
low molecular substances, but also low
molecular proteins such as beta 2 microglobulin
and those to the level of molecular weight foralbumin. The recent progress of the dialyzers
improves patient mortality and quality of life byrelieving complications of renal patients. A wide
range of dialyzers Nipro carries suggests to help
treat a variety of patients with renal diseases
and their complications.
In addition, Nipro further will launcha new CTA dialyzer series, “SUREFLUX UH
Series”, within the year 2003 (though alreadyin Japan from April 2003). The new series are
epoch-making dialyzers with the world-highest
performance especially on removal of low
molecular proteins and least albumin leakage
property. With such abundant selectionsof the Nipro dialyzers, we shall penetrate evenfurther into the world markets.

Annual Report 2003 18

Review of Operations

OutlookPlanning to improve sales force
and competitiveness to dominate
the domestic market
In the domestic business, we have been aiming toincrease medical equipment sales, including
pharmaceutical products, by approximately 10,000
million yen, within three years since the organization’s
restructuring in April 2002.
The medical division will focus on dialyzers(artificial kidney), blood lines for dialysis, substitution
fluids for HF and HDF, powdered dialysate solution,
dialysis machines and other products related to dialysis.
It will develop and launch new products, and byimproving quality and boosting sales, it will further
expand its market share. For disposable products
for injections, infusions, catheters and so on, the divisionplans to expand its market share for infusion sets,syringes and other injection/infusion-related products,
and to develop and promote the salesof new products such as vascular catheters.
For circulatory-organ-related products, the division
will release a new type of PTCA catheter in May 2003,
for which approval was obtained in March 2003. It will
focus on promoting sales and expanding market share.
For circulatory organs, the medical division has alreadylaunched a project (with the development division)

Marketing new products to increase global sales

New Dialysis Machine (DIAMAXTM)

SAFETOUCH AVF Needle

In an effort to adapt to theadvanced dialysis treatment
required in overseas markets,
we are developing a new dialysis
machine (DIAMAXTM) with various
new functions and highexpandability. DIAMAXTM meetsthe safety specification standards
in Europe and the United States.
It has new functions to provide
better treatment, as well asfunctions to support medical
staff engaged in dialysis treatment.
DIAMAXTM is currently underdevelopment, and it is due to be released at the end of 2003.

19

for developing new products and expanding
the product range, to improve its sales force
and competitiveness. It will release and promote
new products for blood tests.

For international business, there are no longer any
regional disparities in the global medical equipment
market. It is becoming increasingly difficult to maintaincompetitiveness based on existing region-by-region
sales strategies. Therefore, in the future, the medical
division will view the global market as a single block,and it will develop a strategy for pricing and a range ofadapted products, and then promote sales accordingly.
For conventional general-purpose medical devices,the division’s policy is to utilize Nipro’s overseas
sales bases and actively promote manufacturingoutsourcing based on technology licensing, as in
the previous years.
New products to be released in fiscal 2003
include the following: in the dialysis field, a cheaper,
improved version of the conventional dialyzer product(with the European CE Mark); in the field of circulatoryorgans, a guide wire; and in the diabetes field,
an insulin infusion pump. Each new product is
expected to contribute substantially to our businessperformance in fiscal 2003. Additionally, for dialysisrelated products, the division will actively pursue sales,R

Needlestick accidents are oneof the major causes of nosocomial
infection. Doctors, nurses and medical
staff who have accidentally pricked
their finger, hand or other partsof the body with a bloodstainedneedle may be infected with HIV,hepatitis C or other diseases. Nipro
has developed the SAFETOUCH R AVF
Needle to prevent needlestick
accidents. This product is used in
artificial dialysis. The needle can beaccommodated and locked inside
the wing-hub after the completionof dialysis so the needle will not come out again. It is smaller thanthe AVF needles made by competitors and it is an extremely userfriendly safety device.

with a framework that can fully adapt to market changes.

Expanding product range to increase market share
The NIPRO Brand has a solid reputation for its
product range for the medical industry, which
includes dialysis-related products that are currently
dominant in both domestic and overseas markets.
In fiscal 2003, the medical division plans to further
increase its share in each field. In particular, it will
focus on each organ being targeted, it will conduct
R&D and expand the product range for all organs
and tissues, including kidneys (including dialyzers),
pancreas (related to diabetes), circulatory organs(advanced catheters), cardiovascular (related to left
ventricular assist devices), and even skin,blood vessels and blood. Moreover, it plans tocontinually train staff dedicated to quality
assurance operations, and to improve
the quality assurance framework.
Based on these policies, the entire medical
division, combining domestic and international
businesses, is expected to generate 79,230 million yen(a year-on-year increase of 4.2%) in sales.

Medical Division

SUREFUSERR

The SUREFUSER R is a small,lightweight continuous drug injection
pump that uses the contractile
pressure of a balloon. It is widelyused to control pot-operative pain
and to inject drug into terminal caner
patients. The new SUREFUSER R
with Variable Flow Regulator employsa switch handle that can be turned to
set the rate of injection, making it
possible to proportionally control
pain according to the manifestationand symptoms. It also comes witha Patient-Controlled Analgesia
system that allows the patient to inject a predetermined amountof painkiller by him/herself when feeling pain. Demand for home-use
pain control system is expected to grow in the future.

FreestyleTM Blood Glucose Monitoring System
FreestyleTM is a Self-Monitoring Blood
Glucose (SMBG) system that uses the
FreeStyleTM Nano-Sample technology
developed by TheraSense, Inc. in the
United States. FreeStyleTM requires
a blood sample of just is 0.3 microliters
which is the smallest in the world.
Nipro Corporation has exclusive
distribution of FreeStyleTM in Japan. FreeStyleTM was introduced in April
2002 into the Japanese market through Nipro and a co-marketing alliancewith Kissei Pharmaceutical. The easy-to-use FreeStyleTM allows people withdiabetes to take a blood sample from multiple sites including theirfingertips, forearm, upper arm, thigh, calf and fleshy part of the hand,eliminating virtually all the pain of testing and thereby helping to encourage
more frequent testing. FreestyleTM relieves patients of pain and helps
improve their quality of life.

Annual Report 2003 20

Review of Operations

Pharmaceutical
Division
Pharmaceutical division net sales ratio (% of total net sales)

12.2%

21

The year in review
The release of new products
increased sales dramatically
During fiscal 2002, which ended March 31, 2003,
pharmaceuticals market competition remained intense
due to revision the price of the pharmaceutical products
listed on the National Health Insurance (NHI) price list andthe intensifying retail price war. Under thesecircumstances, our pharmaceutical division focused on
expanding the sales products such as powdered dialysate
solutions. We also released sales of liquid-and-powder
double-bag kits, pre-filled syringe kits, substitution fluid for
HF and HDF (Japan’s first double bag kit type), low-dosetablets and an infusion-related pharmaceutical product.
Also, Self-Monitoring of Blood Glucose (SMBG) system,
which we offered from March 2002 after acquiringdomestic distribution rights from an American company,
contributed significantly to sales. As a result, sales of ourpharmaceutical division sales increased dramatically to
21,979 million yen (a year-on-year increase of 37.8%).
For the division, fiscal 2002 marked the beginningof a new phase. For the first time, our company

The division obtained license for manufacturing ofsoft bags for intravenous injections, low-dose (half-dose)tablets, improved “LYMPACKTM (powdered dialysate
solutions),” and pre-filled syringe preparations (twoitems). The division is now establishing the production
framework.

established a cycle for commercializing pharmaceuticalproducts-from basic research to R&D, application/
approval, manufacturing and release-and completed its
framework for the pharmaceutical business to becomea core business in parallel with our medical business.

Consolidated subsidiaries’ manufacturing
volume increased substantially
Over the past few years, we have actively invested in ourconsolidated subsidiary, Hishiyama Pharmaceutical Co.,
Ltd. (currently known as Nipro Pharma Corporation),
and we have promoted the expansion of its production
capacity. A massive increase in production capacity
helped sales in fiscal 2002 due to the commencement of
production at Nipro Pharma’s Odate factory, which serves
as the center of outsourced production business forpharmaceutical products. Two other factors also helped
sales: the progressive improvement of the Odate factory’s
production facilities, and the extension of the Ise factory
production line . Amid the sluggish domestic
pharmaceuticals market, Nipro Pharma’s sales increased
substantially by 34.5%, from 14,400 million yen in fiscal
2001 to 19,370 million yen in fiscal 2002.

Net Sales(Millions of yen)
25,00021,97920,00015,94615,00013,47814,12011,96910,000

5,000

0

1999

2000

2001

2002

2003

(Years ended March, 31)

Half-type Kit
The Half-type Kit is a reconstitution kit product with a double-ended
needle, which enables powdered injection drugs in a vial to bedissolved safely and easily. As the inlet for dissolving purposes(positioned at the top) is designed separately to the outlet thatconnects to infusion set (positioned at the bottom), the Half-type
Kit is less prone to leakages and coring associated with IV infusion.
Safety is ensured by accommodating the double-ended needle
for dissolving purposes on the inside of the sticker on the upper
part of the product.

Annual Report 2003 22

Review of Operations

Outlooka series of competitive pharmaceutical products thatsatisfy patients and medical staff.

Releasing a series of unique,competitive pharmaceutical products

Building a production line for pre-filled syringes

In fiscal 2003, the division plans to launch
intravenous injection preparations in soft-bag, kit
products, low-dose (half-dose) tablets, and improved“LYMPACKTM”
Among these products, the improved“LYMPACKTM” is a groundbreaking product, whichmakes dissolving easier by packing the powdereddrugs in two separate bags instead of three,
as in conventional products.
We expect our dialysates market shareto increase from the current 20% to 30%
by releasing this product. Furthermore,
our preparations in soft bags for intravenous
injection, which is used for mycosis profunda, ensuresterility during administration as the preparations
are packed in soft bags instead of glass bottles
as in conventional products.
We will obtain the license to manufacture someitems fiscal 2003, which include liquid-and-powder
double bag kits of antibiotics for intravenous injection,
Continuous Ambulatory Peritoneal Dialysis (CAPD)
fluids with neutral pH and pre-filled syringe
preparations. Our policy is to actively develop new
products to expand the range of kits, and to launch

In fiscal 2003, the pharmaceutical division willcontinue to expand production capacity. In particular,
we plan to make capital investments of approximately
13,000 million yen in Nipro Pharma’s Odate
production facilities over the next two or three years.
The Odate factory has already started the
production of liquid-and-powder double bag kits for
cephem antibiotics, and it will start the outsourced
production of liquid-and-liquid double-bag kits soon.
It also plans to produce various kinds of pre-filled
syringes. The construction of a new manufacturing
wing is underway for double-bag kits, and active
investment is needed in building a production line forpre-filled syringe preparations.
Through aggressive R&D and increase inproduction capacity, the division is expected togenerate 27,000 million yen in sales in fiscal 2003
(a year-on-year increase of 22.8%).

Launching new projects to expand
the pharmaceutical business
The pharmaceutical division is engaged in ongoing
R&D over the long term, and it is progressing
steadily with product commercialization.

Pre-filled Syringes
A pre-filled syringe consists of a syringe (a cylindrical vessel
designed for injection) that is pre-filled with various injection solutions.
The demand for these products has expanded rapidly in recent years
based on their safety and practicality. Medical staff can administer
drugs safely by taking the syringe out of the blister pack, removing
the rubber plug on the end and attaching the injection needle.
As the syringe is already filled with an injection solution, there is noneed to fill the syringe with injection drugs from vials, ampoules.

23

In a new project for the developmentof recombinant pharmaceutical products,
to further improve our artificial-dialysis-related
business, we are working to make it a reality.
In the oxygen infusion project, we identified
the candidates to be developed, and we are
now in the next stage of development. In 2003,
we also plan to start specific applications
for Drug Delivery System (DDS) preparations
using human serum albumin, which is a promisingfundamental technology for sustained-releaseintravenous injection drugs. This year, we alsoplan to release a development projectfor converting injection drugs into
oral preparations.
The division will continue promoting
R&D specializing in kidney diseases, bloodand intravenous hyper-alimentation.

Pharmaceutical Division

Double-bag Kits (Liquid-and-Powder)This is a kit product based on a double-bag design, in which
the powdered drug and the reconstitution are in two separate bags
and combined together. The layer between the bags made of different
material is completely sealed by applying Nipro’s unique adhesion
techniques. To dissolve the drug, press the bag to penetrate the wall.
As the dissolving task involves nothing more than just pressing
the bag, it reduces the medical staff's workload. An aluminum cover ispasted onto the bag containing the powdered drug to ensure stability.

Annual Report 2003 24

Review of Operations

Glass & Materials
Division
Glass & Materials division net sales ratio (% of total net sales)

6.1%

The year in review
Promoting sales and the developmentof new products amid difficult market conditions
In fiscal 2002, the year ended March 31, 2003, the glassand materials division sustained its efforts in expanding
the sale of existing products and developing new products.
However, in the area of glass for pharmaceutical purposes,
the impact of the transformation of containers forpharmaceutical products affected market conditions;for example, ampoules shifted to plastics and pre-filled
syringes, and vials to soft bags and syringes. In contrast,
rubber plugs, always in full supply, increased in production
volume because the rubber plugs plant extension wascompleted at Nipro’s Odate factory in September 2002.
Net Sales(Millions of yen)
15,00011,907

12,021

11,784
11,234

11,064

2002

2003

10,000

5,000

0

1999

2000

2001

(Years ended March, 31)

25

This lead to an increase in sales of rubber plugs, rubber
for infusion bag plugs. On the other hand, cheaper
Chinese products affected thermos bottles but exports
remained relatively steady. For glass for illumination
purposes, sales of glass for LCD backlight bulbs
and related materials remained steady.
As a result, sales generated by the glassand materials division totaled 11,064 million yen(a year-on-year decrease of 1.5%).

OutlookPlanning to tap new markets for growing LCD demand
In fiscal 2003, the glass and materials division plans to
expand sales and improve the quality of glassfor LCD backlight bulbs for the growing demand
and the advanced performance requirements in
the LCD field. Furthermore, it will commercialize
environmentally friendly color glass that does notcontain any hazardous substances, and it will tap
markets in the consumer electronics field
and the automotive sector. For rubber plugs,
it plans to expand the market by introducing newlaminated rubber plugs, and it plans to increase
the sales of conventional products. For thermos bulbs,
our policy is to improve the production frameworkof Shanghai Nissho Vacuum Flask Refill Co, Ltd.,and sell price-competitive products in China andabroad.
Based on these policies, the division is
expected to generate 10,720 million yen in sales
in fiscal 2003 (a year-on-year decrease of 3.1%).

Supermarket
Division
Supermarket division net sales ratio (% of total net sales)

38.6%

The year in review
Achieved higher revenues by securing valuable
customers and opening new stores
In the year ended March 31, 2003, our supermarket
division faced a difficult market environment becauseof sluggish consumption caused by the prolonged
recession. Furthermore, competition further intensified dueto the opening of new stores and the extension of ourcompetitors’ trading hours. Despite these circumstances,
our food supermarket business generated profits as ourefforts-the introduction of “point cards” aimed at securing
customers, the increase in the number of liquor-licensed
stores and the renovation of stores-became evident.
On the other hand, our drugstore business,
Net Sales(Millions of yen)
80,00069,56064,76456,88260,00051,19951,034

1999

2000

40,00020,000

0

2001

2002

2003

which operates the suburban drugstores, “Server,”forged ahead aggressively in fiscal 2002, which included
the release of 16 new stores. Customers have supported
both new and existing stores, and our drugstorescontributed business significantly in terms of revenue
growth. Consequently, our supermarket division
generated 69,560 million yen of sales (a year-on-yearincrease of 7.4%).

OutlookPlanning new initiatives and high value-added services
In fiscal 2003, our food supermarket business plans tosecure valuable customers with the “E-mail Membership
Program,” which provides product and daily life information,and the Nissho Member Card, for which customers earnpoints for purchases. We plan to expand our Traceable
Products business for food safety and security, and we
also plan to develop the Direct Shop, a mail order service
that delivers premium products from all over Japan.
We have other new initiatives such as the Weekly
Management System and Electric Shelf Label. Additionally,
we plan to cut labor costs by linking the Fresh Food
Information System, which helped to improve
the profitability of the fresh food division, to LSP (workschedule).
As for drugstores, we will continue promoting
the launch of stores in fiscal 2003 to quickly achieve ourgoal of opening 200 stores.
Based on these policies, our supermarket
division is expected to generate 79,310 million yen insales in fiscal 2003 (a year-on-year increase of 14.0%).

(Years ended March, 31)

Annual Report 2003 26

Board of Directors and Auditors (As of June 28, 2003)
Director

Director

Masato Naganami

Noriaki Watanabe

Director

Director

Kiyoshi Fukui

Kazuo Wakatsuki

Director

Director

Akihiko Yamabe

Hiroyuki Hattori

DirectorStanding Statutory Auditor

Hiroshi Ikeuchi

Hiroshi Kobayashi

Director

Statutory Auditor

Makoto Sato

Shigeru Kobayashi

Director

Statutory Auditor

Yoshihiko Sano

Masamichi Wada

President

Minoru Sano *Senior Managing Director

Shigeki Tanaka

27

Managing Director

Managing Director

Director

Seiya Ishida

Shuichi Tsuzuki

Masataka Yanai*Representative Director

Approach and Measures to
Corporate Governance

Establishment of Management
Risk Control Committee

Nipro regards the improvement of corporate governanceas a management priority and as a social responsibility.
We are striving to strengthen our administration system,
and we are working to improve the soundness
and efficiency of management. Our management &administration framework for managerial decision-making,execution and supervision are based on the Boardof Directors system and the Auditors system set forthin the Japanese Commercial Code. Specifically, we haveestablished a self-sufficient management & administration
framework for each business division to clearly define
the responsibilities and improve the administration.

In April 2003, we set up the Management Risk Control
Committee in an effort to establish a structure to control
management risks and promote compliance withcorporate ethics including laws and ordinances.
As one of the tools for promoting this, we distributed
a booklet titled the Code of Conduct for Compliancewith Laws, Ordinances and Corporate Ethics to ouremployees to make the subject widely known
and deeply understood. We will effectively run and utilize
the Committee into the future in an effort to prevent
management risks from arising and to execute
operations properly.

Financial Section

2003

Nipro Corporation and its consolidated subsidiaries
year ended March 31,2003 (fiscal 2002)

Financial Review 29
Five-Year Summary 34
Consolidated Balance Sheets 35
Consolidated Statements of Income 37
Consolidated Statements of Shareholders’ Equity 38
Consolidated Statements of Cash Flows 39
Notes to Consolidated Financial Statements 40
Report of Independent Certified Public Accountants on 49
The Consolidated Financial Statements

Annual Report 2003 48

Annual Report 2003 28

Financial Review

Year ended March 31, 2003 (Fiscal 2002)

The following sections are a review of Nipro
Corporation’s financial position and operating
performance for the year ended March 31, 2003.
All figures are ona consolidated basis and include
the accounts of Nipro Corporation,
Nipro Medical Industries, Ltd.,
Nipro (Thailand) Corporation Ltd.,
Fuzhou Nipro Co., Ltd.,
Nipro (Shanghai) Co., Ltd.,
Nipro Medical LTDA.,
Nipro Europe N.V.,
Nipro Medical Corporation,
Nipro Medical Panama S.A.,
Nipro Medica de Mexico S.A. DE C.V.,
Hishiyama Pharmaceutical Co., Ltd.,*
Shinwa Shoji Co., Ltd.,
Shanghai Nissho Vacuum Flask Refill Co., Ltd,
Nissho Corporation
Nissho Drug Co., Ltd., and Bipha Corporation.*** On April 1, 2003 Hishiyama Pharmaceutical Co., Ltd.
changed its corporate name “Nipro Pharma
Corporation.”** Affiliate accounted for by the equity method.

Overview
During the fiscal year ended March 31, 2003, theJapanese economy remained stagnant and individual
consumption and capital investment remained sluggish.
Under such conditions, the Nipro Group (the Group)
continued to focus on developing new products as well
as executing extensive efforts to achieve targets for eachbusiness unit. In the Medical Division, domestic
operations concentrated on improving sales efficiency
and increasing sales locations while overseas operations
actively promoted the NIPRO brand products. In the
Pharmaceutical Division, the Group took actions toincrease the sales of existing products and in addition,
we aggressively launched new products. In the
Supermarket Division, the Group opened 16 new
drugstores.

Operating Results
The consolidated net sales for fiscal 2002 increased by
5.3% from the previous fiscal year to 180,370 million yen(USD 1,500,582 thousand), which was a result of
an increase in sales of the Pharmaceutical Division andan increase in the number of the Supermarket Division’s
drugstores. This more than made up for the decrease insales of the Medical Division, which was caused by

Net Sales(Millions of yen)

Operating Income(Millions of yen)

200,000

15,00014,435

180,370

14,899171,217
152,072
150,000

141,635

12,000143,700

10,342
9,729
8,622

9,000
100,000
6,000

50,000
3,000

0

0

1999

2000

2001

2002

2003

(Years ended March, 31)

29

1999

2000

2001

2002

2003

(Years ended March, 31)

a decrease in sales of dialyzers due to lower demand
from overseas OEM customers.

Information by Business Segment
Medical Division
Net sales in the Medical Division decreased by 2.0%
from the previous fiscal year to 76,009 million yen (USD
632,354 thousand), and operating income decreased by
5.6% from the previous fiscal year to 14,175 million yen(USD 117,928 thousand). While we recorded growth indomestic business and increased export sales of safe
blood collecting needles, this growth could not make up
for the decrease in sales of dialyzers of caused by lower
demand from overseas OEM customers.
Pharmaceutical Division
Net sales in the Pharmaceutical Division increased by
37.8% to 21,979 million yen (USD 182,854 thousand),and operating income increased by 79.5% to 1,981
million yen (USD 16,481 thousand) reflecting the start ofproduction for new kit products and sales growth indiabetes-related products.

Supermarket Division
Net sales in the Supermarket Division increased by
7.4% to 69,560 million yen (USD 578,702 thousand),and operating income increased by 6.9% to 1,109
million yen (USD 9,226 thousand) as a result of the
opening of 16 new drugstores and the continuous
efforts to widen selection of goods, to maintainand enhance product quality and to improve thecustomer services, which had attracted repeatpurchases from local customers.
Other sales increased by 3.4% to 1,758 million yen(USD 14,625 thousand), and operating income
increased by 29.3% to 148 million yen (USD 1,231
thousand).

Information by Geographic Segment

Glass & Materials Division
Net sales in the Glass & Materials Division decreased by
1.5 % to 11,064 million yen (USD 92,047 thousand), andoperating income decreased by 1.6% to 1,777 million
yen (USD 14,784 thousand).

Japan
In Japan, consumption remained sluggish due to thestagnant economy, and there was a downward revisionof pharmaceutical product prices by the Ministry of
Health, Labour and Welfare in April 2002. Under thesecircumstances, the Group commenced outsourced
manufacturing of new injection kit products and strived
to open new drugstores. As a result, sales in Japan
totaled 168,848 million yen (USD 1,404,725 thousand),and operating income totaled 18,099 million yen (USD
150,574 thousand).

Income Before Income Taxes(Millions of yen)

Net Income(Millions of yen)

11,617

12,000

6,000

5,842
5,078

5,000

10,000

8,781
8,000

4,000

3,401

6,641
5,930

6,000

3,000

2,621

4,440
4,000

2,000

2,000

1,000

0

1,793

0

1999

2000

2001

2002

2003

(Years ended March, 31)

1999

2000

2001

2002

2003

(Years ended March, 31)

Annual Report 2003 30

Financial Review

America
Although price competition has increasingly intensified,the Group endeavored to widen and strengthen its sales
network. As a result, net sales in America totaled 4,545
million yen (USD 37,812 thousand), and operating
income totaled 253 million yen (USD 2,105 thousand).
EuropeDespite the severe competition, the Group assiduously
reinforced its sales network and introduced high addedvalue products. As a result, net sales in Europe totaled
5,360 million yen (USD 44,592 thousand), and operating
income totaled 155 million yen (USD 1,289 thousand).
Asia
In Asia, the activity is mainly operated by consolidated
manufacturing subsidiaries. Net sales in Asia totaled
1,617 million yen (USD 13,453 thousand), and operating
income totaled 885 million yen (USD 7,363 thousand).

1.1% to 17,364 million yen (USD 144,459 thousand)(9.6% of the total consolidated net sales) and sales toAsia increased by 8.4% to 5,427 million yen (USD
45,150 thousand) (3.0% of the total consolidated
net sales).
In line with the growth in net sales, cost of sales
increased by 5.5% to 128,776 million yen (USD
1,071,348 thousand) and gross profit increased
by 5.0% to 51,594 million yen (USD 429,234
thousand).
Selling, general and administrative (SG&A)
expenses increased by 5.8% to 36,695 million yen(USD 305,283 thousand), however, ratio of SG&A
expenses to net sales was 20.3%, unchanged fromthe previous fiscal year. The rise in the expenses wasdue to increased transportation, storage and othercosts as a result of net sales growth and increasein costs related to new drugstore openings.

Export sales and sales by overseas subsidiaries
decreased by 6.3% from the previous fiscal year to41,823 million yen (USD 347,945 thousand).
The details of this result are as follows: sales to theAmericas decreased by 15.1% to 19,032 million yen(USD 158,336 thousand) ( 10.6% of the total
consolidated net sales), sales to Europe increased byOperating income increased by 3.2% to 14,899
million yen (USD 123,951 thousand). The growthratio of operating income was slightly lower thanthat of net sales because sales growth was centeredmainly in the Pharmaceutical Division and Supermarket
Division, which have relatively lower operating margins.

Capital Expenditures(Millions of yen)

Total Assets(Millions of yen)
300,000

25,00020,775245,403

250,000
20,000252,848

228,918
217,455

17,166

205,558
200,000

14,29515,00012,362150,000
10,0008,463
100,000

5,000
50,000

0

0

1999

2000

2001

2002

2003

(Years ended March, 31)

31

1999

2000

2001

2002

2003

(Years ended March, 31)

Other expenses (net) increased by 117.1%
from 2,818 million yen in the previous fiscal year to
6,118 million yen (USD 50,898 thousand). This was
mainly due a stronger yen in fiscal 2002 which
resulted in exchange losses of 1,750 million yen(USD 14,559 thousand) compared with exchange
gains of 471 million yen in the previous fiscal year
as well as the expense of 1,178 million yen (USD
9,800 thousand) for the compensation for breachof contract with an overseas OEM customer.
As a result, income before income taxes decreased
by 24.4% to 8,781 million yen (USD 73,053 thousand).
Due to the above results, net income decreased by
13.1% from the previous fiscal year to 5,078 million
yen (USD 42,246 thousand).
Basic earnings per common share were 84.3 yen(USD 0.70) and cash dividends per share for fiscal
2002 were 32.0 yen (USD 0.27) based on our policyof distributing 50% of non-consolidated net income.

Financial Position
AssetsTotal assets increased by 3.0% from the previous fiscal
year to 252,848 million yen (USD 2,103,560 thousand),primarily reflecting the increase in property, plant andequipment in Medical and Pharmaceutical divisions.
Current assets increased by 0.8% to 116,431
million yen (USD 968,644 thousand). This was mainly
due to the increases in trade notes and accountreceivables by 2,748 million yen, inventories by 4,199
million yen and other current assets by 4,317 million yen
which more than offset a decrease in cash and cash
equivalents of 11,360 million yen.
Investments and other assets decreased by 7.3%
to 45,270 million yen (USD 376,622 thousand). Other
investments increased by 3,954 million yen from theprevious fiscal year to 4,574 million yen (USD 38,053
thousand) mostly as a result of the acquisition ofpreferred investment securities of 4,000 million yen.
However, marketable securities for investments
decreased by 6,846 million yen to 16,061 million yen(USD 133,619 thousand) primarily due to a decline in
year-end market value.
Property, plant and equipment-net increased by
12.5% from the previous fiscal year to 91,147 million
yen (USD 758,294 thousand). This was mainly due tothe increases in buildings by 6,161million yen and in

Working Capital(Millions of yen)

Shareholders’ Equity(Millions of yen)

60,00090,00083,53352,06576,09950,00069,19644,82040,00065,56365,368

1999

2000

60,00035,77027,54230,00030,00020,000

9,792

10,000

0

0

1999

2000

2001

2002

2003

(Years ended March, 31)

2001

2002

2003

(Years ended March, 31)

Annual Report 2003 32

Financial Review

machinery and equipment by 8,662 million yen reflecting
the capital investments to enhance production capacity
and to increase the efficiency of production.

Liabilities
Current liabilities decreased by 16.0% from the previous
fiscal year to 88,889 million yen (USD 739,509
thousand). This was mainly a result of a decrease of
13,000 million yen in the current portion of bonds and adecrease of 11,210 million yen in the current portion of
convertible bonds which more than offset the increase incommercial paper by 7,000 million yen.
Long-term liabilities increased by 27.0% from theprevious fiscal year to 78,657 million yen (USD 654,384
thousand). This was primarily due to an increase of
19,542 million yen in long-term debt.

Shareholders’ Equity
Shareholders’ equity increased by 7,434 million yen or
9.8% to 83,533 million yen (USD 694,950 thousand).
This was due to an increase of 11,087 million yen incommon stock and additional paid-in capital as a resultof the conversion of convertible bonds and an increaseof 2,095 million yen in retained earnings which morethan offset the decreases in unrealized gains onmarketable securities for investments by 3,651 million
yen and foreign currency translation adjustments by
1,701 million yen. As a result, shareholder’s equity ratio

was 33.0% compared to 31.0% of the previous year.

Cash FlowsNet cash provided by operating activities decreased
from 7,882 million yen of the previous fiscal year to
5,622 million yen (USD 46,772 thousand).
Net cash used in investing activities increased from
14,218 million yen of the previous fiscal year to 30,108
million yen (USD 250,482 thousand). Primarily uses ofcash were purchase of property, plant and equipment.
Net cash provided by financing activities increased
from 1,268 million yen of the previous fiscal year to
11,301 million yen (USD 94,018 thousand). This was
mainly a result of an increase in long-term bank loans
and the issuance of bonds.
As a result, cash and cash equivalents decreased
by 13,392 million yen to 29,393 million yen (USD
244,534 thousand) from 42,785 million yen at the
beginning of the fiscal year.

Basic Earnings Per Share(Yen)

Return on Equity
(%)
10

120

104.4
100

8.0

8

84.3
6.4

80
6

5.1

60.8
60

46.9

4.0

4

40

2.7

32.0
2
20

0

0

1999

2000

2001

2002

2003

(Years ended March, 31)

33

1999

2000

2001

2002

2003

(Years ended March, 31)

Five-Year Summary
Nipro Corporation and its consolidated subsidiaries
Years ended March 31
Thousands of
U.S. dollars (Note 1)

Millions of yen

2003

2002

2001

2000

1999

2003

Income Statement Data:
Net Sales ............................................ ¥Medical ............................................
Pharmaceutical ................................
Glass and Materials ..........................
Supermarket ....................................
Cost of sales .......................................
Selling, general and administrative expenses ....
Operating income ................................
Medical (1) .......................................
Pharmaceutical (1) ............................
Glass and Materials (1)......................
Supermarket (1) ...............................
Income before income taxes .................
Net income ..........................................
Capital expenditures .............................
Depreciation and amortization ...............
R&D expenses .....................................

180,370
76,00921,97911,06469,560128,776
36,695
14,89914,175
1,981
1,777
1,109
8,781
5,078
20,775
8,767
2,328

¥

171,217 ¥
77,572
15,946
11,23464,764122,092
34,69014,43515,016
1,104
1,806
1,037
11,617
5,842
17,1667,215
2,553

152,072 ¥
66,413
14,12011,78456,882
110,608
31,735
9,729
11,913
844
1,773
20
6,641
3,401
14,295
6,898
3,048

143,700 ¥65,71813,47812,021
51,034
104,734
30,344
8,622
10,422
516
1,758
637
5,930
2,621
8,463
7,124
2,278

141,635
64,73011,96911,907
51,199101,965
29,328
10,342
12,272
71
1,780
888
4,440
1,793
12,3626,681
2,889$ 1,500,582
632,354
182,854
92,047578,702
1,071,348
305,283
123,951
117,928
16,481
14,7849,226
73,05342,246
172,837
72,937
19,368

Balance Sheet Data:
Total assets ......................................... ¥Property, plant and equipment-net ........
Working capital ....................................
Current liabilities ..................................
Long-term liabilities ..............................
Common stock ....................................
Additional paid-in capital .......................
Shareholders’ equity.............................

252,848
91,14727,542
88,88978,65728,66329,972
83,533¥

245,403 ¥81,029
9,792
105,764
61,952
23,11324,43576,099228,918 ¥
72,06135,77074,99583,26022,56323,886
69,196

217,455 ¥
64,49752,06575,00875,58522,56323,88665,368205,558
62,91944,82073,39864,47822,56323,88665,563$ 2,103,560
758,294
229,135
739,509654,384
238,461
249,351
694,950Yen

Per share data:
Basic earnings (2) ................................. ¥Diluted earnings (2) ...............................
Cash dividends ....................................
Shareholders’ equity.............................

84.3
78.5
32.0
1,310.7¥

104.4 ¥
92.4
47.0
1,343.7

60.8 ¥
54.3
31.0
1,236.6

U.S. dollars

46.9 ¥
42.1
34.5
1,168.2

32.0
28.1
19.0
1,171.7

Number of common shares issued .......
Number of employees (at year-end).......

63,878,505
8,029

56,670,149
7,835

55,956,987
6,818

55,956,987
6,636

55,956,987
6,064

Selected Data and Ratios:
Shareholders’ equity ratio (3) (%) ..........
Return on assets (3) (%) .......................
Return on equity (3) (%) .......................
Price earnings ratio (times) ...................

33.0
6.0
6.4
21.5

31.0
6.1
8.0
17.4

30.2
4.4
5.1
16.5

30.1
4.1
4.0
18.6

31.9
5.3
2.7
34.6

$

0.70
0.65
0.27
10.90

Note:
(1) Operating income at the operating segment level is not adjusted for intra-segment transactions. See note 13 to the consolidated financial statements.
(2) Effective April 1, 2002, the Company adopted a new accounting standard for earnings per share of common stock issued by the Accounting Standards Boardof Japan. Basic earnings and diluted earnings per Share for the year ended March 31, 2003 are computed in accordance with the new standard. Basic earningsand diluted earnings per Share for the prior years are not restated to reflect the new standard’s provision.
(3) Shareholders’ equity ratio is the ratio as of the period end of shareholders’ equity to total assets. Return on assets is the ratio of operating income for the period
to average total assets during the period. Return on equity is the ratio of net income for the period to average shareholders’ equity during the period.
Annual Report 2003 34

Consolidated Balance Sheets
Nipro Corporation and its consolidated subsidiaries
For the years ended March 31, 2003 and 2002
Thousands of U.S. dollars(Note 1)Millions of yen

2003

2002

2003

..................................................

¥ 32,540¥ 43,900

Marketable securities (Note 2 and 6) ......................................

—

15

—

Trade notes and accounts receivable......................................

42,76140,013355,749

Allowance for doubtful receivables..........................................

(201)

(238)

(1,672)Inventories (Note 3) . . . . . ............................................. . . . . . . . . . . . . .

31,21427,015

259,684

Deferred income taxes (Note 10) .............................. . . . . . . . . . . . . .

2,244

1,295

18,669Other current assets..................................... . . . . . . . . . . . . . . . . . . . . . . . . .

7,873

3,556

65,499Total current assets .......................................................

116,431

115,556

968,644

accounted for by the equity method (Note 2) ......................

6,383

7,041

53,103Marketable securities for investments (Note 2 and 6) ...............

16,061

22,907

133,619

Other investments (Note 2 and 6) ..........................................

4,574

620

38,053

Lease deposits .....................................................................

12,235

12,398

101,789

Deferred income taxes (Note 10) ............................................

175

153

1,456

Other ...................................................................................

5,842

5,699

48,602

Total investments and other assets ................................

45,27048,818376,622

Land ....................................................................................

22,45923,044

186,847

Buildings ..............................................................................

77,00470,843640,632

Machinery and equipment .....................................................

68,74060,078571,880

Construction in progress .......................................................

6,852

4,916

57,005

AssetsCurrent assets:
Cash and cash equivalents$

270,715

Investments and other assets:
Investment in unconsolidated subsidiaries and affiliate

Property, plant and equipment (Note 7):

175,055

158,881

1,456,364

Accumulated depreciation .....................................................

(83,908)(77,852)(698,070)

Property, plant and equipment-net .................................

91,14781,029758,294

Total assets ..................................................................

¥ 252,848¥ 245,403$ 2,103,560

The accompanying notes are an integral part of these statements.

35

Thousands of U.S. dollars(Note 1)Millions of yen

2003

2002

2003

Current liabilities:
Short-term bank loans (Note 4) ...........................................
Current portion of long-term debt (Note 4) ...........................
Trade notes and accounts payable .....................................
Accrued income taxes .......................................... . . . . . . . . . . . . .
Accrued expenses ................................................ . . . . . . . . . . . . .
Commercial paper (Note 4) ................................................
Other current liabilities ........................................................
Total current liabilities....................................................

¥ 29,010
9,248
27,085
2,620
5,372
7,000
8,554
88,889¥ 25,291
31,52728,028
3,523
5,137
—
12,258105,764

Long-term liabilities:
Long-term debt (Note 4).....................................................
Accrued pension and severance liabilities (Note 8) ...............
Deferred income taxes (Note 10).........................................
Other long-term liabilities ....................................................
Total long-term liabilities ...............................................

72,821
1,977
541
3,318
78,65753,279
1,731
3,570
3,372
61,952605,832
16,4484,501
27,603654,384

1,769

1,588

14,71728,663

23,113

238,461

29,972
2,851(5,407)
27,90583,984(451)

24,435
6,502(3,706)25,81076,154(55)

249,351
23,719(44,984)
232,155
698,702(3,752)

83,533¥ 252,848

76,099¥ 245,403

694,950$ 2,103,560

Liabilities and shareholders’ equity

Minority interests..................................................................
Commitments and contingent liabilities (Note 12)
Shareholders’ equity (Notes 9 and 14) :Common stock ................................................................
Authorized: 200,000,000 shares
Issued:At March31, 2002-56,670,149 shares
At March31, 2003-63,878,505 shares
Additional paid-in capital .........................................................
Unrealized gains (losses) on marketable securities for investments ...
Foreign currency translation adjustments .................................
Retained earnings...................................................................
Less cost of common shares of treasury stock..........................
Total shareholders’ equity .............................................
Total liabilities and shareholders’ equity .........................

$

241,348
76,938225,333
21,797
44,692
58,236
71,165739,509

Annual Report 2003 36

Consolidated Statements of Income
Nipro Corporation and its consolidated subsidiaries
For the years ended March 31, 2003 and 2002
Thousands of U.S. dollars(Note 1)Millions of yen

2003

2002

2003

Net sales ...............................................................................

¥ 180,370¥ 171,217$ 1,500,582

Cost of sales ........................................................................

128,776

122,092

1,071,348

Gross profit .........................................................................

51,594

49,125429,234

36,69534,690305,283

14,89914,435

123,951

Interest and dividend income ...............................................
Interest expenses (Note 4) ...................................... . . . . . . . . . . . . .

398(1,671)568(1,786)

Losses on sales and disposals of property, plant and equipment-net . . . . . .
Exchange gains (losses) .......................................................

(337)

(164)

3,311
(13,902)(2,803)(1,750)Equity in losses of affiliate .....................................................

(658)

471
(348)

(14,559)(5,474)

Gains (losses) on sales of marketable securities for investments ........

(269)

Losses on devaluation of marketable securities for investments . . . . . .

—
(629)

(418)

—
(5,233)Compensation for breach of contract ...................................

(1,178)—(9,800)Gains (losses) on derivative financial instruments-net .............
Other, net ...........................................................................

—
(293)

72
(944)

—
(2,438)

Income before income taxes ...............................................

8,781

11,61773,053

4,958(1,341)

5,286

Deferred .............................................................................

448

41,248(11,156)

Minority interests .................................................................

(86)

(41)

(715)

Selling, general and administrative expenses
Operating income ...............................................................
Other income (expenses):

Income taxes (Note 10):
Current ...............................................................................

Net income........................................................................

¥

¥

5,078

5,842

$

42,246

U.S. dollars(Note 1)

Yen

2003

2002

2003

Amounts per common share:
Basic earnings ............................................................ .....

84.3

¥

104.4

$

0.70

78.5

92.4

0.65

Cash dividends ........................................................... .....

32.0

47.0

0.27

The accompanying notes are an integral part of these statements.

37¥

Diluted earnings ...............................................................

Consolidated Statements of Shareholders‘ Equity
Nipro Corporation and its consolidated subsidiaries
For the years ended March 31, 2003 and 2002
Thousands of U.S. dollars(Note 1)Millions of yen

2003

2002

2003

¥ 23,113¥ 22,563$ 192,288

Conversion of convertible bonds ....................... . . . . . . . . . . . . . . . . . . . .
(2003-7,208,356 shares; 2002-713,162 shares)

5,550

550

46,173

Closing balance ...................................................................
(2003-63,878,505 shares; 2002-56,670,149 shares)¥ 28,663¥ 23,113$ 238,461¥ 24,435¥ 23,886$ 203,286

Conversion of convertible bonds ...........................................

5,537

548

46,065

Profit from merger ................................................................

—

1

—

Closing balance....................................................................

¥ 29,972¥ 24,435$ 249,351

Opening balance ..................................................................

¥ 25,810—¥ 22,341(214)$ 214,725

Decrease due to merger .......................................................
Net income ..........................................................................
Cash dividends paid .............................................................

5,078(2,815)

5,842(2,070)42,246(23,419)

Bonuses to directors and statutory auditors ..........................

(168)

(89)

(1,397)

Closing balance....................................................................

¥ 27,905¥ 25,810$ 232,155

Common stock (Note 9):Opening balance ..................................................................
(2003-56,670,149 shares; 2002-55,956,987 shares)
Add;

Additional paid-in capital (Note 9):Opening balance ..................................................................
Add;

Retained earnings :—The accompanying notes are an integral part of these statements.

Annual Report 2003 38

Consolidated Statements of Cash Flows
Nipro Corporation and its consolidated subsidiaries
For the years ended March 31, 2003 and 2002
Thousands of U.S. dollars(Note 1)Millions of yen

Operating activities:
Net income ........................................................................
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization .........................................
Equity in losses of affiliate ................................................
Allowance for doubtful receivables ...................................
Losses on devaluation of marketable securities .................
Provision for deferred taxes .............................................
Exchange (gains)losses ....................................................
Losses on sales and disposals of property, plant and equipment-net..
Losses(gains) on derivative financial instruments-net .........
Other, net .......................................................................
Changes in operating assets and liabilities:
Trade receivables ............................................................
Inventories ......................................................................
Other current assets ........................................................
Trade payables ...............................................................
Accrued income taxes .....................................................
Other current liabilities .....................................................
Total adjustments ........................................................
Net cash provided by operating activities ......................
Investing activities:
Purchases of property, plant and equipment .....................
Proceeds from sales of property, plant and equipment ......
Proceeds from sales of marketable securities ...................
Purchases of securities ....................................................
Increase in investment in unconsolidated subsidiaries and affiliate ..
Deposits (Over three months) ...........................................
Other, net .......................................................................
Net cash used in investing activities ..............................
Financing activities:
Net (decrease) increase in short-term loans ......................
Proceeds from long-term debt .........................................
Repayment of long-term debt ..........................................
Proceeds from issuance of bonds ....................................
Repayment of bonds*.......................................................
Net increase in commercial paper ....................................
Cash dividends paid ........................................................
Bonuses to directors and statutory auditors .....................
Other, net .......................................................................
Net cash provided by financing activities .......................
Effect of exchange rate changes on cash and cash equivalents ...
Net decrease in cash and cash equivalents .......................
Cash and cash equivalents at beginning of year (Note 2) ..
Cash and cash equivalents at end of year (Note 2) ............

2003

2002

2003

¥ 5,078¥ 5,842

8,767
658
(16)
629
(1,341)
1,039
337
—
383

7,215
348
233
418
448
(907)
164
(72)
672

72,937
5,474
(133)
5,233
(11,156)
8,644
2,803
—
3,186

(3,884)(4,517)(676)(1,004)
(903)
1,072
544
5,622

(7,536)(2,710)
(526)
2,223
1,112
958
2,040
7,882

(32,313)(37,579)(5,624)(8,353)(7,512)
8,919
4,526
46,772(23,853)143
5(4,061)—(2,120)(222)(30,108)(11,699)
259
343(1,272)(3,566)1,968(251)(14,218)(198,444)
1,190
42(33,785)—(17,638)(1,847)(250,482)

3,719
23,598(8,181)
5,967(17,230)
7,000(2,810)(168)(594)
11,301(207)(13,392)
42,785¥ 29,393(2,596)
12,305(5,990)———(2,066)
(89)
(296)
1,268
700
(4,368)47,153¥ 42,785

30,940196,323(68,062)
49,642(143,344)
58,236(23,378)(1,397)(4,942)
94,018(1,722)(111,414)
355,948$ 244,534$

42,246* Repayment of bonds includes ¥4,108 million that was eventually reimbursed to the Company on April 15, 2003, because conversion of convertible bonds occurred
after the Company advanced the repayment money to a bank on March 26, 2003.
The accompanying notes are an integral part of these statements.

39

Notes to Consolidated Financial Statements
Nipro Corporation and its consolidated subsidiaries

1.Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements are prepared fromthe consolidated financial statements issued for domestic reporting purposes.
Nipro Corporation (the “Company”) and its domestic consolidated
subsidiaries maintain their accounts and records in accordance withthe provisions set forth in the Japanese Commercial Code and in conformity
with generally accepted accounting principles and practices in Japan.
Its foreign subsidiaries maintain their accounts in conformity with thoseof each country of their domicile.
In preparing the accompanying consolidated financial statements, certain
reclassifications have been made to the consolidated financial statements
issued domestically in order to present them in a form which is more familiar
to readers outside Japan.
The presentation of consolidated statements of shareholders’ equity is

not required for domestic reporting purposes. It is, however, presented herein
for the readers’ convenience.
In addition, the notes to consolidated financial statements include
additional information which is not required under generally accepted
accounting principles and practices in Japan. Certain reclassifications
have been made to the 2002 amounts to conform with the 2003
presentation.
The financial statements presented herein are expressed in Japanese
yen and, solely for the convenience of the reader, have been translated
into the United States dollars at the rate of ¥120.20=U.S. $1, theapproximate exchange rate on March 31, 2003. These translations should
not be construed as representations that the Japanese yen amounts
actually are, have been or could be converted into U.S. dollar amounts.

2.Summary of Significant Accounting Policies(a ) Basis of Consolidation
The consolidated financial statements include the accounts of theCompany and the following significant subsidiaries and affiliate
accounted for by the equity method;
Nipro Medical Industries, Ltd.
Nipro (Thailand) Corporation Ltd.
Fuzhou Nipro Co., Ltd.
Nipro (Shanghai) Co., Ltd.
Nipro Medical LTDA.
Nipro Europe N.V.
Nipro Medical Corporation
Nipro Medical Panama S.A.
Nipro Medica de Mexico S.A. DE C.V.
Hishiyama Pharmaceutical Co., Ltd.*
Shinwa Shoji Co., Ltd.
Shanghai Nissho Vacuum Flask Refill Co., Ltd.
Nissho Corporation
Nissho Drug Co., Ltd.
Bipha Corporation*** On April 1, 2003, Hishiyama Pharmaceutical Co., Ltd. changed its corporate name “Nipro Pharma
Corporation”.
* * Affiliate applied equity method

Investment in unconsolidated subsidiaries and affiliates (20% to 50%
owned) are stated at cost and the equity method is not applied
for the valuation of such investments since they are considered immaterial
in the aggregate. The difference between the cost of investments in
subsidiaries and affiliates and the equity in their net assets at datesof acquisition in being amortized over five years.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profit included in assets
resulting from transactions within the Company and its consolidated
subsidiaries is eliminated.
( b ) Translation of Foreign Currencies
Balance sheets of consolidated overseas subsidiaries are translated into
Japanese yen at the current exchange rate as of the balance sheet date
except for shareholders’ equity, which is translated at the historical rate.
Income statements of consolidated overseas subsidiaries are translated
into Japanese yen at the annual average exchange rate. Resulting
translation adjustments are shown as “Foreign currency translation
adjustments” in a separate component of shareholders’ equity.

( c ) Investments in Securities
Marketable securities, marketable securities for investments and otherinvestments are classified and accounted for, depending on
management’s intent, as follows:i ) held-to-maturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity are reported
at amortized cost; andii ) available-for-sale securities, which are not classified as
the aforementioned securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate
component of shareholders’ equity.
Non-marketable available-for-sale securities are stated at cost
determined by the average method.
For other than temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
( d ) Inventories
Inventories of the medical, pharmaceutical and glass and materials
segments are stated at the average cost, except for certain inventories
stated at the first-in, first-out cost. Inventories of the supermarket segment
are stated at the retail inventory method.
( e ) Depreciation
Depreciation of property, plant and equipment of the Company and its
domestic subsidiaries is computed principally by the declining-balancemethod. The straight-line method is applied to buildings acquired by
the domestic companies after April 1, 1998, and is principally applied tothe property, plant and equipment of foreign subsidiaries.
The range of useful lives is principally from 31 to 50 years
for buildings and from 7 to 12 years for machinery and equipment.
( f ) Income Taxes
The provision for income taxes is based on income for financial statement
purpose. The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
( g ) Leases
Finance leases which do not transfer ownership are accounted for in
the same manner as operating leases in accordance with Japanese
accounting standards for leases.

Annual Report 2003 40

Notes to Consolidated Financial Statements( h ) Amounts per Common Share
Effective April 1, 2002, the Company adopted a new accounting standard
for earnings per share of common stock issued by the AccountingStandards Board of Japan. Under the new standard, basic earnings
per share is computed by dividing net income available to commonshareholders, which is more precisely computed than under previous
practices, by the weighted-average number of common shares
outstanding for the period, retroactively adjusted for stock splits.
Under the previous practice, the basic earnings per share iscomputed by dividing net income by the weighted-average numberof common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities were exercised or converted into common stock.
Diluted earnings per share of common stock assumes full conversionof the outstanding convertible notes and bonds at the beginningof the year (or at the time of issuance) with an applicable adjustment
for related interest expense, net of tax, and full exercise of outstanding
warrants.
Basic earnings and diluted earnings per share for the year ended
March 31, 2003 are computed in accordance with the new standard’s
provision.
Basic earnings and diluted earnings per share for the year ended
March 31, 2002 are not restated to reflect the new standard’s provision.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective years including dividends to be paid after the endof the year.

(i) Consolidated Statements of Cash Flow
In the consolidated statements of the cash flows, cash and cash
equivalents include all highly liquid investments, generally with original
maturities of three months or less, that are readily convertible to cash.
Balances of cash and cash equivalents in the consolidated
statements of cash flows are reconciled with those in the consolidatedbalance sheets as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2003

2002

2003

Cash and cash equivalents ............... ¥ 32,540 ¥ 43,900(3,147)(1,115)Time deposits (Over three months) ........
Cash and cash equivalents at end of year .. ¥ 29,393 ¥ 42,785
Cash and cash equivalents at beginning of year .. ¥ 42,785 ¥ 47,153$ 270,715(26,181)$ 244,534$ 355,948

Additional cash flow information is as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen

2003

2002

2003

Common stock ................... ¥ 5,550
Additional paid-in capital ........
5,537

¥ 550
548

$ 46,173
46,065

Non-cash financing activities:
Conversion of convertible bonds into:(j) Appropriation of Retained Earnings
Appropriation of retained earnings is accounted for and reflected in
the accompanying consolidated financial statements when approvedby the shareholders.

3.Inventories
Inventories consisted of the following:
Millions of yen

2003
Food and groceries ........................................ .............................
Household goods .......................................................................
Medicine (in stores)......................................................................
Finished goods..........................................................................
Raw materials ...........................................................................
Work in process .........................................................................
Packing and other.......................................................................

41

¥

689
2,305
841
20,413
3,484
2,407
1,075
¥ 31,214

Thousands of U.S. dollars (Note 1)

2002
¥

625
1,906
715
17,751
2,757
2,202
1,059
¥ 27,015

2003
$

5,732
19,176
6,997
169,825
28,98520,0258,944$ 259,684

4.Short-Term Loans and Long-Term Debt
Short-term loans comprised overdrafts, promissory notes.
The interest rates of short-term bank loans and commercial paper as of March 31, 2003 and 2002 ranged from 0.058% to 1.875%
and from 0.390% to 1.625%, respectively.
Long-term debt comprised the following:Thousands of U.S. dollars (Note 1)

Millions of yen

1.0% convertible bonds due 2003 ...................................................
2.0% unsecured bonds due 2002 ...................................................
2.325% unsecured bonds due 2004 ................................................
3.2% unsecured bonds due 2008 ...................................................
3.0% unsecured bonds due 2006 ...................................................
0.76% fixed rate bonds due 2003....................................................
0.82% fixed rate bonds due 2003....................................................
0.67% unsecured bonds due 2006 ..................................................
1.07% unsecured bonds due 2010 ..................................................
Loans, primarily from banks due 2003-2018, with interest ranging from 0.499% to 10.64% ....
Less current portion of long-term debt ...............................................
In April 1994, the Company issued ¥14,000 million ($116,473 thousand)of 1.0% convertible bonds due 2003, which are convertible into sharesof common stock of the Company at the option of the holders on or
before March 28, 2003. At March 31, 2003, such convertible bonds wereconverted into common stock or redeemed.
In November 1997, the Company issued ¥10,000 million ($83,195
thousand) of 2.0% unsecured bonds due 2002.
In November 1997, the Company issued ¥10,000 million ($83,195
thousand) of 2.325% unsecured bonds due 2004.
In June 1998, the Company issued ¥10,000 million ($83,195
thousand) of 3.2% unsecured bonds due 2008.

2003

2002

2003

—
—
¥ 10,000
10,00010,000
—
2,000
3,000
3,000
44,069(9,248)¥ 72,821¥ 11,210
10,00010,00010,00010,000
3,000
2,000
—
—
28,596(31,527)¥ 53,279——$ 83,195
83,19583,195—
16,63824,95824,958366,631(76,938)$ 605,832

In June 1998, the Company issued ¥10,000 million ($83,195
thousand) of 3.0% unsecured bonds due 2006.
In February 2000, the Company issued ¥3,000 million ($24,958
thousand) of 0.76% fixed rate bonds due 2003.
In April 2000, the Company issued ¥2,000 million ($16,638
thousand) of 0.82% fixed rate bonds due 2003.
In March 2003, the Company issued ¥3,000 million ($24,958
thousand) of 0.67% fixed rate bonds due 2006.
In March 2003, the Company issued ¥3,000 million ($24,958
thousand) of 1.07% fixed rate bonds due 2010.

The aggregate annual maturities of long-term debt outstanding at March 31, 2003 are as follows:2004 ...................................................................................
2005 ...................................................................................
2006 ...................................................................................
2007 and thereafter ...................................................................
As is customary in Japan, long-term and short-term bank loans are madeunder general agreements which provide that additional securities
and guarantees for present and future indebtedness will be given undercertain circumstances at the request of the bank, and that any collateralso furnished will be applicable to all indebtedness due to the bank.

Thousands of U.S. dollars (Note 1)

Millions of yen

Years ending March 31

2003

2003

¥ 9,248
17,5099,915
45,397¥ 82,069$ 76,938
145,666
82,487
377,679$ 682,770

In addition, the agreements provide that the bank has the right to offset
cash deposits against any long-term and short-term bank loan that
becomes due, and in case of default and certain other specified events,
against all other loans payable to the bank. Such rights have never been
exercised by banks against the Company or its consolidated subsidiaries.

5.Leases
Information relating to finance leases, except for which the ownership of the leased assets is considered to be transferred to the lessee.
The pro forma information of leased assets under finance leases that do not transfer ownership of the leased property to the lessee on
an “as if capitalized” basis for the years ended March 31, 2003 and 2002 was as follows:
Millions of yen

2003
Acquisition cost ......................................................................
Accumulated depreciation ..........................................................
Net ...................................................................................

¥
¥

9,687
4,772
4,915

Thousands of U.S. dollars (Note 1)

2002
¥
¥

9,313
3,873
5,440

2003
$
$

80,591
39,70140,890

Annual Report 2003 42

Notes to Consolidated Financial Statements

Millions of yen

Payments due within one year ......................................................
Payments due after one year ........................................................

Thousands of U.S. dollars (Note 1)

2003

2002

2003

¥ 1,477
4,023¥ 5,500¥ 1,503
4,675¥ 6,178$ 12,288
33,469$ 45,757

Lease payments under such leases for the year ended March 31, 2003 and 2002, were ¥1,749 million (U.S. $14,551 thousand) and ¥1,625 million, respectively.

6.Marketable securities, Marketable securities for investments and Other investments
Marketable securities, marketable securities for investments and other investments as of March 31, 2003 and 2002 consisted of the following:Thousands of U.S. dollars (Note 1)

Millions of yen

2003
Current-debt securities ..............................................................
Non-current:
Marketable:
Marketable equity securities ...................................................
Marketable debt securities .....................................................

Sub total ........................................................................
Other investments: non-marketable equity securities ...........................
Total .........................................................................

2002

2003

15

—

¥ 22,393
514¥ 22,907¥
620¥ 23,527$ 130,749
2,870$ 133,619$ 38,053$ 171,672¥—¥ 15,716
345¥ 16,061¥ 4,574¥ 20,635

The fair value of other investments, which are classified as available-for-sale securities, was not readily determinable as of March 31, 2003 and 2002.
The carrying amounts and aggregate fair values of marketable securities and marketable securities for investments as of March 31, 2003 and 2002 were as follows:
Millions of yen

2003
Cost

Available-for-sale securities
Equity securities ......................................................
Debt securities .......................................................
Total ...............................................................

Unrealized Gains¥ 12,402
368¥ 12,770¥¥

Unrealized Losses

4,344
—
4,344

¥
¥

Fair Value

1,030
23
1,053

¥ 15,716
345¥ 16,061

Thousands of U.S. dollars (Note 1)

2003
Cost

Available-for-sale securities
Equity securities ......................................................
Debt securities .......................................................
Total ...............................................................

Unrealized Gains$ 103,178
3,062$ 106,240$

Unrealized Losses

36,140—36,140$$$Fair Value

8,569
192
8,761

$ 130,749
2,870$ 133,619

Millions of yen

2002
Cost

Available-for-sale securities
Equity securities ......................................................
Debt securities .......................................................
Total ...............................................................

¥¥

Unrealized Gains

12,946839
13,785¥¥

Unrealized Losses

9,969
—
9,969

¥
¥

Fair Value

522
310
832

¥ 22,393
529¥ 22,922

Proceeds from sales of securities and gross realized gains (losses) on those sales for years ended March 31, 2003 and 2002 were as follows:
Millions of yen

2003
Proceeds ..............................................................................
Gains (losses) on sales ................................................................

43

¥

5
—

Thousands of U.S. dollars (Note 1)

2002
¥

343
(269)

2003
$

42
—

7.Pledged Assets
The following assets were pledged as collateral:
Millions of yen

Thousands of U.S. dollars (Note 1)

2003
Land ....................................................................................
Buildings ...............................................................................
Notes receivable .......................................................................
Certificate of deposit ...................................................................

2002

¥

5,175
8,434
4,245
237
¥ 18,091

¥

6,415
9,504
2,152
—
¥ 18,071

2003$

43,05370,16635,3161,972$ 150,507

Short-term bank loans and long-term debt at March 31, 2003 and 2002 with assets pledged as collateral were as follows:
Millions of yen

2003
Short-term bank loans .................................................................
Long-term debt ........................................................................
Total ...............................................................................

¥

5,673
3,863
9,536

¥

Thousands of U.S. dollars (Note 1)

2002
¥

3,841
4,978
8,819

¥

2003
$
$

47,19632,13879,3348. Accrued Pension and Severance Liabilities
The Company and certain consolidated subsidiaries have defined benefit
pension plans and unfunded retirement benefit plans for employees.
Effective April 1, 2000, the Company and its consolidated subsidiaries
adopted a new accounting standard for employees’ retirement benefits andaccounted for the liability for retirement benefits based on the projected

benefit obligations and plan assets at the balance sheet date.
The transitional obligation of ¥519 million determined as of April 1, 2000 isamortized over five years and presented as other expense in the income
statement.

The following table sets forth the changes in projected benefit obligation, plan assets and funded status of the Company and its consolidated subsidiaries
at March 31, 2003 and 2002.
Millions of yen

1) Projected benefit obligation at end of year .........................................
2) Fair value of plan assets at end of year.............................................
3) Projected benefit obligation in excess of plan assets 1) + 2) ......................
4) Unrecognized actuarial (gain) loss .................................................
5) Transition obligation at date of adoption .........................................
6) Prepaid pension cost ...............................................................
7) Accrued pension and severance liabilities 3) + 4) + 5) + 6) ........................

Thousands of U.S. dollars (Note 1)

2003

2002

2003

¥ (8,678)
4,884¥ (3,794)
1,609
208
—
¥ (1,977)¥ (7,755)
4,916¥ (2,839)797
311—¥ (1,731)$ (72,196)
40,632$ (31,564)
13,3861,730—$ (16,448)

The breakdown of net pension and severance costs for the years ended March 31, 2003 and 2002 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2003
Service cost ..........................................................................
Interest cost ..................... .....................................................
Expected return on plan assets .....................................................
Amortization:
Retirement benefit obligation at transition .......................................
Actuarial losses ..................................................................
Net periodic benefit cost ............................................................

¥

¥

535
231
(180)
104
193
883

2002
¥

¥

2003

538
224
(174)

$ 4,451
1,922(1,498)

104
166
858

865
1,606
$ 7,346

The assumptions used in the accounting for the adove benefit plans were as follows:

Discount rate .................................................................................
Expected rate of return on plan assets .....................................................
Amortization period for transition obligation at date of adoption ...........................
Amortization period for actuarial losses .....................................................

2003

2002

Primarily3.0% at start of year
and primarily 2.5% at year- end
1.5~4.0%
5 years
5 years

Primarily 3.0%
1.5~4.0%
5 years
5 years

Annual Report 2003 44

Notes to Consolidated Financial Statements

9.Shareholders’ Equity
In connection with conversions of convertible bonds, 713,162 sharesof common stock were issued for the year ended March 31, 2002
and 7,208,356 shares of common stock were issued for the year ended
March 31, 2003.
Conversion of convertible bonds into common stock is accounted
for in accordance with the provisions of the Japanese Commercial Codeby crediting approximately one - half of the conversion proceeds tothe common stock account and the remainder to the additional paid-in

capital account.
The amount of retained earnings available for dividends under
the Japanese Commercial Code was ¥33,429 million ($278,111 thousand)as of March 31, 2003, based on the amount recorded in the parent
company’s general books of account. In addition to the provision that
requires an appropriation for a legal reserve in connection with the cash
payment, the Japanese Commercial Code imposes certain limitations on
the amount of retained earnings available for dividends.

10. Income Taxes
The Company and its domestic subsidiaries are subject to Japanese national
and local taxes based on income, which, in aggregate, resulted in a normal
statutory rate of 41.9% in the year ended March 31, 2002.
An amendment to the Japanese tax regulations was enacted on March
31, 2003, and the normal statutory rate was reduced from approximately

41.9% to 40.5%, effective from April 1, 2004. As a result of this amendment,
for the year ended March 31, 2003, deferred income tax was calculated at
the rate of 41.9% for current portion of temporary differences and 40.5%
for non-current portion.

The significant components of deferred tax assets and liabilities were as follows:
Thousands of U.S. dollars (Note 1)

Millions of yen

2003
Deferred tax assets:
Operating loss carried forward for tax purposes ................................
Intercompany profits .............................................................
Allowance for reduction in price .................................................
Employees’ retirement benefits ..................................................
Other .............................................................................
Total deferred tax assets .......................................................
Deferred tax liabilities:
Valuation account of marketable securities .....................................
Reserve for overseas investments ..............................................
Other .............................................................................
Total deferred tax liabilities .....................................................
Net deferred tax assets (liabilities) ..................................................

¥

¥
¥

¥
¥

2002

424
600
570
569
1,400
3,563

¥

1,354
129
202
1,685
1,878

¥

¥

2003

24
543
392
458
1,076
2,493

$

3,527
4,992
4,742
4,734
11,647$ 29,642

4,022
258
335
¥ 4,615¥ (2,122)$ 11,265
1,073
1,680
$ 14,018$ 15,624

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

2002
Statutory tax rate ..........................................................................................................................
Expenses not deductible for tax purposes ............................................................................................
Non-taxable dividend income ..........................................................................................................
Loss in subsidiaries ....................................................................................................................
Other ....................................................................................................................................
Effective tax rate ...........................................................................................................................

41.9%
1.4
(0.5)
4.1
2.5
49.4%

For the year ended March 31, 2003, there were no significant reconciling items between the statutory tax rate and the effective tax rate.

11.Research and Development Expenses
Research and development expenses for the years ended March 31, 2003 and 2002 were ¥2,328 million ($ 19,368 thousand) and ¥2,553 million, respectively.

12. Commitments and Contingent Liabilities
The Company and its consolidated subsidiaries have the following commitments and contingent liabilities:
Millions of yen

2003
Liabilities for guarantees ......................................... ...................
Notes receivable discounted .......................................................
Export drafts discounted ...........................................................

¥

¥

45

3,273
—
35
3,308

¥

¥

Thousands of U.S. dollars (Note 1)

2002

2003

3,784
1,599
11
5,394

$ 27,230—291$ 27,521

13. Segment Reporting
The Company and its consolidated subsidiaries are primarily engaged in thebusiness consisting of four major segments: medical equipment,
pharmaceutical products, glass and material products and supermarket.
The Company is organized into operating segments based on themarket nature of products.
The medical segment manufactures and sells disposable medical
equipment. The medical equipment sold includes dialyzers, dialysis-related
devices, and injection-related products.
The pharmaceutical segment manufactures and sells a rangeof pharmaceutical products and devices, such as prescribed specialized

and diagnostic products for hospital use, and medical equipment
incorporating solutions and drugs, such as pre-filled syringes and infusion kits.
The glass and materials segment sells internal glass sections for vacuum
flasks, glass tubes for ampoule and vial production, glass tube vials,
and other glass products.
The supermarket segment encompasses a supermarket businessand a drugstore business. The supermarket segment sells fresh and daily
foods, general grocery, household goods, medicine and other merchandise.
The sales of “Other” include the sales of machinery for manufacture of
medical equipment and real estate rental income.

Business segment information for the years ended March 31, 2003 and 2002, was as follows:
Millions of yen

2003
Medical

Net sales:
Outside ................................. ¥ 76,009
Intersegment ............................
534
Total ..................................... ¥ 76,543
Cost and expenses ........................ 62,368
Operating income (loss) ................... ¥ 14,175
Identifiable assets .......................... ¥ 84,726
3,650
Depreciation ...............................
7,853
Capital expenditures ......................

Pharmaceutical

Glass &
Materials

Supermarket

Other

Total

¥ 21,979—¥ 21,979
19,998¥ 1,981¥ 51,192
2,828
9,646

¥ 11,064
2,473¥ 13,537
11,760¥ 1,777¥ 13,604
559
1,476¥ 69,560—¥ 69,560
68,451¥ 1,109¥ 41,879
1,152
1,327

¥ 1,758668¥ 2,4262,278¥
148¥ 2,04440
70¥180,370
3,675¥184,045
164,855¥ 19,190¥193,445
8,229
20,372Eliminations /Corporate

Consolidated¥180,370——¥ (3,675)¥ (3,675) ¥180,370
616 (1) 165,471¥ (4,291) ¥ 14,899¥ 59,403 (2) ¥252,848
538
8,767
403
20,775

Thousands of U.S. dollars (Note 1)

2003
Medical

Net sales:
Outside ................................. $632,354
Intersegment ...........................
4,443
Total .................................... $636,797
Cost and expenses ....................... 518,869
Operating income (loss) ................... $117,928
Identifiable assets ......................... $704,875
Depreciation ...............................
30,366
Capital expenditures ......................
65,333Eliminations /Corporate

Pharmaceutical

Glass &
Materials

Supermarket

Other

Total

$182,854—$182,854
166,373$ 16,481$ 92,047
20,574$112,621
97,837$ 14,784$578,702—$578,702
569,476$ 9,226$ 14,625
5,557$ 20,182
18,951$ 1,231$1,500,582
30,574$1,531,156
1,371,506$ 159,650— $1,500,582—$ (30,574)$ (30,574) $1,500,582
5,125 (1) 1,376,631$ (35,699) $ 123,951$425,890
23,52780,250$113,178
4,651
12,279$348,411
9,584
11,040$ 17,005
333
582$1,609,359
68,461
169,484$494,201 (2) $2,103,560
4,476
72,937
3,353
172,837

Consolidated

Millions of yen

2002
Net sales:
Outside ................................
Intersegment ...........................
Total ....................................
Cost and expenses .......................
Operating income (loss) ..................
Identifiable assets .........................
Depreciation ..............................
Capital expenditures .....................

MedicalPharmaceutical

Glass &
Materials¥ 77,572
16¥ 77,588
62,572¥ 15,016¥ 81,672
3,151
3,825

¥ 15,946—¥ 15,946
14,842¥ 1,104¥ 41,162
1,802
12,098¥ 11,234
1,380¥ 12,614
10,808¥ 1,806¥ 12,904
398
303

Supermarket

Other

Total

¥ 64,764—¥ 64,764
63,727¥ 1,037¥ 40,166
1,234
386¥ 1,701637¥ 2,338
2,223¥
115¥ 2,659
64
33¥171,217
2,033¥173,250
154,172¥ 19,078
178,563
6,649
16,645

Eliminations /Corporate—¥ (2,033)¥ (2,033)
2,610 (1)¥ (4,643)¥ 66,840 (2)566521Consolidated¥171,217—¥171,217
156,782¥ 14,435¥245,403
7,215
17,166Note:(1) Cost and expense of “Eliminations and Corporate” for the years ended March 31, 2003 and 2002 included unallocated corporate costs of ¥4,291 million($35,699 thousand) and ¥4,643 million, respectively. The unallocated corporate costs consisted primarily of research and development costs and headquarters
administration costs.
(2) Assets of “Eliminations and Corporate” at March 31, 2003 and 2002 included ¥59,673 million ($496,448 thousand) and ¥67,307 million of corporate assets,
respectively, consisting primarily of cash and cash equivalents, investments in securities, research and development-related equipment and headquarters
administration-related assets.
Annual Report 2003 46

Notes to Consolidated Financial Statements

The information by geographic area for the years ended March 31, 2003 and 2002, was as follows:
Millions of yen

2003
Japan

Net sales:
Outside ...................................................
Intersegment .............................................
Total ......................................................
Cost and expenses .........................................
Operating income (loss) ....................................
Identifiable assets ...........................................

¥ 168,848
8,801¥ 177,649
159,550¥ 18,099¥ 172,740

¥
¥
¥
¥

4,545
419
4,964
4,711
253
4,840

Southeast
Asia

EuropeAmerica

¥
¥
¥
¥

5,360
34
5,394
5,239
155
3,076

¥

1,617
8,235
¥ 9,852
8,967¥
885¥ 18,119

Eliminations /Corporate—¥ (17,489)¥ (17,489)(12,996) (1)¥ (4,493)¥ 54,073 (2)Consolidated¥ 180,370—¥ 180,370
165,471¥ 14,899¥ 252,848

Thousands of U.S. dollars (Note 1)

2003
Net sales:
Outside ...................................................
Intersegment .............................................
Total ......................................................
Cost and expenses .........................................
Operating income (loss) ....................................
Identifiable assets ...........................................

Japan

America

EuropeSoutheast
Asia

Eliminations /Corporate

Consolidated$1,404,725
73,220$1,477,945
1,327,371$ 150,574$1,437,105$ 37,812
3,486$ 41,298
39,193$ 2,105$ 40,266$ 44,592
283$ 44,875
43,586$ 1,289$ 25,590$ 13,453
68,511$ 81,964
74,601$ 7,363$150,740—$ (145,500)$ (145,500)(108,120) (1)$ (37,380)$ 449,859 (2)$1,500,582—$1,500,582
1,376,631$ 123,951$2,103,560

Eliminations /Corporate

Consolidated

Millions of yen

2002
Japan

Net sales:
Outside ..................................................... ¥160,058
Intersegment ...............................................
9,186
Total ........................................................ ¥169,244
Cost and expenses ............................................ 150,912
Operating income (loss) ....................................... ¥ 18,332
Identifiable assets .............................................. ¥157,557

America

EuropeSoutheastAsia¥ 4,681394¥ 5,075
5,404¥ (329)¥ 5,224¥ 4,624120¥ 4,7445,726¥ (982)¥ 3,903¥ 1,854
8,415¥ 10,269
8,274¥ 1,995¥ 17,983—¥ (18,115)¥ (18,115)(13,534) (1)¥ (4,581)¥ 60,736 (2)¥171,217—¥171,217
156,782¥ 14,435¥245,403

Note:(1) Cost and expense of “Eliminations and Corporate” for the years ended March 31, 2003 and 2002 included unallocated corporate costs of ¥4,291 million($35,699 thousand) and ¥4,643 million, respectively. The unallocated corporate costs consisted primarily of research and development costs and headquarters
administration costs.
(2) Assets of “Eliminations and Corporate” at March 31, 2003 and 2002 included ¥59,673 million ($496,448 thousand) and ¥67,307 million of corporate assets,
respectively, consisting primarily of cash and cash equivalents, investments in securities, research and development-related equipment and headquarters
administration-related assets.
(3) The main countries of each geographic area are as follows:.America: The United States of America and Brazil.Europe: Belgium.Asia: China and Thailand

47

Sales to foreign customers were as follows:
Millions of yen

2003
America

Export sales and sales byoverseas subsidiaries ......................... ¥ 19,032
Percentage of such sales against
10.6%
consolidated net sales ........................

Europe¥ 17,364

¥

9.6%

2002
Asia

Total

America

Europe

Asia

Total

5,427

¥ 41,823¥ 22,429¥ 17,181¥ 5,005¥ 44,615

3.0%

23.2%

13.1%

10.1%

2.9%

26.1%

Thousands of U.S. dollars (Note 1)

2003
America

Europe

Asia

Total

Export sales and sales byoverseas subsidiaries ......................... $158,336$144,459$ 45,150$347,945

14. Subsequent Event(1) The following appropriation of retained earnings was approved by the Shareholders’ Meeting held on June 27, 2003:
Millions of yen

Cash dividends paid .........................................................................
Bonuses to directors and statutory auditors ...............................................

¥

700
108

Thousands of U.S. dollars (Note 1)

$

5,824
899

(2) On July 18, 2003, the Company issued Zero Coupon Convertible Bonds due 2023 (the “Bonds”) as follows.

Total amount of issue of the Bonds: ¥14,000 million ($116,473 thousand)Issue price of the Bonds:
100 per centOffer price of the Bonds:
102.5 per centCoupon:Zero
Date of payment:
July 18, 2003
Maturity of the Bonds:
July 31, 2023
Use of proceeds:
The net proceeds of the Bonds will be applied primarily towards
increasing the production capacity of kit products throughan expansion of the Odate plant of Nipro Pharma Corporation,other capital expenditure and general corporate purposes.
Exercise Period:
Each Bondholder is entitled to exercise the Stock Acquisition

Right in respect of any Bonds to acquire the shares of the common
stock of the Company (“Shares”) on and after August 18, 2003, up to
and including, July 18, 2023 at the conversion price of ¥2,300,
subject to adjustment under certain defined events.
Issuer’s Call Option:
The Company may redeem all, but not some only, of the Bonds thenoutstanding for cash at any time on or after July 31, 2006, at 100%of their principal amount.
Bondholder’s Put Option:
A Bondholder may require the Company to redeem all or a portionof their Bonds on July 31, 2006, July 31, 2009, July 31, 2013,
and July 31, 2018 at 100% of their principal amount.

Annual Report 2003 48

Report of Independent Certified Public Accountants on
The Consolidated Financial Statements

To the Board of Directorsof Nipro Corporation

We have audited the accompanying consolidated balance sheets of Nipro Corporation and consolidated
subsidiaries as of March 31, 2002 and 2003, and the related consolidated statements of income,shareholders’ equity, and cash flows for the years then ended, all expressed in Japanese yen.
These consolidated financial statements are the responsibility of Nipro Corporation’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards, procedures and practices generally
accepted and applied in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Nipro Corporation and consolidated subsidiaries as of March
31, 2002 and 2003 and the consolidated results of their operations and their cash flows for the years thenended in conformity with accounting principles and practices generally accepted in Japan.

Osaka, Japan
July 31, 2003
Tomei Audit Corporation

49

Corporate Information (As of March 31, 2003)
Common Stock
Authorized
200,000,000 shares
Issued63,878,505 shares
Outstanding
63,645,860 shares
Number of Shareholders
7,425

Date of Establishment
July 8, 1954
Head Office
3-9-3 Honjo-nishi, Kita-ku, Osaka 531-8510, Japan
Telephone: +81-6-6372-2331
Facsimile : +81-6-6375-0669

Stock Listings
Tokyo Stock Exchange, Osaka Securities Exchange
Ticker Codes: 8086

Tokyo Office
4-3-4 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan
Telephone: +81-3-5684-5611
Facsimile : +81-3-5684-5610

Transfer AgentThe UFJ Trust and Banking Co., Ltd.
6-3, Fushimi-machi 3-chome, Chuo-ku, Osaka 541-8502, Japan

Number of Employees
Parent company ............................................. 1,761
Consolidated subsidiaries ..................................... 6,268
Total .......................................................... 8,029

Stock Price Range (Tokyo Stock Exchange)
(Yen)
2,500

2,000

Principal Shareholders
Number ofPercentage ofShares Held Total Shares in(in thousands)
Issue (%)

Sanri Kosan Co., Ltd................................... 12,920
Japan Trustee Services Bank, Ltd. (Trust Account) .... 6,004
The Master Trust Bank of Japan, Ltd. (Trust Account). 5,609
Trust & Custody Service Bank, Lts. (Trust Account) ... 2,722
Minoru Sano........................................... 1,993
Mitsui Asset Trust and Banking Company, Limited .... 1,641
Resona Bank, Limited ................................. 1,380
UFJ Trust Bank Limited (Trust Account) ............... 1,336
Kinki Osaka Bank Limited ............................. 1,316
The Fuji Fire and Marine Insurance Co., Ltd............ 1,041
Total ................................................... 35,963

20.23
9.40
8.78
4.26
3.12
2.57
2.16
2.09
2.06
1.63
56.30

1,500

1,000

500

0

12

3

6

2001

9

12

3

6

9

2002

12

3

2003

Subsidiaries and affiliates (As of June 30, 2003)
Area

Asia

CountryJapan

Thailand
China

America

EuropeBrazilU.S.A
PanamaMexicoU.S.A.
BelgiumCompany

Nipro Medical Industries, Ltd.
Nipro Pharma Corporation
Shinwa Shoji Co., Ltd.
Nissho Corporation
Nissho Drug Co., Ltd.
Nissho Insurance Services Co., Ltd.*
Bipha Corporation**
Nipro (Thailand) Corporation Ltd.
Fuzhou Nipro Co., Ltd.
Nipro (Shanghai) Co., Ltd.
Nipro Asia Pte. Ltd.*
Shanghai Nissho Vacuum Flask Refill Co., Ltd.
Nipro Trading (Shanghai) Co., Ltd.*
Nipro Medical LTDA.
Nipro Medical Corporation
Nipro Medical Panama S.A.
Nipro Medica de Mexico, S.A. DE C.V.
Nipro Diabetes Systems, Inc.*
Nipro Europe N.V.

Segment

MedicalPharmaceutical
Glass & Materials
Supermarket
Supermarket
Other
Pharmaceutical
Medical
Medical
Medical
MedicalGlass & Materials
Medical
Medical
Medical
Medical
Medical
Medical
MedicalPrincipal business

Manufacturing
Manufacturing and Marketing
Manufacturing and Marketing
Supermarket management
Drugstore management
Insurance agency
R&D and Manufacturing
Manufacturing and Marketing
Manufacturing and Marketing
Manufacturing and Marketing
Marketing
Manufacturing and Marketing
Marketing
Manufacturing and Marketing
MarketingMarketingMarketing
R&D and Marketing
MarketingNote:(1) * Unconsolidated** Affiliate applied equity method(2) Sanki Kosan Co., Ltd., an Affiliate Company, manages rental of real property estate.
Annual Report 2003 50

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

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