Everything begins
with measurement
Analysis and measurement provides the base for all kinds of technologies.
By pursuing “measuring technologies”, HORIBA contributes to a pleasantand enjoyable society with consideration for the global environment,
energy issues, human health, and public safety.

01

HORIBA’s measuring products are contributing in various scenes,
from global-scale events to invisible nano-sized things.

Solar cells
Semiconductor devices
Electric appliances
Printed circuit boards
Cosmetics

Paints and coating

Foods

Petrochemical plantsduPro

c ti vity ie ment inmprov

manufacturing process;Quality management

Next-generation materials

Clean energy

Next-generation displays

Ultra-low emission gas
Engines, drive-lines and brakes

Secondary batteries

R & D o n ne w m

Hum

an

aterials a nd ne

weFuel efficiency

nerg

y te

chn

ol o gMedical tests

Drinking water

Driving safety

lt h

ds

a fe

ty;
En
vir
on
me
nta
l

Eco-driving

Alternative fuels

ies ;

R&

Do

nn
ext
-ge
n

era
tion
vehi
cles

Environmental
radiation measurement

anElectric motors

Greenhouse gas

Food safetyh eaPharmaceuticals

Flat panel displays

Air pollution monitoring
Water quality monitoring
for rivers, lakes, and oceans

Plant emission regulations

preser
Water quality regulations
vat
ion

Agricultural anddaily use water
Hazardous substances
Chemical fertilizers
HORIBA Report 2014 | 02

Under the corporate motto “Joy and Fun” HORIBA has achieved continuous growth
based on its corporate philosophy.
HORIBA believes that the essence of its CSR is demonstrated in a growth of its
underlying business of providing “measurement” technologies.
“Joy and Fun”

Corporate motto

Originates from the belief that if we take interest and pride in the work that occupies
most of the active time in our lives, in the place where we spend the large part ofeach day, then as a result our satisfaction with life will increase, and we will be able toenjoy our lives even more. Taking interest and pride in our work leads us to“Joy and Fun.”Business operations

Corporate philosophy

We, at HORIBA, believe that our mission is to apply our most advanced analyticaltechnologies to provide highly original analytical and measuring products
and equipment, thereby contributing to the progress of science and technology
and the preservation of global environment.

Customer responsivenessWe maintain a philosophy of pursuing technology to the ultimate degree in boththe fundamental and applied technology fields, supplying products that continuously
satisfy customers’ requirements.

Responsibility to shareholders and investors
We have the basic policy of paying a certain amount of net income of each fiscal year
to shareholders as cash dividends.

Employees
We are proud of the entrepreneurial spirit that led to the creation of HORIBA.

Net sales

1945

Operating income

1950

1955

HORIBA’s history

1945

1953

• Masao Horiba establishes
HORIBA RADIO LABORATORY• HORIBA, Ltd. is established• Masao Horiba becomesthe first president

1960

1965

1970

1975

1970

• OLSON-HORIBA, INCORPORATED,a joint venture company,
is established in the U.S.
HORIBA begins overseas expansion
1971• Listed in the Second Sectionof the Osaka Securities Exchange

1974• Listed in the Second Sectionof the Tokyo Stock Exchange• Establish Standard
Technology Co., Ltd.
(now HORIBA STEC , Co., Ltd.)1950• HORIBA pioneers
the first made-in-Japan
glass electrode pH meters
made-in-Japan1964• Launched “MEXA,”a global brandfor automotive exhaustgas analyzers

Results up to 1977 are on a nonconsolidated basis and results in and after 1978 are on a consolidated basis.

03

Net sales¥153.0 billion

Operating income¥17.2 billion

1980

1985

1990

1995

2000

2005

2010

2014

1992

1978

• Atsushi Horiba becomes
the third president• Masahiro Oura becomes
the second president
1987

1996

2004

• Form an alliance with ahematology analyzer
manufacturer ABX S.A. (France)• Acquire ABX S.A.

• Launch “One Company Matrix Management”(now HORIBA ABX S.A.S.) in France
1997

2005

• Acquire Instruments S.A.

• Acquire MCT (Mechatronics) businessof Carl Schenck AG in Germany(now HORIBA Jobin Yvon S.A.S.)

in France
1975• Establish COS Co., Ltd.
(now HORIBA Advanced Techno Co., Ltd.)• Deliver emission gas analyzers
to the United States
Environmental Protection Agency (EPA)2000• Establish HORIBA Techno Service Co., Ltd.

1982

2006

2011

• Listed in the First Section of the Tokyo Stock
Exchange and the Osaka Securities Exchange• Launch previous
Mid-Long Term
Management Plan
[2006-2010]• Launch current
Mid-Long Term
Management Plan
[2011-2015]

1980• Standard Technology Co., Ltd.
(now HORIBA STEC , Co., Ltd.)launches mass flow controllers

1998• Announce the “LC-270 CRP,”
the world’s first hematology and
CRP analyzers

HORIBA Report 2014 | 04

Index

Editorial policy
We have published integrated “HORIBA Report” since 2013 to help you better understand thetrue value of HORIBA by introducing our unique corporate culture and “invisible values”, whichcannot be found in financial statements. Additional information on our “invisible values” isavailable on our website.

HORIBA Report

Booklet“To our stakeholders”

Website“Invisible values” web data collection

This booklet summarizes primarily HORIBA’s
business activities and financial information,
along with “invisible values” such as humanresources and technologies.

This website provides the detailed information including the HORIBA Report
web data collection, which features HORIBA’s safety and environmental
activities, contribution to the society, and other information.

http://www.horiba.com/to-our-stakeholders/

Notation of HORIBA and HORIBA, Ltd.
In this HORIBA Report, the HORIBA Group of companies is described as “HORIBA” and the parent company as “HORIBA, Ltd.”
Disclaimer Regarding Future Plans and Forecasts
This HORIBA Report contains certain statements describing future plans, strategies, and performance forecasts of HORIBA, Ltd. andits affiliated companies. These statements reflect forecasts based on management’s assumptions and beliefs based on the available
information as of February 12, 2015 when business results were announced. Actual performance may differ due to unforeseen
circumstances in the operating environment.
Notation of owners
HORIBA fully recognizes the importance of its shareholders and frequently calls them owners.
Change of Fiscal Year-End
HORIBA unified its fiscal year-end as December 31, effective from fiscal 2006. As a result of this change, the following irregular fiscal periods
were recorded: Fiscal 2006 for HORIBA, Ltd. and HORIBA Advanced Techno Co., Ltd. comprised the 9 months and 11 days from March 21, 2006
to December 31, 2006; and fiscal 2006 for HORIBA STEC, Co., Ltd. comprised the 9 months from April 1, 2006 to December 31, 2006. The fiscal
year-end of other consolidated HORIBA subsidiaries was December 31. Their 2006 fiscal periods remained unchanged at 12 months.
Please note that when comparing results by fiscal year.
Prior to the fiscal year-end change, the fiscal year ended March 21, 2006 was described as 2005, the fiscal year ended March 21, 2005 as 2004.

05

Index

P01

Everything begins with measurement

P07

Message from the CEO

P11

Progress of the
Mid-Long Term Management Plan

P13

Message from the CFO

P15Business outline
Overview by region and by segment
Automotive Test Systems;
Medical-Diagnostic Instruments & Systems
Semiconductor Instruments & Systems
Scientific Instruments & Systems
Process & Environmental Instruments & Systems

Value creation based on invisible values

P29

Human resources
Technologies
Organizational structures
Customers
BrandsP39

Corporate governanceDirectors, corporate auditors, and corporate officers
An Outside Director’s views on HORIBA’s corporate governance

Financial data

P43

Eleven-year summary

Corporate data
Corporate philosophy

P80
P81

HORIBA Report 2014 | 06

Message from the CEO“JOY and FUN”
With this spirit,
we will grow globally.

My role is to create real value for HORIBA.
Moreover, the source of value creation lies in every single employee's
understanding of the company motto of “Joy and Fun” and putting it
into practice every day.
By investing in human resources and technology in both economic
upturns and downturns, we will grow globally.

Chairman, President & CEO

Net Sales / Operating Income Ratio / ROE

Mid-Long Term Management Plan 2011-2015
Numerical targets¥150 billion
Operating
Income Ratio 13% or more
ROE
11% or more
Net sales

Billionsof yen150

Net Sales (left)
Operating Income Ratio (right)
Operating
Income Ratio

120

2015 Sales(Forecast)

ROE (right)
ROE

12

90

9

60

6

30

3

0

Concentrated investment
in highly profitable business0
2005 2006 2007 2008 2009 2010 2011 2012 2013 20142015 Forecast

Operating Income Breakdown by Business Segment

Change from strategy led by“technology development”
to one led by“customer viewpoint and business models”
Complete“One Company Matrix Management”
Accelerate global product development
and production

Billionsof yen20

2015 Operating Income Breakdown(Forecast)

17.2
12%
7%

15
10
5

3%
9%
22%
8%

18.0
12%
7%

11.2

58%

Process &Environmental
Scientific

37%

38%

Semiconductor

10%

10%

Medical34%

33%

Automotive

0
2005

07

%
15

2014

2015 Forecast

Sales and profits reached all-time highs in 2014.

sails of the Semiconductor, Process & Environmental, andScientific Instruments & Systems segments.

In 2014, ended December 31, 2014, HORIBA posted record-highIn the Semiconductor Instruments & Systems segment, while asales and profits, with consolidated net sales of ¥153.0 billion (upstrong tailwind is blowing, and our market share is increasing, we

10.8% year-on-year) and operating income of ¥17.2 billion (upmay need to skillfully control the sails to manage the pace. In

25.3% year-on-year). In the Semiconductor Instruments & Systems

regards to the Process & Environmental Instruments & Systems

segment, which was the main earnings driver, sales of mainstay
mass flow controllers increased, and HORIBA’s global market
share rose to 52% from 48% in 2013. In the Automotive Test
Systems segment, sales of vehicle emission measurement
systems (EMS) improved in Asia, and global operating income
recorded a year-on-year increased of 35.9%. All businesssegments posted net sales that were higher than in 2013, but
operating income declined in the Medical-Diagnostic Instruments& Systems segment, which continues to face challenges.

segment, sales are robust on a global basis and we will resolutely
capture this tailwind. The sail of the Scientific Instruments &Systems segment can capture winds from several directions. Herewe will increase the speed of development while reinforcing
collaboration of R&D resources based in France, the U.S. andJapan, and create a new business model in such fields as energy,
automobiles, biotechnology and drug discovery. It is the MedicalDiagnostic Instruments & Systems segment that will steadily
proceed with preparations to become the main sail of the future.
In 2014, sales reached a record high, but this was not accompanied
by profitability. This is an issue we are carefully working to tackle
through expansion of the business scale. We are aiming forincreased sales, including the introduction of new products from theWe will connect five sails together
to ensure that all kinds of winds
propel us forward.
We achieved our Mid-Long Term
Management Plan’s 2015 sales target of ¥150
2011-2015
billion one year ahead of schedule. In 2015,
we aim for an even higher target. With regard to operating income
and ROE, however, the delay in improving earnings in the MedicalDiagnostic Instruments & Systems segment will make it difficult torealize our initial targets. While continuing investment and nurturing
the seeds of growth, we will endeavor to post profits that are ashigh as possible. We will strive to recover our current investment
during the next Mid-Long Term Management Plan.
The theme for today, when our business is expanding, is to refine
our sense of balance in order to advance towards our targets. So
far, by advocating our “HORIBA Group is One Company.” policy
and promoting Matrix Management with five businesses in three
regions, we have been transforming our management structure. In
this way, we will secure stable high earnings by managing ourAutomotive Test Systems, Medical-Diagnostic, Semiconductor,
Scientific and Process & Environmental Instruments & Systems
segments in a well-balanced manner.
Figuratively speaking, the sense of balance in management issimilar to a sailing ship that advances by transforming all kinds ofwinds into a driving force. By efficiently connecting five sails (ourfive business segments), we will move the ship forward to ourtargets by using both tailwinds (opportunities) and headwinds(predicaments) as the driving force. A single sail without any
support may have its the mast be damaged by the wind and evenif we have five sails, the ship may lose balance without being atright angle to the wind. In order to advance towards our targets, itis therefore vital to develop a system that we determine a few sails
that can be the mainstay and that enable supporting other sails tokeep the boat moving quickly even should one become slack.
At present, the Automotive Test Systems segment that is the main
driving force. In 2014, we expanded the business by strengthening
synergies between the EMS and MCT (Mechatronics) businesses.
“MEXA-ONE”, a new product in the EMS business, will also drive
growth. Following the Automotive Test Systems are the supporting

new Medical R&D center which is due to be completed in thesummer of 2015 in France. Concurrently we will continue to carryout our medium to long-term R&D focused on new markets.

We will achieve “craftsmanship unique to Japan”
at our new facility: HORIBA BIWAKO E-HARBOR.
In order to realize sustainable growth, I believe it is important toproactively invest in the future. While aiming to enhance profitability,
we will continue to combine technologies and expand the scope ofbusiness operations not only through investment in humanresources and M&A, but also in the enhancement of production
efficiency and mass production.
We have invested a record amount of approximately ¥10 billion in
HORIBA BIWAKO E-HARBOR, which is scheduled to becompleted in the autumn of 2015. This new production facility
will be integrated with our partner suppliers to realize greater
efficiency and expanded production. By transferring the gas
measurement businesses of the Automotive Test Systems andProcess & Environmental Instruments & Systems segments tothe new base, we aim to double production efficiency andreduce delivery time to one-third.
This transfer project also plays the important roles of“craftsmanship unique to Japan” and passing on technology
through “rebuilding the shrine”. The production system at our Kyoto
headquarters has been established with varied know-how that was
accumulated through expertise and successive generations ofengineers. In transferring these businesses, we aim to bring to lightthe kind of minute know-how that we may have missed in daily
operations so it can be passed on to the current generation ofengineers. In Japan, “sengu,” which means rebuilding the shrine,refers to the passing on of skills from one generation of shrine
carpenters to the next and is carried out every 20 years. This“sengu” is the Japanese tradition which has been cherished forover 800 years. I intend to transfer the core technologies, fosteredin Kyoto over a period of 60 years, into the hands of a newgeneration of engineers that will lead to the fostering of new
development capabilities and the expansion of production capacity.
HORIBA Report 2014 | 08

Message from the CEO

We will strengthen our human resources
to promote balanced management.

Atsushi Horiba
Chairman, President & CEO

Dr. Kozo Ishida
Executive Vice Chairman

Juichi Saito
Executive Vice President
General Manager of Corporate &Segment Strategy Division

Fumitoshi SatoManaging Director
General Manager of General
Administration Division,and Tokyo Branch Manager

I believe every single employee will actually implement therealization of the management policy of “HORIBA Group is
One Company.” and well balanced management. At present,
there are approximately 6,000 “HORIBARIANS” (as we refer
to all HORIBA employees around the world). They
understand the essence of the company motto “Joy andFun” and are playing an active role in its promotion. On the
global stage, the combination of our respective cultures
through business has brought about a dependable trend ofcreating innovative technology.
In 1984, we introduced a system of overseas training forwhich all employees can apply. By 2015 year end, there willbe 220 alumni of this program, and each year around adozen employees now take part. Approximately 90% of
directors, 30% of managers and 15% of general employees
have experience working overseas. By securing andeducating our employees with a sense of balance, we
maintain a strong competitive edge.
Fur thermore, based on the themes of quality improvement,
developing our human resources and invigorating ourorganization, we have worked to create an environmentthat encourages our employees to take on challenges.
Examples include the continuation of the Blackjack
Project, which operates at HORIBA around the world, and
HORIBA COLLEGE, which is aimed at human resource
development. In 2014, we also launched activities aimed atcreating a work environment that values diversity, under
the name of the “HORIBA Stained Glass Project”. There is
no doubt that investing in our employees has led to thematuring of our corporate culture and is the source of ourcurrent grow th momentum.

We aim to be a great mid-sized company.

Dr. Masayuki Adachi
Director
General Manager of Research &Development Division
President of HORIBA Jobin Yvon S.A.S.
(France)

Dr. Jai Hakhu
Executive Corporate Officer
Chairman, President & CEO of
HORIBA International Corporation(U.S.)
President of HORIBA Europe
Holding S.A.S. (France)09

As we enter the final chapter of our Mid-Long Term
Management Plan, a new era will unfold before our eyes,
but our true aspiration is to be a great mid-sized company.
So, what does it mean to be a great mid-sized company?
It means that not only the management but all
HORIBARIANS are conducting our business with a senseof ownership. A sense of ownership means carr ying out
things by thinking, making decisions and taking
responsibility oneself. Even as our scale grows and wecontinue to globalize, it is crucial to maintain and develop
this attitude.
Amid the trends of expansion in business scale andglobalization, we have reached a turning point in terms ofmanagement overseas. I believe that the management of
our overseas divisions should now pass the baton to local
personnel. On the global stage, we will be exposed tofierce competition. Under these conditions, we will fur therstrengthen by combining the historically subtle Japanesemanagement style that is trusted by the world withdynamic management that is typical of global companies.
With our corporate culture as the cornerstone of ourmanagement philosophy, company per formance and the

Sunao Kikkawa

morale of our employees will continue to improve.

Senior Corporate Officer
General Manager ofFinance & Control Division

While focusing on engagement, we will deepen our
dialogue with all stakeholders.
HORIBA will achieve an improvement in corporate earnings
and sustainable growth by increasing the satisfaction ofshareholders, customers, suppliers, employees and all otherstakeholders. In 2011, we signed the United Nations Global
Compact, a set of universally accepted principles in the areasof human rights, labor, environment, and anti-corruption that
the United Nations advocates. We are monitoring our activities
from the perspective of global standards to ensure that we
conduct business rooted in each country and region together
with local employees by understanding the diverse cultures,customs and values.
Our basic policy on returning profits to owners (shareholders)is to target total returns to shareholders at 30% of HORIBA’s
consolidated net income (with a combination of dividend
payments and share buybacks), allocating the remainder toreserves for capital and strategic investment.
In fiscal 2014, we paid a record-high annual dividend per shareof ¥67 (compared to a dividend per share of ¥60 in fiscal 2013).
For fiscal 2015, we conducted a share buyback worth ¥1.0
billion in February, we are currently forecasting an annual
dividend per share of ¥70, achieving a 3-year average total
return to shareholders of 30% from fiscal 2013 to fiscal 2015.
I intend to increase my focus on engagement with all owners
and to deepen the dialogue with them. I would like to engage
in constructive dialogue with everyone, not only regarding ourquarterly business performance but also from a medium tolong-term perspective. I have been encouraged by increasing
shareholder engagement aimed at envisioning the future
together such as recent support for aggressive investment.
I am proud that all the business activities we conduct together
with our stakeholders are contributing to the realization of acomfortable and sustainable society. This is because ourcompany culture has been handed down from our initialfoundation to the present, in line with our fundamental way of
thinking regarding Corporate Social Responsibility. Now, a
new generation is serving as directors, and the generationthat will support the future has been growing steadily. We
intend to continue to contribute to society with pride and asense of challenge.
I sincerely hope that you all agree with our management policy
and will continue to support us for many years to come.

April 2015
Chairman, President & CEO

Atsushi Horiba

Takashi Nagano
Senior Corporate Officer
General Manager of Sales Division
President of HORIBA KOREA LTD.
(South Korea)

Hideyuki Koishi
Senior Corporate Officer
Vice President of HORIBA STEC Co., Ltd.
(Japan)Changes in the management structure
Measures taken so far• Changed the corporate name and unified our
corporate brand.
• Introduced “Matrix Management”.
• Restructured group companies in the Americas
and Europe, and organized development bases
Introduced “Shared services*” in the U.S.,
Japan and the U.K.
• Enhanced head office function.
• Expanded the Blackjack Project globally.
• Initiated the HORIBA COLLEGE.
• Launched the HORIBA Stained Glass Project.
*Shared services is to centralize specific work of more than one divisionof the company or group with the aim of raising productivity and cost reduction.

Measures to take from now on• Expand “Shared services” in Europe and Asia.
• Implement ERP (Enterprise Resource Planning) systems
in all group companies, making it complete.
(Plan to complete global implementation in 2015.)

HORIBA Report 2014 | 10

Progress of the Mid-Long Term Management Plan

Numerical targets
for 2015(announced in February 2011)

Progress of the
Mid-Long Term
Management Plan

Net sales¥150.0billion2014: ¥153.0 billion

Operating income ratio

During 2014, the fourth year of the current
Mid-Long Term Management Plan [2011-2015],

13%

HORIBA achieved its sales target one year ahead of
the plan, due to favorable business in the Automotive
Test Systems, Semiconductor and Process &Environmental Instruments & Systems segments.
However, profit improvement in the Medical-Diagnostic
Instruments & Systems segment, the segment on
which we focus, was weaker than planned.
We need to speed up our achieving the profit target.

or more2014: 11.2%

ROE*

11%

or more2014: 8.9%

* Return on equity

Assumed exchange rates: ¥80/U.S. dollar ¥110/Euro

Review of the Mid-Long Term Management Plan [2011-2015]
Enhanced synergies of the EMS (Emission Measurement Systems) andMCT (Mechatronics) businesses in the Automotive Test Systems segment

Sales growth of mass flow controllers by acquiringa higher market share

The MCT business acquired from Carl Schenck AG in Germany in 2005,
involving test systems for chassis, engines, power trains, and brakes, isaccelerating its growth, based on the trust and brand power which wasestablished by the MEXA-series emission measurement systems, which
has high global market share. We have established a business model tomake comprehensive proposals, encompassing test cell layout, design,and construction oversight of automotive R&D facilities, in order to better
respond to our customers’ analysis and measurement needs. This is one
way whereby we strive to increase sales and enhance profitability.

Mass flow controllers, that are the main product of the Semiconductor
Instruments & Systems segment, raised its global market share to 52%
in 2014. We have established a system to flexibly adjust production tomatch fluctuation in demand from the semiconductor industry. We believe
this contributed to our market share gain. We continued our development
investment and did not reduce the number of our employees in production,even during the downturn in demand of 2009 and 2012. This has enabled
us to deliver products quickly during the upturn in demand.
HORIBA intends to continue building a better balanced profile of the fivebusiness segments.

Sales of EMS, MCT, and ITS*

Billionsof yenBillionsof yen80

MCT's growth60
40

Sales in 2015 vs. 2011

38.6
8.1

280%

43.2
4.0

11.6

49.5
2.9

14.5

30

55.0

1.7
16.2

64.0 2.0
1.3

60

ITS
MCT

EMS

26.4

28.6

33.3

37.4

39.0

2011

2012

2013

2014

2015 Forecast* ITS: Intelligent Transportation System

11%

Share (right)

20

50

10

40

23.0

20
0

Net Sales (left)

0

30
2009

2010

2011

2012

2013

2014

Business portfolios aimed by the Mid-Long Term Management Plan
2005 20102010 2014

Contributed by growthin the Semiconductor segment

Steady growth of the Automotive, Process &Environmental, and Semiconductor segments

2010 2015
More balanced portfolio with growthin the Medical segment

Profitability 25%

Profitability 25%

Profitability 25%

20%

20%

Semiconductor
Semiconductor

15%

Semiconductor

MedicalScientific

10%
Process &Environmental

5%

MedicalProcess &Environmental

15%

10%

20%
15%
Automotive

10%

MedicalAutomotive

5%

Process &Environmental

5%

Automotive
0%
0%

-4%

4%

8%

12%
GrowthScientific

0%
0%

-4%

4%

8%

12%
GrowthScientific

0%
0%

-4%

4%

8%

12%
GrowthVertical axis: Operating income ratio in the final year / Horizontal axis: Compound annual growth rate of net sales / Size of circle: Net sales volume in the final year

Net sales and operating income by business segment

Net sales (left :Billions of yen)64

Automotive

Operating income (right :Billions of yen)
Progress of the Mid-Long Term
Management Plan

55

Mid-Long Term
Management Plan(2015)49

Net Sales
46 billions of yen

Medical43

Semiconductor

ScientificProcess &Environmental

Mid-Long Term Management Plan(2015)38

Net Sales
34 billions of yen

Mid-Long Term Management Plan(2015)

Mid-Long Term Management Plan(2015)

Mid-Long Term
Management Plan
(2015)

Operating
Income5 billions of yen

4.4 4.2

5.8

6.0

Operating
Income6 billions of yen

26
23

22

3.1

2012

2013

2014

Operating Income
6 billions of yen

2015
Forecast

2011

2.4 2.4

2012

2013

1.7

2014

24

24

6.4

6.8

2011

2012

Mid-Long Term Management Plan(2015)

Net Sales
24 billions of yen

22

Mid-Long Term Management Plan(2015)20

Net Sales
16 billions of yen

Mid-Long Term
Management
Plan(2015)

Operating Income
1.5 billions of yen

2013

2014

2015
Forecast

14

Mid-Long Term
Management
Plan(2015)

1.4

2011

0.9

2012

0.9 1.2

2013

2014

1.3

2015
Forecast

13
2.5

Operating Income
1.5 billions of yen

1.6

2011

2012

18

16

14

2.0

1.2

2013

2014

2.1

2015
Forecast

Improve profitability of theMedical segment

Investment in building a global supply network
for the Medical-Diagnostic Instruments & Systems segment
The Mid-Long Term Management Plan focuses on the Medical-Diagnostic
Instruments & Systems segment, which has been improving supply
efficiency by newly building or expanding reagent plants in several
key countries. Aiming at accelerating new product launches, we areconstructing a development facility for medium to large-sized instruments
in France. We will continue to invest management resources in the segment
and strive for business expansion and profitability improvement.

28

25

22

4.8

2.2

1.8

2015
Forecast

31

28

Mid-Long Term Management Plan(2015)

4.9 17

2.8

2011

Net Sales
30 billions of yen

28

27

Initiatives
requiringfurtherchallenges

Enhance sales network
Americas, Asia

Enhance development
Profit from investment in a new Medical
R&D facility (France) and speed up
development of new products

Construction update on HORIBA BIWAKO E-HARBOR

Open a new Medical R&D center(Construction completion scheduled in the summer of 2015)

Expanded production capacity
at the Aso plant

At our new HORIBA BIWAKO E-HARBOR we will organically integrate development,
design, and production of gas measurement technology and related devices, whichhave so far been separately carried out by the Automotive Test Systems and the Process& Environmental Instruments & Systems segment. By doing so, we aim to improve
the time-to-market of new products, and efficiency of production. By transferring theaccumulated core technology HORIBA has acquired in its first 60 years of existence inKyoto to the next generation of engineers and technical personnel, knowledge and know-how
of the previous generations will be put to use and facilitate further development andgrowth. Construction is scheduled to be completed by the autumn of 2015.

Opened a reagent plant in China

Opened a reagent plantin India

Opened a representative office in Indonesia

Rendering of
HORIBA BIWAKO E-HARBOR

Expanded the reagent plant in Brazil

HORIBA Report 2014 | 12

Message from the CFO

HORIBA is achieving sustainable growth andhigher ROE by seeking earnings growth andrewards to shareholders in a balanced manner.
Senior Corporate Officer and General Manager of Finance & Control Division

Sunao Kikkawa

Basic capital policy

Implementing shareholder return linked to earnings growth.
2013 onwards: Aiming for payout ratio of 30% of HORIBA’s consolidated net income.**Target total returns to shareholders at 30% of consolidated net income, by combining the amount of dividend payments and share buybacks.

Select an optimal financing method, responding to capital needs
and with due consideration to factors such as the equity ratio,
capital cost, market interest rates, and credit ratings.
Achieving a high ROE based on earnings growth.
Target of the Mid-Long Term Management Plan [2011-2015]: 11% or more.

Implement a shareholder return policy linked toearnings growth
HORIBA frequently calls shareholders owners and puts
emphasis on exceeding their expectations. In 1974,
when a majority of companies paid fixed dividends, wewere the first listed Japanese company to start paying
shareholder dividends based on a payout ratio and havecontinued this practice without interruption for 40 years(See Corporate Philosophy on page 81). Starting in 2013,
we changed to a dividend policy targeting total returns
to shareholders (the combined amount of dividend
payments and share buybacks) at 30% of consolidated
net income, instead of targeting 30% of nonconsolidated
net income, in order to link shareholder return directly toconsolidated operating results.

Sunao Kikkawa

Financial policies
HORIBA maintains an appropriate level of liquidity inhand to ensure efficient funding in response to capitalrequirements. This is an important guideline for HORIBA’s
financing activities. We define liquidity in hand to be a sumof cash and cash equivalents and the open amount of thecommitment lines that have been negotiated with financial
institutions. At the end of 2014, liquidity in hand amounted
to ¥56.1 billion, which included ¥51.1 billion in cash andcash equivalents and ¥5.0 billion of open commitment
lines with financial institutions. We consider this cash inhand and commitment lines as reserves for future capital
expenditures, M&A activities, and other investments.

Senior Corporate Officer and General Manager of Finance & Control Division

Sunao Kikkawa joined HORIBA, Ltd. in 1974. He was assigned to work at HORIBA Instruments Incorporated (U.S.) in 1982 and returned to HORIBA, Ltd. in 1988. He wasappointed General Manager of the Accounting Department in 1996 and Senior Corporate Officer in 2007. He made efforts toward globalizing HORIBA’s accounting operations
along with the Group’s globalization and maintaining compliance with international accounting standards. At present he is engaged in raising efficiency in capital strategy andgroup administrative operations as Senior Corporate Officer and General Manager of the Finance & Control Division.

13

Dividend Payments and Total Return Ratio
In fiscal 2014, we paid a record-high dividend per shareof ¥67. Looking back at the recent dividend payment
record, our dividend per share was at a lower level in fiscal
2009 and 2010, due to profit deterioration caused by the
economic downturn that began in 2008. However, thanks
to earnings recovery in each business segment, we madea significant increase in dividend value per share in fiscal
2011 and changed the dividend policy to one targeting total
returns to shareholders (the combined amount of dividend
payments and share buybacks) at 30% of consolidated net
income. If we recalculate the 10-year dividend payment
record up to fiscal 2012, when the dividend policy targeted
a payout of 30% of nonconsolidated net income, using
the new dividend policy of the total return ratio based on
consolidated net income, our payout ratio would have been
20.8%. Thus, we believe that our new dividend policy has
allowed us to return more to our owners (shareholders).
In fiscal 2015, we are projecting a dividend per share of¥70, based on our net income forecast of ¥11.5 billion as
of February 12, 2015. In addition, we conducted a sharebuyback worth ¥1.0 billion in February 2015. As a result,
our three-year (2013-2015) average total return ratio is
expected to be 30%, meaning that we will achieve thetarget of 30% in total return ratio, which is one of ourcapital policies. We intend to continually increase rewards
to owners (shareholders) by growing earnings per share(EPS) and achieving higher ROEs on a medium-term basis.

Cash flow in the Mid-Long Term Management
Plan [2011-2015]
HORIBA consistently invests in equipment, ERP, R&D,
and human resources from a long-term perspective,
without depending on performance of a single fiscal
year. In the Mid-Long Term Management Plan [2011-2015],
we have invested mainly in overseas R&D facilities andreagent production facilities (new construction andcapacity expansion) from the first year of the plan.
From 2014, our focus was shifted to setting up bases inJapan. We are investing about ¥10.0 billion, the highest
amount for one base, in building HORIBA BIWAKO
E-HARBOR, scheduled to be completed by the autumn
of 2015. This will be a primary reason that our investing
cash flow will be significantly higher in 2015, comparedto the average of 2011-2014. Projecting increases in bothsales and profit year-on-year in 2015, we are confident
that our healthy balance sheet will be maintained.
We continue to be dedicated to rewarding 30% ofconsolidated net income to our owners (shareholders)and investing in strengthening our craftsmanship inJapan, aiming for high growth.

Dividend payments and total return ratio
Dividend per share (right)
Total return ratio (left)[including commemorative dividends and share buybacks]

%

Yen

70

70

60

60
Total return ratio

30% in 3-year average

50

50

40

40

30

30

20

20

10

10

0

0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20142015
Forecast

Comparison of 2011-2014 average and 2015 forecasts
Billionsof yen15
12.5

2011-2014 average

2015 forecasts

Operatingcash flow

10
Operatingcash flow

7.5
5
Free cash flow

2.5
0
-2.5
-5
-7.5
-10
-12.5
-15

Investing cash flowFreecash flow

-17.5
-20

Investing cash flow

HORIBA Report 2014 | 14

Business outline

Leaders of business segments from various countries
Twice a year, the global meeting, attended by management and executives ofthe HORIBA Group companies, is held to facilitate better communication andpromote decision making.
Photos taken in Japan in December 2014

Automotive Test Systems

Medical-Diagnostic Instruments & Systems

15

Semiconductor Instruments & Systems

Scientific Instruments & Systems

Process & Environmental Instruments & Systems

HORIBA Report 2014 | 16

Business outline

Business overview by region: Present status and future development• Increasing needs for analysis and measurement in China, South Korea, andSoutheast Asian countries.
• Aim at aggressively deploying know-how accumulated in Automotive Test Systems,
Medical-Diagnostic and Process & Environmental Instruments & Systems segment businesses
in developed markets for expansion.

25%& Systems segment.
• Invest in sales network for the Medical-Diagnostic Instruments & Systems segment.
• Acquired business in Scientific Instruments & Systems segment in North America.
• Aim at expanding market share in this major market that represents 40% of global demand
for analytical and measurement instruments.
• Demand related to government budget is weak, due to the sluggish economies in Europe.
• A development facility is scheduled to open in Montpelier, France with the aim of launchingnext-generation medical products.

31%
Sales byregionAmericas • The reagent plant in Brazil expanded capacity in the Medical-Diagnostic Instruments

Europe

Japan

ro

Asia

EuropeEu• Steady growth and high market shares, mainly for products that are related to R&D applications
and environmental regulations.
• Relocate and strengthen a development and production base for the Automotive Test Systems
and Process & Environmental Instruments & Systems segment to HORIBA BIWKO E-HARBOR(Shiga prefecture) in the autumn of 2015.

n
Ye

Japan

U.S. dollars

Americas18%

Automotive Test Systems
HORIBA’s automotive EMS (Emission Measurement Systems)
are adopted as the primary standard by national certification
bodies in many countries and have an 80%* global market share.
HORIBA provides the EMS and other measurement systems forautomotive development, enhancing the R&D efforts and quality
control of automotive manufacturers and automotive component
manufacturers around the world.

Principal products
Sales bysegment

36%* HORIBA’s estimate
Risk factor

The global automotive industry’s shifting R&D investments

Major customers

Automotive manufacturers, automotive component manufacturers, multipurpose
motor manufacturers, government regulatory agencies, oil companies, automotive
maintenance and repair centers

Product applications

Development of new gasoline, diesel and hybrid powertrains, vehicle certificationand quality control, in-use vehicle inspections

Emission measurement
systems,
Automotive emission
analyzers,
Onboard emission
measurement systems,
Driveline test systems,
Engine test systems,
Break test systems,
Drive recorders

Medical-Diagnostic Instruments & Systems
HORIBA medical products are primarily blood testing instruments
and reagents for the in-vitro diagnostics market, with over ¥5trillion in global annual sales. Blood testing instruments are usednear the site where patients are located such as a surgery ward,a hospital ward, or a clinic for outpatients.

17

Principal products
Sales bysegment

17%

Risk factor

Changes in medical insurance systems in different countries

Major customers

Medical testing centers, small to medium-sized hospitals, medical practitioners

Product applications

Health and diagnostic testing, disease diagnosis

Equipment for blood
sample analysis(hematology analyzers,
Equipment
for measuring
immunologicalresponses,
Clinical chemistry
analyzers,
Blood glucose
measurement
systems)

Asia

26%

Semiconductor Instruments & Systems
HORIBA contributes to the semiconductor industry bysupplying mass flow controllers, which are devices that
control gas and liquid flows in the semiconductor, solar cell,and LED (light-emitted diode) manufacturing process,and other monitoring systems.

Principal products
Sales bysegment

19%

Risk factor

Significant fluctuation in demand caused by the “silicon cycle” in thesemiconductor industry and investments related to solar cells, LEDs, and otherenergy sources

Major customers

Semiconductor production equipment manufacturers, semiconductor device
makers, semiconductor cleaning equipment manufacturers

Product applications

Flow control of gases and liquids, monitoring of cleaning fluid concentrations insemiconductor manufacturing processes, semiconductor and LCD quality control
inspections

Mass flow controllers,
Chemical concentration monitors,
Reticle/mask particle
detection systems,
Residual gas analyzers

Scientific Instruments & Systems
HORIBA provides over 500 types of instruments for use at theleading edge of scientific technology and commands leading
market shares in niche markets. The Scientific Instruments& Systems segment develops basic analytical and measurement
technologies, which play key roles in providing new technologies
to other HORIBA’s business segments.

Principal products
Sales bysegment

17%

Risk factor

Investment trend of national government agencies and other institutions
Demand fluctuation following changes in environmental regulations

Major customers

Manufacturers, research institutions, universities, government agencies, electric
power companies

Product applications

R&D, product quality testing, criminal forensics

pH meters,
Particle-size distribution analyzers,
X-ray fluorescence analyzers,
Raman spectrometers,
Spectrometers,
Gratings

Process & Environmental Instruments & Systems
HORIBA provides environmental measurement solution
technologies associated with environmental regulations in
the world. Together with providing process measurement
technologies which fulfill analytical needs in manufacturing
development, we ensure better public safety, security,and health.

Principal products
Sales bysegment

11%

Risk factor

Demand fluctuation following changes in environmental regulations

Major customers

Manufacturers, government agencies, electric power companies

Product applications

Measurement of gaseous emissions, wastewater and water supplies, environmental
pollution monitoring, environmental radiation measurement equipment

Stack gas analyzers,
Water quality analysis andexamination systems,
Air pollution analyzers,
Environmental radiation
monitors

HORIBA Report 2014 | 18

Business review

Automotive Test Systems
Sales breakdown

Sales breakdown by region

Net sales and operating income
Net sales (left) – Operating income (right)

ITS business 2%

Europe 29%

Japan 28%

EMS business

MCT business

68%

30%

Net sales
2014

55.0

Operating income plan for 2015 (right)

Billions of yen

Billions of yen

75

10

60

8

45

6

30

4

15

2

Billions of yen

Americas 15%

0

Asia 28%

0’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’15
Forecast Plan

Providing a powerful support
to the automotive development2014 results and 2015 forecasts

HORIBA’s automotive EMS (Emission Measurement
Systems) are adopted by national certification bodies
throughout the world, commanding an installed basemarket share of 80%. HORIBA provides complete test
and measurement solutions for automotive development,such as test systems for chassis, engines, power trains,and brakes to major global automotive manufacturers.
Customers find HORIBA test systems to be indispensable
tools developing new technologies required to meet rising
global fuel economy and emission standards. HORIBA
test systems find applications in the development of
conventional gasoline and diesel engines, hybrid electric
power trains, alternative fuel engines, and electric vehicles.
We expect the increasing demand for automotive test
systems to drive growth in our business.

HORIBA’S automotive business
HORIBA aims to expand sales and improve profit by focusing investmentsin emissions measurement systems and powertrain & driveline test systems.
HORIBAbusiness divisions

EMS business

MCT business

ITS business

Gasoline& dieselHybridElectric

Emissions measurement

Market size
(Billions of yen)

40
~50

Engine performance tests

100
~120

Vehicles, wind tunnel balances, brake tests

15~20

Drivelines tests

30~40

Safety and ITS

10~15

Investing to achieve higher production
efficiency and expand the MCT business
EMS sales increased in 2014, thanks to an increase inautomotive manufacturers’ R&D investment globally and theweakening of the Japanese yen. Both sales and operating
income increased year-on-year, due to improvement in
profitability of the MCT(Mechatronics) business, in addition to
the high-margin EMS business.
In 2015, we are expecting automotive manufacturers tocontinue to increase their investments. In addition, automotive
component manufacturers tend to increasing their investments
in technology development, leading to an expansion of themarket for HORIBA products. Against this background,
we project a significant increase in MCT sales, and plan to

HORIBA’s Automotive Test Systems segment sales
and major automakers’ R&D spending
HORIBA's automotive segment sales (left)
Aggregate R&D spending by 3 German automakers (right; Million Euro)
Aggregate R&D spending by 2 U.S. automakers (right; Million US$)
Aggregate R&D spending by 3 Japanese automakers (right; 100 Million yen)
Billions of yen

60

24,00050

20,00040

16,00030

12,000

20

8,000

10

4,000

0

0
2005

2006

2007

2008

2009

2010

Source: HORIBA’s survey based on companies’ disclosed materials

19

Million Euro/Million US$/
100 Million yen

2011

2012

2013

Major products and market shares
Emission measurement
systems

NOTE: Market shares quoted are estimates by HORIBA.

World market
share

Segment sales
share

80%

42%

These systems continuously andsimultaneously measure a wide rangeof gaseous and particle components inemission gases over a broad rangeof concentrations.
They are widely used in R&D andengine/vehicle certification in theautomotive industry.

Driveline test systems

World market
share

Segment sales
share

15%

4%

The driveline is an extremely
important part of the overall
powertrain that transmits energy
from engines or motors to thevehicles’ tires. HORIBA’s driveline
test systems will use the latest
simulation technology for a wide
range of powertrain and driveline
testing applications. HORIBA’s
strength is demonstrated byproviding flexible systems basedon custom and open solutions.

further improve profitability by sales volume increase andcost reduction. At the same time, we are expecting to incura one-time relocation expense related to HORIBA BIWAKO
E-HARBOR, our new integrated development and production
facility, in which construction is scheduled to be completed in
the autumn of 2015. As a result, we are projecting a modest
increase in operating income on a significant sales gain.

The advantage of comprehensive,
integrated solutions

development. HORIBA, with its broadening MCT productportfolio is able to provide automotive manufacturers withmore comprehensive measurement systems via integrationof EMS and MCT products, within its open and custom test
automation systems. Following our unique open and custom
test systems approach, a strong commitment to new productdevelopment and leveraging our core analytical know-how,
HORIBA expects to meet increasing customer demand forcomprehensive, integrated solutions and continuously growsales and enhance profitability.

The global MCT market, which includes test systems forchassis, engines, power trains, and brakes, is worth over¥150 billion in annual sales and is anticipated to continue
growing on the strength of rising demand for automotive

Trend of automobile-related regulations
1. Progression of emission standards by region/country

2. Automotive fuel efficiency (CO2 emission) standards of Japan, U.S., and Europe
Carbon dioxide (CO2) weighted average (g/km)

Newshort-term
regulations

JAPANNew long-term
regulations

Post new long-term
regulations

Next emission
regulation

200 U.S.
Japan: 20.3km/l(calculated by preliminary
target amount)180
California

U.S.
FederalLEV

LEVTier 2Tier 3

160

Japan

140

EuropeEuro 4

EuropeEuro 5Euro 6

China

120
China 5100

Bharat Stage 3 in Cities Nationwide

India
Bharat Stage 4 in Cities

2000

2005

U.S.
26.4km/l

17.8km/l

China 3, China 4
Introduced only in Beijing in 2013.
Nationwide launch plan in 2018

2010

2015

Europe: 24.4km/l

Nationwide

2020

Sources: HORIBA’s survey based on materials of the Ministry of Economy, Trade and Industry; Ministry of Land,
Infrastructure, Transport and Tourism; Japan Automotive Manufacturers Association Inc.; and others

2005

2010

2015

2020

2025

Sources: HORIBA’s survey based on materials of the Ministry of Economy,
Trade and Industry, Japan Automotive Manufacturers Association Inc., and others

HORIBA Report 2014 | 20

Business review

Medical-Diagnostic Instruments & Systems
Sales breakdown

Sales breakdown by region

Net sales and operating income
Net sales (left) – Operating income (right)

Service andmaintenance

Testing
reagents

11%

Europe 43%

Japan 19%

Billions of yen

40

Operating income plan for 2015 (right)

Billions of yen

854%

Net sales
2014

27.0
Billions of yen

Medicaldiagnostic
instruments

35%

Americas 25%

Asia 13%

30

6

20

4

10

2

0

0
’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’15
Forecast Plan

Proactive product development
for the in-vitro diagnostics market

2014 results and 2015 forecasts

In the global market of in-vitro diagnostics; HORIBA
provides instruments and reagents for blood sample testing
throughout the world. The segment’s business modelis based on recurring revenues generated from sales ofreagents which are consumables. We thus aim to ensurestable earnings by expanding our installed base of medicaldiagnostic instruments. In particular, HORIBA is aggressive
in developing business that leads to sales of testing
reagents, and does this by launching innovative small andmedium-sized blood cell counters in the diagnostic market
for POCT*, such as small to medium hospitals, specialty
clinics, test centers and surgery centers.
*POCT Point of Care Testing

Increasing sales in Japan from new products;
accelerating global product launches
In 2014, Medical-Diagnostic Instruments & Systems
segment sales increased year-on-year, partly due to thepositive impact of the depreciation of the Japanese yen.
However, sales in Europe were sluggish and instrument
sales in Japan were lackluster as purchases were delayedby the consumption tax hike in April 2014. In addition,
investment in development of new medium and largesized products in Europe, and continued enhancement of
the sales network in North America caused a decrease inoperating income.
In 2015, we are focusing on expanding sales ofhematology and CRP analyzer, which was launched in

Business development by test category
Test category

Clinical chemistry

Hematology

Immunology

Coagulation

Market size

¥2 trillion¥0.35 trillion¥2 trillion¥0.2 trillion

Hospitals

Hematology
analyzer systems

Large hospitals
Testing centers
Small andmedium-sized
hospitals
Privatepractitioners
Hospital units andsurgery rooms

Clinicalchemistry
analyzers

Blood glucose
measurement
systems

Small andmedium-sized
hematology
analyzers

Field in which HORIBA exhibits strength

CRP analysis

Coagulation
reagents(POCT)

Market size: Based on the HORIBA Report of 2013, market size was defined as the amount of demand generated from central and core labs testing departments.
Starting in 2015, from this year's Report (HORIBA Report 2014), the market is re-categorized to include demand from places other than central and core labs testing facilities.

21

Major products and market shares
Hematology analyzers

NOTE: Market shares quoted are estimates by HORIBA.

World market
share

Segment sales
share

7%

80%

Blood tests are essential for diagnosis
and assessing the health of people andanimals. These analyzers check red
and white blood cell counts as well as
hemoglobin concentrations andplatelet counts.

March 2015 as a strategic product in Japan. Meanwhile,
we will continue investment for enhancing the sales
network in North America, and R&D investment forlaunching new products early in Europe.

Investment for product development;
accelerate next-generation products
development and launches
With technological synergy between our bases inJapan and France, we launched a new medium-sized
hematology and CRP analyzer, targeting the Chinese
market, in February 2014. Regarding test reagents, ourstrategy is to initiate local production of reagents inmass-consumption areas and establish a global supply
system of reagents. In the last four years, from 2011

Hematology and CRP
analyzers
This is the first analyzer in the world
to simultaneously measure blood
cell counts and C-Reactive Protein(CRP), which the body produces in
response to internal inflammation,
thus facilitating faster and moreaccurate diagnosis.

World market
share

Segment sales
share

100%

9%

to 2014, we began operation or expanded capacity ofreagent plants in Japan (Aso, Kumamoto Prefecture),
China, India, and Brazil. At present, HORIBA ABX S.A.S.
(France), a center of excellence for R&D of medium andlarge-sized products, is building a new R&D center, whichis scheduled to begin operation in the summer of 2015.
We will promote joint development projects with teams inJapan and France and accelerate developing products forthe global market.

Global product development and supply system

Ratio of reagent sales tosegment sales

France100

Product development
and production base(instruments and reagents)

Development technology
of medium andlarge-sized products

80

Japan
India
Production base
(Reagents)

China
Production base(instruments
and reagents)

Product development
and production base60

(instruments and reagents)

Development technology
of small-sized products

Brazil
Production base40

(Reagents)

Instruments• Small-sized products: Expand sale of our hematology and CRP analyzer globally• Medium-sized products: Introduce products for the Chinese market byintegrating technologies in Japan and France• Medium and large-sized products: Accelerate product development toexpand market shares in Europe and Americas

Reagents• The local supply systems

have resulted in cost
reductions for distribution
and inventory
management, thereby
improving profitability.

20

02005 2006 2007 2008 2009 2010 2011 2012 2013 2014

HORIBA Report 2014 | 22

Business review

Semiconductor Instruments & Systems
Sales breakdown
Dry process monitors

1%

Sales breakdown by region

Other 4%

Net sales (left) – Operating income (right)

Europe 6%

Wet processmonitors

11%

Japan 39%

16%

Net sales
2014
Billions of yen

Mass flow
controllers

Billions of yen

12

HORIBA’s Semiconductor Instruments & Systems
segment sales compared to worldwide sales ofsemiconductor manufacturing equipment
HORIBA’s Semiconductor Instruments & Systems segment sales (left)

Trillions of yen

Worldwide sales of semiconductor manufacturing equipment (right)

6

25

5

20

4

15

3

10

2

5

1

0

0
2006

2007

2008

2009

2010

2011

30

9

20

6

10

3

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’15

02014 results and 2015 forecasts

HORIBA’s mass flow controllers, which are devices
that control gas and liquid flows in the semiconductor,
solar cell, and LED (light-emitted diode) manufacturing
process, have a leading global market share. Products
from HORIBA include many other types of monitoring
equipment for semiconductor manufacturers. HORIBA
aims to contribute to the semiconductor industry byproviding customers with high-level solutions that support
technical advances in processing, miniaturization, andyield enhancement.

23

Operating income plan for 2015 (right)

Forecast Plan

Contributing for miniaturization andyield enhancement in semiconductor
manufacturing processes

2005

40

0

Asia 39%

84%

30

Billions of yen

Americas28.9Billions of yen

Net sales and operating income

2012

2013

2014

Paying particular attention to the demand
outlook for the second half of 2015
despite the semiconductor industry’s solid
capital expenditures
In 2014, due to continued growth in demand forsemiconductors from 2013 as well as several new successful
product launches, sales of mass flow controllers increased to
52% of global market share.
Sales of chemical concentration monitors, which areused in semiconductor wafer cleaning processes, also
increased mainly in Asia due to an increase in demand fromsemiconductor manufacturers. As a result, sales and profit
increased significantly year-on-year.
In 2015, we expect high levels of demand to persist forEnhancing development capabilityof the Semiconductor Instruments & Systems segment
HORIBA STEC* Kyoto Fukuchiyama Technology Center opened in 2013 as a
research-only facility. Its main focus is to develop mass flow controllers and nextgeneration advanced material control equipment. It also has the aim of discovering
ways to apply new technologies to HORIBA’s other products. We also expanded our
R&D foot print in North America to respond more quickly to the needs of advanced
semiconductor research at key device makers and semiconductor equipment
manufacturer to enable engagement and support during both upturns anddownturns of the industry.

*HORIBA STEC, Co., Ltd. is mainly engaged in development, manufacturing, and sales of mass
flow controllers. It is leading the Semiconductor Instruments & Systems segment in the HORIBA.
The photo shows the Kyoto Fukuchiyama Technology Center

Major products and market shares
Mass flow controllers
These high-precision gas andliquid controllers regulate flow rates
in semiconductor manufacturing
processes, typically inthin-film formation processes.
They are indispensable components
for high quality semiconductorand LED production.

NOTE: Market shares quoted are estimates by HORIBA.

World market
share

Segment sales
share

52%

84%

the first six months, but moving toward the second half of2015, we need to pay attention to the investment outlook of
semiconductor manufacturers, particularly in South Korea
and Taiwan. Additionally we are focusing on the demand
outlook for production equipment manufacturers for solar
cells and LEDs.

Expansion of sales in Asia, supported
by strong trust from global
semiconductor makers
One of the HORIBA’s strength is its capability to support
customers in Asia. Our strategy is to expand our market
share in Asia by earning more credibility not only fromsemiconductor manufacturers, but also from manufacturersof solar cells, LEDs, and semiconductor devices and by

Chemical concentration
monitors
These compact units are used insemiconductor manufacturing tomonitor concentrationsof chemical cleaning agents.
They ensure cleansing
fluids are precisely
delivered and properly
used, thereby optimizing
the cleaning process
and boostingproduction yields.

World market
share

Segment sales
share

80%

11%

providing enhanced quality products that satisfy anticipatedcustomer demand.
At the Aso plant (Kumamoto Prefecture, Japan), our major
plant for manufacturing mass flow controllers, we broadened
production capacity to satisfy needs of the MedicalDiagnostic Instruments & Systems segment. This allows us
to effectively utilize resources by shifting personnel between
the two business segments even when we face a drop in
production for semiconductor system equipment. Flexible
plant management according to fluctuations in production
demand is one of HORIBA’s strengths.

HORIBA’s global market share for mass flow controllers
HORIBA has maintained more than 40% of the global mass flow
controller market share since 2009. It is noteworthy that our share
expanded in the period from a downturn phase, which started in2009 and lasted until a recovery in 2010, by successfully meeting
our customers’ needs through new product introductions andexpanded production capacity. In our view, this is attributed tothe success of our balanced management, which minimized the
reduction in manufacturing investment and production capacity
during a significant downturn in the market.

60

52
%

50

40

30

20
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

HORIBA Report 2014 | 24

Business review

Scientific Instruments & Systems
Sales breakdown

Water quality
analysis 8%
Particlecharacterization

11%

Sales breakdown by region

Net sales and operating income
Net sales (left) – Operating income (right)

Other 4%

Molecular &microanalysis

Europe 28%

Japan 27%

Operating income plan for 2015 (right)

Billions of yen

Billions of yen

30

3

37%

Net sales
2014

20

2

Billions of yen

10

1

25.6

Opticalcomponents

20%

Elemental analysis

20%

Americas 24%

Asia 21%0

0’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’15
Forecast Plan

Achieve a good balance between
creation of analytical measurement
technologies and business growth

2014 results and 2015 forecasts

Expecting sales increase in fluorescence
spectroscopy business and demand growth
in private sector

HORIBA provides over 500 types of instruments for use at
the leading edge of scientific technology. HORIBA solutions
for data acquisition and analysis in niche markets support
advanced research that ventures into unknown territory
in the quest for products and processes of the future.
HORIBA’s analyzers are widely used in basic research,
foreign-object examination and defect analysis for materials
science, food, drugs, electronic components, forensic
science, and archaeological surveys. Additionally, the
Scientific Instruments & Systems segment develops basic
analytical methods and core measurement technologies,
which play key roles in providing new technologies to thefour other business segments of HORIBA.

In 2014, Scientific Instruments & Systems segment sales
increased in yen terms from the previous year, partly due
to the impact of the depreciation of the Japanese yen. The
acquisition of Photon Technology International (PTI) in the
U.S. expanded HORIBA’s business by increasing sales offluorescence spectroscopy. In addition, the depreciation of
the yen helped boost sales of metal analysis instruments
for the automotive industry in Asia. As a result, we recorded
increases in sales and operating income year-on-year.
In 2015, we anticipate sales growth following an increasein R&D investment by private companies in Japan. We

HORIBA’s target markets and proprietary technologies
HORIBA’s Scientific Instruments & Systems segment products
using the leading edge technologies are utilized by many
diverse R&D centers, including corporate research divisions andacademic research institutions. In February 2014, we acquired
a fluorescence spectroscopy business with particular strengths

Target markets

25

Application

Organic material
analysis• Organic EL lighting devices• Electrolyte for fuel cells

Inorganic material
analysis• Carbon materials• Metallic material (rare metals)

Lithium ion
battery• Positive and negative electrodematerials, electrolytic solution
for separators

Drug discovery
and biotechnology• Basic research to quality assessmentof new drugs• Pharmaceutical composition mapping

pH meterParticlecharacterization
instrument

in microscopy, drug discovery and biotechnological research. In
those fields, as well as the energy, automotive, and others, we
provide analysis and measurement solutions with the ultimate
goal of becoming a true partner with whom our customers seek
to consult and collaborate.

X rayanalyzer

Metalanalyzer

Grating

Raman
Fluorescence
spectrometer spectroscopy

Ellipsometer

GDS

Areas
strengthenedby theacquisitionof the PTI

Major products and market shares
Raman spectrometers
Raman spectroscopy is a spectroscopic techniquethat provides information about the molecular
structure of molecules by measuring the vibrationalmodes of a molecule. The vibrational modes of amolecule, which are a molecular fingerprint offering
a quantitative measurement, can be used to identify
the chemical under analysis. In recent years, Raman
spectroscopy has attracted attention for new
applications in material research. Raman has a very
weak light scattering machanism, so ahighly-sensitive and optimal optical design isnecessary. HORIBA Jobin Yvon’s outstandingknow-how in optics-related technology has beensuccessfully applied in the core development of our
extremely high performance Raman spectrometers.

NOTE: Market shares quoted are estimates by HORIBA.

World market
share

Segment sales
share

30%

18%

also aim to further boost HORIBA’s market share (21%)
in fluorescence spectroscopy business, which was
expanded by the acquisition of PTI, and promote sales ofthese instruments for medical research, drug discovery,
biotechnology, and other sectors.

Support for basic research innext-generation energy sources
Demand is growing for products manufactured by HORIBA
Jobin Yvon S.A.S. (France) for data analysis and basic
research for organic and inorganic materials such as rareearth metals and advanced lithium ion batteries, which are
expected to become a core component in next-generation
automobiles. Specific products include diffraction gratings,
fluorescence spectroscopy and Raman spectrometers,

pH meters
HORIBA is recognized as one of
the top pH meter brands beginningwith a history of its developmentof Japan’s first glass electrode pH
meter in the 1950’s. HORIBA offers afull pH product line to satisfy diverse
customer needs ranging from desktop models to support laboratory
research to rugged instruments forfield applications measuring riverwater, groundwater,
and waste water.

Japan market
share

Segment sales
share

50%

7%

which command a high global market share. We expect toincrease our global sales and market share, as the markets
respond to tighter regulations and more government
spending, especially in the emerging markets.
In the particle characterization market, the need toaccurately measure finer particle-size distribution isincreasing for R&D activities and quality management
in a wide range of areas such as battery materials,
automobile catalysts and pharmaceuticals. With HORIBA
particle characterization instrument, with world top-classmeasurement precision, we aim at expanding market sharein the high-growth Asian market.

Accelerate market development for the fluorescence spectroscopy business
In February 2014, HORIBA acquired PTI’s fluorescence
spectroscopy business. This has led to an increase HORIBA’s
global market share in this field from 16% to 21%*. PTI operates infour countries and is strongly connected to the academic fields, by
having a research facility in the Faculty of Medicine and Dentistryof the University of Western Ontario in Canada. HORIBA intends
to create synergies by combining fluorescence spectroscopy withother HORIBA technologies and accelerate business expansion
using these combined technologies and techniques.
*Source: SDi report [2013]

16 %
World
marketshare

The acquisition
led to a higher
market share

21%

PTI’s employees at an exhibition

HORIBA Report 2014 | 26

Business review

Process & Environmental Instruments & Systems
Sales breakdown

Europe 14%

Other 14%
Air pollution
analysis

15%

Sales breakdown by region

Stack gasanalysis38%

Net sales
2014

Japan 51%

14%

Billions of yen

33%

20

Operating income plan for 2015 (right)

Billions of yen

4

15

3

10

2

5

1

0

Asia 21%

0’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’15
Forecast Plan

HORIBA supports global environmental
measures and new energy industries
We supply instruments to various industries whose work
is essential for environmental emissions reduction andprocess monitoring. We play an important role in gas
measurement and monitoring of industrial liquid waste
in the electric power, steel, and chemical industries aswell as energy industries including oil refining, and heavy
chemicals; purified water management for medical andsemiconductor use; and constant monitoring and controlof water quality in the pharmaceutical, food, and cosmetics
fields. In addition, HORIBA’s accurate and accessible
technology helps ensure public safety by providing
accurate environmental radiological measurements,
demand for which has expanded since the Great East
Japan Earthquake of March 2011.

27

Net sales (left) – Operating income (right)

Billions of yen

Americas

16.4

Water quality
analysis

Net sales and operating income

2014 results and 2015 forecasts

Solid demand for stack gas analyzers in Asia
Aiming to expand sales in Japan’s waterrelated market
In 2014, sales of stack gas analyzers for thermal power plants
and factories increased in Japan and China, while sales ofportable gas analyzers increased in Europe. In addition, water
quality measurement instruments launched in 2014, sold wellin Japan while sales in China, South Korea, and other Asian
countries were also solid. This activity led to an increase insales and operating income year-on-year.
In 2015, we expect sales of stack gas analyzers to continue tobe firm in various regions. In addition, we will continue to pay
attention to demand growth for air pollution analyzers in Asia.
As to our process measurement equipment business in North

Stack gas analyzers

Air pollution analyzers

Water quality analyzers

HORIBA has a leading market share in Japan incontinuous emission monitoring systems used inplants and other facilities that generate gaseousemissions and soot. Our instruments haveestablished a widely recognized credibility forrobust and reliable sampling systems, which areessential in continuous measurement of a variety
of gases. The analyzers are used in applications
for power generation, petrochemicals, steel, paper,
foods and pharmaceuticals.

HORIBA’s air pollution analyzers have won high acclaimin the field as highly reliable analyzers that demonstrate
excellent precision and long-term stability at ppb*
concentrations. They are used in over 50 countries
to monitor air quality by municipal governments andprivate industries. Demand has been expanding for
PM2.5-related monitoring.

HORIBA‘s products are used for monitoring andcontrol in water treatment processes. We have awide-ranging water quality product line to measure
pH, the basic water quality indicator, as well as
chemical oxygen demand (COD), total nitrogen, andtotal phosphorous.
Our products have been highly evaluated in the water
quality analysis field by companies in the electric
power, gas, petrochemical, steel, paper, food, andpharmaceutical industries.

* ppb: parts per billion. One part per billion denotes one partper 1,000,000,000 parts. This notation is mainly used fordescribing low concentration measurements.

Major products and market shares
Stack gas analyzers
These analyzers provide highly sensitiveand precise measurements of NOx,
SO2, CO, CO2, and O2 constituents ingases emitted by boilers and furnaces
in thermal power stations and refuse
incineration facilities. A single unit
can simultaneously and continuously
measure all five gases. HORIBA has aleading market share in this competitivemarket in Japan and seeks sales growthin the global market.

NOTE: Market shares quoted are estimates by HORIBA.

Japan market
share

Segment sales
share

50%

H-1 series of industrial water
quality analyzers

38%Japan market
share

Segment sales
share

20%

33%

(Total of water quality analyzers ) (Total of water quality analyzers )These industrial water quality analyzers perform
in a wide range of applications from pure water
for semiconductor and food to water treatment tosewage and industrial wastewater. They confirm
progress in wastewater treatment processes andcontrol water treatment equipment. Moreover,
we have developed pH electrodes that resist
damage in harsh environment by strengthening
their toughness, thereby reducing the frequency ofelectrode replacement and maintenance operations.
By responding to expanding worldwide needs forremote monitoring services in water and sewage
quality management and process monitoring,
HORIBA pursues sales growth in the global market.

America, we are carefully following the outlook of the shale gas
industry and the capital expenditure trend of petrochemicalcompanies. In Japan, we plan to expand sales of water quality
measurement instruments for the public and private sectors.

Aiming to become global No. 1 in theenvironmental regulation business
HORIBA is determined to grow its markets share in the global
environmental analytical instrument markets, estimated at¥150 billion, by utilizing its accumulated know-how andexperience in Japan, Europe, and the Americas. We also aim
to expand our market share in waste water monitoring forwater supply and sewerage systems, and the water quality
measurement and monitoring field in the environmental
area such as lakes and rivers, by giving added emphasis

to pH measuring technology, a HORIBA core businesssince its foundation in the 1950s. Moreover, we will further
develop business by leveraging HORIBA’s expertise in theenvironmental and analytical instrument markets in Asia andother emerging nations, where demand is projected to growrapidly. Such instrumentation includes stack gas analyzers,
water quality measurement instruments, and air pollution
monitoring and analysis instrument. In addition, based on theprocess measurement equipment business we acquired in2013, we will expand our process measurement business invarious industries.

Adoption example of stack gas analyzers at a thermal power plant

Growing demand
stack gas analyzers
In developed countries which have tightened
regulations on emission gas, we have seen the
introduction of denitration and desulfurization
processes, which have lowered emission
gas concentration levels. HORIBA provides
instrumentation which can analyze both gases
at extremely low concentrations as well as
the measurement equipment needed formonitoring these processes.
In emerging countries, environmental pollution
has led to introduction of regulations similar
to those of developed countries. Based on
the technologies accumulated in improving
Japan’s environmental problems, HORIBA willcontinue expanding in the global market.

Gas analysis at a thermal power plant (image)ENDA Series stack gas analyzers
Steam turbine

Boiler

CO

NOX

NOX

O2

SO2

Smokestack

CO
CO2
O2
Hg
Dust
Flow
volumeFlue gas desulfurizationequipment

Electro statict
precipitator

Flue gas
denitration equipment

HORIBA Report 2014 | 28

Value creation based on invisible values

Diverse human resources
attracted to HORIBA’s Omoi
Responding scrupulously
to customers’ needs

Continual investment
regardless of economic
upturns and downturns
Practice of “Joy and Fun”

Invisible Values

Focus on analytical andmeasurement technologies

Assets not visible in the financial statements

Value-creating spiral
Creating values by using our “Invisible Values” is one of HORIBA’s important management philosophies.
The earnings statement and balance sheet both embody visible and important values.
However, we believe that the essence of good management is to increase “Invisible Values” which arefirmly rooted in corporate culture.
Management’s emphasis on maximizing short-term earnings will not foster sustainable growth or an increasein corporate value; these two objectives cannot be achieved if there is neglect to invest in Invisible Values.

29

Humanresources

At HORIBA, employees are considered to be not simply “employees” but “humanresources” in the sense of resources that are assets. In order for all employees toachieve self-realization through “Joy and Fun”, we have set forth, shared, and been
striving to realize HORIBA’s five Omoi shown below. HORIBA’s strong organizational
power is generated from the compelling desire of all highly-diversified HORIBA
employees to practice HORIBA’s five Omoi.

HORIBA’s five Omoi
• To be a part of a collaborative community,

at the forefront of new ideas and creations.
• To achieve goals and making my life memorable
by fostering the highest intellectual potential.

Technologies

Organizational
structures

Customers

Brands• To reach across the globe to expand learning that
captures key business developments, wherever they occur.
• To be proud of sharing what I do and what HORIBA delivers.
• I want to participate all around and where I can be of help.

Technological development is one of the most important drivers for value
creation and the lifeline of a manufacturer such as HORIBA. To make an analogy,
technical capability is a form of basic physical fitness, which cannot be
maintained without continual training and exercise. Using this analogy, HORIBA
needs to keep training in order to maintain the power to make a dash forward ina recovery phase of the economy.

HORIBA operates five business segments in 26 countries. We believe it is importantthat our human resources in each business and each region take the initiativein promoting their business. With that aim, we are spreading our “Joy and Fun”
corporate philosophy into our global group-wide operation and promoting“One Company Matrix Management.”

HORIBA helps improve people’s quality of life in a sustainable society by supplying
products and providing services to customers. We think it is important to provide
solutions in addition to supplying hardware (instruments). In order to achieve thisgoal, we collaborate with suppliers and group companies in Japan and overseas toimprove the quality of our products and services.

HORIBA works on growing “Invisible Values”, such as human resources,
technologies, and its corporate culture. “Invisible Values” are essential in generating
future earnings and enabling enterprise continuity, while achieving numericaltargets for net sales, profits, and other indicators.
We believe that our persistent, continuous efforts on increasing the other fourinvisible assets, namely “human resources,” “technologies,” “organizational
structure,” and “customers,” have greatly helped us to establish our brands,
representing trust in HORIBA placed by our customers.
HORIBA Report 2014 | 30

Value creation based on invisible values

Human
resources
HORIBA has 5,965 employees worldwide including 2,482 Japanese.
The various activities are shown below.

Launching “HORIBA Stained Glass Project”
The HORIBA Stained Glass Project was launched in January 2014, to provide a focal point for continuing efforts toward
becoming a more vibrant, stronger organization where our people respect each other’s abilities and individuality.

Project mission
We establish a strong
HORIBA by allowing various
personalities and talents toshine for creating new values
on an ongoing basis.

Performance by female employees was
the first year’s theme
In 2014, performance by female employees was the main themeand various workshops featured on topics such as how they
go about their jobs or how they feel about the work. In total,
1,480 employees participated the project, helping them to be

Number of Annual
Workshop Participants

aware of the importance of promoting diversity. As of the end of2014 women made up 11% of overall HORIBA managerial level
persons. At HORIBA, Ltd., the ratio was 4%. The percentage ofwomen among all group employees is 25%. We believe that wehave ample capacity for offering women opportunities to develop
their abilities and advance in the organization. On the other hand,
HORIBA’s overseas employee ratio was as high as 58% as of theend of 2014. This is not a result of shifting production offshore
in order to use low-cost labor but rather is a consequence ofour growing need for highly skilled workers and specialists who
hold advanced degrees. This is quite unique among Japanesecompanies. Keeping our corporate motto “Joy and Fun” in mind,
we aim to build a powerful organization where all employees
respect each other’s strength and weakness and make the bestout of diversity.

Ratio of female managers

Overseas employee ratio
Americas ex. U.S.A 2%
U.S.A. 12%

1,480

persons11%
As of December 31, 201431

Other Europe 5%
Germany 9%

58%

Japan
42%

France 16%
Asia ex. Japan 14%
As of December 31, 2014

Invisible Values

Number of yearly users of Fun House

5,778

persons

In keeping with the belief that the training center could create
more values than a manufacturing plant, we opened a training
center that we named Fun House in 1991. Since then, many
employees attended the HORIBA COLLEGE training courses, inwhich know-how and skills are transferred from employees aslecturers to other employees. There are courses for new recruits,
and global conferences attended by the management of Group
companies in various countries, and others. 5,778 employees
used the Fun House in 2014. The attendees have more diverseand stimulating exchanges with each other as a result of being
away from everyday assignments and spending time together
with their colleagues at Fun House.

Assets not visible
in the financial statements

Number of Japanese nationals
who have received overseas training

220

persons

As early as 1984 we adopted the policy of sending some of ourpeople to our overseas Group companies for one-year period
to acquire international working experience and an international
outlook. Every employee can apply this with on each individual’s
own initiative. In 2015, 16 persons will be transferred to post
abroad, bringing the total of such participants to 220 persons.
We will continue to value the willingness of employees to take up
challenges, send them to overseas bases, and develop humanresources with multicultural perspective.

HORIBA Report 2014 | 32

Value creation based on invisible values

Technologies

Accelerating investments in basic analytical andmeasurement technologies and application development

Comparison with other companies – operating income
ratio and ratio of R&D expenditures to net sales

The development of analytical technology and engineering
technology is vital to HORIBA as an analytical and measurement
equipment manufacturer. We have maintained R&D investment
at the level of 7-8% of sales, even during economic downturns
when our competitors reduced their investments. This strategy
has helped to boost our market share during subsequent upturn
phases. In 2009, our sales declined sharply, but we maintained thesame level of R&D investment. We firmly believe this investment
policy will contribute to our future growth and profitability
improvement. HORIBA aims to improve the efficiency of our R&D
investments and realize a higher operating income ratio.

HORIBA recorded 11.2% in operating income ratio and 7.8%
in the ratio of R&D expenditures to net sales in 2014. In recent
years, those ratios have been stable and the ratio of R&D
expenditures, in particular, has been a higher level compared toother companies.

Comparison with other companies – operating income
ratio and ratio of R&D expenditures to net sales

Operating Income Ratio

20%
Targeted Operating Income
Ratio of HORIBA’s
the Mid-Long Term
Management Plan Thermo
Fisher Scientific[2011-2015]

R&D expenditures and ratio of R&D expenditures
to net sales
Billions of yen

R&D expenditures (left)

AbbottLaboratories

Agilent
Technologies

2011

2005

11.9 10.0

Siemens

10%

7.8

9

HORIBA 201413%%

− Ratio of R&D expenditures to net sales (right)

12

Sysmex7.5

Shimadzu

2012

PerkinElmer

Canon

2013

6

5.0

3

2.5

0

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Yokogawa Electric

2000

0

HORIBA’s major analysis
and control technologies(selected on the basis of sales-size importance)

Automotive

Infrared measurement
Technology for real-time analysis
of elements in gases

Gas flow control
Technology to measure andinstantly control the flow of gases

Particle-size
distribution analysis
Technology to measure particle
diameter and particle distribution

Spectroscopic analysis
Technology for analysis
of visible light

33

10%

Ratio of R&D expenditures to net sales

Other companies’ information is extracted from their disclosed materials, which are available as of April 1, 2015.

From core technology to product development
HORIBA strives to astutely allocate its
R&D resources to specific analyticaltechnologies, apply them to productdevelopment in five different businesssegments, and achieve productreleases efficiently.

5%

Process &Environmental

Scientific

Medical

Semiconductor

Assets not visible
in the financial statements

Invisible Values

Initiatives to create competitive technologies and accelerate product development
Technological development is the most important growth driver for and the lifeline of HORIBA. HORIBA is making global group-wide efforts
to focus on those “technologies” and clearly identify the steps to bring out products to market.

HORIBA Group IP (Intellectual Property) World Cup

IP Liaison

Our in-house IP World Cup competition was held for the firsttime in 2011, with the aim of encouraging creation of HORIBA
technology which can initiate the next growth phase of HORIBA.
HORIBA’s numerous unique technology and intellectual property
have propelled growth of businesses. From 2011 to 2014, 68
applications have been submitted from 11 bases worldwide. In
the Fourth World Cup of 2014, out of 16 applications, 5 superior
applicants were invited to the award ceremony and the in-houseseminar held at the headquarters in Kyoto. The purpose of theseminar is to facilitate exchange of technological information andideas among the different business segments. We anticipate to
generate synergy effects across different segments as a result.

HORIBA has introduced a system to nominate “IP Liaisons” mainly from among
engineers to enhance awareness on intellectual property. The IP Liaisons serve
as a bridge for the IP division, development and design division, and otherdivisions. An IP Liaison is assigned for each major development project topromote creation, protection, and use of proprietary technologies.
R&D division

IP Liaison

IP Liaison

IP Liaison
In-house presentation
by a IP World Cup
award winner

R&D project 1
R&D project 2

Following up andcommunicate
closelyIPdivisionR&D project 3

Promote creation, protection, and use of proprietary competitive technologies

Mid-Long Term Management Plan’s Investments in R&D facilities
HORIBA has been investing in R&D facilities for the five business segments
for the Mid-Long Term Management Plan period of 2011 to 2015. Enhanced
R&D capability for each segment will allow us to accelerate R&D
in a balanced manner in the future.
Automotive Test Systems

Process & Environmental
Instruments & Systems

HORIBA BIWAKO E-HARBOR (Japan)
Scheduled to be completed in the autumn of 2015; approximately¥10 billion investment
Objective: Improve the time-to-market of new gas measurement products andefficiency of production by an organic integration of development,
design and production
Medical-Diagnostic Instruments & Systems

New Medical R&D Center (France)
Scheduled to be completed in the summer of 2015;
approximately ¥1 billion investment
Objective: Enhance medical R&D including development for medium and large-sized
hematology analyzers, with new prospective markets in mind. This is intended to be an
important base for growth and profitability improvement of our medical business.

Semiconductor Instruments & Systems

HORIBA STEC Kyoto Fukuchiyama Technology Center (Japan)
Opened in 2013; approximately ¥1 billion investment
Objective: Develop mass flow controllers and next-generation advanced material
control equipment
Scientific Instruments & Systems

HORIBA Europe Research Center (France)
Opened in 2012; approximately ¥2 billion investment
Objective: At a location next to the École Polytechnique, the renowned Frenchengineering institution, to use industry, academic, and government interaction andresearch to quickly ascertain future customer needs and accelerate development of
new products
Corporate-wide

HORIBA Advanced Technology Center (Japan)
Opened in 2015 April; approximately ¥3 billion investment
Objective: Integrate technical development teams of semiconductor sensors
used in all segments of HORIBA products to accommodate market needs andshorten the development-to-production time

HORIBA Report 2014 | 34

Value creation based on invisible values

Organizational
structures

One Company Matrix Management
We announced the concept of “HORIBA Group is One Company.” in 2004 and have promoted this concept ever since. Under
the corporate motto of “Joy and Fun”, we have established basic infrastructure for sustainable growth, by overcoming
barriers such as often inherent in national boundaries and corporate organizations. We are united under our corporate brandand all the group companies in the world have worked as one entity, aiming to improve corporate value. HORIBA intends toenhance our organizational strength and become a more competitive global group.

Matrix structure, and promotion of
global business strategies
HORIBA is managed under the matrix management acrossfive business segments and three operating regions. This isa global organizational framework for executive decisions on
strategies and plans by business segment, by removing barriers
such as separation of countries, regions, or group companies.
This framework has also enabled globally-integrated business
operation and ability to swiftly react to diverse opportunities,
depending on the market outlook for each segment. We willcontinue to exploit the benefits of the multiplier effect fromsuccessful examples and strengths in one segment or one region
to others and improve HORIBA’s corporate values.

35

Shared services for efficient regional management
HORIBA has been introducing “shared services” whichcentralize certain common services such as finance, HR and IT
in several divisions and organizations, in the Asia, Europe, andAmericas regions. This has enabled identification and selectionof skillful expertise to be concentrated in specific services in
the organization, as well as achieving more efficient operations,group-wide productivity improvement and cost reduction.

Global ERP for One Company: GEO

Restructuring in the U.S.

Since 2007 HORIBA has been sequentially introducing theenterprise resource planning (ERP) system, called the GEO
System, to each group company, with the aim of enabling quick
assessment of business strategies for the entire group as one
entity. The introduction of GEO in all major locations of thegroup will be completed in 2015. This will reduce or eliminate
information barriers caused by national boundaries or corporate
organization and further facilitate sharing of business resources
and information.

As one of measures toward realization of One Company
management, we are promoting restructuring, consolidation, andbuilding of bases in each country. In 2014, the U.S. operation wasrestructured. Various separate offices in the U.S. were consolidated
into one base, with enhanced controlling function as the U.S.
headquarters. An improved showroom for Medical-Diagnostics
Instruments and Systems segment was opened at this new base,which not only represent pursuit of efficiency but also a stronger
supporting function for businesses.

Invisible Values

Assets not visible
in the financial statements

Conveying HORIBA corporate culture and philosophy globally

All employees
HORIBA published the “HORIBA Brand Book” in 2007 to preserve and cultivate HORIBA’s corporate
culture while expanding global business. The Book is like a bible that tells the origin of the HORIBA
Brand, lessons which employees reaffirm, share, and convey to others. This is distributed to all group
and newly-hired employees.
The Book contains the story behind the corporate motto “Joy and Fun” and messages contributed by
employees. It is published in six languages: Japanese, English, French, German, Chinese, and Korean.

Blackjack Project830

ideas for change

The Blackjack Project, which began in 1997 with the objective of changing
the awareness and activities of employees, has resulted in submissionof 830 suggestions and proposals for change in 2014. In addition to
improvement in operational efficiency and cost reduction, personnel
development and enhancement of organizational strength are among popular
proposals, demonstrating one aspect of HORIBA’s corporate culture whichemphasizes organizational reform by employees.
We hold an internal World Cup competition among candidate proposals fromeach country where we operate and have employees. This competition also
provides an opportunity to demonstrate to management and employees how
we make our belief a reality. We see the Blackjack Project as having theimportant function of sharing corporate culture, experience and knowledge.

Blackjack Award World Cup 2014 winners

Proposals submitted in 2014 e.g. HORIBA, Ltd.

1,000

Other

11%

800

Sales promotion
and marketing

7%
Quality18%

Number of proposals
Japan

Overseas

Overseas

600
Time saving,
efficiency,
cost reduction

42%

400
Japan

200

Ideas for Human resourcesand organization 22%02005 2006 2007 2008 2009 2010 2011 2012 2013 2014

HORIBA Report 2014 | 36

Value creation based on invisible values

Customers

Customers’ opinions are precious in product development
In addition to adapting to regulations, we find it important todevelop products based on the real needs of our customers inanalysis and measurement, by visiting them and exploring theirneeds. We will continue to provide products and analysis andmeasurement solutions, that are directly linked to customers’
value creation, and thereby both expand our business domain
and earn their trust.

MarketProviding solutions
directly linked tocustomers’ value
creation(Customers)

Products & Solutions
Core technology& Application
technology

Regulations

Global customer service organization
HORIBA has set up an after-sales service network in theAmericas, Europe, and Asia and has earned the trust of ourcustomers. As a part of our internal efforts, we regularly
hold international service meetings, which are attended bythose in charge of service from various countries, and holdtraining sessions on services for new products, with theaim of improving services. Experienced service engineers inJapan are dispatched overseas to support overseas service
members and overseas employees come to Japan for
training. In 2013, we opened a new training center in Kyoto.

Customers in Asia and Oceania participatedin HORIBA’s training programs held in Japan

China
37

ThailandSouth Korea

We also conduct product training sessions for overseas
customers who request to visit Japan, verify that we will
provide products meeting the specifications and performancestandards they require, and participate in a training program.
We instruct them on use of the product, and propose themost suitable method of measurement to satisfy specificneeds, as well as the method of maintenance. During five
years from 2010 to 2014, 376 customers from 145 companies
in Asia and Oceania attended product training sessions
in Japan. Going forward, we will continue to propose themost appropriate services for each region and give reliable,
trustworthy support to customers, so that we can have moresatisfied customers and higher market shares.

145
India

companies

Indonesia/376
Malaysia

persons

Australia

Assets not visible
in the financial statements

Invisible Values

The first Japanese company in the analysis and measurement industry to acquire IMS*With the aim of providing our customers with high-quality, reliable
products, HORIBA, Ltd. has adopted the Integrated Management System(IMS), which is a combination of the Quality Management System ISO9001,
Environmental Management System ISO14001, and Occupational Health &Safety Management System OHSAS18001, and became the first Japanesecompany in the analysis and measurement industry to acquire “JQAINTEGRATED MANAGEMENT SYSTEM Certificate of Implementation”(JQA-IG0001-08) in 2004. These management systems have been put
into place by HORIBA, Ltd. and its domestic subsidiaries since 2011.

In 2014, HORIBA, Ltd. and a domestic subsidiary also acquired
certification for Business Continuity Management System ISO22301 in the
medical and semiconductor areas and established a system for a stablesupply of products even in the wake of an earthquake, accident, or various
diverse risk events. We are committed to continual enhancement of IMS for
customer satisfaction, in order to further improve our corporate value.
* IMS (Integrated Management System) is an integrated management system of more than
one ISO and OHSAS.

Development of long-life, energy conservation “eco-friendly products”
In order to provide customers with products that reflect considerationof their life cycle, such as long usable life and minimization of energy
consumption, we have positioned certain products as being “eco-friendly
products” if they have satisfied certain standards we have adopted, andthis descriptor is used when developing and marketing those products.
An “eco-friendly product”
The OCMA-500 oil content monitor

With social and economic matters such as the rise in energy costs in the
background, we use quantitative measurement to determine how products
represent a reduction in energy requirements or a reduction in materials
used. Our “eco-friendly products” target a 25% reduction compared to ourconventional models.
Reduction in environmental load of “eco-friendly products” (Example of an oil content monitor)
Annual consumption of solvent at 100
standard usage(Measuring 25 times/day for 240 days/year)

The oil content monitor measures oil content
such as in factory waste water, residual oil after
washing mechanical parts, and in soil. It is mainly
used by petrochemical makers and component
processing makers but is expected to be used in
the food and other industries in the future.

Down
20%

Annual consumption ofelectricity at AC100-120V

75

Down
25%

50
25

100 VA75
50
25

0
Old model:

New model:0
Old model:

New model:

Increasing market shares together by collaboration with suppliers during economic upturns
Over the long term we have developed strong ties with our regular production
partner companies, which has enabled us to provide customers with highquality products and reliable delivery scheduling. We are now increasingprocurement on a global basis through our network of overseas companies.
In Japan, in order to ensure continuation of our Win-Win relationships, we
provide opportunities to share our thoughts and experience in business matterswith the suppliers, and help them develop their next generation of managers.
The regular suppliers with which we had been doing business for seven years

or longer since 2008 represent 71% of all our suppliers. They have been able
to prosper in good times and survive tough times, together with us. One reason
we have been able to increase our market shares in the past even when
there has been a strong surge in demand is that our relationships with these
suppliers has enabled us to respond very quickly to customer demand.
Production partner companies which have worked with HORIBA for 7 years or longer

71% or 681 companies out of 964 companies
HORIBA Report 2014 | 38

Corporate governanceCorporate Governance Philosophy
Even when Japanese corporations were paying little attention to corporate governance, years ago, HORIBA pledged
to conduct its corporate affairs by the forward-thinking policies.

Appointment of outside director andcorporate auditors
To avoid managing with an introverted approach, HORIBA
has always appointed at least one director and one corporate
auditor from outside the company. This practice started withthe company’s origin in 1953 and has been continued throughto the present day. HORIBA’s outside director and two outside
corporate auditors qualify as independent, as specified by
the Tokyo Stock Exchange, because their current posts andbackgrounds indicate that they have little risk of having conflictof interests with general shareholders and can retain their
independence between their current duties and past careers.

Implementing shareholder return linked toearnings growth
HORIBA was the first listed Japanese company to start paying
shareholder dividends based on a predetermined payout ratio
in 1974 when HORIBA was listed in the Second Section of theTokyo Stock Exchange. Since fiscal 2013, HORIBA has changed
the base amount of profit returns to shareholders (the combined
amount of dividend payments and share buybacks) from 30% of
HORIBA, Ltd. (nonconsolidated) net income to 30% of HORIBA,
Ltd. (nonconsolidated) net income to 30% of consolidated net
income, so that shareholder returns are more directly linked toconsolidated performance.

Open general meetings of shareholders
Since its initial stock listing in the Second Section of the Osaka
Securities Exchange in 1971, HORIBA has encouraged allshareholders (whom it frequently calls owners) to attend theannual general shareholders meeting. These meetings are held
on Saturdays to facilitate public attendance. An informal
get-together event is held afterwards to enable shareholders totalk directly with the management.

Directors’ compensation
Compensation for directors consistsof base compensation (regular
fixed-amount salary), earnings-basedsalary (bonus) linked to the earnings
results of each fiscal year, and stock
options (retirement allowance) linked
to medium to long-term earnings
performance. Compensation foroutside directors, however, is only basecompensation (regular fixed-amountsalary), excluding compensation
linked to earnings performance,
given the nature of their assignment.
The limits for compensation for
directors and for outside directors areapproved as a separate matter at theannual general shareholders meeting.
The directors (except the outside
directors) compensation of 2014 was¥678 million in total.

Breakdownof directors’compensation(excluding outside directors)
Stockoption7%

Earningsbased
compensation

73%

Base
compensation

20%

Adoption of a corporate officer system
Since 2005, HORIBA had limited the number of directors tofive members to prevent the board of directors meetings frombecoming inflexible and to promote lively, in-depth discussion.
In April 2014, the board was increased by one member to six
directors to strengthen company management. In addition,
HORIBA introduced a corporate officer system in 1998 to makedecisions at the board meetings more prompt and augment
managerial capability. At present, HORIBA has 17 corporate
officers including Dr. Jai Hakhu, who joined HORIBA in 2010
and now serves as a head of HORIBA’s U.S. operation and
HORIBA ABX S.A.S. in France, and Haruko Nozaki who is
Principal of HORIBA COLLEGE and in charge of CSR.

As of April 1, 2015

Directors: 6 (including one outside member)
Corporate officers: 17(including one non-Japanese and one female)39

Corporate governance structure chart
General Meeting of Shareholders
Appointment,
Dismissal

Board of Directors(Directors)
ReportingSelection, Dismissal
Business Execution
Instructions

Board of Corporate Auditors(Corporate Auditors)
Supervising, Monitoring

Independent Auditor
Coordination
Financial Audit

Internal controls

Supervision

President

Monitoring

Reporting

Litigation, Exports, Legal Affairs, Fixed assets,
Public-Sector Grants, Subsidiary Audits

ReportingDiscussed Items

ReportingAppointment,
Dismissal

Supervising, Monitoring

Business Execution

Supervision
Entrusting Business
Execution

Approval of Resignation,
Dismissal, and Reappointment
Judging Suitability of the
Independent Auditors

Appointment,
Dismissal

Directors andCorporate Officers’
Meeting/
Operations Committee/
Management Committee

Internal Auditing(Group Internal Audit Office)Supervising
Coordination

Corporate Officers/Division Managers

Direction andOrders,ReportingCommittees, etc.*
Supervising

Integrated Management System (IMS)(Quality, Environmental, Safety & health,Quality of medical equipment,
Business continuity management,
and Road traffic safety management)

Promotion

Internal Control Promotion Committee
HORIBA CSR Promotion Committee

Advisory,
Proposals

Reporting Principles
Coordination

Joy and Fun, Open and Fair

HORIBA, Ltd.
CSR Promotion Committee**

Coordination

Compliance Committee

HORIBA Corporate Philosophy and Ethical Guidelines* Committees, etc. refer to committees and conferences that are established and registered based on the “Regulations concerning conferences
and committees,” such as the Group Promotion Committee for Management of Public Subsidies and the Safety and Health Committee.
** The CSR Promotion Committee decides on the CSR Policy and priority measures and organizes CSR-related specific activities. In addition,
it discusses and approves the issues and the measures concerning the promotion of risk management.

Board of Corporate Auditors

Group internal audit system

HORIBA’s Auditor System, as of April 2015, relies on the Boardof Corporate Auditors comprising three corporate auditors,
including two outside auditors in order to ensure objective
auditing. Outside corporate auditors have vast experience andknowledge in corporate legal affairs and management, andcontribute to auditing particularly in the compliance aspect ofexecution by directors. In 2014, the Board of Corporate Auditors
held 14 meetings.

HORIBA’s group internal audit office is under the direct controlof the president and remains independent of other divisions. It
conducts audits to determine whether group companies in Japanand abroad are conducting themselves in a fair and legal manner.
In addition, the office gives advice to the auditing parties on how to
improve operations or risk management. The three auditing entities
of internal audit, auditors’ audit, and accounting audit exchange
information and cooperate with one another. In 2014, the groupinternal audit office conducted audits at 30 Japanese locations, 13
overseas locations, and four locations of major business partners.

HORIBA Report 2014 | 40

Corporate governance

Board of directors andcorporate auditors (as of April 1, 2015)
Atsushi Horiba

Chairman, President and CEO

1972 Joined HORIBA, Ltd. and held positions such as General Manager of Overseas Technology
Department and General Manager of Overseas Headquarters
1982 Appointed as HORIBA’s Director
1992 Appointed as President and CEO
2005 Appointed as Chairman, President and CEO up to the present

Director
General Manager of Research & Development Division

1985 Joined HORIBA, Ltd. and held positions such as General Manager of Emission analysis
Research & Development Division and General Manager of Engine Measurement System
Management Division.
2006 Appointed as HORIBA’s Corporate Officer
2007 Appointed as President of HORIBA International Corporation (US)2014 Appointed as HORIBA’s Director up to the present
Appointed as President of HORIBA Jobin Yvon S.A.S. (France) up to the present

Director (Outside), Independent Director

1970 Joined HORIBA, Ltd. and held positions such as General Manager of Products DepartmentⅠof Development and Sales Headquarters and President of HORIBA Europe GmbH
1988 Appointed as HORIBA’s Director
2002 Appointed as Executive Vice President
2005 Appointed as Executive Vice President and Representative Director
2014 Appointed as Executive Vice Chairman up to the present

Executive Vice President
General Manager of Corporate & Segment Strategy Division

Juichi Saito

1982 Joined HORIBA, Ltd. and held positions such as General Manager of Engine Measurement
Planning & Development Department and President of HORIBA Instruments Inc. (US)2005 Appointed as HORIBA’s Director
2013 Appointed as Executive Vice President up to the present

Managing Director, General Manager of General Administration
Division, and Tokyo Branch Manager

Fumitoshi Sato

1976 Joined the Bank of Japan and held positions such as Aomori Branch Manager andFukuoka Branch Manager
2004 Joined HORIBA, Ltd. and was appointed as Senior Corporate Officer
2005 Appointed as Managing Director up to the present

Masahiro Sugita

See page 42.

Dr. Kozo Ishida

Executive Vice Chairman

Dr. Masayuki Adachi

Toshihiko Uno

Corporate Auditor

1974 Joined HORIBA, Ltd. and held positions such as General Manager of Hardware Development
and General Manager of Production Center
2002 Appointed as HORIBA’s Corporate Officer
2004 Appointed as Senior Corporate Officer
2011 Resigned as Senior Corporate Officer
2012 Appointed as HORIBA’s Corporate Auditor up to the present

Corporate Auditor (Outside), Independent Auditor

Kanji Ishizumi

1971 Joined the Ministry of International Trade and Industry 1975
Registered as Attorney at Law
1981 Appointed as representative partner of the Chiyoda Kokusai Law Offices
up to the present
1995 Appointed as HORIBA’s Corporate Auditor up to the present

Corporate Auditor (Outside), Independent Auditor

Keisuke Ishida1978 Appointed as Representative Director and CEO, SHASHIN KAGAKU CO., LTD.
2000 Appointed as Representative Director, Chairman of the Board, CEO,SHASHIN KAGAKU CO., LTD. up to the present
2001 Appointed as Chairman of the Board, SK-Electronics Co., Ltd. up to the present
2005 Appointed as HORIBA’s Corporate Auditor up to the present

Corporate officers (as of April 1, 2015)
Executive Corporate Officer

Dr. Jai Hakhu

Chairman, President & CEO of HORIBA International Corporation (U.S.)
President of HORIBA Europe Holding S.A.S. (France)

Chairman of HORIBA Instruments Inc. (U.S.)
President of HORIBA ABX S.A.S. (France)

Senior Corporate Officer

Sunao Kikkawa
Takashi Nagano
Hideyuki Koishi

General Manager of Finance & Control Division
General Manager of Sales Division and President of HORIBA Korea Ltd. (South Korea)
Vice President of HORIBA STEC Co., Ltd. (Japan)

Corporate Officer

Yuichi Muroga
President of HORIBA Techno Service Co., Ltd. (Japan)
Hiroshi Kawamura President of HORIBA Europe GmbH (Germany)
Atsushi Nakamine Division Manager of IT & BPR Center
Junior Corporate Officer

Seiji Usui
Narihiro Oku
Tadao Nakamura

Deputy General Manager of Research & Development Division (New Product)
Deputy General Manager of Research & Development Division (Medical)
President of HORIBA (China) Trading Co., Ltd.
President of HORIBA Instruments (Shanghai) Co., Ltd.

Tsukasa Satake
Yasuo Yamashita
41

Division Manager of Quality Management Center
Deputy General Manager of General Administration Division

Kenichi Obori
Hideyuki Nishibun
Haruko Nozaki
Yoshimasa Tanaka
Hiroo Chihara

Liaison for Academia and Government of Research & Development Division
Deputy General Manager of Sales Division (International Sales)
Principal of HORIBA COLLEGE, CSR
Deputy General Manager of Research & Development Division (Technology)
General Manager of Production Division

An Outside Director’s views on
HORIBA’s corporate governance

Board discussions from a global perspective
At HORIBA board meetings, the agenda items are presented with a broad overview on strategies andchanges which are in the background, and, typically, lively and constructive small-group discussions are
conducted in a casual atmosphere. HORIBA believes it is coping well in a flexible way in today’s rapid global
economic environment. Discussions are conducted from a global perspective and directors and corporate
officers contribute by making best use of their background and experience. During the meetings, I tend to
ask candid questions from a broader general perspective, rather than from my area of expertise, which is inmacroeconomics and international finance. My goal is to affirm management’s attitude and commitments.

Shareholder return linked to consolidated earnings
Since fiacal 2013, HORIBA has changed the base amount of profit returns to shareholders (the combined
amount of dividend payments and share buybacks) from 30% of nonconsolidated net income to 30% ofconsolidated net income, so that shareholder returns are more directly linked to consolidated performance.
I find that this change will enable HORIBA to increase its profit returns to shareholders than in the past.
In my view, HORIBA’s flexible and forward-looking shareholder return policy, such as share buybacks,
is favorable and is positively recognized in the stock market.

Governance that matches HORIBA’s management style
HORIBA emphasizes consistent management style rather than short-term profit-oriented style. Its styleemphasizes importance in maintaining a high level of ROE or raising it continually. Regarding the issue ofgovernance of the board of directors, a new trend is emerging in Japan. For example, the GPIF (Japanese
Government Pension Investment Fund) changed the investment policy which includes their stewardship
responsibilities. I believe that HORIBA shall not be caught up in formalities but will practice governance thatmatches to its management style. This will be one of the key issues for HORIBA in the coming years.

Masahiro Sugita Director (Outside)
Masahiro Sugita joined the Bank of Japan in 1967 and held positions such as Matsumoto Branch Manager andDirector-General of the International Department. In 1998 he was renamed Director of Overseas Investment ResearchInstitute, the Export-Import Bank of Japan before being appointed as Auditor of the Bank of Japan in 1999. In 2003,
he was appointed as Outside Auditor (full-time) of Banyu Pharmaceutical Co., Ltd., the current MSD K.K.
2006 Appointed as HORIBA’s Outside Director up to the present2010 Appointed as Auditor of MSD K.K. up to the present2013 Appointed as Outside Director of 77 Bank Ltd. up to the present

HORIBA Report 2014 | 42

Financial data

Financial Data
Eleven-Year Summary
2005.32006.32006.122007.122008.12Net sales¥92,492¥105,665¥116,099¥144,283¥134,248

Operating costs and expenses

83,11994,390104,392

127,753

123,290

Operating income

9,373

11,275

11,707

16,53010,958Net income

3,524

6,473

6,510

8,691

6,039

Capital expenditures

3,956

5,664

5,059

9,336

6,645

Depreciation and amortization

2,944

3,173

3,246

4,161

4,955

Research and development expenses

5,636

6,553

6,136

9,474

10,662¥99,913¥119,976¥129,236¥154,367¥133,279

16,10814,884

15,673

20,56522,660----30,59537,40842,48545,87337,330Inventories

22,012

27,27330,94733,73429,802

Property, plant and equipment, net

18,481

20,22321,70024,071

23,115

26

45

44

53

40

11,26413,017

14,917

16,792

11,063Liabilities with interest

16,042

13,866

16,22425,177

20,984

Shareholders’ equity

52,26365,446

72,37180,377

76,829

Share price at end of fiscal period (¥)

1,950

3,690

4,400

4,100

1,237

Number of employees (consolidated)

3,984

4,461

4,697

4,976

5,146

Net income - basic¥98.33¥154.27¥154.23¥205.01¥142.76

Net income - diluted

83.81

146.97

153.70204.39142.71

1,415.75

1,548.08

1,710.75

1,892.64

1,816.96

16.00

28.00

26.00

39.00

44.00

Operating income to net sales (%)

10.1

10.7

10.1

11.5

8.2

Return on assets (%)

3.7

5.9

5.2

6.1

4.2

For the Year:At Year-End:Total assets
Cash and cash equivalents
Trade notes andAffiliated companies

accounts receivable

Other

Trade notes andAffiliated companies

accounts payable

Other

63

Per Share Information:

Net assets
Cash dividends
Financial Ratios:

Return on equity (%)

7.4

11.0

9.4

11.4

7.7

Shareholders' equity ratio (%)

52.3

54.6

56.0

52.1

57.6

Consolidated dividend payout ratio (%)

16.5

18.1

16.9

19.0

30.8

Nonconsolidated dividend payout ratio (%)

41.8

33.8

30.0

30.1

30.0

Notes:The stated amounts are rounded down to the nearest million yen from the year, ended December 31, 2009, but are rounded (up or down) to the nearest million yen prior to that year.
1. The U.S. dollar amounts are provided solely for convenience at the rate of ¥120.55 to US$1.00, the rate prevailing on December 31, 2014.
2. Effective from the year ended December 31, 2006, HORIBA adopted the revised accounting standard for presentation of net assets in the balance sheet. The amounts in prior years have not been restated.
3. For the year ended December 31, 2006, the accounting term for HORIBA, Ltd. and HORIBA Advanced Techno Co., Ltd. was only 9 months and 11 days and that for HORIBA STEC Co., Ltd.
was only 9 months as a result of a change in the fiscal year-end to December 31.

43

HORIBA, Ltd. and Consolidated Subsidiaries
The years ended March 20, 2005 - 2006 and the years ended December 31, 2006 - 2014.

2009.122010.122011.122012.122014.122013.122014.12

Millions of yen

Thousands of U.S. dollars¥104,538¥118,556¥123,456¥117,609¥138,136¥153,065$1,269,722

99,394106,256

108,549

105,857

124,402135,851

1,126,926

5,144

12,29914,906

11,751

13,733

17,214

142,795

3,161

7,927

8,664

7,396

8,999

10,58987,839

4,534

4,033

4,670

7,882

7,680

11,001

91,256

4,573

4,523

4,146

3,743

4,279

4,905

40,688

9,831

9,480

10,06010,092

10,774

11,98699,427

Millions of yen

Thousands of U.S. dollars¥129,580¥137,290¥144,649¥153,836¥189,269¥207,335$1,719,908

27,59034,45935,76738,85849,246

51,109423,965

6

1

126

4

25

149

1,236

34,50536,42539,24937,51647,38652,097432,160

23,363

24,843

26,28828,101

33,08534,838288,992

23,602

22,51622,92428,17933,32639,441

327,175

52

60

0

-

-

20

165

10,515

13,423

13,196

11,82916,40915,385

127,623

18,34817,12818,35818,083

24,57728,412

235,686

79,906

84,01990,232

99,248114,209

123,924

1,027,988
U.S. dollars 33.30

2,250

2,303

2,320

2,489

3,590

4,015

5,133

5,202

5,448

5,530

5,787

5,965
Yen

U.S. dollars¥74.77¥187.46¥204.88¥174.87¥212.76¥250.28

$2.07

74.68

187.11204.41

174.37212.01

249.282.06

1,889.58

1,986.77

2,133.44

2,346.45

2,699.88

2,928.82

24.29

13.00

17.00

40.00

50.00

60.00

67.00

0.55

4.9

10.4

12.1

10.0

9.9

11.2

2.4

5.9

6.1

5.0

5.2

5.3

4.0

9.7

9.9

7.8

8.4

8.9

61.7

61.2

62.4

64.5

60.3

59.8

17.4

9.1

19.5

28.6

28.2

26.8

30.0

30.3

30.5

37.5

48.9

38.5

Computations:Shareholders’ equity = net assets - subscription rights to shares - minority interests
Net income per share (¥) = (net income – projected bonuses to directors and corporate auditors)* / (average number of shares issued and outstanding in the fiscal period, corrected for treasury stock)
Net assets per share (¥) = (shareholders’ equity – projected bonuses to directors and corporate auditors)* / (number of shares issued and outstanding, corrected for treasury stock)
Operating income to net sales (%) = 100 x operating income / net sales
Return on assets (ROA, %) = 100 x net income / average total assets in prior fiscal period
Return on equity (ROE, %) = 100 x net income / average shareholders’ equity in prior fiscal period
Shareholders’ equity ratio (%) = 100 x shareholders’ equity / total assets
Consolidated dividend payout ratio (%) = 100 x dividends paid / net income (consolidated)*Directors' and corporate auditors' bonuses from the year ended
Nonconsolidated dividend payout ratio (%) = 100 x dividends paid / net income (nonconsolidated)
December 31, 2006 are recognized in selling, general and administrative expenses.

HORIBA Report 2014 | 44

Financial data

Eleven-Year Summary

Net Sales by Segment
Millions of yen

150,000

14,290120,000

90,00092,492
8,999

25,30022,351

18,03918,18320,50830,00013,721
25,74824,810118,556
104,538

11,787

12,022

20,825

10,31919,51060,0009,753

138,136

134,248

116,099
105,665

20,111

26,93425,836

16,762

24,722

14,55822,040

Process &Environmental

31, 2014, HORIBA’s net sales

25,627

Scientificincreased from the previous year

28,934

Semiconductor

27,037

Medical-Diagnostic

14,711

117,60913,70920,406in all segments, as investments by

22,91324,15320,503
24,694

27,676

26,832
23,48522,51427,02237,94551,47522,40038,67835,75137,192

43,23049,524

into yen. The net sales reached a

55,001

record high, beating the highest

02005.32006.3the weaker yen boosted the valueof overseas sales when converted

Automotive
Test Systems

54,232

semiconductor manufacturers andautomotive manufacturers grew and

17,861

12,483
22,33722,989123,456

16,465

18,77734,446

In fiscal 2014, ended December

153,065

144,283

sales recorded in fiscal 2007.

2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

Net Income and Return on Equity (ROE)Net Income
Return on Equity (ROE)

Millions of yen

12,000

%

12.0

11.4

11.0

10,000

10.0

9.9
9.7
9.4

8,000

8.9

7.8

7.4

8.4

6.0

4,000

4.0

4.0

net income due to an increasein operating income and otherreasons. This resulted in ROE rising

8.0

7.7

6,000

HORIBA posted record highby 0.5 percentage points from ayear ago to 8.9%.
In February 2015, HORIBA
conducted a share buyback worth¥1.0 billion. HORIBA intends

2,000
0

2.0
3,524

6,473

6,510

8,691

6,039

3,161

7,927

8,664

7,396

8,999

10,5892005.32006.32006.122007.122008.122009.122010.122011.122012.122013.122014.120.0

to continually return to owners(shareholders), targeting total
returns to shareholders at 30% ofconsolidated net income.

Net Income per Share and Net Assets per ShareNet Income per Share (left)
Net Assets per Share (right)

Yen

300

Yen

3,000
2,929

2,700

250
2,133

205

200
1,548

150
1,416

154

1,711

1,893

154

2,346

250

213

2,000

1,987
1,817

1,890

2,500

205
187

175

1,500

143

100

1,000
98
75

50

500

0

0
2005.3

45

2006.32006.122007.122008.122009.122010.122011.122012.122013.122014.12

Fiscal 2014 net assets per sharereached a record high of ¥2,929,
while net income per share also
was at a record high of ¥250, up¥37 from the previous year.

Operating Income and Ratio of Operating Income to Net Sales
Operating Income
Ratio of Operating Income to Net Sales

Millions of yen

18,000

11.5

12.1

10.7

15,000

85

82

82

86

85

8.0

9,000

6.0
4.9

6,000

100

81
81

76

30,000

8.2

Days

93

92

10.0

12,000Inventories
Days

Millions of yen

40,000

10.0

9.9

10.1

%

12.0

11.2

10.4

10.1

Inventories and Inventory Turnover (Days)

75

74

20,00050

10,000

25

4.0

3,000

2.0

0

9,373

11,275 11,707 16,530 10,958

5,144

0

12,299 14,906 11,751 13,733 17,214

0

Total Assets
Return on Assets (ROA)

Millions of yen

%

10.0

200,000

8.0

R&D Expeditures
R&D Expeditures to Net Sales

Millions of yen

12,000

10.0
9.4
8.6

6.0

6.1

6.1
5.9

5.9

5.2

5.2

100,000

4.2

50,000

6.1

2.4

2.0

189,269 207,335
0 99,913 119,976 129,236 154,367 133,279 129,580 137,290 144,649 153,836 189,296

0

7.8

7.8

6.0

5.3

4,000

4.0

2,000

2.0

0

5,636

6,553

6,136

9,474

10,662 9,831

9,480 10,060 10,092 10,774 11,986

Cash Dividends per Share

Capital Expenditures andDepreciations and Amortization

Yen

Millions of yen

Capital Expenditures
Depreciations and Amortization

12,000
67

60

60

0

2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

70

8.0

8.1

6.6

6.2

4.0

3.7

8.0

7.9

6,000

5.3

5.0

%

12.0

10,0008,000

150,000

0

R&D Expenditures andR&D Expenditures to Net Sales

Total Assets and Return on Assets (ROA)
250,000

22,012 27,273 30,947 33,734 29,802 23,363 24,843 26,288 28,101 33,085 34,838
2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

11,001

10,000
9,336

50

50
44

40

8,000

7,882

40

39

7,680

6,645

6,000
30

5,664

28
26

20
16

10

3,956

17
13

2,000

4,534

5,059

4,000
2,944

4,955
4,161

3,173

3,246

4,523

4,573
4,033

4,905
4,670
4,146

4,279

3,743

0

0
2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12 2014.12

HORIBA Report 2014 | 46

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review
During the fiscal year ended December 31, 2014, global

MCT(Mechatronics) business acquired from Carl Schenck AG

economic conditions recovered moderately on an overall

in Germany in 2005. The segment thereby captured

basis. In the U.S., economic conditions steadily recovered,measurement demand in both the emissions measurement

supported by an increase in personal consumption. The

and MCT businesses.

European economy continued to experience a mild pickup,

In addition, the Process & Environmental Instruments &but the recovery came to a standstill in the second half due

Systems segment pursued business expansion in the oilto the impact of the worsening Russian economy and fiscal

refining market, including shale gas and oil, as HORIBA had

austerity in various countries. In emerging nations, the paceacquired the U.S. company Cameron’s process analyticalof economic growth in China became moderate, but a pickup

product line in 2013.

gradually emerged in India after the general election. In
contrast, stagnant conditions associated mainly withHORIBA launched new products aimed at the Chinese

domestic demand intensified in Brazil and Russia. In Japan,

market that were developed by concentrating technologicalafter consumer spending accelerated temporarily due to rush

capabilities in both Japan and France to meet growing

demand prior to the consumption tax increase in the firstdemand for blood testing in China.

quarter of the fiscal 2014, weakness became apparent mainly

In the Semiconductor Instruments & Systems segment, thebecause of a reaction to this from April onward. However, the

HORIBA Advanced Technology Center, which has been

weakness of consumer spending gradually eased andunder construction since 2013, is scheduled to commence

economic conditions underwent a moderate recovery. The

full-scale operation soon. This will accelerate the speed ofannual average exchange rates for 2014 were 105.79 yen

product development and enhance productivity inagainst the U.S. dollar and 140.35 yen against the euro,

semiconductor-related businesses.

marking respective depreciation of 7.6% against the U.S.

Finally, in the Scientific Instruments & Systems segment,

dollar and 7.5% against the euro, compared to the fiscal 2013.

HORIBA acquired the spectrofluorimetric analysis businessIn the analytical and measurement equipment industry,of Photon Technology International (U.S.), and by combining

semiconductor-related demand expanded, as aggressivethese with the spectrofluorimetric technologies possessed bycapital investment at semiconductor makers continued fromthe HORIBA Group, the segment aims to increase sales inthe second half of the fiscal 2013. In the automotive industry

the pharmaceutical, food and life science markets, whereas well, capital investment and R&D investment by domestic

analysis demand is growing.

and overseas automakers were strong as in the fiscal 2013.

Furthermore, to reinforce the supervisory function for U.S.

Moreover, in the environmental equipment industry, demand

operations, HORIBA moved and concentrated the U.S. headfor stack gas analysis for thermal power plants and factories

office in the State of California. In Japan, HORIBA also

in China and other countries increased.

started construction of HORIBA BIWAKO E-HARBOR in

In this operating environment, HORIBA, Ltd. (“theShiga Prefecture, which is scheduled for completion in the

Company”) and its consolidated subsidiaries (together “thefall of 2015, in order to bolster development and production

HORIBA Group” or “HORIBA” as a consolidated group)capabilities in the gas measurement area in the Automotive

promoted reinforced measures that each division carried out

Test Systems segment and the Process & Environmental

in the fiscal 2014.

Instruments & Systems segment. In addition, HORIBA is

The Automotive Test Systems segment expanded sales of47

In the Medical-Diagnostic Instruments & Systems segment,

introducing the HORIBA Group’s enterprise resource planning

new emission measurement systems that were launched insystem (GEO system), which is aimed at speeding up

2013 and also promoted expansion of the

management decision-making and standardizing operational

processes. During the fiscal 2014, HORIBA newly introduced

million from fluctuations in foreign exchange rates, however,the system in France, South Korea and India while also

the actual increase in SG&A expenses was ¥1,977 million

carrying out system renewals in Germany and China.

rather than the nominal increase of ¥4,189 million.

On the background of the yen’s depreciation, as a result of

As a result, consolidated operating income increased bysuch measures and sales efforts, both of consolidated net¥3,480 million, or 25.3%, year-on-year to ¥17,214 million.

sales and profits increased from a year ago.

The operating income ratio was 11.2%, up 1.3 percentage
points from 9.9% for the previous year.

Net Sales
In the fiscal year ended December 31, 2014, consolidated net

Business Segments

sales increased by ¥14,929 million, or 10.8%, year-on-year to

The operating results of each business segment are¥153,065 million. The average foreign exchange rate appliedsummarized as follows.

in book closings was ¥105.79 to the U.S. dollar, comparedwith ¥97.73 for the previous year, and ¥140.35 to the euro,(Automotive Test Systems)

compared with ¥129.78 for the previous year. Using theIn addition to an increase in capital spending and R&D

exchange rates for the previous year, consolidated sales forspending by automakers in Asia, Europe and the U.S., sales

fiscal 2014 would have been ¥145,411 million. Thus, ¥7,654

in Europe and the U.S. increased after conversion to yen

million in increased sales can be attributed to the

because of the weaker yen. Consequently, segment sales

depreciation of the yen.

increased by 11.1% year-on-year to ¥55,001 million, andoperating income increased by 35.9% to ¥5,827 million.

Cost of Sales, SG&A Expenses, and Operating Income
Consolidated cost of sales increased by ¥7,258 million to(Process & Environmental Instruments & Systems)¥87,884 million. The cost of sales ratio improved by 1.0

Sales of stack gas analyzers for power plants and factories

percentage points from a year ago to 57.4%, due mainly toincreased in Japan and China, and sales of water quality

the depreciation of the yen, and an increase in sales of mass

analyzers were firm in Asia including China and South Korea.

flow controllers, which owes to an increased production at

In Europe, sales of portable gas analyzers increased. As asemiconductor production equipment manufacturers.

result, segment sales increased by 11.9% year-on-year to

Excluding ¥3,484 million from fluctuations in foreign¥16,465 million, and operating income increased by 58.9% toexchange rates, however, the actual increase in cost was¥2,007 million.

¥3,773 million rather than the nominal increase of¥7,258 million.
Selling, general and administrative (SG&A) expenses(Medical-Diagnostic Instruments & Systems)
Sales in Europe and the U.S. increased after conversion toincreased by ¥4,189 million from the previous year to ¥47,966

yen because of the weaker yen, but sales of blood cell testing

million. The ratio to net sales improved by 0.3 percentage

instruments were weak in various countries. Moreover,points to 31.4%, due mainly to the depreciation of the yen,profitability declined mainly due to R&D expenditure for new

an increase in sales of mass flow controllers, which owes to

product development in Europe and expenses to reinforce

an increased production at semiconductor production

sales channels in North America. As a result, segment sales

equipment manufacturers, and sales increase supported byincreased by 0.8% year-on-year to ¥27,037 million, andan increase in capital spending and R&D spending by

operating income decreased by 29.3% to ¥1,717 million.

automakers in Asia, Europe and the U.S.. Excluding ¥2,211
HORIBA Report 2014 | 48

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review(Semiconductor Instruments & Systems)¥3,632 million.

Owing to increased production at semiconductor production

Total consolidated liabilities increased by ¥8,296 million

equipment manufacturers, sales of mass flow controllers, afrom the previous year to ¥83,020 million. The increase in total

core product, were robust, and they increased substantiallyliabilities was due mainly to an increase of ¥4,354 million inin the fourth quarter especially. As a result, segment sales

short-term loans, and ¥2,345 million in accounts payable-other.

increased by 19.8% year-on-year to ¥28,934 million andoperating income rose by 34.1% to ¥6,455 million.

Total consolidated net assets amounted to ¥124,314
million, up ¥9,768 million from a year ago, due mainly to anincrease of ¥7,740 million in retained earnings and ¥2,161(Scientific Instruments & Systems)

million in foreign currency translation adjustments.

In addition to higher sales stemming from the acquisition of
the operations of Photon Technology International (U.S.) in

Cash Flows

the first quarter, sales were firm in the second half as demand(Cash Flow from Operating Activities)

increased due to higher R&D expenditure at government

Net cash provided by operating activities amounted tolaboratories and universities in Europe. Moreover, sales in¥11,455 million, compared to ¥15,076 million provided in theEurope and the U.S. increased after conversion to yen

previous year. Factors contributing to this amount included

because of the weaker yen, resulting in segment sales of

posting of income before tax and depreciation and¥25,627 million, up 11.8% year-on-year, and operating

amortization expense.

income of ¥1,206 million, up 28.6%.
(Cash Flow from Investing Activities)
Net Income

Net cash used in investment activities amounted to ¥9,875

Other income (expenses) resulted in increasing its expenses

million, compared to ¥8,111 million used in the previous year,by ¥747 million from fiscal 2013 to a loss of ¥949 million. Thisdue mainly to payments for purchases of property,

result was mainly because HORIBA posted a loss associatedplant and equipment.

with the decision of the policy to dissolve the employees’
local pension fund in which the Company and a domestic(Cash Flow from Financing Activities)

consolidated subsidiary are members, and equity in losses of

Net cash used in financing activities amounted to ¥273

affiliates, despite posting of a gain associated with the salemillion, compared to ¥2,324 million provided in the previousof investment securities. Nevertheless, because of theyear. This was mainly attributable to payments for dividends,

increase in operating income, income before income taxes

despite an increase of short-term borrowings.

and minority interests increased by ¥2,733 million, or 20.2%,

As a result, there was a net increase of ¥1,863 million in cash andto ¥16,265million, and net income increased by ¥1,589

cash equivalents to ¥51,109 million as of December 31, 2014.

million, or 17.7%, to ¥10,589 million.
Dividend Policy

49

Financial Position

The Company believes that the distribution of profits to

As of December 31, 2014, total consolidated assets wereshareholders is one of its priority issues while giving due¥207,335 million, up ¥18,065 million from December 31, 2013.

consideration to ensuring a stable management base and

The main factors contributing to the increase of total assetsinternal reserves for business expansion. The basic policy

were an increase in trade notes and accounts receivable ofregarding profit returns to shareholders is to maintain a total¥4,834 million and an increase in buildings and structures ofshareholder return ratio of around 30% of consolidated net

income, combined with the amount of dividend payments

diligent investigations when making acquisitions and forming

and the amount of share buyback. In addition, the Company

alliances in order to avoid any negative impact on earnings

will appropriate internal reserves as basic funds for working

and cash flows. However, it is possible that HORIBA’s

capital for business expansion, capital expenditure,

financial condition and business performance could be

investment in research and development, and theaffected if an acquisition or alliance did not proceed inreinforcement of the financial strength, making returns toaccordance with initial plans.

shareholders through the development of businesses
for the future.

(3) Repair of Facilities Following Natural Disasters andAssociated Delays in Delivery, etc.

Major Risks

The HORIBA Group’s manufacturing bases are located in

1. Business Risks

diverse areas, including Japan (Kyoto, Shiga and Kumamoto(1) Risks Associated with International Business Activities

Prefectures), Europe (France, Germany and the Czech

HORIBA conducts business activities in many countries

Republic), Americas (the U.S. and Brazil) and Asia (China,

around the world, including the U.S. and countries in Europe

South Korea and India). However, it is possible that HORIBA’s

and Asia. Major risks associated with the entry into thesefinancial condition and business performance could beoverseas markets and conducting business there include

affected in the case of a major earthquake or other naturalsudden shifts in economic conditions or in product supply

disasters, as HORIBA’s manufacturing facilities could be

and demand, sudden changes in retail prices due todamaged and require expensive repairs or an interruption tocompetition, changes in laws, regulations and tax systems

HORIBA’s supply chain could affect HORIBA’s production

and social disruptions such as terrorism and war. These risks

and/or distribution.

could affect HORIBA’s financial position and business results.
To protect against fluctuations in foreign currency exchange(4) Risks Associated with Contracts and Transactions

rates, HORIBA promotes local production and supply.

HORIBA enters into various contracts with customers,

HORIBA also employs foreign exchange forward contracts

suppliers and other stakeholders and conducts its

within the limits of its transaction amounts of foreign currency

business activities based on these contracts.

denominated receivables and payables to import and export

Nevertheless, there is a possibility of claims for damages

transactions to minimize foreign exchange risks. However,arising from different views of performance or different

fluctuations in foreign exchange rates could still have an

understandings of business terms between parties. It is

impact when financial statements prepared in local currencies

possible that such circumstances could result in HORIBA

are translated into Japanese yen for the consolidated

facing a claim for compensation.

financial statements, and a major change in foreign exchange
rates beyond our estimates could affect our financial(5) Other Business Risks

condition and business performance.

In addition to the above-mentioned risks, other risks
include a risk of breakdown or malfunction of information(2) Changes in Performance or Financial Position

systems, threats related to information security and risks

Associated with Acquisitions and Alliances

associated with laws and regulations imposed on

HORIBA has actively promoted corporate acquisitions andbusinesses. HORIBA is taking preventive measures against

alliances to enhance the efficiency and effectiveness of its

these risks but they could affect HORIBA’s financial

business operations. HORIBA conducts complete andposition and business results.
HORIBA Report 2014 | 50

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review
2. Risks Associated with Development and Production

necessary. However, it may require some time for an(1) Compensation for Product Liability

increase in purchasing prices to be passed on and

HORIBA conducts optimum quality control for its

reflected in selling prices. Such circumstances could

products and services and strives to maintain the highest

significantly affect HORIBA’s financial condition andstandards of reliability. Nevertheless, there is always thebusiness performance.

possibility of recalls or litigation arising from unforeseen
defects. HORIBA carries insurance for product liability,

3. Financial Risks

but there can be no guarantee that this insurance would(1) Impairment Loss on Securities and Fixed Assets bycover the full amount of any unforeseen damages. Such

Shifts in the Market Pricecircumstances could have an affect on HORIBA’s financial

HORIBA holds shares in its major alliance partners andcondition and business performance.

other companies as part of its technology and businessstrategies for the future. HORIBA ’ s acquisitions and sales2) Delays in Development of New Products

of investment securities are carefully inspected by the

The measuring instruments business in which HORIBA

Board of Directors. Market prices of the shares areoperates is extremely specialized and requires high levels

reported to top management on a timely basis, and theof technical capability. HORIBA, therefore, invests large

purpose for holding the investment securities is properly

sums in product development. However, it is possible that

reviewed. If significant declines in the market price of land,

expected returns of this investment will not be realized due

buildings or other assets occurred or segment losses wereto unforeseen circumstances.

generated for two consecutive fiscal years in the future,
there could be a negative impact on the financial condition(3) Risks Concerning Intellectual Property Rights

and business performance of HORIBA reflected by the

HORIBA possesses a wide range of intellectual property

application of impairment accounting.

rights related to the products it manufactures, including
patents, trademarks and expertise, which give it(2) Reversal of Deferred Tax Assets Resulting Fromsuperiority in terms of competitiveness. HORIBA

Changes in Systems or Accounting Policies

exercises all possible caution regarding the management

It is possible that changes in systems or accounting

and protection of these intellectual property rights.

policies (e.g., reductions in tax rates) could require

However, in the case of infringement by a third party, it is

HORIBA to reverse its deferred tax assets at the end of

possible that HORIBA will be unable to attain its expected

the fiscal year.

earnings. There is also a possibility of disputes overintellectual property rights with other companies. Such

(3) Dissolution of Employees’ Pension Funddisputes could significantly affect HORIBA’s financial

The Kyoto Machinery and Metal Employees’ Pension Fundcondition and business performance.

(general type), of which the Company and a domestic
consolidated subsidiary are members, resolved to adopt

51(4) Risks Associated with Fluctuations in Raw

Japanese government policy to carry out a special

Material Prices

dissolution at the representative assembly. Accordingly,

HORIBA takes into account the risk of fluctuations in

HORIBA posted an estimated loss in association with thepurchasing prices and makes arrangements such as

dissolution as “Provision for loss on dissolution of theadvance purchasing to manage this risk when it is deemed

employees’ pension fund”. However, it expects to beapproved for dissolution in early 2018. It is possible that

(3) Medical-Diagnostic Instruments & Systems

an estimated loss will change, due to changes in the

The main products in the Medical-Diagnostic

operating environment for the Fund, and in case of such as

Instruments & Systems segment are hematology

voluntary withdrawals, closures and bankruptcies of theanalyzers, which are small and medium-sized equipment

Fund members other than HORIBA.

used by small and medium-sized hospitals and medical
practitioners, the target market. Price competition for

4. Risks by Business Segment

these products that is beyond our expectations could

HORIBA operates in five business segments: Automotive Test

have a significant impact on HORIBA’s financial

Systems, Process & Environmental Instruments & Systems,

condition and business performance.

Medical-Diagnostic Instruments & Systems, Semiconductor
Instruments & Systems and Scientific Instruments & Systems.

(4) Semiconductor Instruments & Systems

HORIBA can achieve balanced growth by overcoming each

The main products in this segment are fluid control products

segment’s weakness with complementary strengths amongfor semiconductor manufacturing processes and products

all the business segments. Nevertheless, each businessthat support R&D and quality testing by semiconductor

segment carries risks associated with fluctuations in its

manufacturers. To minimize fluctuations in therespective operations.

semiconductor market, HORIBA makes efforts to shorten
the lead time for these products and quickly respond to(1) Automotive Test Systems

customers’ needs. Nevertheless, sharp fluctuations in the

Emission measurement systems, the main products of thedemand for semiconductors and the investment ofAutomotive Test Systems segment, are used bysemiconductor manufacturers could affect the financial

automobile manufacturers, automotive component

condition and business performance of HORIBA.

manufacturers and government agencies. The setting oflegal limits on exhaust emissions affects the demand for(5) Scientific Instruments & Systems

these measurement systems. It is possible, therefore, that

Scientific analysis instruments are the main products ofthe financial condition and business performance of

the Scientific Instruments & Systems segment and are

HORIBA will be significantly affected by futureused for R&D and product quality testing. There is a risk

regulations. Furthermore, capital expenditures related tothat the demand for these products could be affected byshifts in the automation of automotive test systems could

the R&D budgets of government agencies and the R&D

have a significant impact on HORIBA’s financial condition

investment and production of private enterprises and haveand business performance.

a significant impact on HORIBA Group’s financial condition
and business performance.

(2) Process & Environmental Instruments & Systems
Demand for environmental-related products such as
analyzers for air pollution and water quality may beaffected by changes in environmental regulations. Changes
in the demand for these products could have a significant
impact on HORIBA Group’s financial condition andbusiness performance.

HORIBA Report 2014 | 52

Financial data

Consolidated Balance Sheets
Consolidated Balance Sheets
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2013 and December 31, 2014ASSETS
Current assets:
Cash and cash equivalents...................................................................................................................................
Trade notes and accounts receivable (Note 4,7)
Affiliated companies..................................................................................................................................
Other................................................................................................................................................................
Allowance for doubtful receivables...................................................................................................................
Marketable securities (Note 4,5)........................................................................................................................
Inventories (Note 6)................................................................................................................................................
Deferred tax assets (Note 15)............................................................................................................................
Other current assets..............................................................................................................................................
Total current assets..................................................................................................................................
Property, plant and equipment (Note 18):
Land (Note 8).............................................................................................................................................................
Buildings and structures........................................................................................................................................
Machinery, equipment and vehicles (Note 8)................................................................................................
Construction in progress.......................................................................................................................................
Other property, plant and equipment...............................................................................................................
Total.................................................................................................................................................................
Accumulated depreciation....................................................................................................................................
Net property, plant and equipment.....................................................................................................
Investments and other noncurrent assets:
Investment securities (Note 4,5)........................................................................................................................
Investments in nonconsolidated subsidiaries and affiliates....................................................................
Deferred tax assets (Note 15)............................................................................................................................
Net defined benefit asset (Note 9)...................................................................................................................
Allowance for doubtful accounts.......................................................................................................................
Other investments and other assets...............................................................................................................
Total.................................................................................................................................................................
Intangibles:
Goodwill (Note 18)....................................................................................................................................................
Software.......................................................................................................................................................................
Other intangibles.......................................................................................................................................................
Total.................................................................................................................................................................
Total assets.............................................................................................................................................................................

Millions of yen
12/2013
12/2014

Thousands of
U.S. dollars(Note 1)
12/2014¥49,246¥51,109$423,965

25
47,386(914)
1,800
33,0853,186
6,419
140,235

149
52,097(1,023)
2,102
34,8383,635
6,772
149,680

1,236
432,160(8,486)
17,436288,992
30,15356,175
1,241,642

9,504
27,68816,175
1,763
14,95270,085(36,758)
33,326

9,908
31,321
16,6193,817
15,70277,369(37,927)
39,441

82,189259,817
137,859
31,663130,253
641,800(314,616)
327,175

5,984
105
1,750
(45)
2,801
10,597

7,069
53
1,993
2
(44)
2,785
11,85958,639439
16,53216(364)
23,102
98,374

314
3,054
1,741
5,110
¥189,269

418
4,134
1,801
6,353
¥207,335

3,467
34,292
14,93952,700$1,719,908¥5,534
1,229¥9,8881,104$82,024
9,158

16,40912,112
3,523
87
905
56
1,492
10,78652,13820
15,385
14,457
5,220
88
908
62
1,525
10,34059,003

165
127,623
119,925
43,301
729
7,532
514
12,65085,773
489,448

17,814
659
2,406
1,704
22,58574,723

17,419
174
2,264
1,870
2,287
24,01783,020144,496
1,443
18,78015,512
18,971
199,228
688,676

12,011

12,011

99,63518,71778,477(765)
108,441

18,717
86,218(730)
116,216

155,263715,205(6,055)964,048

2,296
3
3,468
5,768
335
0
114,545¥189,269

2,041
18
5,630
16
7,707
389
0
124,314¥207,335

16,930149
46,702
132
63,9313,226
01,031,223$1,719,908

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans (Note 4,8)................................................................................................................................
Current portion of long-term debt (Note 4,8)..............................................................................................
Trade notes and accounts payable (Note 4)
Affiliated companies..................................................................................................................................
Other................................................................................................................................................................
Accounts payable - other (Note 4)..................................................................................................................
Accrued income taxes (Note 4).........................................................................................................................
Deferred tax liabilities (Note 15)........................................................................................................................
Accrued bonuses to employees.........................................................................................................................
Accrued bonuses to directors and corporate auditors............................................................................
Reserve for product warranty.............................................................................................................................
Other current liabilities..........................................................................................................................................
Total current liabilities..............................................................................................................................
Long-term liabilities:
Long-term debt (Note 4,8) ..................................................................................................................................
Deferred tax liabilities (Note 15)........................................................................................................................
Employees' retirement benefits (Note 9).......................................................................................................
Net defined benefit liability (Note 9)................................................................................................................
Provision for loss on dissolution of the employeesʼ pension fund (Note 9).....................................
Other noncurrent liabilities...................................................................................................................................
Total long-term liabilities........................................................................................................................
Total liabilities..............................................................................................................................................
Contingent liabilities (Note 13)
Net assets (Note 10):
Shareholders' equity:
Common stock...........................................................................................................................................................
Authorized - 100,000,000 shares
Issued and outstanding - 42,301,569 shares (excluding treasury stock) at 12/2013
Issued and outstanding - 42,312,201 shares (excluding treasury stock) at 12/2014
Capital surplus...........................................................................................................................................................
Retained earnings.....................................................................................................................................................
Treasury stock - 231,183 shares at 12/2013 and 220,551 shares at 12/2014.............................
Total shareholders' equity......................................................................................................................
Accumulated other comprehensive income:Unrealized gains (losses) on available-for-sale securities.....................................................................
Deferred gains or losses on hedges (Note 14).............................................................................................
Foreign currency translation adjustments.....................................................................................................
Remeasurements of defined benefit plans (Note 9)..................................................................................
Total accumulated other comprehensive income.........................................................................
Subscription rights to shares (Note 11)......................................................................................................................
Minority interests in consolidated subsidiaries........................................................................................................
Total net assets..........................................................................................................................................
Total liabilities and net assets.........................................................................................................................................
See the notes to the consolidated financial statements.

53

Consolidated Statements of Income
Consolidated Statements of Income
Thousands of
U.S. dollars(Note 1)
12/2014HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2013 and December 31, 2014

Millions of yen
12/2013
12/2014
Net sales (Note 18).......................................................................................................................................................................

¥138,136¥153,065$1,269,722

Operating costs and expenses (Note 18):
Cost of sales........................................................................................................................................................................
Selling, general and administrative expenses.........................................................................................................
Total operating costs and expenses............................................................................................................

80,625
43,777
124,40287,88447,966
135,851

729,025
397,892
1,126,926

Operating income (Note 18).......................................................................................................................................................

13,733

17,214

142,795

Other income (expenses):
Interest and dividend income........................................................................................................................................
Interest expense.................................................................................................................................................................
Foreign exchange gains (losses), net.........................................................................................................................
Gain on sales of property, plant and equipment...................................................................................................
Loss on sales of property, plant and equipment...................................................................................................
Loss on disposal of property, plant and equipment.............................................................................................
Impairment loss (Note 16,18)........................................................................................................................................
Gain on sales of investment securities (Note 5)..................................................................................................
Loss on valuation of investment securities (Note 5)..........................................................................................
Gain on sales of subsidiaries and affiliates' stocks.............................................................................................
Loss on sales of shares of subsidiaries and associates....................................................................................
Equity in losses of affiliates..........................................................................................................................................
Subsidy income...................................................................................................................................................................
Reversal of provision for compensation losses.....................................................................................................
Gain on bargain purchase (Note 18)..........................................................................................................................
Provision for loss on dissolution of the employeesʼ pension fund (Note 9)..............................................
Other, net..............................................................................................................................................................................
Total other expenses, net................................................................................................................................

294
(560)
(274)
431
(7)
(65)
(190)
17
(15)
67
(103)
70
173
64
(103)
(201)

337
(545)
(111)
9
(0)
(110)
(42)
1,804
(0)
(660)
147
103
(1,954)
71
(949)

2,795
(4,520)
(920)
74
(0)
(912)
(348)
14,964(0)(5,474)
1,219
854(16,209)588(7,872)

Income before income taxes and minority interests.......................................................................................................

13,532

16,265

134,923

Income taxes (Note 15):
Current...................................................................................................................................................................................
Deferred.................................................................................................................................................................................
Total income taxes..............................................................................................................................................

4,280
299
4,580

6,662
(985)
5,676

55,263(8,170)47,084

Income before minority interests............................................................................................................................................

8,951

10,58887,830Minority interests in earnings (losses) of consolidated subsidiaries........................................................................

(47)

(0)

(0)

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

¥8,999¥10,589$87,839

Yen
12/2013
Per share information:
Net income - basic...........................................................................................................................................................
Net income - diluted........................................................................................................................................................
Cash dividends....................................................................................................................................................................

¥212.76
212.01
60.00

12/2014

U.S. dollars(Note 1)
12/2014¥250.28
249.28
67.00

$2.07
2.06
0.55

Millions of yen
12/2013
12/2014¥8,951¥10,588

Thousands of
U.S. dollars(Note 1)
12/2014$87,830

Consolidated Statements of Comprehensive Income
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2013 and December 31, 2014

Income before minority interests
Other comprehensive income (Note 17)
Unrealized gains (losses) on available-for-sale securities...............................................................................
Deferred gains or losses on hedges...........................................................................................................................
Foreign currency translation adjustments...............................................................................................................
Share of other comprehensive income of affiliates accounted for using equity method....................
Total other comprehensive income............................................................................................................................
Comprehensive income
Total comprehensive income attributable to
Owners of the parent.......................................................................................................................................................
Minority interests...............................................................................................................................................................

1,308
3
6,896
(8)
8,199
¥17,151

(254)
15
2,132
29
1,923
¥12,511(2,107)
124
17,685240
15,951$103,782¥17,193(42)¥12,512(0)$103,790(0)

See the notes to the consolidated financial statements.

HORIBA Report 2014 | 54

Financial data

Consolidated Statements of Changes in Net Assets
Consolidated Statements of Changes in Net Assets
Thousands of
U.S. dollars(Note 1)
12/2014HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2013 and December 31, 2014

Millions of yen
12/2013
12/2014
Shareholders' equity
Common stock
Balance at beginning of current fiscal year...........................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................

¥12,011¥12,011¥12,011¥12,011$99,635$99,635

Capital surplus
Balance at beginning of current fiscal year...........................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................

¥18,717¥18,717¥18,717¥18,717$155,263$155,263¥71,725¥78,477$650,991(2,241)
8,999
(5)
6,752
¥78,477(2,834)
10,589(13)
7,740¥86,218(23,508)
87,839(107)
64,205$715,205(¥780)(¥765)($6,345)1414(¥765)(0)35
35(¥730)(0)
290
290($6,055)

Retained earnings
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Cash dividends.....................................................................................................................................................................................
Net income.............................................................................................................................................................................................
Disposal of treasury stock..............................................................................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Treasury stock
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Purchase of treasury stock............................................................................................................................................................
Disposal of treasury stock..............................................................................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................

Shareholders' equity, total
Balance at beginning of current fiscal year........................................................................................................................................... ¥101,674 ¥108,441
Changes in items during the period:
Cash dividends.....................................................................................................................................................................................
(2,241)(2,834)
8,999
10,589Net income.............................................................................................................................................................................................
Purchase of treasury stock............................................................................................................................................................
(0)
Disposal of treasury stock..............................................................................................................................................................
9
21
Total.........................................................................................................................................................................................................
6,766
7,775
Balance at end of current fiscal year....................................................................................................................................................... ¥108,441 ¥116,216
Accumulated other comprehensive income
Unrealized gains (losses) on available-for-sale securities
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Deferred gains or losses on hedges
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Foreign currency translation adjustments
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Remeasurements of defined benefit plans
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Accumulated other comprehensive income, total
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Subscription rights to shares
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................
Minority interests in consolidated subsidiaries
Balance at beginning of current fiscal year...........................................................................................................................................
Changes in items during the period:
Net changes in items other than shareholders' equity.......................................................................................................
Total.........................................................................................................................................................................................................
Balance at end of current fiscal year.......................................................................................................................................................

55(23,508)
87,839(0)
174
64,496$964,048¥987¥2,296$19,046

1,308
1,308
¥2,296(254)(254)¥2,041(2,107)(2,107)$16,930

-

¥3

$24

3
3
¥3

15
15
¥18

124
124
$149

(¥3,413)¥3,468$28,768

6,882
6,882
¥3,4682,161
2,161¥5,63017,926
17,926$46,702

-

-

-

-

16
16
¥16

132
132
$132

(¥2,426)¥5,768$47,847

8,194
8,194
¥5,768

1,939
1,939¥7,707

16,08416,084$63,931

¥245

¥335

$2,778

90
90
¥335

53
53
¥389

439
439
$3,226

¥42

¥0

$0

(42)
(42)
¥0

(0)
(0)
¥0

(0)
(0)
$0

Net assets, total
Balance at beginning of current fiscal year...........................................................................................................................................
¥99,536 ¥114,545
Changes in items during the period:
Cash dividends.....................................................................................................................................................................................
(2,241)(2,834)
8,999
10,589Net income.............................................................................................................................................................................................
Purchase of treasury stock............................................................................................................................................................
(0)
Disposal of treasury stock..............................................................................................................................................................
921
Net changes in items other than shareholders' equity.......................................................................................................
8,242
1,992
Total.........................................................................................................................................................................................................
¥15,009¥9,768
Balance at end of current fiscal year....................................................................................................................................................... ¥114,545 ¥124,314
See the notes to the consolidated financial statements.

$899,552$950,186(23,508)
87,839(0)
174
16,524$81,028$1,031,223

Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2013 and December 31, 2014

Millions of yen
12/2013
12/2014
Cash flows from operating activities:
Income before income taxes and minority interests....................................................................................................................................................
Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities:
Depreciation and amortization....................................................................................................................................................................................
Impairment loss.................................................................................................................................................................................................................
Increase (decrease) in allowance for doubtful receivables............................................................................................................................
Increase (decrease) in employees' retirement benefits...................................................................................................................................
Increase (decrease) in net defined benefit liability............................................................................................................................................
Increase (decrease) in directors' and corporate auditors' retirement benefits ..................................................................................
Increase (decrease) in provision for loss on dissolution of the employees' pension fund................................................................
Interest and dividend income......................................................................................................................................................................................
Interest expense...............................................................................................................................................................................................................
Foreign exchange losses (gains)................................................................................................................................................................................
Loss (gain) on sales of property, plant and equipment....................................................................................................................................
Loss on disposal of property, plant and equipment...........................................................................................................................................
Loss (gain) on valuation of investment securities.............................................................................................................................................
Loss (gain) on sales of investment securities.....................................................................................................................................................
Decrease (increase) in trade notes and accounts receivable.......................................................................................................................
Decrease (increase) in inventories...........................................................................................................................................................................
Increase (decrease) in trade notes and accounts payable............................................................................................................................
Other, net............................................................................................................................................................................................................................
Subtotal.....................................................................................................................................................................................................................
Interest and dividends received.................................................................................................................................................................................
Interest paid.......................................................................................................................................................................................................................
Income taxes (paid) refund..........................................................................................................................................................................................
Net cash provided by (used in) operating activities...............................................................................................................................

Thousands of
U.S. dollars(Note 1)
12/2014¥13,532¥16,265$134,923

4,279
190
(160)
104
(195)
(294)
560
(17)
(424)
65
15
(17)
(4,222)
(630)
1,989
2,910
17,684289(591)(2,307)
15,076

4,905
42
68
(214)
1,870
(337)
545
(237)
(9)
110
(1,804)(2,718)12(1,943)514
17,069346(538)(5,422)
11,45540,688348
564(1,775)
15,512(2,795)
4,520(1,965)(74)912(14,964)(22,546)
99(16,117)
4,263
141,592
2,870(4,462)(44,977)
95,022

Cash flows from investing activities:
Increase in time deposits..............................................................................................................................................................................................
Decrease in time deposits............................................................................................................................................................................................
Decrease in time deposits restricted for use......................................................................................................................................................
Payments for purchase of marketable securities...............................................................................................................................................
Proceeds from sales or redemption of marketable securities......................................................................................................................
Payments for purchase of property, plant and equipment.............................................................................................................................
Proceeds from sales of property, plant and equipment...................................................................................................................................
Payments for purchase of intangibles...................................................................................................................................................................
Payments for purchase of investment securities..............................................................................................................................................
Proceeds from sales or redemption of investment securities......................................................................................................................
Proceeds from sales of stocks of subsidiaries and affiliates........................................................................................................................
Payments for transfer of business...........................................................................................................................................................................
Other, net............................................................................................................................................................................................................................
Net cash provided by (used in) investing activities................................................................................................................................

(2,363)1,505
32(2,404)
2,103(6,040)870(1,535)
(23)
32
77
(322)
(45)
(8,111)(2,843)2,988
32(3,008)2,706(7,806)85(1,846)(1,859)
2,184
1
(658)
149
(9,875)(23,583)
24,786
265(24,952)
22,447(64,753)705(15,313)(15,420)
18,1168(5,458)
1,236(81,916)

Cash flows from financing activities:
Proceeds from issuance of corporate bonds.......................................................................................................................................................
Payments for redemption of corporate bonds.....................................................................................................................................................
Net increase (decrease) in short-term borrowings...........................................................................................................................................
Increase in long-term debt..........................................................................................................................................................................................
Repayments of long-term debt..................................................................................................................................................................................
Repayments on finance lease obligations..............................................................................................................................................................
Net decrease (increase) of treasury stock...........................................................................................................................................................
Cash dividends paid........................................................................................................................................................................................................
Net cash provided by (used in) financing activities................................................................................................................................

14,919(10,106)
185
1,285(1,534)(183)
0(2,242)
2,324

3,294
269
(803)
(200)
(0)
(2,833)(273)

27,324
2,231(6,661)(1,659)(0)(23,500)(2,264)

Effect of exchange rate changes on cash and cash equivalents........................................................................................................................................
Net increase (decrease) in cash and cash equivalents..........................................................................................................................................................
Cash and cash equivalents at beginning of year.......................................................................................................................................................................
Cash and cash equivalents at end of year...................................................................................................................................................................................

1,098
10,38838,858¥49,246556
1,863
49,246¥51,109

4,612
15,454
408,510$423,965

See the notes to the consolidated financial statements.

HORIBA Report 2014 | 56

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
1. Basis of presenting consolidated financial statementsintercompany transactions and accounts have been eliminated in

The accompanying consolidated financial statements of HORIBA,

consolidation. In the elimination of investments in subsidiaries, theLtd. (“the Company”) have been prepared in accordance with theassets and liabilities of the subsidiaries, including the portions

provisions set forth in the Japanese Financial Instruments andattributable to minority shareholders, are evaluated using the fair

Exchange Law and its related accounting regulations and invalue at the time the Company acquired control of the respective

conformity with accounting principles generally accepted in Japansubsidiary. Acquisition costs that are in excess of the net assets of(“Japanese GAAP”), which are different in certain respects as toacquired subsidiaries and affiliates and cannot be assigned toapplication and disclosure requirements from International Financial

specific individual accounts are amortized on a straight-line basis

Reporting Standards.

over five years.

The accounts of the consolidated overseas subsidiaries have

December 31 is the year-end of the consolidated subsidiaries

been prepared in accordance with either International Financial

and that of the consolidated financial statements for fiscal 2013 andReporting Standards or U.S. generally accepted accounting

fiscal 2014.

principles, with adjustments for the five specified items as applicable.

Two of the Company’s subsidiaries are not included in the

The accompanying consolidated financial statements have been

consolidated accounts as the effect of their inclusion on total assets,

restructured and translated into English, with some expanded

sales, income and retained earnings would have been immaterial.

descriptions, from the consolidated financial statements of the

For one of the two nonconsolidated subsidiaries, the equity

Company prepared in accordance with Japanese GAAP and filed

method was applied. The other was accounted for on a cost basis,

with the appropriate Local Finance Bureau of the Ministry ofas the effect on income and retained earnings was immaterial.

Finance as required by the Japanese Financial Instruments and

The Company has one affiliated company (two in fiscal 2013).

Exchange Law. Some supplementary information included in theInvestments in the affiliates (generally 20%-50% ownership) were

statutory Japanese language consolidated financial statements, but

accounted for on a cost basis, not by the equity method, as the

not required for fair presentation, is not presented in theeffect on income and retained earnings was immaterial.

accompanying consolidated financial statements.

(b) Cash and cash equivalents

Yen amounts are rounded down to the nearest million. Therefore,

Cash and cash equivalents include cash on hand, readily available

total or subtotal amounts do not necessarily correspond with thebank deposits and short-term highly liquid investments that are

aggregate of such account balances.

readily convertible into cash, have insignificant risk of change in

The translation of the Japanese yen amounts into U.S. dollar

value and have original maturities of three months or less from dateamounts is included solely for the convenience of readers outsideof purchase.

Japan, using the prevailing exchange rate at December 31, 2014,(c) Securities

which was ¥120.55 to U.S. $1.00. The translations should not be

Available-for-sale securities with available fair market values areconstrued as representations that the Japanese yen amounts havestated at fair market value. Unrealized gains and losses on thesebeen, could have been or could in the future be converted into U.S.

securities are reported, net of applicable income taxes, as adollars at this or any other rate of exchange. The U.S. dollars

separate component of net assets. Realized gains and losses onamounts are then rounded down to the nearest thousand.

the sale of such securities are computed using moving average

Certain prior year amounts have been reclassified to conform tothe current year's presentation.

cost. Available-for-sale securities with no available fair market value
are stated mainly at moving average cost.
(d) Inventories

2. Summary of significant accounting policies

Inventories are stated at the lower of average cost or net realizable(a) Principles of consolidation

value. Cost is determined principally by the weighted average

The consolidated financial statements include the accounts of themethod for merchandise, finished goods and work-in-process andCompany and 37 (37 in fiscal 2013) of its subsidiaries (“HORIBA”

by the moving average method for raw materials and supplies.

as a consolidated group).

(e) Property, plant and equipment and depreciation (except for

The accompanying consolidated financial statements include the57leases)accounts of the Company and significant companies over which theProperty, plant and equipment are stated at cost. Depreciation isCompany has control through majority voting rights or certain othercomputed by the straight-line method over the estimated useful life

conditions evidencing control by the Company. Significantof the asset. The estimated useful lives of buildings and structures

range from 3 to 60 years and those of machinery, equipment andtype) in which the Company and a domestic consolidated

vehicles from 2 to 18 years.

subsidiary are members, HORIBA posted an estimated loss that will(f) Goodwill

arise in relation to the dissolution.

Goodwill, which represents the excess of the purchase price over(n) Accounting methods associated with retirement benefits

the fair value of the net assets acquired, is amortized on aⅰ) Period-based method for estimated amount of retirement

straight-line basis over a period of five years.

benefits(g) Software

In calculating projected benefit obligations, the method to attribute

Amortization of computer software used by HORIBA is computed

the estimated amount of retirement benefits to the period up to theby the straight-line method over the estimated useful life of 3 to 10

end of the current fiscal year is based on the straight-line method.

years.

ⅱ) Recording of expenses for actuarial differences and prior service(h) Leases

costsWith regard to leased assets under finance leases other than those

Prior service costs are recognized in expenses using thethat are deemed to transfer ownership of the leased property to thestraight-line method over a fixed term of years (10 years), which islessee, the lease term is deemed to be the useful life, andwithin the average of the estimated remaining service years ofdepreciation is computed by the straight-line method over the lease

employees, commencing in the period they arise.

term with zero residual value. Finance leases other than those that

Actuarial differences are recognized in expenses from theare deemed to transfer ownership of the leased property to therespectively occurring subsequent fiscal year, using the straight-line

lessee and which commenced in fiscal years beginning prior tomethod over a fixed term of years (5 to 8 years), which is within theJanuary 1, 2009 continue to be accounted for in a way that is similar

average of the estimated remaining service years of employees, atto the method used for operating leases.

the time of occurrence of each fiscal year.

(i) Allowance for doubtful receivables(o) Sales and costs of completed construction

The Company and its domestic subsidiaries provide for doubtful

Sales and costs of completed construction were recorded using theaccounts principally at an amount computed based on the actual

percentage of completion method when the progress of theratio of bad debts in the past plus the estimated uncollectible

construction up to the end of fiscal 2014 was deemed to be certain

amounts of certain individual receivables. The overseas(estimates of the ratio of completion of construction work are based

subsidiaries provide for doubtful accounts based on estimateson the cost-to-cost method). In the case of other construction, sales

made by management.

and costs were recorded using the completed contract method.

(j) Accrued bonuses to employees(p) Foreign currency translation

Accrued bonuses to employees are provided for the expected

Short-term and long-term receivables and payables in foreign

payment of employee bonuses for fiscal 2014 to those employees

currencies are translated into Japanese yen based on exchange

employed at the end of the fiscal year.

rates at the balance sheet date.

(k) Accrued bonuses to directors and corporate auditors

Balance sheet accounts of consolidated foreign subsidiaries areSome consolidated subsidiaries provide for accrued bonuses totranslated into Japanese yen at the balance sheet date, except for

directors and corporate auditors for the expected payment ofshareholders’ equity accounts, which are translated at historicaldirector and corporate auditor bonuses for fiscal 2014 to those

rates. Revenue and expense accounts of consolidated foreign

directors and corporate auditors serving at the end of the fiscal year.

subsidiaries are translated into Japanese yen at average annual(l) Reserve for product warranty

exchange rates. Differences arising from the application of the

The reserve for product warranty is provided for accrued warranty

process stated above are presented separately in the consolidated

expenses for products of the Company and certain subsidiaries.

financial statements in “Foreign currency translation adjustments”

The provision is based on estimates made from actual pastand “Minority interests in consolidated subsidiaries” in net assets.

experience and product warranty records and takes into account(q) Derivatives

individual cases.

Derivative financial instruments are stated at fair value, and(m) Provision for loss on dissolution of the employees’changes in the fair value are recognized as gains or losses, unlesspension fundthe derivative financial instruments are used for hedging purposes.

As it was resolved to adopt Japanese government policy to carry

HORIBA uses foreign currency exchange contracts to manage riskout special dissolution of the employees’ local pension fund (generalrelated to its importing and exporting activities. Regarding derivative

HORIBA Report 2014 | 58

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
transactions, in addition to conducting exchange agreementtransactions within the limit of the balance of foreign
currency-denominatedreceivables

andpayables,

HORIBA

income tax purposes.
The Company and its consolidated domestic subsidiaries haveadopted the consolidated taxation system.

conducts forward exchange agreement transactions for the(u) Per share information

expected foreign currency-denominated receivables and payables,

The computations of net income per share are based on thewhich would be generated with certainty by scheduled export orweighted average number of shares of common stock outstanding

import trading. HORIBA also uses interest rate swap contracts toduring each period. The weighted average number of shares of

avoid the risk of rising interest rates. Contracts are entered into andcommon stock used in the computation for fiscal 2013 and fiscal

controlled by the finance department, which reports results to the2014 was 42,299 thousand and 42,309 thousand, respectively.

director. Transactions involving derivative contracts are limited to

Diluted net income per share of common stock assumes full

highly rated banking institutions, and HORIBA considers that there

conversion of dilutive convertible bonds at the beginning of the year

are no material credit risks associated with them.

or at the later date of issuance, with an applicable adjustment for(r) Hedge accounting

related interest expense, net of tax and dilutive stock option plans.

ⅰ) Hedge accounting method

The weighted average number of shares used in the computation

Deferred hedge accounting is applied.

for fiscal 2013 and fiscal 2014 was 42,448 thousand and 42,479

ⅱ) Hedging instruments and hedged items

thousand, respectively.

Hedging instruments: Forward foreign exchange contracts, etc.
Hedgeditems:

Foreigncurrency-denominatedforecasttransactionsⅲ) Hedging policy

Cash dividends per share shown in the consolidated statements
of income represent actual amounts applicable to earnings in therespective fiscal year, including dividends to be paid after the end of
the period.

Forward foreign exchange transactions are used to avoid foreign
currency risks, based on the Company’s Administrative Rules.

ⅳ) Assessment of hedge effectiveness3. Accounting standards issued but not yet effective(a)“Accounting Standard for Retirement Benefits” (ASBJ Statement

The effectiveness of hedges is assessed by comparing theNo. 26, issued on May 17, 2012) and “Guidance on Accounting

cumulative change of cash flows of both hedging instruments andStandard for Retirement Benefits” (ASBJ Guidance No. 25, issued

corresponding hedged items. However, the assessment ofon May 17, 2012)

effectiveness is not conducted for forward foreign exchangeⅰ) Overview

contracts as the significant conditions of both hedging instruments

With a viewpoint of improving financial reporting and inand corresponding hedged items are the same.

consideration of international trends, application of these accounting(s) Research and development expenses

standards is intended to improve the accounting method for

Research and development expenses are charged to income when

actuarial differences and past service costs that are yet to be

incurred. Research and development expenses charged to income

recognized and the method of calculation for projected benefit

for fiscal 2013 and fiscal 2014 were ¥10,774 million and ¥11,986

obligations and service cost and to expand disclosure.

million ($99,427 thousand), respectively.

ⅱ) Date of application(t) Income taxes

The revision to the method of calculation for projected benefit

Income taxes comprise corporate tax, enterprise tax and prefectural

obligations and service costs will be applied from the start of theand municipal inhabitant taxes.

fiscal year ending December 31, 2015. As transitional accounting

HORIBA recognizes the tax effects of loss carryforwards and thetreatment is prescribed in the applicable accounting standards,

temporary differences between the carrying amounts of assets andretroactive application in relation to consolidated financial

liabilities for tax and financial reporting. The provision for current

statements for past periods will not be carried out.

income tax is computed based on the pretax income included in theⅲ) Effect of applying these accounting standards

consolidated statements of income.

HORIBA is currently evaluating the effect of applying these

The asset/liability approach is used to recognize deferred tax

accounting standards on its consolidated financial statements.

assets and liabilities for the expected future tax consequences of59

temporary differences between the carrying amounts of assets and(b) “Accounting Standard for Business Combinations” (ASBJ

liabilities for financial reporting purposes and the amounts used forStatement No. 21, issued on Sep. 13, 2013), “Accounting Standard

for Consolidated Financial Statements” (ASBJ Statement No. 22,
issued on Sep. 13, 2013), “Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7, issued on Sep. 13, 2013),“Accounting Standard for Earnings Per Share” (ASBJ Statement No.
2, issued on Sep. 13, 2013), “Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, issued on Sep. 13, 2013)
and “Guidance on Accounting Standard for Earnings Per Share”(ASBJ Guidance No. 4, issued on Sep. 13, 2013)ⅰ) Overview

These accounting standards have been revised mainly in terms of(1) handling a change in equity of a parent company in relation to a
subsidiary when control continues in the case of the additional
acquisition

ofsharesofasubsidiary,(2)handlingofacquisition-related expenses, (3) the representation of net income
and a change from a minority interest to a non-controlling interest,and (4) handling of provisional accounting procedures.
ⅱ) Date of application

It is planned to apply these standards from the start of the fiscal year
ending December 31, 2016. It is planned to apply the handling of
the establishment of provisional accounting procedures starting withbusiness combinations that are implemented from the start of the
fiscal year ending December 31, 2016.

ⅲ) Effect of applying these accounting standards
HORIBA is currently evaluating the effect of applying theseaccounting standards on its consolidated financial statements.

HORIBA Report 2014 | 60

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
4. Financial instruments(1) Overview of financial instruments
Management policy
HORIBA carries out fund management with an emphasis on security and procures funds mainly through bank borrowings and bondissuances. Derivatives are used to manage foreign exchange fluctuation risk and interest rate fluctuation risk, and it is HORIBA's
policy not to engage in speculative transactions.
Financial instruments, risks and risk management
Trade notes and accounts receivable, which are operating receivables, are exposed to the credit risk of customers. HORIBA
endeavors to reduce this risk by conducting due date control and balance control and by attempting to promptly recognize
collection concerns stemming from such factors as a deterioration in the financial condition of a customer.
Most trade notes and accounts payable, which are operating payables, have payment due dates within one year.
Some operating receivables and payables are denominated in foreign currencies and are exposed to foreign exchange fluctuation
risk. However, HORIBA endeavors to reduce this risk by offsetting foreign currency denominated operating receivables andpayables and by using forward exchange contracts, etc.
Marketable securities are mainly short-term investments with high liquidity such as negotiable deposits. Investment securities
are mainly shares of companies that have a business relationships with HORIBA and are exposed to market value fluctuation risk.
However, when acquiring or selling shares of a certain value, the Board of Directors considers the details of the transactions and
HORIBA endeavors to reduce any risk by ensuring that the market value information regarding the shares is reported to the
management team in a timely manner.
Short-term loans are mainly for financing related to operating transactions, while long-term loans and corporate bonds aremainly for financing related to plant and equipment and working capital.
Trade liabilities and loans are exposed to liquidity risk, but HORIBA endeavors to reduce this risk by using methods such as the
preparation of cash flow plans.
Regarding derivative transactions, in addition to conducting exchange agreement transactions within the limit of the balance of
foreign currency-denominated receivables and payables, HORIBA conducts forward exchange agreement transactions for the
expected foreign currency-denominated receivables and payables, which would be generated with certainty by scheduled export orimport trading. HORIBA conducts interest rate swap transactions aimed at avoiding interest rate fluctuation risk within the limit of
the balance of borrowings. HORIBA's policy is not to engage in speculative transactions.
Supplementary explanation of the estimated fair value of financial instruments
The market value of financial instruments includes values based on market prices and amounts rationally calculated when there
are no market prices available. As HORIBA incorporates variable factors when making these calculations, the amounts may change
due to the adoption of different assumptions. With regard to contract amounts related to derivative transactions in the Notes toConsolidated Financial Statements item "Derivative transactions," the amounts do not indicate the market risk associated with
derivative transactions themselves.
(2) Fair value of financial instruments
The book value and fair value of financial instruments and any difference between the two as of December 31, 2013 and December
31, 2014 are set forth in the table below. Financial instruments whose fair value was extremely difficult to estimate are not included(See Note 2). Cash and cash equivalents of \8,470 million and \9,278 million ($76,963 thousand) for the fiscal years ended December
31, 2013 and December 31, 2014 are included in (3) Marketable securities and investment securities.
Millions of yen
12/2013
Book value Fair value
Assets:(1) Cash and time deposits....................................................... ¥42,228(2) Trade notes and accounts receivable...........................
47,412(3) Marketable securities and investment securities
Available-for-sale securities.....................................
16,127
Total............................................................................................ ¥105,767

61

Millions of yen
12/2014
DifferenceBook value Fair value

Difference¥42,228
47,412-¥43,255
52,246¥43,255
52,246-

16,127¥105,767-

18,320¥113,822

18,320¥113,822-

Liabilities:(1) Trade notes and accounts payable.................................
(2) Short-term loans and current portion of
long-term loans......................................................................
(3) Accounts payable - other..................................................
(4) Accrued income taxes.........................................................
(5) Bonds..........................................................................................
(6) Long-term loans.....................................................................
Total............................................................................................

¥16,409¥16,409-¥15,406¥15,406-

6,606
12,112
3,523
15,0002,576¥56,229

6,606
12,112
3,523
14,891
2,477¥56,021(108)(99)(¥207)

10,832
14,4575,220
15,0002,209¥63,127

10,832
14,457
5,220
15,264
2,177¥63,359

264
(32)
¥232

Derivative transactions(1) Hedge accounting not applied...........................................
(2) Hedge accounting applied...................................................
Total............................................................................................

(¥188)
5(¥182)(¥188)
5(¥182)-(¥113)
29(¥84)(¥113)
29(¥84)-

Thousands of U.S. dollars
12/2014
Book value

Fair value$358,813
433,396$358,813
433,396-

151,970$944,189

151,970$944,189-

Liabilities:(1) Trade notes and accounts payable...........................................................................................................
(2) Short-term loans and current portion of long-term loans..............................................................
(3) Accounts payable - other.............................................................................................................................
(4) Accrued income taxes....................................................................................................................................
(5) Bonds.....................................................................................................................................................................
(6) Long-term loans................................................................................................................................................
Total....................................................................................................................................................................

$127,797
89,854
119,925
43,301
124,429
18,324$523,658$127,797
89,854
119,925
43,301
126,619
18,058$525,582

2,189
(265)
$1,924

Derivative transactions(1) Hedge accounting not applied......................................................................................................................
(2) Hedge accounting applied..............................................................................................................................
Total....................................................................................................................................................................

($937)
240($696)($937)
240($696)-

Assets:(1) Cash and time deposits..................................................................................................................................
(2) Trade notes and accounts receivable......................................................................................................
(3) Marketable securities and investment securities
Available-for-sale securities.............................................................................................................
Total....................................................................................................................................................................

Difference

Note 1. Method for calculating the fair value of financial instruments and notes regarding securities and derivative transactions.
Assets(1) Cash and time deposits and (2) Trade notes and accounts receivable
As these are settled in the short term, market value approximates book value and is, therefore, based on the applicable bookvalue.
(3) Marketable securities and investment securities
Market value for these is based on prices on securities exchanges in the case of shares, etc. For bonds, market value is basedon prices on securities exchanges or prices indicated by corresponding financial institutions. For marketable securities
classified by the purpose for which they are held, see Note 5.
Liabilities(1) Trade notes and accounts payable, (2) Short-term loans and current portion of long-term loans, (3) Accounts payable - otherand (4) Accrued income taxes
As these are settled in the short term, market value approximates book value and is, therefore, based on the applicable bookvalue.
(5) Bonds
Market value for bonds issued by HORIBA is calculated based on market prices.
(6) Long-term loans
Borrowings based on variable interest rates reflect market interest rates, and as the creditworthiness of HORIBA has notchanged significantly since execution, market value is considered to be approximate book value and is, therefore, based on
applicable book value. The value of borrowings with fixed interest rates is based on the total amount of principal and interest
discounted at an interest rate of a similar new loan.
Derivative transactions
See Note 14 for derivative transactions.
Net receivables (payables) derived from derivative transactions are displayed in the table above. Total net payables are shownin parenthesis.
Note 2. The following table summarizes financial instruments whose fair value was extremely difficult to estimate.

Non-listed equity securities..............................................................................................................
Investments in nonconsolidated subsidiaries and affiliates..................................................

Millions of yen
12/2013
12/2014
¥129
¥129
105
53

Thousands of
U.S. dollars
12/2014$1,070439

The above financial instruments were not included in "(3) Marketable securities and investment securities" because they did
not have market values and the fair value was extremely difficult to estimate.

HORIBA Report 2014 | 62

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
Note 3. Repayment schedule of monetary claims, available-for-sales securities with maturities and bonds held to maturity.
Millions of yen
12/2013Over one year Over five years
Within one
but within five
but within ten Over ten years
year
years
years
Cash and time deposits.........................................................................
¥42,228
Trade notes and accounts receivable..............................................
47,412Marketable securities and investment securities
Available-for-sale securities with maturities
10(1) Governmental/municipal bonds............................................
401
200(2) Corporate bonds.........................................................................
1,099(3) Other bonds..................................................................................
(4) Other...............................................................................................
799
27
14
Total...............................................................................................................
¥91,941¥238¥14-

Cash and time deposits.........................................................................
Trade notes and accounts receivable..............................................
Marketable securities and investment securities
Available-for-sale securities with maturities(1) Governmental/municipal bonds............................................
(2) Corporate bonds.........................................................................
(3) Other bonds..................................................................................
(4) Other...............................................................................................
Total...............................................................................................................

Millions of yen
12/2014Over one year Over five years
Within one
but within ten Over ten years
but within five
year
years
years
¥43,255
52,246
-

501
1,299
800
¥98,104

Within one
year
Cash and time deposits.........................................................................
Trade notes and accounts receivable..............................................
Marketable securities and investment securities
Available-for-sale securities with maturities(1) Governmental/municipal bonds............................................
(2) Corporate bonds.........................................................................
(3) Other bonds..................................................................................
(4) Other...............................................................................................
Total...............................................................................................................
Note 4. Repayment schedule of bonds and long-term debt
See Note 8 for short-term loans and long-term debt.

63$358,813
433,396

4,155
10,775
6,636$813,803

10
201
26
¥237

14
¥14

-

Thousands of U.S. dollars
12/2014Over one year Over five years
but within five
but within ten Over ten years
years
years
-

82
1,667
215
$1,965

116
$116

-

5. Securities
The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities as ofDecember 31, 2013 and December 31, 2014.
Millions of yen
12/2013
Acquisition
Book value
Difference
costMillions of yen
12/2014Acquisition
Book value
Difference
cost

Securities with book values
exceeding acquisition costs:
Equity securities...............................
Governmental/municipal bonds.
Corporate bonds...............................
Other bonds.......................................
Other.....................................................
Subtotal................................................

¥5,636
10
100
500
6,247

¥2,178
10
100
500
2,788

¥3,4570
0
03,459¥6,683
10
201
500
7,395

¥3,627
10
200
500
4,337

¥3,0560
1
0
3,058

Securities with book values notexceeding acquisition costs:
Equity securities...............................
Governmental/municipal bonds.
Corporate bonds...............................
Other bonds.......................................
Other.....................................................
Subtotal................................................

301
1,299
8,278
9,879

301
1,300
8,278
9,880

(0)
(0)
(0)
(0)

36
501
1,299
9,086
10,924

38
502
1,300
9,086
10,927

(1)
(0)
(0)
(0)
(2)

Total...................................................................

¥16,127¥12,668¥3,458¥18,320¥15,265¥3,055

Thousands of U.S. dollars
12/2014Acquisition
DifferenceBook value
cost
Securities with book values
exceeding acquisition costs:
Equity securities..................................................................................................................
Governmental/municipal bonds.....................................................................................
Corporate bonds..................................................................................................................
Other bonds...........................................................................................................................
Other........................................................................................................................................
Subtotal...................................................................................................................................

$55,437
82
1,667
4,147
61,343$30,087
82
1,659
4,147
35,976$25,35008
025,367

Securities with book values notexceeding acquisition costs:
Equity securities..................................................................................................................
Governmental/municipal bonds.....................................................................................
Corporate bonds..................................................................................................................
Other bonds...........................................................................................................................
Other........................................................................................................................................
Subtotal...................................................................................................................................

298
4,155
10,77575,371
90,618315
4,164
10,78375,37190,642

(8)
(0)
(0)
(0)
(16)

Total...................................................................................................................................................... $151,970$126,627$25,342

Note. Non-listed equity securities, etc, of \129 million and \129 million ($1,070 thousand) for the fiscal years ended
December 31, 2013 and December 31, 2014, respectively, are not included in the above table because they did
not have market values and the fair value was extremely difficult to estimate.
The following table summarizes available-for-sale securities sold for the fiscal year ended December 31, 2013 andDecember 31, 2014.
Thousands of
U.S. dollars
Millions of yen
12/2013
12/2014
12/2014¥30¥2,178$18,067
Total sales of available-for-sale securities..........................................................................
Related gains.....................................................................................................................................
17
1,804
14,964
Impairment loss on marketable securities
The Company recognized an impairment loss of \15 million in fiscal 2013 on available-for-sale securities. When
applying impairment accounting, if the market value at the end of the term has fallen by more than 50% from theacquisition price, an impairment loss is applied to the entire amount. If the market value has fallen by approximately
30% to 50%, an impairment loss is applied to the amount recognized as necessary after considering the possibility ofrecovery, etc.

HORIBA Report 2014 | 64

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements

6. Inventories
Inventories at December 31, 2013 and December 31, 2014 consisted of the following:
Millions of yen
12/2013
12/2014Merchandise and finished goods......................................................................................
¥11,111¥13,81112,755
11,022Work-in-process.....................................................................................................................
Raw materials and supplies................................................................................................
9,218
10,003
Total................................................................................................................................
¥33,085¥34,838

Thousands of
U.S. dollars
12/2014$114,566
91,43082,978$288,992

7. Trade notes receivable maturing on December 31, 2013 and December 31, 2014, which werebank holidays
December 31, 2013 and December 31, 2014, the end of the period, were bank holidays. Trade notes receivable maturingon those dates were settled on the following business day. Therefore, notes in the amount of \290 million were includedin the ending balance at December 31, 2013 and notes in the amount of \355 million ($2,944 thousand) were included in
the ending balance at December 31, 2014.

8. Short-term loans and long-term debt
Short-term loans are generally represented by bank notes with annual interest rates ranging from 0.48% to 15.93% and0.58% to 13.45% at December 31, 2013 and December 31, 2014, respectively.
Long-term debt at December 31, 2013 and December 31, 2014 consisted of the following:
Millions of yen
12/2013
12/20140.609% unsecured bonds due in 2020............................................................................. ¥15,000¥15,000
Loans from banks due serially from 2015 to 2022
at rates from 1.29% to 17.65% per annum........................................................
3,648
3,154
394
369
Lease obligations at 6.74% maturing serially through 2019...................................
Total................................................................................................................................
19,043
18,524Current portion........................................................................................................................
Long-term debt, less current portion............................................................................

(1,229)¥17,814(1,104)¥17,419

Thousands of
U.S. dollars
12/2014$124,429
26,163
3,060
153,662(9,158)$144,496

The aggregate annual maturities of long-term debt outstanding at December 31, 2014 were as follows:Year ending December 31
Millions of yen
2015...........................................................................................................................................................
¥1,1042016...........................................................................................................................................................
696
2017...........................................................................................................................................................
459
2018...........................................................................................................................................................
359
2019...........................................................................................................................................................
238
Thereafter...............................................................................................................................................
15,665
Total................................................................................................................................................ ¥18,524

Thousands of
U.S. dollars$9,158
5,773
3,807
2,978
1,974
129,946$153,662

As of December 31, 2014, the Company and its 8 subsidiaries had entered into agreements for bank overdrafts orloan commitments with 9 banks as follows:
Thousands ofMillions of yen
U.S. dollars
The maximum aggregate principal.............................................................................................................
¥15,042$124,778407
3,376
Amount utilized..................................................................................................................................................
Balance available..............................................................................................................................................
¥14,635$121,401
As of December 31, 2014, assets were pledged as collateral for current portion of long-term debt of \158 million($1,310 thousand) and long term debt of \400 million ($3,318 thousand) as follows:
Thousands ofMillions of yen
U.S. dollars
Land........................................................................................................................................................................
¥154$1,277
Machinery, equipment and vehicles..........................................................................................................
550
4,562
Total.......................................................................................................................................................................
¥704$5,83965

9. Employees' severance and pension benefits
The year ended December 31, 2013
Outline of adopted retirement pension fund
The Company and domestic consolidated subsidiaries have adopted a defined contribution pension plan and a defined benefit pension
plan (cash balance type). The Company and a domestic consolidated subsidiary have been members of the Kyoto Machinery and Metal
Employees' Pension Fund (general type). The Company and some domestic consolidated subsidiaries use both defined contribution anddefined benefits plans.
(1) The funded status of the multi-employer pension plan at December 31, 2013 (available information as of March 31, 2013), to which
contributions were recorded as net periodic retirement benefit costs, was as follows:(a) Funded status of pension plans
Millions of yen
12/2013¥49,891
Fair value of plan assets.................................................................................................................
Pension benefits obligation recorded by pension fund.......................................................
71,774(¥21,883)
Net balance...........................................................................................................................................
(b) The ratio of pension premiums expensed from March 1, 2013 to March 31, 2013 by the Company and its subsidiaries to the total
premium amount was 15.71%.
Note 1. Net balance resulted from the prior service cost of \20,390 million, and the shortage of reserve for plan assets of \1,493 million forthe year ended December 31, 2013.
Note 2. Prior service cost is amortized over 20 years.
Note 3. The percentage of HORIBA's contribution to the multi-employer pension plan described above in (1)(b) should not be construed
as the percentage of HORIBA's actual obligation.
Note 4. The Fund resolved to adopt Japanese government policy to carry out a special dissolution at the representative assembly thattook place on February 20, 2014.
(2) Liabilities for employees' retirement benefits at December 31, 2013 consisted of the following:
Millions of yen
12/2013
Projected benefit obligation...........................................................................................................
(¥7,782)
Pension assets....................................................................................................................................
5,406
Unfunded projected benefit obligation......................................................................................
(2,375)
Unrecognized actuarial differences............................................................................................
(41)
Unrecognized prior service costs...............................................................................................
9
Employees' retirement benefits...................................................................................................
(¥2,406)
Employees' retirement benefits expense for the year ended December 31, 2013 comprised the following:
Millions of yen
12/2013Service cost.........................................................................................................................................
¥908
Interest expense on projected benefit obligation.................................................................
159
Expected return on plan assets...................................................................................................
(118)
Amortization of actuarial differences........................................................................................
82
Amortization of prior service costs............................................................................................
114
Other.......................................................................................................................................................
539
Retirement benefits expense........................................................................................................
¥1,684Note 1. Premiums on the contributory funded retirement plan in the amount of \478 million expensed for the year ended December 31,
2013 was also included in service cost.
Note 2. "Other" is plan participants' contribution to the defined contribution pension plan.
Assumptions used were as follows:
Discount rate (mainly)......................................................................................................................
Expected rate of return on plan assets (mainly)..................................................................

12/2013
1.20-1.50%
2.50%

The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using
the estimated total number of service years. Actuarial differences are recognized in the income statement using the straight-line
method mainly over 5-8 years. Prior service costs are recognized in the income statement using the straight-line method mainly over
10 years.

HORIBA Report 2014 | 66

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
The year ended December 31, 2014
(1) Outline of adopted retirement pension fund
The Company and domestic consolidated subsidiaries have adopted a funded defined benefit pension plan (cash balance plan) anda defined contribution pension plan. Certain overseas consolidated subsidiaries have adopted funded and unfunded defined benefit
plan and a defined contribution plan.
The Company and a domestic consolidated subsidiary have been members of the Kyoto Machinery and Metal Employees' Pension Fund(general type). As it is not possible to reasonably calculate the amount of pension assets corresponding to the company's own
contributions, accounting procedures are the same as for defined contribution plans.
(2) Defined benefits plan(a) The changes in projected benefit obligation for the year ended December 31, 2014 were as follows:
Millions of yen
12/2014
Balance at beginning of year.......................................................................................................................................
¥7,782Service cost...................................................................................................................................................................
603
Interest expense on projected benefit obligation...........................................................................................
143
284
Actuarial differences...................................................................................................................................................
Benefits paid..................................................................................................................................................................
(541)
Other.................................................................................................................................................................................
178
Balance at end of year...................................................................................................................................................
¥8,449Thousands of
U.S. dollars
12/2014$64,554
5,002
1,186
2,355
(4,487)
1,476$70,087(b) The changes in pension assets for the year ended December 31, 2014 were as follows:
Millions of yen
12/2014
Balance at beginning of year.......................................................................................................................................
¥5,406
Expected return on pension assets.....................................................................................................................
150
270
Actuarial differences...................................................................................................................................................
Contributions from the employer..........................................................................................................................
630
Benefits paid..................................................................................................................................................................
(371)
Other.................................................................................................................................................................................
101
Balance at end of year...................................................................................................................................................
¥6,187

Thousands of
U.S. dollars
12/2014$44,844
1,244
2,239
5,226
(3,077)837$51,323(c) Reconciliation between the net defined benefit liability and the net defined benefit asset posted in the consolidated balance sheets,
and the balances of projected benefit obligation and pension assets
Thousands of
U.S. dollars
Millions of yen
12/2014
12/2014
Funded projected benefit obligation.........................................................................................................................
¥7,135$59,187
Pension assets..................................................................................................................................................................
(6,187)(51,323)
947
7,855
1,313
10,891
Unfunded projected benefit obligation.....................................................................................................................
Net liability for retirement benefits in the consolidated balance sheets..................................................
2,261
18,755Net defined benefit liability...........................................................................................................................................
Net defined benefit asset..............................................................................................................................................
Net liability for retirement benefits in the consolidated balance sheets..................................................

2,264
(2)
¥2,261

18,780(16)$18,755(d) The components of retirement benefits expense for the year ended December 31, 2014 were as follows:
Millions of yen
12/2014Service cost........................................................................................................................................................................
¥603
Interest expense on projected benefit obligation...............................................................................................
143
Expected return on pension assets..........................................................................................................................
(150)
109
Amortization of actuarial differences.......................................................................................................................
Amortization of prior service costs..........................................................................................................................
9¥715
Retirement benefits expense.......................................................................................................................................

67

Thousands of
U.S. dollars
12/2014$5,002
1,186(1,244)904
74$5,931(e) The components of remeasurements of defined benefit plans (before tax effect) as of December 31, 2014 were as follows:
Thousands of
U.S. dollars
Millions of yen
12/2014
12/2014¥56$464
Unrecognized actuarial differences...........................................................................................................................
Total.......................................................................................................................................................................................
¥56$464(f) Pension assetsⅰ) The pension assets, by major category, as a percentage of total pension assets as of December 31, 2014 were as follows:
12/2014
Debt investments.............................................................................................................................................................
45.7%
Equity investments..........................................................................................................................................................
27.3
13.6
Mutual funds (Note).........................................................................................................................................................
Other......................................................................................................................................................................................
13.4
Total.......................................................................................................................................................................................
100.0%
Note. Mutual funds primarily invest in debt investments.
ⅱ) Method of determining the expected rate of return on pension assets
The expected rate of return on pension assets is determined considering the current and anticipated future portfolio of pension assets
and, the long-term rates of return which are expected currently and in the future from the various components of the pension assets.
(g) Assumptions used for the year ended December 31, 2014 were as follows:
Discount rate (mainly)....................................................................................................................................................
Expected rate of return on pension assets (mainly).........................................................................................

12/2014
1.0-1.4%
2.5%(3) Defined contribution plan
Benefits expense for the defined contribution plan for the year ended December 31, 2014 was \629 million ($5,217 thousand).
(4) Multi-employer pension plan
Benefits expense for the multi-employer pension plan, for which accounting procedures are the same as for defined contribution plans, forthe year ended December 31, 2014 was \432 million ($3,583 thousand).
(a) Funded status of pension plans (available information as of March 31, 2014)

Millions of yen
12/2014
Fair value of plan assets...............................................................................................................................................
¥51,677
Pension benefits obligation recorded by pension fund.....................................................................................
72,954
Net balance......................................................................................................................................................................... (¥21,276)

Thousands of
U.S. dollars
12/2014$428,676
605,176($176,491)(b) The ratio of pension premiums expensed from March 1, 2014 to March 31, 2014 by the Company and its subsidiaries to the total
premium amount was 16.21%.
Note 1. Net balance resulted from the prior service cost of \19,778 million ($164,064 thousand), and the shortage of reserve for plan assets of\1,497 million ($12,418 thousand) for the year ended December 31, 2014.
Note 2. Prior service cost is amortized over 20 years.
Note 3. The percentage of HORIBA's contribution to the multi-employer pension plan described above in (4)(b) should not be construed as
the percentage of HORIBA's actual obligation.
Note 4. As it was resolved to adopt Japanese government policy to carry out special dissolution of the Fund at the representative
assembly that took place on February 20, 2014, HORIBA posted an estimated loss that will arise in relation to the dissolution.
Consequently, we posted provision for loss on dissolution of the employees’ pension fund of \1,954 million ($16,209 thousand)under other income (expenses) in the consolidated statements of income, and provision for loss on dissolution of the employees’
pension fund of \1,870 million ($15,512 thousand) under long-term liabilities in the consolidated balance sheets.
(Application of Accounting Standard for Retirement Benefits)
HORIBA has applied “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, May 17, 2012, “the Standard”) and“Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012, “the Guidance”) from fiscal 2014, withthe exception of provisions in clause 35 of the Standard and clause 67 of the Guidance. Under the Standard, the difference between
projected benefit obligation and pension assets is recognized as net defined benefit liability. Unrecognized actuarial differences andunrecognized prior service costs are recognized as net defined benefit liability.
The application of the Standard and the Guidance, is subject to the transitional accounting treatment in clause 37 of the Standard. In
fiscal 2014, remeasurements of defined benefit plans is included in accumulated other comprehensive income to reflect the impact of thischange.
As a result of this change, we posted net defined benefit asset of \2 million ($16 thousand) and net defined benefit liability of \2,264
million ($18,780 thousand), and accumulated other comprehensive income increased by \16 million ($132 thousand) in fiscal 2014. Thisapplication had immaterial impact on net assets per share.

HORIBA Report 2014 | 68

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
10. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However,a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares asadditional paid-in capital, which is included in capital surplus.
Under the Japanese Corporate Law ("the Law"), in cases where a dividend distribution of surplus is made, the smaller of an amount equal
to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve
must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and alllegal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available fordividends. Both of these appropriations generally require a resolution of the shareholder's meeting.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of theCompany in accordance with Japanese laws and regulations.
At the Board of Directors' meeting held on February 12, 2015, the Board of Directors approved cash dividends in the amount of \1,777
million ($14,740 thousand). The appropriation had not been accrued in the consolidated financial statements as of December 31, 2014.
Such appropriations are recognized in the period in which they are approved by the Board of Directors.

11. Stock options(1) Expenses and items related to stock options
Millions of yen
12/2013
12/2014Selling, general and administrative expenses.................................................................................................
¥99¥75

Thousands of
U.S.dollars
12/2014$622(2) Scale and movement (fluctuation) of stock options
Information regarding stock options outstanding. The number of stock options is stated after conversion into an equal number of shares.
(a) Details of stock options
No. 2 Stock-based
No. 3 Stock-based
No. 1 Stock-based
No. 4 Stock-based
Compensation Type
Compensation Type
Compensation Type
Compensation Type
Stock Option
Stock Option
Stock Option
Stock Option
4 directors and4 directors and4 directors and4 directors and
14 corporate officers 16 corporate officers 16 corporate officers
13 corporate officers
Persons granted optionsof the Companyof the Companyof the Companyof the Company
Common stock
Common stock
Common stock
Common stock
Number of shares by type of stock
26,400 shares
31,000 shares
28,200 shares
54,200 shares(Note 1)
April 16, 2009
April 24, 2012
April 23, 2010
April 21, 2011
Date of grant(Note 2)
(Note 2)
(Note 2)
(Note 2)
Vesting conditions(Note 3)(Note 3)Service period(Note 3)(Note 3)
April 25, 2012
April 22, 2011
April 24, 2010
April 17, 2009
to
to
to
to
April 24, 2042
April 21, 2041
April 23, 2040
Exercise period
April 16, 2039
No. 5 Stock-based
No. 6 Stock-based
Compensation Type
Compensation Type
Stock Option
Stock Option
4 directors and5 directors and
14 corporate officers
12 corporate officersof the Company,of the Company,
2 directors and3 directors and3 corporate officers
6 corporate officers
Persons granted optionsof the subsidiariesof the subsidiaries
Number of shares by type of stock
Common stock
Common stock(Note 1)
33,200 shares
27,500 shares
Date of grantMay 8, 2013
April 24, 2014
Vesting conditions(Note 2)
(Note 2)Service period(Note 3)(Note 3)
May 9, 2013
April 24, 2014
toto
Exercise period
May 8, 2043
April 23, 2044
Note 1. Stock options are convertible into an equal number of shares.
Note 2. Vesting conditions are not stipulated.
Note 3. The service period is not stipulated.

69

(b) Number, movement and price of stock options
Stock options are convertible into an equal number of shares.
(i) Number of sharesNo. 1 Stock-based
Compensation Type
Stock Option
Options before vesting(number of shares)
Balance at December 31, 2013
GrantedForfeited
VestedBalance at December 31, 2014
Options after vesting(number of shares)
Balance at December 31, 2013
VestedExercised
Forfeited
Balance at December 31, 2014

Options before vesting(number of shares)
Balance at December 31, 2013
GrantedForfeited
VestedBalance at December 31, 2014
Options after vesting(number of shares)
Balance at December 31, 2013
VestedExercised
Forfeited
Balance at December 31, 2014

No. 2 Stock-based
Compensation Type
Stock Option

No. 3 Stock-based
Compensation Type
Stock Option

No. 4 Stock-based
Compensation Type
Stock Option

-

-

-

-

46,1003,400
42,70023,6001,600
22,00029,7002,400
27,30027,1002,200
24,900No. 5 Stock-based
Compensation Type
Stock Option

No. 6 Stock-based
Compensation Type
Stock Option-

27,50027,500-32,5001,100
31,40027,50027,500No. 1 Stock-based
Compensation Type
Stock Option

No. 2 Stock-based
Compensation Type
Stock Option

1
3,819
1,091

1
3,819
2,628

No. 5 Stock-based
Compensation Type
Stock Option

No. 6 Stock-based
Compensation Type
Stock Option

1
3,819
2,988

1
2,739

(ii) Price per share

Option price (yen)Weighted average stock price (yen)Fair value at grant date (yen)Option price (yen)Weighted average stock price (yen)Fair value at grant date (yen)No. 3 Stock-based
Compensation Type
Stock Option

No. 4 Stock-based
Compensation Type
Stock Option
1
1
3,819
3,819
2,208
2,245

HORIBA Report 2014 | 70

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements(3) Method to estimate fair unit value of stock options
The grant date fair value of No. 6 Stock-based Compensation Type Stock Option in the year ended December 31, 2014 was estimatedusing the Black-Scholes option pricing model as follows:
No. 6 Stock-based
Compensation Type Stock
OptionStock price volatility (Note 1)
Expected remaining period (Note 2)
Expected dividend (Note 3)
Risk free interest rate (Note 4)

36.9%
15 Years\60/share
1.10%

Note 1. Stock price volatility was calculated based on actual weekly stock prices over 15 years (from the week of April 19, 1999 to theweek of April 14, 2014).
Note 2. As it was difficult to estimate the expected remaining period without sufficient relevant data, it was determined to be exercised at
the mid-point of the exercise period.
Note 3. Expected dividend was calculated by using the actual dividend paid for the year ended December 31, 2013.
Note 4. Risk free interest rate represents the comparable compound interest rate of strip government bonds whose remaining period
corresponds to the expected remaining period of the stock options.
(4) Condition regarding the estimate of the fair unit value of stock options
Retirement from the office of director is a condition to exercise stock options, but continuous employment is not. Accordingly, the initial
number of stock options granted is used as an estimate of the number of vested shares.

12. Leases
Finance leases which do not transfer ownership at December 31, 2013 and December 31, 2014 consisted of leases for office equipment
and software. The method of depreciation and amortization of lease assets is described in Note 2(h), "Summary of significant accounting
policies - Leases."
With respect to finance lease transactions that do not transfer ownership and in which the lease transaction began before December
31, 2008, the Company has continued to account for them in the same manner as operating leases, as stated above.
At December 31, 2013 and December 31, 2014, assets leased under non-capitalized finance leases were as follows:
Acquisition cost, accumulated depreciation and balance of assets leased

Machinery, equipment and vehicles...............................................................................
Other property, plant and equipment............................................................................
Less accumulated depreciation and amortization....................................................
Total............................................................................................................................................
Note.

Millions of yen
12/2013
12/2014
¥109
¥96
45
45
(128)
(134)
¥27
¥8

Thousands of
U.S. dollars
12/2014$796
373(1,111)$66

The above depreciation and amortization was calculated by the straight-line method over the term of the lease. If the above leases
had been capitalized, interest of \0 million and \0 million ($0 thousand) and depreciation and amortization of \23 million and \18
million ($149 thousand) would have been recorded for the years ended December 31, 2013 and December 31, 2014, respectively.
Lease payments under non-capitalized finance leases were \25 million and \20 million ($165 thousand) for the years ended
December 31, 2013 and December 31, 2014, respectively. Obligations under finance leases at December 31, 2013 and December
31, 2014 were as follows:
Thousands of
U.S. dollars
Millions of yen
Payments remaining:
12/2013
12/2014
12/2014
Payments due within 1 year........................................................................
¥20
¥7
$58
Payments due after 1 year...........................................................................
8
1
8
¥29
¥8
$66
Total.......................................................................................................................

Payments remaining under operating leases at December 31, 2013 and December 31, 2014 were as follows:

Payments remaining:
Payments due within 1 year........................................................................
Payments due after 1 year...........................................................................
Total.......................................................................................................................

Millions of yen
12/2013
12/2014
¥805
¥915
1,603
2,180
¥2,409¥3,096

Thousands of
U.S. dollars
12/2014$7,59018,083$25,682

13. Contingent liabilities
The outstanding amount for which the Company was contingently liable under a debt assumption agreement was \10,000 million of the
HORIBA, Ltd. No. 3 Unsecured Straight Bonds at December 31, 2013.
The Company and certain consolidated subsidiaries were contingently liable as guarantors of loans to a nonconsolidated subsidiary using
equity method in the amount of \270 million ($2,239 thousand) at December 31, 2014.

71

14. Derivative transactions
Derivative transactions for which hedge accounting was not applied at December 31, 2013 and December 31, 2014 were as follows:
Currency related:
Millions of yen
Millions of yen
12/2013
12/2014Amount ofAmount ofContract
MarketGainContract
Marketprincipal due
principal due
amountvalue(loss)
amountvalue
over 1 year
over 1 year
Forwards
Selling(¥90)
US dollar¥3,575(¥84)(¥84)¥3,235
Euro
1,861
(141)
(141)
2,021
(75)
Pound
225
(9)
(9)
149
(1)
Yen
25
0
Chinese yuan
45
(0)
Baht
63
(1)
Hong Kong dollar
8
(0)
(0)
Buying1
US dollar
52
2
2
140
Euro
597
41
41
583
(12)
Pound
25
0
0
98
0
Yen
160
(6)
(6)
102
2
Chinese yuan
160Currency swap
Receiving in US dollar
8864
and paying in Real
147
121
9
9
481
Total
¥6,656¥121(¥188)(¥188)¥6,964¥88(¥113)
Note. Market value is determined by banking institutions.

Contract
amountForwards
Selling
US dollar
Euro
Pound
Yen
Chinese yuan
Baht
Hong Kong dollar
BuyingUS dollar
Euro
Pound
Yen
Chinese yuan
Currency swap
Receiving in US dollar
and paying in Real
Total

Thousands of U.S. dollars
12/2014Amount ofMarketprincipal due
value
over 1 year

(¥90)
(75)
(1)
0
(0)
(1)
1
(12)
0
2
0

64
(¥113)

Gain(loss)$26,835
16,764
1,236
207
373
522
-

-

($746)
(622)
(8)
0
(0)
(8)
-

($746)
(622)
(8)
0
(0)
(8)
-

1,161
4,836
812
846
132

-

8
(99)
0
16
0

8
(99)
0
16
0

3,990
$57,768

729
$729

530
($937)

530($937)

Derivative transactions for which hedge accounting was applied at December 31, 2013 and December 31, 2014 were as follows:
Currency related:
Millions of yen
Millions of yen
12/2013
12/2014Amount ofAmount ofHedgedContract
MarketHedgedContractprincipal due
principal due
items
amountvalue
items
amountover 1 year
over 1 year
Forwards
Selling
Accounts
Accounts
Euro
¥8
(¥0)
¥5
receivable
receivable
BuyingAccounts
Accounts
514
Euro
54
6
payablepayable
Total
¥63
¥5
¥520
Note. Market value is determined by banking institutions.

Hedgeditems
Forwards
SellingEuro
Buying
Euro
Total

Gain
(loss)

Accounts
receivable
Accounts
payableThousands of U.S. dollars
12/2014Amount ofContract principal due
amountover 1 year

Market
value

(¥0)
29
¥29

Market
value

$41

-

($0)

4,263
$4,313

-

240
$240

HORIBA Report 2014 | 72

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
15. Income taxes
The Company is subject to a number of taxes based on income, which, in the aggregate, indicate a statutory income tax rate in Japanof approximately 37.9% for the years ended December 31, 2013 and December 31, 2014.
The following table summarizes the significant differences between the statutory tax rate and HORIBA's effective tax rate forfinancial statement purposes for the years ended December 31, 2013 and December 31, 2014.

Statutory tax rate......................................................................................................................................................
Expenses not qualifying for permanent deduction,e.g. entertainment expenses..........................................................................................................
Nontaxable dividend income.....................................................................................................................
Per capita inhabitants tax..........................................................................................................................
Increase/decrease in valuation allowance for deferred tax assets.........................................
Differences in tax rate between
foreign subsidiaries and the Company.......................................................................................
Tax credits.......................................................................................................................................................
Reduction in deferred tax assets by the changes of tax rate....................................................
Other..................................................................................................................................................................
Effective tax rate.......................................................................................................................................................

12/201337.9%

12/2014
37.9%

1.0
(0.7)
0.3
0.7

1.8
(0.5)
0.3
0.9

(2.6)
(4.2)
1.4
33.8%

(3.3)
(4.5)
0.8
1.6
34.9%

Significant components of HORIBA's deferred tax assets and liabilities at December 31, 2013 and December 31, 2014 were as follows:

Millions of yen
12/2013
12/2014

Thousands of
U.S. dollars
12/2014

Deferred tax assets
Accrued enterprise tax...............................................................................................................................
Loss on write-down of inventory...........................................................................................................
Allowance for doubtful receivables........................................................................................................
Accrued bonuses...........................................................................................................................................
Loss carryforwards.......................................................................................................................................
Unrealized gains.............................................................................................................................................
Employees' retirement benefits...............................................................................................................
Net defined benefit liability........................................................................................................................
Depreciation....................................................................................................................................................
Loss on valuation of investment securities.......................................................................................
Loss on impairment of fixed assets.......................................................................................................
Provision for loss on dissolution of the employees’ pension fund..........................................
Other..................................................................................................................................................................
Total deferred tax assets.......................................................................................................................................
Valuation allowance..................................................................................................................................................
Net deferred tax assets..........................................................................................................................................

¥243
981
79
220
2,146
1,379
641
558
108
117
2,406
8,885
(1,807)
7,078

¥313
864
70
229
1,333
1,555
461
547
109
117
665
3,163
9,430
(1,281)
8,149$2,596
7,167
580
1,899
11,057
12,899
3,824
4,537
904
970
5,516
26,23878,224(10,626)
67,598Deferred tax liabilities
Unrealized losses...........................................................................................................................................
Net unrealized holding gains on securities.........................................................................................
Other..................................................................................................................................................................
Total deferred tax liabilities...................................................................................................................................

(399)(1,161)(1,326)(2,888)(402)(1,013)(1,367)(2,784)(3,334)(8,403)(11,339)(23,094)

Net deferred tax assets..........................................................................................................................................

¥4,189¥5,365$44,504

Millions of yen
12/2013
12/2014
Current assets................................................................................................................................................
¥3,186¥3,635Investments and other noncurrent assets.........................................................................................
1,750
1,993
(87)
(88)
Current liabilities............................................................................................................................................
Long-term liabilities.....................................................................................................................................
(659)
(174)
Net deferred tax assets..........................................................................................................................................
¥4,189¥5,365

Thousands of
U.S. dollars
12/2014$30,153
16,532(729)(1,443)$44,504

Net deferred tax assets are included in the consolidated balance sheets as follows:(Revision of amount of deferred tax assets and deferred tax liabilities due to change in rate of corporate and other income taxes)
The “Act for Partial Amendment of the Income Tax Act” (2014, Act No. 10) was promulgated on March 31, 2014 in Japan, and special
corporate tax for reconstruction was no longer imposed from the fiscal year beginning on and after April 1, 2014. Consequently, thestatutory effective tax rate used to calculate deferred tax assets and deferred tax liabilities will change from the current 37.9% to35.5% for a temporary difference which is expected to be reversed in the fiscal year beginning on January 1, 2015.
Owing to this change in the tax rate, the amount of deferred tax assets (the amount after deducting the amount of deferred tax
liabilities) has decreased by \134 million ($1,111 thousand) and the amount of income taxes (deferred) has increased by the sameamount.

73

16. Impairment loss
HORIBA reviewed its long-lived assets for impairment, and, as a result, impairment losses were recognized by the Company for thefollowing asset groups as other expenses for the year ended December 31, 2013.
Location
Beijing, China

Use-

Longjumeau, France
Montpellier, France
Kyoto, Japan

Idle
Idle
Idle

Type
Goodwill
Buildings and structures
Land
Machinery and equipment
Land

Millions of yen
¥143
32
10
4

(Background)
In the case of idle assets, there was no concrete plan to use the assets for business. In the case of goodwill, income that HORIBA
had assumed in the business plan that it considered at the time of stock acquisition was no longer projected. Thus, the book valueof these assets was lowered to the recoverable value, and the resulting impairment loss (\190 million) was recognized as otherexpenses.
(Method used for grouping)
In connection with the use of impairment accounting, business assets are grouped on a reporting segment basis. Idle assets which are
not expected to be used in the future are grouped on a property-by-property basis.
(Method used for calculating a recoverable amount)
The recoverable amount for idle assets was measured according to estimated net realizable value. As it is difficult to sell or divert
machinery and equipment elsewhere, the recoverable amount was estimated at zero, while the recoverable amount for land wasestimated based on publicly announced market values for land. Furthermore, in regard to goodwill, the unamortized balance for which
it was acknowledged that income was unlikely to be obtained in the future was recognized as an impairment loss.
HORIBA reviewed its long-lived assets for impairment, and, as a result, impairment losses were recognized by the Company forthe following asset groups as other expenses for the year ended December 31, 2014.

Location
Montpellier, France
Gothenburg, Sweden

Use
Idle
Planned to be soldType
Machinery and equipment
Machinery and equipment

Millions of yen¥25
16

Thousands of
U.S. dollars
$207
132

(Background)
In the case of idle assets, there was no concrete plan to use the assets for business. In the case of assets that are planned to be
sold, they have been estimated that losses will arise due to the sales. Thus, the book value of these assets was lowered to
the recoverable value, and the resulting impairment loss (\42 million ($348 thousand) ) was recognized as other expenses.
(Method used for grouping)
In connection with the use of impairment accounting, business assets are grouped on a reporting segment basis. Idle assets, etc.
are grouped on a property-by-property basis.
(Method used for calculating a recoverable amount)
The recoverable amount was measured according to estimated net realizable value. As it is difficult to sell or divert machineryand equipment of idle assets elsewhere, the recoverable amount was estimated at zero. Assets that are planned to be soldwere estimated at the contract amount.

HORIBA Report 2014 | 74

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
17. Consolidated statement of comprehensive income
Components of other comprehensive income for the years ended December 31, 2013 and December 31 2014, consisted of the following

Unrealized gains (losses) on available-for-sale securities:
Increase (decrease) during the year.......................................................................................................................................
Reclassification adjustment........................................................................................................................................................
Subtotal, before tax........................................................................................................................................................................
Tax (expense) or benefit..............................................................................................................................................................
Subtotal, net tax..............................................................................................................................................................................
Deferred gains or losses on hedges
Increase (decrease) during the year.......................................................................................................................................
Reclassification adjustment........................................................................................................................................................
Subtotal, before tax........................................................................................................................................................................
Tax (expense) or benefit..............................................................................................................................................................
Subtotal, net tax..............................................................................................................................................................................
Foreign currency translation adjustments
Increase (decrease) during the year.......................................................................................................................................
Share of other comprehensive income of associates accounted for using the equity method
Increase (decrease) during the year.......................................................................................................................................
Total other comprehensive income.......................................................................................................................

Millions of yen
12/2013
12/2014¥2,024¥1,402(17)(1,804)
2,006
(402)
(698)
148
1,308
(254)

Thousands of
U.S. dollars
12/2014$11,630(14,964)(3,334)
1,227(2,107)

5
5
(2)
3

5
17
23
(8)
15

41
141
190
(66)
124

6,896

2,132

17,685(8)¥8,19929¥1,923240$15,951

18. Segment information
General information regarding reportable segments(1) Calculation method for reportable segments
HORIBA's reportable segments are components of the Company about which separate financial information is available and that are evaluatedregularly by the management in deciding how to allocate resources and in assessing performance.
The Company has established the segment strategy office for each product and service at its headquarters which draws a comprehensive planfor Japan and overseas markets for business development.
The Company thus is composed of business segments by product and service that are determined at the head office. The Automotive Test
Systems, Process & Environmental Instruments & Systems, Medical-Diagnostic Instruments & Systems, Semiconductor Instruments & Systems
and Scientific Instruments & Systems comprise five reportable segments.
Major products of each segment are described below.
(a) Automotive Test Systems
Emission Measurement Systems, In-Use Automotive Emissions Analyzers, On-Board Emission Measurement, Driveline Test Systems,
Engine Test Systems, Brake Test Systems, Drive Recorders(b) Process & Environmental Instruments & Systems
Stack Gas Analyzers, Water Quality Analysis and Examination Systems, Air Pollution Analyzers, Environmental Radiation Monitors(c) Medical-Diagnostic Instruments & Systems
Equipment for Blood Sample Analysis (Hematology Analyzers, Equipment for Measuring Immunological Responses, Clinical Chemistry Analyzers,
Blood Sugar Measurement Systems)(d) Semiconductor Instruments & Systems
Mass Flow Controllers, Chemical Concentration Monitors, Reticle/Mask Particle Detection Systems, Residual Gas Analyzers(e) Scientific Instruments & Systems
pH Meters, Particle-Size Distribution Analyzers, X-Ray Fluorescence Analyzers, Raman, Spectrophotometers, Gratings(2) Method of measurement regarding income (loss), assets and other material items by reportable segment
The accounting methods applied for reportable segments are identical with those stated in Note 2, "Summary of significant accounting policies."
Income for each reportable segment is the amount based on operating income.

75

(3) Information regarding income (loss), assets and other material items by reportable segment
Millions of yen
12/2013

Sales
Sales to outside customers.....................
Intersegment sales and transfers..........
Total...................................................................
Segment income (loss).......................................
Segment assets.....................................................
Other items:
Depreciation...................................................
Amortization of goodwill............................
Increase in tangible and intangible
fixed assets...................................................

Automotive

Process &Environmental¥49,524
49,524¥4,287¥43,148¥14,711
14,711¥1,263¥13,676¥26,832
26,832¥2,429¥23,931¥24,153
24,153¥4,815¥25,025

1,344
-

440
-

1,095
-

2,231

672

1,751

MedicalDiagnostic

Semiconductor

Scientific

Adjustment

Consolidated¥22,913
22,913¥937¥21,710¥61,776¥138,136
138,136¥13,733¥189,269

646
47

655
48

-

4,182
96

1,939

1,084

-

7,680

Millions of yen
12/2014

Sales
Sales to outside customers.....................
Intersegment sales and transfers..........
Total...................................................................
Segment income (loss).......................................
Segment assets.....................................................
Other items:
Depreciation...................................................
Amortization of goodwill............................
Increase in tangible and intangible
fixed assets...................................................

Sales
Sales to outside customers.....................
Intersegment sales and transfers..........
Total...................................................................
Segment income (loss).......................................
Segment assets.....................................................
Other items:
Depreciation...................................................
Amortization of goodwill............................
Increase in tangible and intangible
fixed assets...................................................

MedicalDiagnostic

Automotive

Process &Environmental¥55,001
55,001¥5,827¥49,035¥16,465
16,465¥2,007¥14,921¥27,037
27,037¥1,717¥23,953¥28,934
28,934¥6,455¥29,926

1,518
-

503
-

1,181
-

3,827

1,191

2,168

Semiconductor

Scientific

Adjustment

Consolidated¥25,627
25,627¥1,206¥24,405¥65,092¥153,065
153,065¥17,214¥207,335

868
-

743
89

-

4,815
89

2,776

1,038

-

11,001Thousands of U.S. dollars
12/2014
MedicalSemiconductor Scientific
Diagnostic

Automotive

Process &Environmental$456,250
456,250$48,336$406,760$136,582
136,582$16,648$123,774$224,280
224,280$14,243$198,697$240,016
240,016$53,546$248,245

12,592
-

4,172
-

9,796
-

31,746

9,879

17,984

Adjustment

Consolidated$212,583
212,583$10,004$202,447$539,958$1,269,722
1,269,722$142,795$1,719,908

7,200
-

6,163
738

-

39,941
738

23,0278,610-

91,256Note 1. Details of adjustment amounts are as follows:(1)Unallocated amounts to be included in the adjustment amount of segment profits were not generated.
(2)The adjustment amounts of \61,776 million and \65,092 million ($539,958 thousand) of segment assets for the years ended December
31, 2013 and December 31, 2014 represent corporate assets that are not allocated to each business segment. They include cash andcash equivalents, short-term investments, investment securities, idle land, etc.
Note 2. Depreciation and increase in tangible and intangible fixed assets include long-term prepaid expenses and the amount of amortization
associated with the expenses.

HORIBA Report 2014 | 76

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements<Related Information>
1. Information regarding geographic areas(1) Net sales

Japan...........................................................................................................................................................................
United States...........................................................................................................................................................
China............................................................................................................................................................................
Europe.........................................................................................................................................................................
Asia...............................................................................................................................................................................
Others.........................................................................................................................................................................
Total...................................................................................................................................................................

Millions of yen
12/2013
12/2014¥48,496¥47,428
19,237
21,743
13,73916,83633,57738,71017,24522,2495,839
6,097¥138,136¥153,065

Note 1.

Net sales are categorized by country or geographic area based on the location of the customer.

Note 2.

The "Asia" amount is that of the Asian region other than China.

Thousands of
U.S. dollars
12/2014$393,430
180,364
139,659
321,111
184,562
50,576$1,269,722(2) Property, plant and equipment

Japan...........................................................................................................................................................................
France.........................................................................................................................................................................
United States...........................................................................................................................................................
Others.........................................................................................................................................................................
Total...................................................................................................................................................................

Millions of yen
12/2013
12/2014¥16,096¥20,157
6,387
6,997
2,807
3,970
8,035
8,316
¥33,326¥39,441

Thousands of
U.S. dollars
12/2014$167,208
58,04232,932
68,983$327,175

Millions of yen
12/2013
12/2014
¥16
10
25
143
32
4
¥190
¥42

Thousands of
U.S. dollars
12/2014
$132
207
$348

Millions of yen
12/2013
12/2014
¥314
¥418
¥314
¥418

Thousands of
U.S. dollars
12/2014$3,467$3,467

2. Information regarding major customers
There is no customer who represents more than 10% of the consolidated sales.
3. Information regarding impairment loss on fixed assets by reporting segment

Automotive Test Systems..................................................................................................................................
Medical-Diagnostic Instruments & Systems...............................................................................................
Semiconductor Instruments & Systems.......................................................................................................
Scientific Instruments & Systems...................................................................................................................
Others.........................................................................................................................................................................
Total...................................................................................................................................................................
Note. The "Others" amount is that of the Company's idle assets.
4. Information regarding the amortized amount and unamortized balance of goodwill

Scientific Instruments & Systems...................................................................................................................
Total...................................................................................................................................................................

Note. Information regarding the "Amortized amount of goodwill" is omitted as similar information is disclosed in "Segment Information."
5. Information regarding gain on bargain purchase by reporting segment
The year ended December 31, 2013
HORIBA acquired the process analytical product line from the U.S. company Cameron, in the Process & Environmental Instruments & Systems Segment
and recorded gain on bargain purchase. In fiscal 2013, the amount of gain on bargain purchase was \64 million.
The year ended December 31, 2014
Not applicable7719. Related party transactions(1) Related party transactions with the Company
Directors and major shareholders (individuals only) of the Company
The year ended December 31, 2013
Category
Name
Address
Amount of capital stock(millions of yen)
Business or occupation
Percentage of voting rights held
RelationshipThe year ended December 31, 2014
Director's closefamily member
Masao Horiba
Advisor
2.8% (direct)
Consulting contract

Director's closefamily member
Masao Horiba-

Category
Name
Address
Amount of capital stock(millions of yen)
Business or occupation
Percentage of voting rights held
Relationship

Advisor
2.7% (direct)
Consulting contract

Transaction

Transaction
amountConsulting
fee(Note 2)

Transaction

Transaction
amountConsulting
fee(Note 2)\24 million\24 million

Account

Balance at
December 31,
2013

-

-

Account

Balance at
December 31,
2014

-

-

Note 1.
Note 2.

($199
thousand)The above transaction amounts do not include consumption taxes.
Transaction conditions and policy on determining transaction conditions
The consulting fee for Masao Horiba is compensation for management consulting services to the Company, so valued
on the basis of his background of long experience starting with the founding of the Company, and activities of societyacademia collaboration for innovation and participation in economic organizations, as the representative of theCompany. The payment was determined on a negotiated basis.

(2) Related party transactions with consolidated subsidiaries of the Company that submitted consolidated financial statements
Directors and major shareholders (individuals only) of the Company
The year ended December 31, 2013
Category
Name
Address
Amount of capital stock(millions of yen)
Business or occupation
Percentage of voting rights held
RelationshipThe year ended December 31, 2014
Director's closefamily member
Masao Horiba
Advisor
2.8% (direct)
Consulting contract

Director's closefamily member
Masao Horiba-

Category
Name
Address
Amount of capital stock(millions of yen)
Business or occupation
Percentage of voting rights held
Relationship

Advisor
2.7% (direct)
Consulting contract

Transaction

Transaction
amountConsulting
fee(Note 2)

Transaction

Transaction
amountConsulting
fee(Note 2)\30 million\30 million

Account

Balance at
December 31,
2013

-

-

Account

Balance at
December 31,
2014

-

-

Note 1.
Note 2.

($248
thousand)The above transaction amounts do not include consumption taxes.
Transaction conditions and policy on determining transaction conditions
The consulting fee for Masao Horiba is compensation for management consulting services to consolidated subsidiariesof the Company, so valued on the basis of his background of long experience starting with the founding of the Company.
The payment was determined on a negotiated basis.

20. Subsequent events(Acquisition of treasury stock)
The board of directors’ meeting of the Company held on February 12, 2015 passed a resolution to acquire treasury stock
pursuant to the Company’s articles of incorporation in accordance with paragraph 1, article 459 of the Companies Act of Japan.
1. Reason for acquisition of treasury stock
In order to enhance the return of profits to shareholders, the Company has decided to acquire treasury stock.
2. Details of acquisition(1) Type of shares to be acquired: Common stock of the Company(2) Total number of shares to be acquired: Up to 300,000 shares(0.71% of total shares outstanding (excluding treasury stock))(3) Total amount of acquisition: Up to 1,000 million yen(4) Method of acquisition: Open market purchase by a trust bank(5) Period of acquisition: From February 24, 2015 to April 23, 2015
The acquisition of treasury stock was carried out until March 27, 2015 as follows and completed.
(1) Type of shares acquired: Common stock of the Company(2) Total number of shares acquired: 218,400 shares(3) Total amount of acquisition: 999 million yen
HORIBA Report 2014 | 78

Financial data79

Corporate data

Corporate Information
Head Office2, Miyanohigashi-cho, Kisshoin, Minami-ku, Kyoto 601-8510, JapanFounded

October 17, 1945

Incorporated

January 26, 1953

Net sales¥153,065 million (Consolidated)

Paid in Capital¥12,011 million

As of December 31, 2014

Number of Employees

5,965(Consolidated)

As of December 31, 2014

Fiscal Closing Date

December 31, annually

Annual Meeting of Shareholders

Held in March

Transfer Agent

Sumitomo Mitsui Trust Bank, Limited

Independent Auditor

KPMG AZSA LLC

Stock Listings

Tokyo Stock Exchange, First Section

Fiscal 2014

Securities Code: 6856

Major Shareholders

As of December 31, 2014

Name of Shareholders

Shares (Thousands)

Percentage (%)

Japan Trustee Service Bank, Ltd.

3,162

7.44

The Master Trust Bank of Japan, Ltd.

1,987

4.67

Taiyo Fund, L.P.

1,781

4.19

PICTET AND CIE (EUROPE) S.A.

1,462

3.44

National Mutual Insurance Federation of Agricultural Cooperatives

1,287

3.03

Masao Horiba

1,150

2.70

The Bank of Kyoto, Ltd.

828

1.95

Atsushi Horiba

810

1.90

HORIBA Raku-Raku Kai (partner suppliers)

779

1.83

JAPAN RE FIDELITY

673

1.58

Stock Price Trend
Yen

Yen

5,000

20,000-HORIBA (left)

Securities companies
0.61%
Foreign investors
4.06%
Financial institutions
1.04%-Nikkei Stock Average (Nikkei 225) (right)-JPX-Nikkei Index 400 (right)

3,750Japanese companies
2.72%

Breakdown ofTypes of
Shareholders(5,740 in total)

15,000Individual investors
91.57%
2,500

10,000

1,250

5,000

0

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Japanese companies
7.87%
Securities companies
1.02%

Foreign investors
37.07%

Individual investors
18.57%Breakdown ofOwnership among
Shareholders(42,532,752
shares in total)

Financial institutions
35.47%HORIBA Report 2014 | 80

Corporate philosophy

Business Operations

We, at the HORIBA, apply our most advanced analytical technologies
to provide highly original analytical and measuring products andequipment in such fields as engine emissions, scientific analysis,
industrial and process control, environment monitoring, semi-conductor
process control, medical and health-care, and biotechnology, thereby
contributing to the progress of science and technology, improvement in
the quality, development and benefit of human health. We are engaging
in the new businesses for derivative and peripheral products aim todevelop scientific technology and improve the life of the community,
while at the same time minimizing the impact on the environment.
We strictly abide by all environmental protection laws and regulations
in our business activities. In addition, all HORIBA Group companies
are required to attain the highest levels of quality for establishing,developing, and maintaining environmental systems, including
implementing internal control standards that minimize the impact thatour business activities have on the environment.
We strive to deliver higher value-added products and services in the
shortest possible time to customers all over the world, combining
the functions and specialties of development, production, sales,and services from globally located points throughout the world.
Furthermore, we aim to be the leader in the global market in the fields
and product segments in which we operate, to meet all customers’
needs consistently, and to effectively maximize our limited resources
through a policy of selective investment.

HORIBA's corporate motto

Customer Responsiveness“Joy and Fun”

We maintain a philosophy of pursuing technology to the ultimate degree
in both the fundamental and applied technology fields, supplying productsthat continuously satisfy customers’ requirements. We are committed tooffering top-quality, highly reliable products and services with a consistentlevel of excellence throughout the world. We are obliged to observe thehighest standards for establishing, developing, and maintaining quality
control systems. To provide products and services to customers in
the fastest delivery time possible, we have adopted the slogan “UltraQuick Supplier” for all our activities. This slogan encompasses not only
production lead times but also development, marketing and sales, service,
and control functions.

Originates from the belief that if we take interest and pride in
the work that occupies most of the active time in our lives, inthe place where we spend the large part of each day, then as aresult our satisfaction with life will increase, and we will be able
to enjoy our lives even more. Taking interest and pride in ourwork leads us to “Joy and Fun.”

Responsibility to Shareholders and Investors

Our basic policy is to calculate annual dividends on an allocatedrate of net income. Important information regarding management
and business operations are fully disclosed on a regular basis toshareholders and potential investors. A timely responsive management
control system should be maintained by HORIBA Group companies
to ensure that company objectives are met, profit generated and theinformation disclosed represents the true performance of the company
as well as its management.
Employees

We are proud of the entrepreneurial spirit that led to the creationof HORIBA Group companies. Each employee is made aware of thisheritage, and we actively encourage ideas and innovations from individual
employees. HORIBA promotes an open and fair business environment thatallows all employees to achieve their individual goals and maximize theirpotential. To further each employee’s personal and professional growth,
we encourage thinking from a global perspective and have establisheda global personnel development program and performance evaluation
system. We value employees who challenge their personal abilities andrecognize their own accomplishments.

81

HORIBA Report 2014

HORIBA Report 2014 | 82