TOKYO ELECTRON

Jan 30, 2015

Consolidated Financial Review
for the Third Quarter Ended December 31, 2014
Company name:
URL:
Telephone number:
Stock exchange listing:Notes:

Tokyo Electron Limited
http://www.tel.com(03) 5561-7000
Tokyo Stock Exchange 1st Section (Code 8035)

1. The accompanying financial statements have been prepared in accordance with accounting
principles and practices generally accepted in Japan.
2. Amounts are rounded down to the nearest million yen.

1. Financial highlights for the nine months ended December 31, 2014
Nine months ended
December 31, 2013
December 31, 2014
Net sales (Millions of yen)
392,900
431,295
Operating income (Millions of yen)
7,244
52,196
Ordinary income (Millions of yen)
9,091
56,779Net income (Millions of yen)
(35,621)37,468Net income per share (Yen)(198.79)
209.05
Fully diluted net income per share (Yen)
208.56Comprehensive income:Nine months ended December 31, 2014: 45,978 million yen
Nine months ended December 31, 2013: (25,936) million yen(1) Operating results (Cumulative)(2) Financial position
As ofMarch 31, 2014
Total assets (Millions of yen)
Net assets (Millions of yen)
Equity ratio (%)
Equity: 611,392 million yen (as of December 31, 2014)
578,091 million yen (as of March 31, 2014)

828,591
590,613
69.8

As of
December 31, 2014
831,586
613,10273.5

2. Dividends
Year ended
March 31, 2014
1Q-end dividend per share (Yen)
2Q-end dividend per share (Yen)
3Q-end dividend per share (Yen)
Year-end dividend per share (Yen)Annual dividend per share (Yen)

25.00
25.00
50.00

Year ending
March 31, 2015
10.00
30.00
35.00
-

Note: The dividends for the fourth quarter of the fiscal year ending March 31, 2015 is still tentative,
because the date when the proposed business combination with Applied Materials, Inc. will be effected
has not yet been determined.

1

TOKYO ELECTRON

3. Earnings forecasts for the year ending March 31, 2015
W hile we have not disclosed full-year earnings forecast for the fiscal year ending March 31, 2015 since theeffective date of the business combination still remains undetermined, the TEL Group is expected to achieve
the same level of net sales and operating income in the second half as announced previously (October 29,2014).

4. Others(1)

Important changes in subsidiaries: None
(Changes on specific subsidiaries with changes in scope of consolidation)(2)

Adoption of special accounting method in preparing quarterly financial statement: Yes(3)

Changes in accounting principles, accounting estimation and restatement
1. Changes in accounting policies along with changes in accountins standards: Yes
2. Other changes of accounting policies besides number 1 above: None
3. Changes in accounting estimation: None
4. Restatement: None(4)

Number of shares issued and outstanding (common stock)
1. Number of shares issued and outstanding (including treasury stock)
As of December 31, 2014:

180,610,911 shares

As of March 31, 2014:

180,610,911 shares

2. Number of shares of treasury stock
As of December 31, 2014:

1,357,337 shares

As of March 31, 2014:

1,408,950 shares

3. Average number of shares outstanding
Nine months ended December 31, 2014: 179,232,134 shares
Nine months ended December 31, 2013: 179,190,171 shares

Notification of the status of quarterly financial review procedures:This quarterly financial report is outside the jurisdiction of auditing procedures outlined in the Financial Instruments andExchange Act and remain incomplete at the time of announcing this report.
Explanations on the appropriate use of earnings forecast:
The performance forecast and estimate stated in this Financial Review are based on certain assumptions judged to bereasonable at the present time in light of information currently available. Consequently, actual operating results may differ
substantially from the projections in this Financial Review.
The company plans to hold a financial meeting for analysts and investors on Friday Jan 30, 2015. The supplementarymaterials to these financial reports that will be handed out at this meeting will be posted simultaneously on our company
website.

2

1. Qualitative Information on Financial Results for the Third Quarter(1) Description of Operating Results

Global economy during the first three quarters of the current fiscal year generally remained on a gradual
recovery trend, and the Japanese economy also showed signs of a moderate recovery.
In the electronics industry, the primary area of the Tokyo Electron (TEL) Group’s business activities, theelectronics components market remained robust, as sales of smartphones remained robust, and also dueto the continued increase in the number of devices connected to networks and the corresponding increase
in data traffic which lead to soaring demand for servers for data centers.
Under such circumstances, the Group’s consolidated results (cumulative) for the first three quarters of thecurrent fiscal year were net sales of 431,295 million yen (a year-on-year growth of 9.8%), operating incomeof 52,196 million yen (a year-on-year growth of 620.5%), ordinary income of 56,779 million yen (ayear-on-year growth of 524.5%); and in addition, the net income for the first three quarters of the current
fiscal year stood at 37,468 million yen (compared to a net loss of 35,621 million yen for the same period of
the previous fiscal year).

The overview of each business segment is as described below.
TEL sold part of the shares held in Tokyo Electron Device Ltd. in April and May of the 2014. This resulted inTokyo Electron Device Ltd. being switched from a consolidated subsidiary of the group to an affiliate
accounted for under the equity method, and the Electronic Components and Computer Networks segment
overseen by the company and its subsidiaries being removed from segments reported from the first quarterof the current fiscal year. The 9.8% year on year increase in consolidated net sales mentioned abovereflects the impact of removing Tokyo Electron Device Ltd. from consolidated range.

(i) Semiconductor Production Equipment
In smartphone-related areas, sales in emerging countries such as China remained strong, and sales of new
functionally sophisticated models were robust. Demand for servers for data centers grew, and the demandfor electronic components such as DRAM and NAND flash memory was solid. Consequently, net sales toexternal customers in this segment for the first three quarters of the current fiscal year were 404,620 million
yen (a year-on-year growth of 36.2%).

(ii) Flat Panel Display (FPD) Production Equipment
The market for FPD production equipment remained strong, with ongoing capital investment in facilities for
manufacturing large-sized flat panel displays in China, along with strong demand for small to medium-sized
flat panel displays used primarily for smartphones. As a result, net sales to external customers in this3

segment for the first three quarters of the current fiscal year were 22,781 million yen (a year-on-year growthof 25.1%).

(iii) Photovoltaic Pane (PV) Production Equipment
While we have ceased new sales activities for PV production equipment, sales entries for work in progress
to fulfill existing orders and other factors resulted in net sales to external customers in this segment of 3,472
million yen (a year-on-year loss of 22.6%) for the first three quarters of the current fiscal year.

(iv) Others
Net sales to external customers in this segment were 422 million yen (a year-on-year growth of 26.1%) for
the first three quarters of the current fiscal year.

4

(For reference)

Consolidated Operating Results（ Millions of yen）
FY2015Net Sales
Semiconductor Production Equipment
Japan
U.S.
EuropeKorea
TaiwanChina
S.E.Asia
FPD Production Equipment
PV Production Equipment
OthersOperating Income
Ordinary Income
Net Income
Note:

1Q

2Q

3Q

Total

151,325
136,126
13,42133,79012,53022,451
38,456
13,911
1,565
13,9291,102
167
17,06916,913
11,835

142,948
136,500
26,08433,906
12,18914,69538,352
7,069
4,202
5,099
1,223
125
13,045
14,8608,181

137,021
131,993
19,081
32,041
19,054
18,10328,598
6,322
8,791
3,751
1,146
130
22,081
25,005
17,451

431,295
404,620
58,586
99,73843,77555,250105,406
27,303
14,55922,781
3,472
422
52,196
56,77937,468

Offset elimination has been carried out on the dealing between segments.

Production and Order Performance
1. Production（ Millions of yen）
FY2015
1Q
124,318
7,419
1,081
132,818

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment
Total
Note:

2Q
123,037
3,033
1,191
127,2623Q
145,775
10,953
1,110
157,839Total
393,131
21,406
3,383
417,920

1. Amounts are based on sales prices.
2. The above amounts do not include consumption taxes.

2. Orders Received（ Millions of yen）
FY2015
1Q
137,297
14,280541
167
152,286

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment
OthersTotal
Note:

1. Offset elimination has been carried out on the dealing between segments.
2. The above amounts do not include consumption taxes.

52Q
142,4744,849
8
125
147,457

3Q
167,264
3,474
1,429
130
172,298

Total
447,035
22,6051,979
422
472,042

3. Orders Backlog（ Millions of yen）
FY2015

Semiconductor Production Equipment
FPD Production Equipment
PV Production Equipment

1Q
211,085
29,3718,433

2Q
217,059
29,121
7,219

3Q
252,330
28,844
7,501

OthersTotal

248,889

253,399

288,675

Note:

1. Offset elimination has been carried out on the dealing between segments.
2. The above amounts do not include consumption taxes.

(2) Description of Financial Conditions(i) Financial Conditions
Current assets at the end of the third quarter of the current fiscal year were 618,468 million yen, down 3,024
million yen compared to the end of the previous fiscal year. The major factors influencing this result were a22,455 million yen decrease in trade notes and accounts receivable, a 9,024 million yen increase in cash
and deposit, and a 8,188 million yen increase in short-term investments included in securities.
Tangible fixed assets decreased by 590 million yen from the end of the previous fiscal year, to 111,754
million yen.
Intangible fixed assets decreased by 388 million yen from the end of the previous fiscal year, to 29,167
million yen.
Investment and other assets increased by 6,997 million yen from the end of the previous fiscal year, to72,197 million yen.
As a result, total assets increased by 2,995 million yen from the end of the previous fiscal year, to 831,586
million yen.
Current liabilities were down 12,798 million yen compared to the end of the previous fiscal year, to 157,711
million yen. The major factors causing the decrease were an 11,531 million yen decrease in short-termborrowings associated with the removal of Tokyo Electron Device Ltd. from consolidated accounting, a
7,906 million yen decrease in trade notes and accounts payable, and a 4,289 million yen increase incustomer advances.
Long-term liabilities were down 6,695 million yen compared to the end of the previous fiscal year, to 60,772
million yen.
Net assets were up 22,488 million yen compared to the end of the previous fiscal year, to 61,312 million yen.
The main factors were an increase due to reported quarterly net income of 37,468 million yen, a decrease
as a result of the payment of 11,649 million yen in year-end dividends for the previous fiscal year, quarterly

6dividends for the first quarter of the current fiscal year as well as quarterly dividends for the second quarterof the current fiscal year, and a decrease of 10,629 million yen in minority interests from the removal ofTokyo Electron Device Ltd. from consolidated accounting and other facts.
The equity ratio was 73.5%.

(ii) Cash Flow
Cash and cash equivalents at the end of the third quarter of the current consolidated fiscal year increased
by 150,505 million yen compared to the end of the previous fiscal year, to 255,303 million yen.
The combined balance including a 30,056 million yen in time deposits and short-term investments withperiods to maturity or redemption of at least three months that are not included in cash and cash
equivalents was 285,359 million yen, up 17,213 million yen from the end of the previous fiscal year. The
overall situation regarding cash flow during the third quarter of the current fiscal year was as described
below.
Cash flow from operating activities was positive 40,070 million yen, up 52,180 million yen compared to thesame period of the previous fiscal year. The main positive factors were 53,852 million yen in net income
before income taxes, 15,189 million yen in depreciation and amortization, a 6,927 million yen increase incustomer advances. The main negative factors were the payment of income taxes of 21,845 million yen anda 15,903 million yen increase in inventories.
Cash flow from investing activities was positive 126,701 million yen, compared to positive 16,776 million
yen in the same period of the previous fiscal year. The primary positive factor was 133,300 million yen
associated with a decrease in short-term investments. The primary negative factor was 9,109 million yen in
payments for purchase of tangible fixed assets.
Cash flow from financing activities was negative 11,922 million yen, compared to positive 251 million yen in
the same period of the previous fiscal year. This was primarily the result of the payment of 11,649 million
yen in dividends.

7

Consolidated Cash Flow (Summary)Nine months ended
December 31, 2013

（Millions of yen）
Nine months ended
December 31, 2014

Cash flow from operating ac tivities
Income before income taxes (los s)
Depreciation and amortization
Loss on impairment
Decrease in trade notes and acc ounts receivable (increase)
Decrease in inventories (increase)
Increase in accounts pay able (dec rease)(12,110)(37,542)
18,643
46,583(34,764)(53,371)
12,504

3,503(15,903)(2,277)

OthersCash flow from investing activities
Decrease in time deposits (increase)35,836
16,77625,435(14,294)
126,701
133,300

Others (purchase of fixed as sets )(8,659)(6,598)251(11,922)

Cash flow from financing activities
Effect of exchange rate changes on cash and cas h equivalents

40,07053,852
15,189(5,899)(4,342)(982)

150,505

Cash and cash equivalents at beginning of period

85,313

104,797

Increase in cash and cash equivalents from changes in accounting periods at consolidated
subsidiaries (decrease)(1,206)

Cash and cash equivalents at end of period

83,125

255,303

Cash and cash equivalents and time deposits and short-term investments with periods tomaturity or redemption of at least three months that are not inc luded in cash and cash
equivalents

212,504

285,359

Net increase in cash and cash equivalents (decrease)8-(3) Description of Financial Estimates Information such as Consolidated Performance Forecasts

While we have not disclosed full-year earnings forecast for the fiscal year ending March 31, 2015 since theeffective date of the business combination still remains undetermined, the TEL Group is expected toachieve the same level of net sales and operating income in the second half as announced previously(October 29, 2014).

Note: The financial forecasts and estimates stated in this announcement are based on certain assumptions j udged to bereasonable by the Company in light of information currently available concerning economic conditions in Japan and overseas,fluctuations in foreign exchange rates, and other factors that may have an impact on perform ance. The company does notpromise that the forecasts or estimates will be accurate.
They are therefore susceptible to the impact of many uncertainties, including market conditions, competition, the launching o f
new products (and their success or failure), and global conditions in th e semiconductor related industry. Consequently, actual
sales and profits may differ substantially from the projections stated in this announcement.

9

TOKYO ELECTRON

Consolidated Balance Sheet(Millions of yen)
As ofMarch 31, 2014

As ofDecember 31, 2014ASSETS
Current assets
Cash and deposit

56,34565,370Trade notes and accounts receivable

129,032

106,576

Securities

211,800

219,989

Merchandise and finished goods

114,289

101,214Work in process

38,074

48,877

Raw materials and supplies

15,912

16,843

Others57,53860,462

Allowance for doubtful accounts(1,502)(865)

621,492

618,468

112,344

111,754

Total current assets
Long-term assets
Tangible fixed assets
Intangible fixed assets
Goodwill

9,400

9,534

Others

20,155

19,633

Total intangible fixed assets

29,55629,167

Others

67,065

74,103

Allowance for doubtful accounts(1,866)(1,906)

Total investments and other assets

65,19972,197207,099

213,118

828,591

831,586

Investments and other assets

Total long-term assets
Total assets

10

TOKYO ELECTRON(Millions of yen)
As ofMarch 31, 2014

As ofDecember 31, 2014

LIABILITIESCurrent liabilities
Trade notes and accounts payable

53,667

Short-term borrowings

11,53145,760

Income taxes payable

14,014

11,434

Accrued warranty expenses

10,072

10,527-

Other allowance

8,642

4,630

Others72,58185,358

Total current liabilities

170,509

157,711Long-term liabilities
Other allowance

582

374

Net defined benefit liability

53,44849,520

Others13,436

10,877

Total long-term liabilities

67,46860,772

237,978

218,484

Common stock

54,961

54,961

Capital surplus

78,02378,023Retained earnings

436,174

460,692

Total liabilities
NET ASSETS
Shareholders' equity

Treasury stock
Total shareholders' equity(9,478)(9,144)

559,679

584,532

5,592

7,965

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Translation adjustments

60

147

5,777

13,117

Remeasurements of defined benefit plans

6,981

5,629

Total accumulated other comprehensive income

18,411

26,859Subscription rights to shares

1,643

1,461

Minority interests

10,878248

Total net assets

590,613613,102828,591

831,586

Total liabilities and net assets

11

TOKYO ELECTRON

Consolidated Statement of Income(Millions of yen)
Nine months ended
December 31, 2013

Nine months ended
December 31, 2014

Net sales

392,900

431,295

Cost of sales

262,520

266,204

Gross profit

130,380

165,090

57,394

51,794

Selling, general & administrative expenses
Research and development expenses
Others65,741

61,099Total selling, general & administrative expenses

123,135

112,894

7,244

52,196

Operating income (loss)
Non-operating income
Foreign currency translation income

-

1,796

Others

4,770

2,879

Total non-operating income

4,770

4,675

Non-operating expenses
Foreign currency translation loss

2,619

Maintenance and operation cost of closed business bases
OthersTotal non-operating expenses
Ordinary income (loss)

-

35

34

268

58

2,923

92

9,091

56,779Unusual or infrequent profit
Gain on sale of fixed assets

88

Gain on sale of investment securities

183-

Others18

Total unusual or infrequent profit

107

54
238

Unusual or infrequent loss
Loss on impairment

46,583-

Loss on sales of subsidiaries' stocks

-

1,609

Expenses for restructuring of business bases-

951

Others158

604

Total unusual or infrequent loss

46,741

3,165

Income (loss) before income taxes(37,542)

53,852

Income taxes(2,032)

16,350

Income (loss) before minority interests(35,510)37,501

111

33(35,621)37,468

Minority interests
Net income (loss)

12

TOKYO ELECTRON

Consolidated Statement of Comprehensive Income(Millions of yen)
Nine months ended
December 31, 2013

Income (loss) before minority interests

Nine months ended
December 31, 2014(35,510)37,501

Valuation difference on available-for-sale securities

608

2,370

Deferred gains or losses on hedges

197

143

8,768

7,277

Other comprehensive income

Translation adjustments
Remeasurements of defined benefit plans-(1,321)

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

-

5

9,573

8,476

(25,936)

45,978(26,116)

45,916180

61

Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners
Comprehensive income attributable to minority interests

13

TOKYO ELECTRON

Segment Information(i) Overview of reportable segments

The reportable segments by the company provide separate financial information pertaining to the various
segments of the company, which is reviewed periodically by the management to evaluate corporate
performance as well as make decisions about the allocation of management resources.
The corporate structure consists of product and service segments based on business units (BUs), and thereportable segments are as follows: Semiconductor Production Equipment, Flat Panel Display (FPD)
Production Equipment, and Photovoltaic Panel (PV) Production Equipment.
The Semiconductor Production Equipment segment consists of coaters/developers, plasma etch systems,
thermal processing systems, single wafer deposition systems, cleaning systems used in wafer processing,wafer probers used in the wafer testing process and other semiconductor production equipment, and weare engaged in the development, manufacturing, sales and provision of maintenance services, etc. forsuch products.
The FPD Production Equipment segment consists of coaters/developers, plasma etch/ash systems usedin the manufacturing of flat panel displays, and we are engaged in the development, manufacturing, sales
and provision of maintenance services, etc. for such products.
The PV Production Equipment segment consisted of photovoltaic panel production equipment used in the
manufacturing of thin film silicon photovoltaic panels, and we were engaged in the development,
manufacturing, sales and provision of maintenance services, etc. for such products. However, we havescaled down our business structure of the PV production equipment, by halting development, production,and sales activities for this business and limit operations to support for equipment already delivered as ofthe end of March, 2014.
(ii) Net sales and income (loss) in reportable segments
Nine months ended December 31, 2014

(Millions of yen)

Reportable Segments
Semiconductor
Production
Equipment

FPD Production
Equipment

PV Production
Equipment

OthersTotal

Net sales

404,620

22,781

3,472

8,648

439,522

Segment
income (loss)

94,447(603)(10,486)929

84,287

Eliminations

Consolidated Total

Net sales(8,226)431,295

Segment
income (loss)(30,435)

53,852

Notes:
1.

The "Others" is all other businesses segment which are not included in the reported businesssegments, such as the transportation of products, equipment leasing and insurance, etc. of theTokyo Electron Group companies.

2.

The eliminations of segment income or loss amounting to 30,435 million yen includes
corporate expenses pertaining to the corporate account which are not allocated to any specificreportable segments. The corporate account expenses are mainly R&D expenses of 12,078
million yen, pertaining to fundamental research and element research conducted by thecompany, and business combination expenses of 7,200 million yen, not related to any of thereportable segments.

3.

Segment income (loss) is adjusted against income before income taxes in consolidated statement of income.

14

TOKYO ELECTRON

Segment Information(iii)

Items Related to Changes in Reportable Segments
In conjunction with the change of Tokyo Electron Device Limited (TED) from a
consolidated subsidiary to an equity-method affiliate, from the first quarter of the current
fiscal year, the“Electronic Components and Computer Networks” handled by TED and
its subsidiaries has been eliminated from the reportable segment, and investment profit
or loss on equity method relating to TED has been included in segment income or loss
adjustment amounts.

(iv)

Impairment losses on fixed assets and goodwill, etc. in reportable segments
Significant impairment losses related to fixed assets: None
Significant changes in goodwill amount: None
Significant income related to negative goodwill: None15