Everything begins
with measurement
HORIBA’s “measuring” domains
Human healthand safety
Food safety
Drinking water
Medical tests
Driving safety
Environmental radiation
measurement

01

R&D on newmaterials andnew energy
technologies
Next-generation materials
Next-generation displays
Secondary battery
Clean energy

Productivity
improvement in
manufacturing
process
Semiconductor devices
Flat panel displays
Solar cells
Printed circuit boards
Painting and coating
Petrochemical plants

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

Quality
management
Electric appliances
Cosmetics
Foods
Pharmaceuticals

R&D on nextgeneration vehicles
Ultra-low emission
Fuel efficiency
Greenhouse gas
Alternative fuels
Engines, drive-lines and brakes
Electric motors
Eco-drive

Environmental
preservation
Air pollution monitoring
Water quality monitoring forrivers, lakes, and oceans
Plant emission regulations
Water quality regulations
Agricultural and daily use water
Hazardous substances
Chemical fertilizers

HORIBA Report 2013 | 02

Under the corporate motto “Joy and Fun” HORIBA has achieved
continuous growth based on its corporate philosophy.
Corporate motto“Joy and Fun”
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.”

1997
Acquire Instruments S.A.

(now HORIBA Jobin Yvon S.A.S.)

in France

1996

Consolidated net sales
and operating income

1992

Acquire ABX S.A.

Atsushi Horiba
becomesPresident & CEO

in France(now HORIBA ABX S.A.S.)■ Net sales− Operating income

1985.3

03

1986.3

1987.3

1988.3

1989.3

1990.3

1991.3

1992.3

1993.3

1994.3

1995.3

1996.3

1997.3

1998.3

1999.3

Corporate philosophy
Business operations

Customer responsivenessWe, at HORIBA, believe that
our mission is to apply ourmost advanced analyticaltechnologies to provide
highly original analyticaland measuring products
and equipment, thereby
contributing to the progressof science and technology
and the preservation of global
environment.

We maintain a philosophy of
pursuing technology to theultimate degree in both thefundamental and applied
technology fields, supplying
products that continuously
satisfy customers’
requirements.

Responsibility to
Employees
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.

2006

Launch previous Mid-Long
Term Management Plan［[2006-2010]

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

2011
Launch current Mid-Long
Term Management Plan［[2011-2015]¥138.1billion2005
Acquire MCT(Mechatronics) business ofCarl Schenck AG in Germany

2004
Launch “One Company
Matrix Management”

2002
Begin direct salesof Automotive Test
Systems in Japan

2000.3

2001.3

2002.3

2003.3¥13.7
billion2004.32005.32006.32006.122007.122008.122009.122010.122011.122012.122013.12HORIBA Report 2013 | 04

IndexIndex
P01 Everything begins with measurement
P07 Message from the CEO
P11 Progress of the Mid-Long Term Management Plan
P13 Message from the CFO
P15 Business overview Overview by region and by segment

Automotive Test Systems; Medical-Diagnostic Instruments & Systems;
Semiconductor Instruments & Systems; Scientific Instruments & Systems;
Process & Environmental Instruments & Systems

P27 Value creation based on invisible values Human resources; Technologies
P33 Corporate governance Directors, auditors, and officers

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

P37 Corporate social responsibility
P41 One Company SongP42 Financial data Eleven-year summary
P78 Corporate philosophy “Joy and Fun”
P79 Corporate data05

Editorial policy
From this fiscal year, the contents of our annual report and our Gaiareport (CSR report) are combined in this integrated“HORIBA Report” and our website titled “To our stakeholders,” which presents HORIBA’s various activities. This is basedon our Omoi (meaning an emotional feeling, passion, commitment, mission and objective) to help you better understand thevalues of HORIBA by being exposed to our corporate culture, which does not appear in our financial statements.

Annual report“Gaiareport” (CSR report)

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 andForecasts
This HORIBA Report contains certain statements describing
BookletBookletWebsitefuture plans, strategies, and performance forecasts of
HORIBA, Ltd. and its affiliated companies. These statements
reflect forecasts based on management’s assumptions andbeliefs based on the available information as of February
13, 2014 when business results were announced. Actual

HORIBA Report

performance may differ due to unforeseen circumstances in
the operating environment.

Change of Fiscal Year-End
HORIBA unified its fiscal year-end as December 31,
effective from fiscal 2006. As a result of this change, thefollowing irregular fiscal periods were recorded: Fiscal
Booklet2006 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“To our stakeholders”

STEC, Co., Ltd. comprised the 9 months from April 1,
2006 to December 31, 2006. The fiscal year-end of otherconsolidated 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 fiscal 2005, the fiscal year
ended March 21, 2005 as fiscal 2004, and the fiscal year
ended March 21, 2004 as fiscal 2003.

Websitehttp://www.horiba.com/horibareport/data/

HORIBA Report 2013 | 06

Message from the CEO

We are committed toraising corporate value
over a long-term
As a CEO, one of my important roles is to continually enhance
HORIBA’s corporate value. In Kyoto, where our head office
is located, there are many long-standing companies witha history of 100 years or more. From these pioneers, I
am learning day by day that it is important to disseminate
management philosophy, invest in human resources andtechnologies to be invulnerable to economic downturns,
continuously create innovation inspired by “venture spirit,”
have a spirit of challenge without being satisfied with thestatus quo, win the trust of customers and enhance long-termvalue to run the business in harmony with society.
In 2013, we celebrated the 60th anniversary of our foundation.
I see this as one way point, and we will strive to further
enhance our corporate value.
Chairman, President & CEO

Aiming to achieve sustainable growth and high profitability
Billions of yen
150

Net Sales (left)

Operating Income Ratio (right)
Operating
Income Ratio

120

ROE (right)

Planning to realize well-balanced growth in operating income%
15

Billions of yen
20

20.0
7.5%

ROE

12

90

9

60

6

30

3

3%
9%

11.2

8%

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mid-Long Term Management
Plan［2011-2015］
Numerical targets
Net sales

Operating
Income Ratio

ROE*¥150 billion 13% or more 11% or more
Fiscal 2013 ¥138.1 billion

07

Fiscal 2013 9.9%

Fiscal 2013 8.4%

30%

Semiconductor

30%

Medical25%

Automotive

18%
58%

0

9%
7%
35%

22%
5

Process & Environmental
Scientific

13.7

15

10

7.5%

31%

0

2015
Plan

2005

2013

2015
Plan

Concentrated investment in highly profitable business

Complete “One Company Matrix Management”

Continued investment and steady growth in the Medical-Diagnostic Instruments &Systems segment

Completion of One Company in the Americas through reorganization;
implementation in Europe and Asia

Change from strategy led by “technology development” to
one led by “customer viewpoint and business models”

Accelerate global product development and production

Accelerate opening of reagent plants in theBusiness expansion and profitability improvement through restructuring of MCT business Medical- Diagnostic Instruments & Systems segment→Establish stable global supply system
Market share expansion based on proposing solutions from the customer viewpoint→Application deployment by using HORIBA’s Total Solution(Automotive Test Systems segment) Develop a sales support organization in Southeast Asia
Accelerate global implementation of ERP→Expand services through acquisition of the process analytical equipment business in(Enterprise Resource Planning) systems
North America (Process & Environmental Instruments & Systems segment)*Return on equity

Both sales and profits increased in fiscal 2013
In fiscal 2013, ended December 31, 2013, HORIBA posted
consolidated net sales of ¥138.1 billion (up 17.5% year-onyear), operating income of ¥13.7 billion (up 16.9%) and net
income of ¥8.9 billion (up 21.7%). Both revenue and profit
increased in response to the depreciation of the Japanese
yen and a recovery in semiconductor market conditions, withnet profit reached an all-time high. All business segments
reported increased revenue, but profit declined, except in the
Semiconductor Instruments & Systems segment, where
market conditions recovered. This means to me that we arefacing many challenges.
The Semiconductor Instruments & Systems segment
recorded a large increase in revenue and profit. This is partly
attributable to the upturn in investment in the semiconductor
industry from spring 2013 but also to the fact that HORIBA’s
global market share for its mainstay mass flow controllers
increased to 48%* from 43% of fiscal 2012. This was achieved
because HORIBA maintained proactive investment while
competitors reduced their investment due to the economic
downturn.
Although the Automotive Test Systems segment posted anincrease in sales, profit declined albeit slightly. The recovery
of R&D investment at automakers around the world helped
drive the sales increase in the EMS (Emission Measurement
Systems) business and the MCT (Mechatronics) business.
We introduced new products in EMS, where we have an
80%* global market share, and improved profitability in the
MCT business. However, owing to increased productdevelopment investment in the ITS (Intelligent Transport
Systems) business, the profitability of the overall Automotive
Test Systems segment declined.
In the Medical-Diagnostic, Process & Environmental andScientific Instruments & Systems segments, sales increased
with the depreciation of the Japanese yen but demand wasstagnant and profit decreased mainly because of theuncertain political situation and economic downturn in Europe
as well as a reduction in government budgets in various
countries.
(* HORIBA’s estimates)

We expect to achieve the sales target of the MidLong Term Management Plan［2011-2015］a year
ahead of plan, but improving profitability is an issue
In regard to the Mid-Long Term Management Plan［20112015］, we expect to achieve the sales target of ¥150 billion in
fiscal 2014, one year ahead of plan. Operating income has
also approached a record-high level, but the hurdle toachieving the target of ¥20 billion in fiscal 2015 is still
somewhat high. HORIBA’s overall operating income ratio in
fiscal 2013 was 9.9%, almost the same level as in the previous
year, but as it fell short of the Mid-Long Term Management
Plan［2011-2015］target of 13%, I believe that improving
profitability is a challenge we must tackle. Holding backinvestment and diverting it to profit to achieve quantitative
targets is an option but we intend to maintain investment inorder to continuously enhance our growth potential.
In the Medical-Diagnostic Instruments & Systems segment,
where high growth and high earnings are expected, we havebeen promoting a strategy of “concentrated investment” withwhich we increased investment in reagent manufacturingbases in the so-called BRICs (Brazil, Russia, India, and China)
region where demand is expanding. We strengthened the
management structure of Medical-Diagnostic Instruments &Systems segment in France, which is an important core basefor HORIBA’s product development, and North America,
which has high growth potential, to rapidly bring products tothe market and speed up decision-making processes. We arealso enhancing cooperation between Japan and France inproduct development, and planning to launch new productsthat combine the strength of France’s fundamental
technologies and Japan’s production technologies. However,it will take some time for these initiatives to bear fruit.
In the Automotive Test Systems segment, we broadened theline-up of MEXA-ONE, HORIBA’s first new motor exhaust gas
analyzer in 17 years, that was announced in 2012, andaccelerated sales activities to capture demand in theautomobile industry, which is in a recovery phase. The
segment achieved its sales target of the Mid-Long Term
Management Plan［2011-2015］in fiscal 2013, two years inadvance, and we also expect operating income to attain its
target in fiscal 2014, one year ahead of the plan.
In the Semiconductor Instruments & Systems segment, newproducts that we launched from 2012 to 2013 won highacclaim, which led to higher sales in Asia, where demand is
growing, and the expansion of global market share. We aim toboost earnings by maintaining new product development
even during downturns in demand and establishing andrunning an organization that can adequately meet customers’
requirements for analytical precision and delivery.
In the Process & Environmental Instruments & Systems
segment, sales in the oil refining process measurement
equipment business that HORIBA acquired in March 2013
were robust. We expanded the business targeting thepetroleum and chemicals industries in the U.S. state of Texas,
where demand for shale gas and oil is growing significantly.
In the Scientific Instruments & Systems segment, HORIBA
acquired a fluorescence spectroscopy business from Photon
Technology International, Inc., based in the U.S., and its global
affiliates in February 2014. By generating synergies withHORIBA’s technologies, we aim to increase sales in the fieldof regenerative medicine, where iPS cell research is a
representative example, and the field of drug discovery.
In addition to such initiatives to improve earnings within the
Mid-Long Term Management Plan［2011-2015］, wecommenced construction of “HORIBA BIWAKO E-HARBOR”
to further strengthen our earnings structure for the next
Mid-Long Term Management Plan. We will speed up new
product launches and enhance production efficiency bytransferring the gas measurement businesses of theAutomotive Test Systems and Process & Environmental
Instruments & Systems segments there in order to organicallycombine development, design and production. At the sametime, we aim to make HORIBA BIWAKO E-HARBOR to be a
new base of “craftsmanship” unique to Japan that utilizes our
expertise and accumulated know-hows, where further
innovation of core technologies is promoted while handing
down technologies to the next generation (see page 32 formore details).

HORIBA Report 2013 | 08

Message from the CEO

Continuing to invest in human resources
and technologies
HORIBA is promoting management that clarifies “what wewill change” and “what we will never change” practices welearned by overcoming several economic crises in the past.
A major target of “what we will change” that we are currently
tackling is management balance. By diversifying businesses,
regions and transaction currencies, we are becoming anorganization that can maintain the level of investment for the
future even if one or two of our businesses or regions entera downturn. The recent increase in the global market shareof the Semiconductor Instruments & Systems segment,
where market conditions fluctuate dramatically, is a good
example of this.
On the other hand, an example of “what we will never change”
is our continued investment in “Invisible Values” (assets not
visible in the financial statements) such as human resources
and technologies. Such continued investment will become
the driving force in expanding global market share when
demand recovers, and this has been proven by results manytimes in our history. We have adopted various creative
measures to enable us to secure human resources with
abundant diversity, such as the introduction of recruitment of
new graduates in autumn and the continual recruitment ofstudents from overseas, as well as building up the number ofavailable courses at the HORIBA COLLEGE, which provides
educational opportunities to our employees. Moreover, in
2014, we initiated a corporate project aimed at further
enhancing diversity. It is called the “HORIBA Stained Glass
Project” and it develops a working environment where
everyone in diverse human resources can shine at their best.

01

02

Aiming to be a truly global company with a uniquecorporate culture

05

06

The companies that HORIBA has acquired are all globallyrespected companies that boast excellent technologies,
human resources and histories. I am convinced that thesecompanies have grown together with HORIBA firstly because
the people that have become our new associates deeply
understand our unique corporate culture symbolized by thecompany motto “Joy and Fun,” which enables us to share
Omoi (meaning an emotional feeling, passion, commitment,
mission and objective) and secondary because HORIBA has
consistently practiced management that values this principle.
In 2004, we announced the concept of “HORIBA Group is
One Company.” and promoted changes in policies andsystems such as the unification of the company name andbrand, the invigoration of personnel exchanges among groupcompanies, and the introduction of “Segment and Matrix
Management.” At the same time, to enhance communication
between executive and employees, we hold and host birthday
parties every month in various places in Japan. Furthermore,
we actively create opportunities for face to facecommunication on a global basis. This corporate culture
fosters the “Invisible Values” of human resources and09

Changes in the management structure
Measures taken so far
Changed the corporate name and unified our corporate brandIntroduced “Matrix Management”
Restructured group companies in the Americas and Europe, andorganized 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

03

04
01

Dr. Kozo Ishida

02

Atsushi Horiba

03

Juichi Saito

04

Sunao Kikkawa

Executive Vice Chairman

Chairman, President & CEO

Executive Vice President and General
Manager of Corporate & Segment
Strategy Division

Senior Corporate Officer, General
Manager of Finance & Control Division05

Dr. Masayuki Adachi

06

Dr. Jai Hakhu

07

Takashi Nagano

07

Director and General Manager ofResearch & Development Division
President of HORIBA Jobin Yvon S.A.S.

Executive Corporate Officer,
Chairman, President & CEO of
HORIBA International Corporation

Senior Corporate Officer,
General Manager of Sales Division
President of HORIBA KOREA LTD.

Measures to take from now on
Expand “Shared services” in Europe and Asia
Implement ERP (Enterprise Resource Planning) systems inall group companies, making it complete(Implemented in Europe in 2014)* “Shared services” refer to the consolidation of certain common services inseveral divisions and organizations in order to enhance the productivity of theentire company or group companies and achieve cost reductions.
** See the activities in detail on page 30.

technologies, and we ultimately provide these “Invisible
Values” to customers in the form of real “products andservices” that have enabled the creation of our current
corporate value. We are indeed proud that all the businessactivities we conduct are contributing to the realization of acomfortable and sustainable society, and this is also the basic
concept of our Corporate Social Responsibility.
HORIBA is not just another Japanese company that conducts
business around the world. Rather, our objective is to be atruly global company with an understanding of the diverse
culture, customs, and values of the countries and regions
where we conduct business in harmony with the local
community and employees. We have also signed the United
Nations Global Compact, a set of universally accepted
principles in the areas of human rights, labor, environment
and anti-corruption that the United Nations advocates, andwe are monitoring our activities from the perspective of global
standards.
Based on these initiatives and sustainable profit growth, I
firmly believe we will consequently receive a fair market
valuation from investors around the world as a true global
company.

We forecast a dividend increase in fiscal 2014
In fiscal 2013, we achieved record-high consolidated net
income of ¥8.9 billion. To reward our owners (shareholders)*,
we paid a record-high annual dividend per share of ¥60 infiscal 2013, as we revised our dividend policy that had been
based on non-consolidated net income since HORIBA’s
public listing to the one based on consolidated net income.
(In fiscal 2012, we paid an annual dividend of ¥50, including acommemorative dividend of ¥10.) For fiscal 2014, we are
currently forecasting an annual dividend per share of ¥64,
based on forecast consolidated net income of ¥9 billion.
HORIBA will continue to contribute to society by pursuinganalytical and measurement technologies and helping toovercome various issues associated with energy and theenvironment. We will also continue to supply a wide variety of
products in order to provide a healthy life and “assurance” toall people. Furthermore, when our operating environment isfavorable, we will not be complacent, and when it is uncertain,
we will pursue management strategies which turn risk into
opportunity by correctly ascertaining the situation and acting
boldly. I sincerely hope that all our stakeholders understandand agree with our management policy and will continue tosupport us for many years to come.
(* HORIBA fully recognizes the importance of its shareholders andfrequently calls them owners.)

April 2014
Chairman, President & CEO

Atsushi Horiba
HORIBA Report 2013 | 10

Progress of the Mid-Long Term Management Plan

Accelerate efforts toward achieving goals of the
Mid-Long Term Management Plan [2011-2015]
During fiscal 2013, the third year of the Mid-Long Term Management Plan [2011-2015], HORIBA made significant investments in establishingbusiness bases, mainly in reagent plants for the Medical-Diagnostic Instruments & Systems segment, the segment we focus.
In terms of progress in achieving profit target, however, we still face challenges and need to speed up toward our goals.

Numerical targets for fiscal 2015 (announced in February 2011)¥150.0Net sales

13%

Operatingincome ratio

billion11%

ROE*

or moreFiscal 2013: ¥138.1 billion

Assumed exchange rates:¥80/U.S. dollar¥110/Euro* Return on equity

or moreFiscal 2013: 9.9%

Fiscal 2013: 8.4%

Business portfolios aimed by the Mid-Long Term Management Plan

Vertical 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

2005

2010

2010

Contributed by growthin the Semiconductor segment

2013

2010

Steady growth of
the Automotive segment

More balanced portfolio withgrowth in the Medical segment

Profitability

Profitability

Profitability

35%

35%

35%

Semiconductor

Semiconductor

半導体

25%

25%

25%

Semiconductor
15% Medical

15%

MedicalScientificProcess &Environmental

MedicalAutomotive

15%

Scientific5%5%Process &Environmental

5%

-5%

-5%

Automotive

2015

2%

4%

6%

8%

2%

4%

6%

8%

GrowthProcess &Environmental-5% Scientific

Automotive

2%

4%

6%

8%

GrowthGrowthNet sales and operating income by business segment
Automotive

Net sales

49

Billions of yen
38

Medical2011 2012 2013 2014 2015
Forecast Plan

22

26

28

34
24

24

27

5.2
4.4

2011 2012 2013 2014 2015
Forecast Plan

5.0

2.4

2.4

2.5

2011 2012 2013 2014 2015
Forecast Plan

2011 2012 2013 2014 2015
Forecast Plan

22

24

24

2011 2012 2013 2014 2015
Forecast Plan

13

14

15

16

2011 2012 2013 2014 2015
Forecast Plan

6.0
4.9

3.1

20

14

2011 2012 2013 2014 2015
Forecast Plan

4.8

4.2

2.8

22

5.0

2.5

2.2
1.4

11

Process &Environmental

30

17

6.0

OperatingincomeScientific

46

43

23

Billions of yen

Semiconductor

54

2011 2012 2013 2014 2015
Forecast Plan

0.9

0.9

1.0

1.5

2011 2012 2013 2014 2015
Forecast Plan

1.6

1.2

1.3

1.5

2011 2012 2013 2014 2015
Forecast Plan

Key measures initiated or achieved in fiscal 2013
In fiscal 2013, to drive growth in the Medical-Diagnostic Instruments & Systems segment we are focusing on, we opened a newreagent plant in India and began expanding a reagent plant in Brazil.
In addition, we acquired U.S. company Cameron's process measurement equipment business line for the Process & Environmental
Instruments & Systems segment.
In Japan, we acquired electron beam technologies of Topcon Corporation for the Scientific Instruments & Systems segment andopened HORIBA STEC Kyoto Fukuchiyama Technology Center for the Semiconductor Instruments & Systems segment.
Major investments and key measures, including plans, of the Mid-Long Term Management Plan [2011-2015] are as follows:

From 2011 to 2013

Automotive

From 2014 onward

Japan

Overseas

Merged HORIBA ITECH
Co., Ltd. (ITS business)

Opened HORIBA Shanghai Technical Center(EMS and MCT business) in China
Opened a plant in Czech Republic(MCT business)
Opened a representative office in Turkey

Process &Environmental

Acquired U.S. company Cameron's
process measurement
equipment business
Opened a representative office in Vietnam

MedicalExpanded production capacity
at the Aso plant

Opened a reagent plant in China
Opened a representative
office in Indonesia
Opened a reagent plant in India
Expanded a reagent plant in Brazil

Semiconductor

Opened HORIBA STEC
Kyoto Fukuchiyama
Technology Center

Incorporated the branch in Taiwan as
HORIBA Taiwan, Inc.
Established Beijing HORIBAMETRON Instruments Co., Ltd.
(joint venture) in China.

Scientific

Acquired electron beamtechnologies of Topcon Corp.

Opened HORIBA Europe Research Centerin France.

Japan

Overseas

To open HORIBABIWAKO E-HARBOR

To open HORIBA ABXDevelopment Center(France)

To open HORIBA
Advanced Technology
CenterAcquired fluorescence
spectroscopy businessof Photon Technology
International Inc.

Progress in reform of the Medical-Diagnostic Instruments & Systems segment
During the five years of the Mid-Long Term Management Plan [2011-2015] we plan to improve the profitability of the segment bypromoting reagent production expansion worldwide and sales growth in North America and Asia.

Initiatives progressing
as planned

Initiatives that need
speeding up

・Expand sales of small-sized 		
hematology analyzers in Asia 		(equipment export from Japan, 		
local production)

・Introduce medium-sized and 		large-sized hematology 		
analyzers to the Americas
and Europe

・Establish reagent production 		bases worldwide

・Accelerate growth in Asia

Measures for
improvement

・Reform management of HORIBAABX S.A.S. in France, an R&D
base for medium-sized and largesized hematology analyzers
・Enhance R&D base in France
・Strengthen development 		
collaboration between Japanand France

HORIBA Report 2013 | 12

Message from the CFO

HORIBA is achieving sustainable growth and higher
ROE by seeking earnings growth and rewards toshareholders in a balanced manner.
Basic
capitalpolicyImplementing 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 growthTarget of the Mid-Long Term Management Plan [2011-2015]: 11% or more

Implement a shareholder return policy
linked to earnings growth

Financial policies

HORIBA frequently calls shareholders owners and puts

ensure efficient funding in response to capital requirements.

emphasis on exceeding their expectations. In 1974, whenThis is an important guideline for HORIBA’s financing activities.

a majority of companies paid fixed dividends, we were the

We define liquidity in hand to be a sum of cash and cash

first listed Japanese company to start paying shareholder

equivalents and the open amount of the commitment lines that

dividends based on a payout ratio and have continued thishave been negotiated with financial institutions. At the end ofpractice without interruption for 39 years. (See Corporate

fiscal 2013, liquidity in hand amounted to ¥54.2 billion, which

Philosophy on page 78.)was ¥49.2 billion in cash and cash equivalents and a ¥5.0

Starting in 2013, we changed to a dividend policy targetingbillion open balance of commitment lines with banks.

total returns to shareholders (the combined amount

We consider this cash on hand and commitment lines asof dividend payments and share buybacks) at 30% of

reserves for future capital expenditures, M&A activities, andconsolidated net income, instead of targeting 30% ofother expenditures to be incurred in the future.

HORIBA maintains an appropriate level of liquidity in hand tononconsolidated net income, in order to link shareholder
return directly to consolidated operating results.

Sunao Kikkawa

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 was appointed 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 and group administrative
operations as Senior Corporate Officer and General Manager of the Finance & Control Division.

13

Dividend payments and total return ratio

Dividend Payments and Total Return Ratio
Due to profit deterioration caused by the economic downturn
after the Lehman Brothers Shock in 2008, our dividend per

Yen

%

70

70
■ Dividend per share (left)

share was at a lower level in fiscal 2009 and 2010. However,thanks to earnings recovery in each business segment, we

60■ Commemorative dividend per share (left)− Total return ratio (right) [including

60

commemorative dividends and share buybacks]

made a significant increase in dividend value per share infiscal 2011 and effectively raise it again in fiscal 2012 including

50

50

40

40

30

30

20

20

10

10

a commemorative dividend of ¥10 per share to celebrate the60th anniversary of HORIBA, Ltd.
Since fiscal 2013, we have changed the dividend policy to
one based on consolidated net income and paid a recordhigh dividend per share of ¥60. In fiscal 2014, we areprojecting another record-high dividend per share of ¥64,
based on our net income forecast of ¥9.0 billion as ofFebruary 13, 2014.
We intend to continually increase reward to owners(shareholders) by growing earnings per share (EPS) andachieving higher ROE on a medium-term basis.
Based on consolidated net income, the total return ratio in002003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014

Forecast

the past 10 years, from fiscal 2003 to fiscal 2012, can becalculated to 20.8%. We believe the change of our dividend
policy increases return to owners (shareholders).

Investment record and plans in the MidLong Term Management Plan [2011-2015]

Global investments and plans
Billions of yen■Investments in 2011-2013

HORIBA continuously invests in equipment, ERP, R&D, and億円■Investment plans for 2014 and after

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] with2015 being a final target year, we have invested mainly inoverseas R&D bases and reagent production bases of the3

Medical segment from the first year.

HORIBA Advanced Technology Center

From 2014, our focus will shift to setting up bases in Japan.
We will once again strengthen our manufacturing (literally
meaning “production” but capturing an all-encompassing
approach to manufacturing with respect and craftsmanship)

Aso plant expansion

2

HORIBA STEC
Kyoto Fukuchiyama
Technology Center

1

10

HORIBA BIWAKO E-HARBOR

in Japan, enhance our technology development andmanufacturing capability, and achieve business growth in thenext Mid-Long Term Management Plan.

0.4
2

HORIBA Shanghai Technical Center (China)

1
HORIBA Europe Research Center HORIBA ABX Development Center(France)(France)

0.2

Reagent plant (India)

0.7

Reagent plant (Brazil)

HORIBA Report 2013 | 14

Business overview

Business overview by region

Sales by region

Japan• Steady growth and high market shares for 		
products that are related to R&D applications andenvironmental regulations.
• Plan to open a development and production baseEnvironmental Instruments & Systems businesses

35

%

Yen

for the Automotive Test Systems and Process & 		in Shiga Prefecture.

Asia• Expect high growth in China, India, and Southeast
Asian countries.
• Use know-how accumulated in Automotive 		
Test Systems, Medical-Diagnostic and Process &Environmental Instruments & Systems segment 		businesses in developed markets for expansion.

23%

U.S. dollars

Americas• High potential for expanding market share in thismarket that represents 40% of global demand foranalytical and measurement instruments.
• Focus on product development and marketing for18%

the medical and semiconductor markets.
• The reagent plant in Brazil added capacity in 		
the Medical-Diagnostic Instruments & Systems 		
segment.

Europecorporate acquisition and the business acquisition.
• The new R&D Center in Paris, France opened as acore product development facility in Europe.
• A development facility is scheduled to open in 		
Montpelier, France with the aim of launching next15

generation medical products.

24

%

Euro

• Sales increased thanks to the effects of the 		Business overview by segment

Sales by segment

Automotive
Test Systems

Strong support for automotive development
HORIBA’s automotive EMS (emission measurement systems) have been adopted as the primary standard by national certification
bodies in many countries. This recognition has led to a commanding top position in the industry with an 80%* global market share.
Business acquisitions have expanded our product lineup into complete turnkey systems for automotive development. These test
systems are used at the forefront of research and development and quality control. Our test systems are indispensable for developing
new types of engines, such as gasoline, diesel, hybrid electric powertrains and alternative fuel engines. We expect to experience anincrease in demand for our automotive development instruments.* HORIBA’s estimate

Risk factor

36

Principal products

Emission measurement systems, automotive emission analyzers, onboard emission measurement systems,
driveline test systems, engine test systems, break test systems, drive recorders

Major customers

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

Product applications%

MedicalDiagnostic
Instruments & Systems

HORIBA medical products are primarily blood testing instruments and reagents for the in-vitro diagnostics market, with over ¥2 trillion
in global annual sales. The segment’s business model is based on earnings generated from reagents sales. HORIBA sells its original
small and medium-sized blood cell counters in the diagnostic market for POCT*. We are endeavoring to boost instrument sales which
will lead to expanded sales of testing reagents.
*Point-of-care testing (POCT) is defined as medical testing by a physician at or near the site where patients are located such as asurgery ward, a hospital ward, or a clinic for outpatients.

%

17

%

Instruments & Systems

Scientific
Instruments & Systems

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

Major customers

Medical testing centers, small to medium-sized hospitals, medical practitioners
Health and diagnostic testing, disease diagnosis

Contributing to improve yield in semiconductor manufacturing processes
HORIBA’s main products are mass flow controllers; devices that control gas and liquid flows in the semiconductor, solar cell, andLED (light-emitted diode) manufacturing process. Semiconductor products also include many other types of monitoring equipment
for semiconductor production. HORIBA provides customers with high-level solutions that support technical advances in processing,miniaturization, and yield enhancement.

Risk factor

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

Principal products

Mass flow controllers, chemical concentration monitors, reticle/mask particle detection systems, residual gas
analyzers

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 in semiconductor manufacturing
processes, semiconductor and LCD quality control inspections

Achieve a good balance with unique analytical measurement technologies
and business operations
HORIBA provides over 500 types of instruments in the leading edge of scientific technology. We command leading market shares
thanks to our high-level of analytical technology know-how and enhanced customer support. The Scientific segment develops basic
analytical and measurement technologies, which play key roles in providing new technologies to other business segments.

Risk factor

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

Principal products

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

Major customers

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

Product applications

17

Changes in medical insurance systems in different countries

Principal products

Product applications

19

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

Proactive product development in a large stable-growth market

Risk factor

Semiconductor

The global automotive industry’s shifting R&D investments

R&D, product quality testing, criminal forensics%

Process &Environmental
Instruments & Systems

Providing analytical and measurement instruments for compliance withenvironmental regulations
HORIBA provides environmental measurement solution technologies in a wide range of fields for environmental preservation in various
parts of the world. Together with the provision of process measurement technologies which fulfill analytical needs in manufacturing
development, we ensure public safety, security, and health.

Risk factor

11%

Demand fluctuation following changes in environmental regulations

Principal products

Stack gas analyzers, water quality analysis and examination systems, air pollution analyzers, environmental
radiation monitors

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

HORIBA Report 2013 | 16

Businessreview

MEXA has No. 1 global market share in emission
measurement systems
Since introducing the first MEXA in 1964, HORIBA has been a pioneer inemission measurement systems. We have provided the global market withthe latest technologies required for automotive development, meeting everchanging requirements. HORIBA’s emission measurement systems command
the top position in the industry with an 80%* worldwide market share and havebeen adopted as the primary standard by national certification bodies in many
countries and by major global automotive manufacturers and their component
suppliers. (*HORIBA’s estimate)
We have delivered over 9,000 MEXA units to our customers. Anticipating a
recovery in investment in the market, we plan to expand the sales of MEXAONE, which was introduced in 2012. We are committed to continuing support
for automotive development by responding to increasing demand for themeasurement of the emission characteristics of alternative fuels such as biofuel,and the measurement of emissions in more diverse applications such as
construction machinery, ships, locomotives, and general purpose utility engines.

Sales breakdown

67%
MCT business 30%% ITS business
3%

Sales breakdown
by business divisions

36

Emissionsbusiness

Sales breakdown by region
Europe：27%

Asia：24%

Net sales and operating income
60■ Net sales (left)

ーOperating income (right)

Billions of yen

8

HORIBA offers a broad range of test and measurement systems forautomotive development, including systems for vehicles, engines,
powertrains, drivelines and brakes, as well as its mainstay MEXA-series
emission measurement systems. This portfolio range enables us to respondto the diverse analysis and measurement needs of our customers. In addition
to providing test and measurement equipment, HORIBA can also provide
comprehensive support for test cell layout, design, and construction oversightof automobile R&D facilities. Through our unique business model, extensive
product lineup, and project management know-how, we are aiming to growsales and enhance profitability.

45

6

New Intelligent Transport System (ITS)
business model

30

4

15

2

HORIBA started “HORIBA FLEET LINKAGE” services in November 2013. These
services support safe driving and efficient fleet management. Cloud-stored
data from HORIBA drive recorders and transport management systems (digitaltachographs, etc.), is retrieved and analyzed to help fleet companies reduce
fuel costs and manage their workload more efficiently.

002004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015
Plan

17

HORIBA increased sales in fiscal 2013, thanks to an increase in R&D
investment by automotive manufacturers globally and the weakening of theyen. However, operating income was slightly lower than the previous year’slevel due to our increased investment in the development on the Intelligent
Transport System (ITS) business.
In fiscal 2014, we are expecting automakers to continue their investment
as competition within the industry intensifies. We will focus on improving
the profitability of MEXA-ONE and expanding sales in the MCT business,
providing efficient test and measurement systems for the development of
new fuel-efficient vehicles.

Proposing HORIBA’s total solutions for a wide range
of applications

Japan：34%

Americas：15%

Billions of yen

Fiscal 2014
Providing test and measurement systems fordevelopment of fuel-efficient vehicles

HORIBA’S automotive business

Trend of automobile-related regulations

HORIBA aims to expand sales and improve profit by focusing investmentsin emissions measurement systems and powertrain & driveline test systems.

1. Progression of emission standards by region/country
Gasoline

HORIBAbusiness divisions

Gasoline& diesel

Emissions business

Emissions measurement

HybridMarket size

Electric(Billions of yen)

40

JAPAN

New short-term
regulations

Post new long-term
regulations

California LEV-Ⅱ（2004）（2009）
LEV-Ⅱ

Passenger cars
FederalSmall commercial vehicles

30

Vehicles, wind tunnel balances, brake tests

15

Euro4
Euro5
Euro6

MCT business

China Introduced only in Beijing in 2013.

2005

Nationwide

Bharat Stage 4 in Cities

Nationwide

2010

2015

2. Automotive fuel efficiency (CO2 emission)
standards of Japan, U.S., and Europe■ 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$)
Million Euro/
Aggregate R&D spending by 3 Japanese automakers (right; 100 Million yen) Million US$/

Carbon dioxide (CO2) weighted average (g/km)

200 U.S.
Japan: 20.3km/l

100 Million yen

60

24,00050

20,00040

16,00030

12,000(calculated by preliminary
target amount)

180

160

Japan

140

EuropeU.S.
26.4km/l

17.8km/l

20

8,000

10

4,000

0

0
2004

2005

2006

2007

2008

2009

2010

2011

2012

Source: HORIBA s survey based on companies disclosed materials

120

100
Europe: 24.4km/l
2005

2010

80% 38%World
marketshare

Segment
sales
share

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

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

Major products and market shares

Emission measurement systems

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

HORIBA's automotive segment sales and major
automakers' R&D spending

Billions of yen

Bharat Stage 3 in Cities

2000

10

China 5Nationwide

Bharat Stage 2 in Cities

India

Safety and ITS

China 3、China 4

Nationwide launch plan in 2018

Motor, battery measurement

ITS business

LEV-Ⅲ
Tier-3

EuropeDrivelines tests

Next emission
regulation

Tier-2100

Engine performance tests

Post new long-term
regulations

New long-term
regulations

short-term
Diesel Newregulations

U.S.

New long-term
regulations

NOTE: Market shares quoted are estimates by HORIBA.

Driveline test systems
15% 5%

World
marketshare

Segment
sales
share

The driveline is an extremely
important part of the overall
powertrain that transmitsenergy from engines or motors
to the vehicles’ tires. HORIBA’s
driveline test systems will
use the latest simulation
technology for a wide range ofpowertrain and driveline testing
applications. HORIBA’s strengthis demonstrated by providing
flexible systems based on
custom and open solutions.
HORIBA Report 2013 | 18

Businessreview

Stable business model supported
by sales of reagentsThe business model for HORIBA’s Medical-Diagnostic Instruments andSystems segment features expansion in the installed base of HORIBA
medical-diagnostic instruments such as hematology and chemistry analyzers
to generate stable profits from growing reagent sales.
Our products are used in blood testing, biochemical and other clinical areasthat are directly linked to assessing and diagnosing personal health. As
such, the business is less sensitive to economic fluctuation, when comparedto most other industries. Another characteristic of this segment is thatcurrency risk has been diversified by having two bases for development andproduction, namely, Japan and France. Going forward, we aim to diversify
risks and improve profitability by expanding exports of high-share distinctive
and differentiated products from Japan.

Instruments & Systems
Sales breakdown
Sales breakdown
by business divisions

19%

53%
Medicaldiagnostic 38%
instruments
Service and9%maintenance

Testing
reagents

The ratio of reagents sales at HORIBA’s Medical-Diagnostic Instruments& Systems segment has been stable at around 50-55%. Going forward,
while an increase in sales in Asia may temporarily lower the sales ratio of
testing reagents, we view positively such a temporary decline in the ratio
which occurs in line with higher instruments sales growth.

Sales breakdown by region
Japan：20%

Europe：42%

Strengthen the organizational structure to develop
next-generation products
Aiming for stable supply of reagents

Net sales and operating income
40■ Net sales (left)

ーOperating income (right)

Billions of yen

8

30

6

20

4

10

2
0

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015
Plan

19

In fiscal 2013, Medical-Diagnostic Instruments & Systems segment sales
increased year-on-year, partly due to the positive impact of the depreciationof the Japanese yen. However, lower export margins on products
manufactured in France and advance investment in expansion of the sales
network in North America caused a slight decrease in profits. Meanwhile, inorder to address a surge in demand in Asia, we accelerated our efforts to
expand sales of hematology and CRP analyzer, which has been a strategic
product of Japan in the Chinese, Indian and other Asian markets, with theaim of a higher market share and improved profitability.
Our focus in fiscal 2014 is to strengthen the organization and speed up
development of medium and large-sized products. In addition, we will strive
to raise profitability when the expanded reagent plant in Brazil and a newreagent plant in India start full-scale operation.

Asia：14%

Americas：24%

Billions of yen

Fiscal 2014
Reinforce product supply system for achieving sales
growth in Asia

HORIBA ABX S.A.S. (France) will establish a new development base toaccelerate the introduction of new products to expand the market share andaddress growing customer needs in Europe and Americas.
Regarding testing reagents, which are important profit sources in thissegment, our strategy is to initiate local production of reagents in massconsumption areas. The end result is to reduce costs of distribution andinventory management, to respond promptly to customer needs, and to
improve profitability. We have been making steady progress accordingly.
Reagent plants in Aso, Kumamoto Prefecture, and in China began operationin 2012 while a plant in India began operation and capacity expanded in
Brazil in 2013.

Global product development
and supply system
China

FranceProduction base(instruments
and reagents)

Product development
and production base(instruments and reagents)
Development technology
of medium andlarge-sized products

Japan
Product development
and production base(instruments and reagents)
Development technology
of small-sized products

India
Production base
(Reagents)

Instruments

Reagents

・Small-sized products: Expand sale of our hematology and CRP analyzer to Asia
・Medium-sized products: Introduce products for the Chinese market by integrating
technologies in Japan and France
・Medium and large-sized products: Accelerate product development to expand market
shares in Europe and Americas

・The local supply systems have resulted incost reductions for distribution and inventory
management, thereby improving profitability.

Business development by test category

Joint initiatives to develop products for
China, in Japan and France

Test category

Clinical chemistry

Hematology

Immunology

Coagulation

Market size

¥1 trillion¥0.2 trillion¥1 trillion¥0.1 trillion

Hematology
analyzer systems

Large hospitals
Testing centers

Hospitals

We have been developing medium and large-sized products
in France and small systems in Japan. In the case of “Pentra
MS CRP”, a new medium-sized hematology and CRP
analyzer, with the aim of selling in the Chinese market,
we have succeeded in our development by merging thetechnologies of our bases in Japan and France. Triggeredby the sharing of technological know-how through thedevelopment of the new product, our intention is to speed
up new product development both in Japan and in France.

Small andmedium-sized
hospitals
Privatepractitioners

Hospital units andsurgery rooms(POCT*)

Pentra MS CRP

Brazil
Production base
(Reagents)

Clinicalchemistry
analyzers

Blood glucose
measurement
systems

Small andmedium-sized
hematology
analyzers

Field in which
HORIBA exhibits strength

CRP analysis*Point-of-care testing (POCT) is defined as medical testing by a physician at or near the site where patients are located such as a surgery
ward, a hospital ward, or a clinic for outpatients.

Major products and market shares

NOTE: Market shares quoted are estimates by HORIBA.

Hematology analyzers

Hematology and CRP analyzers

8% 80%

100% 10%

Blood tests are essential for diagnosis and assessing thehealth of people and animals. These analyzers check red andwhite blood cell counts as well as hemoglobin concentrations
and platelet counts.
World
marketshare

Segment
sales
share

Coagulation
reagents

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 more accurate diagnosis.
Worldmarketshare

Segment
sales
share

HORIBA Report 2013 | 20

Businessreview

Products that fulfill the needs of new markets andnew applications
HORIBA has products used throughout the semiconductor manufacturing
process such as mass flow controllers which are essential for dry chambersemiconductor manufacturing equipment, and chemical concentration
monitors, which are used in semiconductor wafer cleaning and etchingprocesses. In particular, our mass flow controllers have a leading 48%*
global semiconductor market share. These highly sophisticated products
satisfy customer requirements for improved productivity and performanceenhancements in next-generation miniaturized manufacturing processes.
HORIBA aims at further raising its market share. (*HORIBA’s estimate)

Instruments & Systems
Sales breakdown
Mass flow
controllers

Sales breakdown
by business divisions

17%

Wet processmonitors
Dry processmonitors
Other

81%
12%
5%
2%

Fiscal 2014
Response to strong demand and focus ondeveloping next-generation products
In the first half of fiscal 2013, a rapid recovery in demand for semiconductors
triggered favorable sales of mass flow controllers to makers of equipment
for manufacturing silicon semiconductors and other products. We rapidly
increased production for a broad range of products at our Aso plant, which
had just completed a capacity expansion in 2012. HORIBA’s global share ofmass flow controllers is inching up, partly because our overseas customers
in semiconductor manufacturing equipment-related makers are shifting moreproduction to Asia.
In fiscal 2014, we expect high levels of demand to persist for the first six
months, but moving toward the second half of fiscal 2014, we need to watch
carefully the investment outlook for semiconductor makers, particularly inSouth Korea and Taiwan. Another area we are focusing on is a potential
increase in demand from makers of manufacturing equipment for solar cells
and LEDs.

Sales breakdown by region
Europe：5%
Americas：16%
Japan：45%
Asia：34%

Expansion of sales in Asia, supported by strong trustfrom global semiconductor makers

Net sales and operating income
Billions of yen

30■ Net sales (left)

ーOperating income (right)

Billions of yen

20

6

10

3

0

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015
Plan

21

9

Much of HORIBA’s service strength lies in its capability to support customers
in Asia. Our strategy is to expand our market share by earning morecredibility not only from semiconductor, solar cell, and LED manufacturing
equipment makers, but also from semiconductor device makers bydeveloping enhanced, quality products that satisfy anticipated customer
demand.
At the Aso plant, which is operated by the Semiconductor Instruments &Systems segment, we are building a system to adjust production with theneeds of the Medical- Diagnostic Instruments & Systems segment. We arethus prepared to meet customers’ delivery requirements during phases of
expanding demand. Flexible plant management according to fluctuations in
production demand is one of HORIBA’s greatest strengths.

HORIBA’s global market share for mass flow
controllers

HORIBA’s Semiconductor Instruments & Systems
segment sales compared to worldwide sales ofsemiconductor manufacturing equipment
Billions of yen

Worldwide sales of semiconductor manufacturing equipment (right)

Trillions of yen

30

HORIBA’s Semiconductor Instruments & Systems segment sales (left)

6

25

5

20

4

15

3

HORIBA has maintained more than 40%* of the global mass flow controller
market share since fiscal 2009. It is noteworthy that our share expanded in
the period from a downturn phase, which started in 2009 and lasted until
a recovery in 2010, by successfully meeting our customers’ needs throughnew product introductions and expanded production capacity. In our view, thisis attributed to the success of our balanced management, which minimized
the reduction in manufacturing investment and production capacity during asignificant downturn in the market.
Our global market share rose to 48%* in fiscal 2013, as a result of anincrease in the ratio of standard adoption at semiconductor manufacturers
for new products and the shift of production to Asia by semiconductor
manufacturing equipment-related makers. (* HORIBA’s estimates)
％

10

2

50
40

5

1
30

0

0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

20
2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(*HORIBA s estimate)

Enhanced development facilities to accelerate response tocustomer needs
HORIBA STEC Kyoto Fukuchiyama Technology Center opened in 2013 as the first researchonly facility. Its main focus is to develop mass flow controllers and next-generation advanced
material control equipment.
Moreover, HORIBA Advanced Technology Center, which is under construction in a site adjacent
to HORIBA STEC Co., Ltd., is scheduled to be completed by the end of 2014. By assembling oursemiconductor sensor-related development teams at the Center, each group company’s knowhow will be brought together to enhance production technology. We also intend to accelerate
development speed by promptly conducting actual gas and liquid tests on new sensors foruse on manufacturing lines for mass flow controllers and other products. We will establish
a structure to respond more quickly to the needs of semiconductors and semiconductor
manufacturing equipment-related makers that are engaged in advanced research.

HORIBA STEC
Kyoto Fukuchiyama
Technology Center(Fukuchiyama City,
Kyoto Prefecture)

HORIBA Advanced
Technology Center(Kyoto City, Kyoto
Prefecture)

New building(Rendering)

Major products and market shares

NOTE: Market shares quoted are estimates by HORIBA.

Mass flow controllers

Chemical concentration monitors

48% 81%

80% 12%

These high-precision gas and liquid controllers regulate flow rates
in semiconductor manufacturing processes, typically in thin-film
formation processes.
They are indispensable components for high quality semiconductorand LED production.
Worldmarketshare

Segment
sales
share

These compact units are used in semiconductor manufacturing
to monitor concentrations of chemical cleaning agents. They
ensure cleansing fluids are precisely delivered and properly
used, thereby optimizing the cleaning process and boostingproduction yields.
World
marketshare

Segment
sales
share

HORIBA Report 2013 | 22

Businessreview

HORIBA’s technology for nano-level analysis provides
essential sample measurement and characterization
Behaviors of nanometer sized atoms and molecules have been highlighted in
microscopic analysis. HORIBA solutions for data analysis support advanced
research that ventures into unknown territories where discoveries may leadto new materials or advanced, high-tech products. Additionally, HORIBA’s
analyzers are widely used in foreign-object examinations and defect analysis
for food, drugs, electronic components, forensic science, and archaeologicalsurvey.

Instruments & Systems
Sales breakdown

Sales breakdown
by business divisions

17%

35%
21%
18%
11%
9%
6%

Molecular &microanalysis
Elemental
analysis
Opticalcomponents
Particlecharacterization
Water quality
analysis
Other

Fiscal 2014
Expecting recovery in sales to industrial markets
Focus on government spending trends in various
nations
In fiscal 2013, Scientific Instruments & Systems segment sales decreased
from the previous year, due to a drop in demand in government spending invarious nations. This is despite the positive impact of the depreciation of theJapanese yen in boosting sales in yen terms. In Japan, the supplementarybudget induced demand for our high-end spectroscopic instruments andresulted in steady product sales.
In fiscal 2014, we foresee sales growth due to ongoing solid budget-induced
demand for the research and development of scientific technology in Japan.
A recovery in fiscal budgets is also expected in overseas markets. Additionalsales from the newly-acquired fluorescence spectroscopy business (details
on the next page) and growth triggered by economic recovery will also help
realize steady sales.

Sales breakdown by region
Europe：25%

Support for basic research in next-generationenergy sources and R&D of HORIBA’s other businesssegments

Japan：31%

Americas：23%
Asia：21%Net sales and operating income
Billions of yen■ Net sales (left)

ーOperating income (right)

Billions of yen

30

3

20

2

10

1

0

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015
Plan

23

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 rare-earth 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, which command a high global
market share. We expect to increase our global sales and market share, as
the markets respond to tighter regulations and more government spending,especially in the BRICs markets.
In the particle characterization market, the need to accurately measure
finer particle-size distribution is increasing for R&D activities and quality
management in a wide range of areas such as battery materials, automobile
catalysts and pharmaceuticals. With our new product launches of 2013, withworld top-class measurement precision, we aim at expanding market sharein the high-growth Asian market.
In addition to product development, the Scientific segment continues toinvest in basic research and provide new technologies to our other businesssegments.

Acquired fluorescence spectroscopy business of
Photon Technology International
HORIBA acquired Photon Technology International (PTI), which operates infour countries and commands a high market share in high-end researchfluorescence spectroscopy. After the acquisition, HORIBA has a combined
21% share*. We will use synergies between both companies to accelerate
fluorescence product line growth. PTI has a long standing collaboration
with a prestigious laboratory in the Faculty of Medicine and Dentistryof the University of Western Ontario in Ontario, Canada. PTI has been
involved with this renowned university in the development of application
software directly targeted to users’ needs.
*Source: SDI report in 2012

Employees of Photon Technology International at an exhibition

Applications covered

Products

Research on iPS cells and other regenerative medical therapies; drug discovery;
and development of next-generation food and agricultural products

Fluorometer, fluorescence microscopy, lifetime measurement equipment andoptical components including spectrometers, light sources and lasers

Expanding functions of demonstration labs, which
will support sales expansion in growth markets
With regards to the many products in HORIBA’s Scientific Instruments& Systems segment, it is important to address the requirements ofscientists and engineers for high precision and to provide diverse
analytical applications. We are setting up demonstration labs invarious parts of the world so that our customers can actually touchand experience products. We also provide services to analyze
measurement samples brought in by customers as a way to expand
the number of users.
In recent years, we have focused on setting up demonstration labs in Asiaand opened the demostration lab in Shanghai, China in 2013. We alsoplan to expand the lab in Brazil into a new location in 2014.

HORIBA’s demonstration lab in Shanghai, China

Major products and market shares

Raman spectrometers
30% 17%

pH meters
50%

7%

Raman spectroscopy is a spectroscopic technique that provides information
about the molecular structure of molecules by measuring the vibrationalmodes of a molecule. The vibrational modes of a molecule, which are amolecular 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 a highly-sensitive and optimal opticaldesign is necessary. HORIBA Jobin Yvon’s outstanding know-how in opticsrelated technology has been successfully applied in the core development of
our extremely high performance Raman spectrometers.
World
marketshare

Segment
sales
share

NOTE: Market shares quoted are estimates by HORIBA.

Japan
marketshare

Segment
sales
share

HORIBA is recognized as
one of the top pH meterbrands beginning with ahistory of its development ofJapan’s first glass electrode
pH meter in the 1950’s.
HORIBA offers a full pH
product line to satisfy diverse
customer needs ranging
from desk-top models to
support laboratory research
to rugged instruments forfield applications measuring
river water, groundwater, andwaste water.

HORIBA Report 2013 | 24

Businessreview

HORIBA supports global environmental measuresand new energy industries
We provide analytical and measurement instruments for a wide variety of
applications to measure air, water, and soil constituents. We supply these
instruments to various industries whose work is essential for environmental
emissions reduction and process monitoring. We play an important role ingas measurement and monitoring of industrial liquid waste in the electric
power, steel, and chemical industries as well as energy industries including
oil refining, and heavy chemicals; purified water management for medical
and semiconductor use; and constant monitoring and control of 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.

Instruments & Systems
Sales breakdown
Sales breakdown
by business divisions

11%

36%
Water quality
32%
analysis
Air pollution
14%
analysisOther
18%
Stack gasanalysis

Sales breakdown by region
Europe：14%
Americas：15%

Japan：55%

Aiming to become No. 1 in the global environmental
regulation businessNet sales and operating income

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 and experience in Japan, Europe, and the Americas.
We also aim to expand our market share in the water quality measurement
field, by giving added emphasis to pH measuring technology, a HORIBA
core business since its foundation in the 1950s. Moreover, we will further
develop business by leveraging HORIBA’s expertise in the environmental andanalytical instrument markets in Asia and other emerging nations, where
demand is projected to grow rapidly. In addition, the process measurement
equipment business we recently acquired will be important for ourdevelopment of business in various industries.

■ Net sales (left)

ーOperating income (right)

Billions of yen

4

15

3

10

2

5

1

0

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2015
Plan

25

In fiscal 2013, despite no significant change in private investment, demand
for stack gas analyzers at thermal power plants was firm.
In fiscal 2014, we will focus on creating demand in Japan with our new
water quality measurement instruments. In addition, we will continue to pay
attention to demand growth for air pollution analyzers, triggered by PM2.5
and other problems, and we expect an increase in present sales and profits.

Asia：16%

Billions of yen

20

Fiscal 2014
Explore demand in Japan’s water-related market
Focus on demand trends for stack gas analyzers

Target market: Environmental regulation market
Stack gas analyzers

Water quality analyzers

HORIBA has a leading market share in Japanin continuous emission monitoring systems
used in plants and other facilities that generate
gaseous emissions and soot. Our instruments
have established a widely recognizedcredibility for robust and reliable samplingsystems, which are essential 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 products are used formonitoring and control in water treatment
processes. We have a wide-ranging
water quality product line to measure pH,
the basic water quality indicator, as well
as chemical oxygen demand (COD), total
nitrogen, and total phosphorous.
Our products have been highly evaluatedin the water quality analysis field bycompanies in the electric power, gas,petrochemicals, steel, paper, foods, andpharmaceuticals industries.

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

Customers’ life cycle costing (LCC) approachin making proposals on water quality
measurement
HORIBA aims at reducing life cycle costs (LCC) of products, in addition
to improving performance. On top of a reduction in maintenancecosts for customers, a decrease in LCC enables savings in energy,
water, and waste, thereby helping to lower the environmental burden.
We will continue to be active in making LCC proposals to expand ourmarket share.
Target markets
Sales breakdown
in water quality
measurement in 2013

Target area

Progress of the process measurement equipment business inNorth America

30%

Water quality measurement andmonitoring in lakes and rivers

Environmental
measurement

The process measurement equipment business, which was acquired from the
U.S. company Cameron in February 2013, generated ¥1.2 billion in sales infiscal 2013. At present, a new measurement demand is emerging in the U.S.,
where the shale gas revolution is taking place, as there is a switch from coal togas as fuel for power generation.
By capturing such measurement demand, we expect the synergy effect toincrease sales of HORIBA’s stack gas analyzers. The Process & Environmental
Instruments & System segment in the U.S. aims to generate sales of ¥6 billion
by fiscal 2018.

10%

Used in quality management and otherprocess management in the electric
power, chemical, and pharmaceuticalindustries

Process
management

20%

Contribution to water quality management
through HORIBA’s sensitive analysis
technology, which is required for water
management at drinking water treatment
plants, etc.

Water

40%

Monitoring activated sludge treatment
process at sewage treatment plants, forindustrial liquid waste, etc.

SewageMajor products and market shares

Stack gas analyzers
50% 36%Japan
marketshare

Segment
sales
share

These analyzers provide highly
sensitive and precise measurementsof NOx, SO2, CO, CO2, and O2
constituents in gases emitted byboilers and furnaces in thermal
power stations and refuse
incineration facilities. A single
unit can simultaneously andcontinuously measure all fivegases. HORIBA has a leading
market share in this competitivemarket in Japan and seeks sales
growth in the global market.

NOTE: Market shares quoted are estimates by HORIBA.

H-1 series of industrial water quality analyzers
These industrial water quality analyzers perform
in a wide range of applications from pure water for
and food to water treatment to sewage
20% 32% semiconductor
and industrial wastewater. They confirm progressin wastewater treatment processes and control
water treatment equipment. Moreover, we havedeveloped pH electrodes that resist damage in harshenvironment by strengthening their toughness, thereby
reducing the frequency of electrode replacement
and maintenance operations. By responding to
expanding worldwide needs for remote monitoring
services in water and sewage quality management
and process monitoring, HORIBA pursues sales
growth in the global market.
Japanmarketshare

Segment
sales
share

HORIBA Report 2013 | 26

Value creation based on invisible values

I n v i s i b l e Va l u e s

Assets not visible
in the financial statements
Value - c rea t i ng s p i r a l
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 essenceof good management is to increase “Invisible Values” which are firmly rooted in corporate culture.
Management’s emphasis on maximizing short-term earnings will not foster sustainable growth or an increase in corporate
value; these two objectives cannot be achieved if there is neglect to invest in Invisible Values.

Diverse humanresources attracted
to HORIBA’s Omoi

Continual investment
regardless of economic
upturns and downturns

Human
resources

BrandsCreation ofincremental
corporate value

Technologies

Responding
scrupulously tocustomers’ needs

Focus on analyticaland measurement
technologies

Customers

Organizational
structure
Practice of “Joy and Fun”

27

Humanresources

At HORIBA, employees are considered to be not simply “employees” but“human resources” in the sense of resources that are assets. In order for all
employees to achieve 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

Technologies

1. To be a part of a collaborative community, at the forefront of new ideas and creations.
2. To achieve goals and making my life memorable by fostering the highest intellectual potential.
3. To reach across the globe to expand learning that captures key business developments, wherever they occur.
4. To be proud of sharing what I do and what HORIBA delivers.
5. I want to participate all around and where I can be of help.

Technological development is the most important growth driver that will
enable HORIBA to achieve the Mid-Long Term Management Plan［[2011-2015]］
targets: ¥150 billion in consolidated net sales and an operating income ratioof 13% or more. We firmly believe that technical development is the lifeline ofa 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, we need to keep training in order to maintain the power to makea dash forward in a recovery phase of the economy.

Organizational HORIBA operates five businesses in 26 countries. We believe it is importantthat our human resources in each business and each region take the initiative
structurein promoting their business and that we have the cohesive power to sustain
HORIBA as an integrated group. With that aim, we are spreading our “Joyand Fun” corporate culture into our global group-wide organization andpromoting “One Company Matrix Management.”

Customers

HORIBA helps improve people’s quality of life in a sustainable society bysupplying products and providing services to customers. We think it isimportant to provide solutions in addition to supplying hardware (instruments).
In order to achieve this goal, we collaborate with suppliers and groupcompanies in Japan and overseas to improve the quality of our products andservices.

BrandsHORIBA works on growing “Invisible Values”, such as human resources,
technologies, and its corporate culture, while achieving numerical targets
for net sales, profits, and other indicators. “Invisible Values” are essential ingenerating future earnings and enabling enterprise continuity.
We believe that these efforts are reflected in raising the value of the HORIBA
brands.

HORIBA Report 2013 | 28

Value creation based on invisible values

Human
resources

29

Regardless of economic upturns and downturns, HORIBA has consistently invested in humanresources, which are precious “Invisible Values”.
What lays the foundation for sustainable value creation is the understanding each HORIBA
employee has of our corporate motto “Joy and Fun” and a corporate culture that is symbolized by”open and fair” and “entrepreneurial spirit,” and puts this heritage into practice at work.

Ratio of female managers

Overseas employee ratio

13%

58%

At the end of 2013, females accounted
for 13% of HORIBA managerial level
persons. At HORIBA, Ltd., the ratio was
5%.
The percentage of females among allgroup employees was 25%. We believethat we have ample opportunities
for females to develop their abilities
and advance within the organization.
The HORIBA Stained Glass Projectis one way whereby we provide anenvironment for that.

Largely as a result of mergers andacquisitions, of the present 5,787 HORIBA
group employees, 58% work outsideof Japan (31% in Europe, 14% in theAmericas, and 13% in Asia except Japan).
This high ratio was not achieved bypursuing low-cost overseas labor forces.
In fact, HORIBA has acquired very talented
people, many holding doctorate degrees,
through acquisitions.

Number of Japanesenationals who have received
overseas training

204

employees

As early as 1984 we adopted a policyof sending people abroad for oneyear period to acquire international
experience and an international
perspective. Applications for this are
made at the initiative of each individual
and the final decision is made at aninterview with the president. By 2014,
204 employees had been given thisopportunity for personal development.
We will continue to value the willingnessof employees to take up challenges,
send them to overseas bases, anddevelop human resources withmulticultural perspective.

Moreover, unique value creation, taking advantage of diversity in different experiences, cultural attributes, and viewpoints, is critical for eachand every one of us to go about our business around the globe. We launched the HORIBA Stained Glass Project in January 2014 in orderto further enhance our organization so as to make the most of the abilities and individuality of each of us. Through facilitating communication
among employees, we will optimize the stage for creating greater value.

Blackjack Project

Users of Fun House

672

5,512

ideas for change

The Blackjack Project, which began in
1997 with the objective of changing theawareness and activities of employees,
has resulted in the submission of 672
suggestions and proposals for change
in 2013. These proposals extend overa wide range, from quality control tohealth management.
We hold an internal World Cup
competition among candidate proposals
from each region where we operate.
This annual competition also provides
an opportunity to demonstrate to
management and employees how
we make Omoi a reality. We see theBlackjack Project as having an importantfunction to globally share and promote
the understanding of corporate culture,experience and knowledge.

Face to face communication
with management

persons

With the belief that a training center
could create more value than amanufacturing plant, we opened a
training center that we named the FunHouse.
In 2013, 5,512 people in total used
the facility to attend the HORIBACOLLEGE courses, training sessions
for new employees, Blackjack ProjectWorld Cup competition, Global Strategy
and Budget Meetings by global top
management, and many more events.
Attendees can actively communicate
face to face by spending time together
while being away from everyday
assignment.

Every month
The President and other executives
host birthday parties in various
locations every month for employeeswith birthdays falling in the month.
The parties create opportunities forface to face communication between
management and employees andprovide an opportunity to exchange
their Omoi, resulting in an atmosphereof openness between them.

Number of ideas for change

800

600

■ Overseas■ Japan

400

200

0
2005 2006 2007 2008 2009 2010 2011 2012 2013

HORIBA Report 2013 | 30

Value creation based on invisible values

Technologies

Technological development will accelerate further growth
The development of analytical technologies and engineering
technologies are the core value of HORIBA as an analyticaland measurement equipment manufacturer. In recognitionof this we have maintained R&D investment at the level of
7-8% of sales, even during economic downturns when ourcompetitors have reduced their investments.
This strategy has helped to boost our market share during
subsequent upturn phases. In fiscal 2009, our sales
declined sharply, but we maintained the same level of R&D
investment. We firmly believe this investment will contributeto our future growth. We aim to improve the efficiency of our
R&D investments and realize a higher operating income ratio.

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［2011-2015］
Sysmex13%

Abbott Laboratories
ThermoFisher Scientific

10%■ R&D expenditures (left)

R&D expenditures to net sales (right)

12

Siemens

%
10.0

5%
9

7.5

6

5.0

3

2.5

0

0
2004

2005

2006

2007

2008

2009

2010

2011

2012

2011
2005

PerkinElmer

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

Agilent Technologies

15%

2000

Shimadzu

0

2012
Canon

HORIBA 2013

Yokogawa Electric

4%
8%
12%
Ratio of R&D expenditures to net sales
Other companies’ information is extracted from theirdisclosed materials, which are available as of April 1, 2014.

2013

From core technology to product development
HORIBA allocates its R&D resources to specific analytical technologies, applies them to product development in five different
business segments, and achieves product releases efficiently.
Automotive

HORIBA’s major
analysis andcontrol
technologies(selected on the basisof sales-size importance)

31

Infraredmeasurement

Technology forreal-time analysis
of elements in gases

Gas flow control

Technology tomeasure and instantly
control the flow of gases

Particle-size
distribution analysis

Technology to measureparticle diameter andparticle distribution

Spectroscopic
analysis

Technology for analysis
of visible light

Process &Environmental

Scientific

Medical

Semiconductor

HORIBA BIWAKO E-HARBOR
Ensuring our technological legacy to the next generation

HORIBA gas measurement technology is a central feature in many of our core products, such as the MEXA series
automotive emission measuring equipment (recognized as one of the top brand in the world) and stack gas analyzers.
At our new HORIBA BIWAKO E-HARBOR, we will work at improving the time-to-market of new products and efficiency
of production by an organic integration of development, design, and production. When we carried out a reorganizationin 2011, we combined the gas measurement businesses in the Automotive Test Systems and Process & Environmental
Instruments & Systems segments at HORIBA, Ltd. Combining these groups allows us to speed up the development
process and improve our ability to meet customer requirements.
The amount of investment planned is on the order of ¥10 billion, the largest amount we have ever invested at a single
location at one time. Construction is to be completed in autumn of 2015.

A new global pacesetter among manufacturing facilities
At this new location, in the same place where HORIBA originated, we will take a giant step forward in
integrating design, development, production, sales operations, and post-sales services. We will introduce a
new manufacturing method by organically combining design, development, and production, with the aim of
responding to different customer needs in Japan where we have the expertise and accumulated know-how basedon our strength in core technology. Production capacity will be doubled, and delivery time will be reduced to athird, resulting in enhanced competitiveness.
We will install analytic and testing equipment for gas measurement equipment for Automotive Test Systems andProcess & Environmental Instruments & Systems segments use. In addition to development of applications,
we will be able to provide clients with training services and demonstrations. The location, on the west shore of
Lake Biwa, is adjacent to our logistics center, reducing logistic cost. By bringing together design, development,
production, sales functions, and post-sales services at a single site, HORIBA’s creativity, quality assurance,technology and know-how will be available to serve customers on a global scale.

Ensuring our technological legacy
Transferring the accumulated core technology HORIBA has acquired in its first 60 years of existence to each new
generation of engineers and technical personnel is vital in order for us to improve and grow. With this knowledgetransfer, we intend to provide an undying driver of technological innovation.
The single capital letter “E” of HORIBABIWAKO E-HARBOR symbolizes “effects,”
representing the various effects HORIBA isaiming to impact at the new facility. The “E”
incorporates our passions for the new facility
that are related to Engineering, Environment,
Energy system, Enhancement, and Efficiency.

Engineering, Environment,
Energy system, Enhancement,
and Efficiency.

HORIBA Ltd. Kyoto headquarters

Aso plant (Semiconductor , Medical)

HORIBA BIWAKO E-HARBOR(Automotive, Process & Environmental)

Rendering of HORIBA BIWAKO E-HARBORHORIBA Report 2013 | 32

Corporate governanceCorporate Governance Philosophy
Appointment of outside director and auditor
To avoid managing with an introverted approach, HORIBA has always appointed at least one director and one auditor from outside
the company. This practice started with the company’s origin in 1953 and has been continued through to the present day.
HORIBA’s outside director and two outside auditors qualify as independent, as specified by the Tokyo Stock Exchange,
because their current posts and backgrounds indicate that they have little risk of having conflict of interests with generalshareholders and can maintain independence between their current duties and past careers.

Implementing shareholder return linked to earnings 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 the Tokyo Stock Exchange. Since 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% of consolidated net income, so that shareholder returns are more directly linked
to consolidated 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 the annual General Shareholders Meeting. These meetings are held
on Saturdays to facilitate public attendance. An informal get-together event is held afterwards to enable shareholders to talkdirectly with the management.

Adoption of a corporate officer system
Since 2005, HORIBA has limited the number of directors to five 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 16 corporate
officers including Dr. Jai Hakhu, who joined HORIBA in 2010 and now serves as a head of HORIBA’s U.S. operations.

1997

Directors: 9(including 2
outside members)

Directors: 6

2014(including 1 outside member)

Corporate officers: 16(including 1 non-Japanese)

The first female to be a corporate officer at HORIBA
In 2014, for the first time since its foundation, the female corporate
officer was appointed at HORIBA.
Since 2001, Haruko Nozaki made efforts toward establishing many
progressive personnel systems and education systems as General
Manager of HORIBA’s Human Resources Division. She is also presidentof HORIBA COLLEGE which started in 2009 and is supporting the
HORIBA Stained Glass Project, launched in 2014, as an advisor.
Outside the HORIBA, she is also actively engaged in expressing opinionsfrom a viewpoint of a private sector in some educational institutions andadministrative advisory committees and councils.
She is expected to contribute greatly in areas such as fostering
HORIBA’s human resources, CSR promotion, and improvement incommunication.

33

Haruko Nozaki
Junior Corporate Officer

Haruko Nozaki joined HORIBA Community Corporation (in charge of
employee welfare and service administration of HORIBA, Ltd.) in 1978
and was transferred to HORIBA, Ltd. in 1980. She was named General
Manager of the Human Resources Department in 2001 and JuniorCorporate Officer in 2014. She concurrently is president of HORIBACOLLEGE in the General Administration Division and is in charge of CSR.

Since the 1950’s, when Japanese corporations paid little attention to corporate governance, HORIBA has pledged to conduct its
corporate affairs by the following policies.

Corporate governance structure chart

General Meeting of Shareholders

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

Appointment,
Dismissal

Appointment,
Dismissal

Board of Directors

Board of Auditors(Directors)

Reporting

Coordination

Selection, Dismissal
Business Execution
Instructions

Supervising, Monitoring

Business Execution
President

Monitoring

Reporting

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

ReportingDiscussed Items

Directors andCorporate Officers’
Meeting/
Operations Committee/
Management Committee

ReportingCorporate Officers/Division Managers

Financial Audit

Internal controls

Supervision

Supervision
Entrusting Business
Execution

Independent Auditor(Auditors)

Supervising,Monitoring

Appointment,
Dismissal

Internal Auditing(Group Internal Audit Office)Supervising
Coordination

Direction andOrders, Reporting

Integrated Management System (IMS)
Committees, etc.*
Supervising(Quality, Environmental, Health & Safety
and Business Continuity Management)

Promotion
Reporting Principles

Internal Control Promotion Committee
Coordination

HORIBA CSR Promotion Committee

Joy and Fun, Open and Fair

Advisory,
Proposals
Coordination

HORIBA, Ltd. CSR Promotion Committee**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 Promotion Committee for Management of Business with 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 andapproves the issues and the measures concerning the promotion of risk management.

HORIBA Report 2013 | 34

Corporate governance

Board of directors, auditors, and corporate officers
Board of directors and auditors
Chairman, President and CEO

Atsushi Horiba

Toshihiko Uno

Auditor1972

Joined HORIBA, Ltd. and held positions such as General Manager of Overseas
Technology Department and General Manager of Overseas Headquarters

1974

Joined HORIBA, Ltd. and held positions such as General Manager of Hardware
Development and General Manager of Production Center

1982

Appointed as HORIBA’s Director

2002

Appointed as HORIBA’s Corporate Officer

1992

Appointed as President and CEO

2004

Appointed as Senior Corporate Officer

2005

Appointed as Chairman, President and CEO up to the present

2011

Resigned as Senior Corporate Officer

2012

Appointed as HORIBA’s Auditor up to the present

Executive Vice Chairman

Dr. Kozo Ishida
Auditor (Outside), Independent Auditor

1970

Joined HORIBA, Ltd. and held positions such as General Manager of Products
Department Ⅰ of 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

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 Auditor up to the present

Auditor (Outside), Independent Auditor
Executive Vice President and General Manager ofCorporate & Segment Strategy Division

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 ofGeneral Administration Division, and Tokyo Branch Manager

Fumitoshi Sato

1976

Joined the Bank of Japan and held positions such as Aoyama Branch Manager andFukuoka Branch Manager

2004

Joined HORIBA, Ltd. and appointed as Senior Corporate Officer

2005

Appointed as Managing Director up to the present

Director and General Manager ofResearch & Development Division

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 Director up to the present
Appointed as President of HORIBA Jobin Yvon S.A.S. up to the present

See page 36.

Masahiro Sugita

Keisuke Ishida

1978

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 Auditor up to the present

Corporate officers
Executive Corporate Officer

Dr. Jai Hakhu

Senior Corporate Officer

Sunao Kikkawa
Takashi Nagano
Hideyuki Koishi

Corporate Officer

Yuichi Muroga
Hiroshi Kawamura
Atsushi Nakamine

Junior Corporate Officer

Seiji Usui
Narihiro Oku
Tadao Nakamura
Tsukasa Satake
Yasuo Yamashita
Kenichi Obori
Hideyuki Nishibun
Haruko Nozaki
Yoshimasa Tanaka

Dr. Masayuki Adachi

1985

Director (Outside), Independent Director

35

Juichi Saito

Kanji Ishizumi

An Outside Director’s views on
HORIBA’s corporate governance
Board meetings
I have been delighted to attend HORIBA’s
board meetings, where lively andconstructive small-group discussions
are conducted in a casual atmosphere.
During the meetings, I tend to ask

candid questions from a broader generalperspective, rather than from my area ofexpertise, which is macroeconomics andinternational finance. My goal is to affirm
management’s attitude and commitments.

Risk management from a global viewpoint
Recent world conditions show a tendency
for risk to become more diverse than in
the past. This is of concern to HORIBA,
as the company is actively investing inindustrialized Western nations as wellas emerging nations. It is important tothe company, therefore, to obtain timely
information on local conditions in thosenations and astutely analyze country

risk there, giving attention to macro levelaspects of finance, politics, and economics.
At HORIBA’s board meetings, the president
and directors comment, from the vantage
point of the expertise and experience ofeach person, on current information fromoverseas, thereby pooling knowledge anddiverse viewpoints.

An emphasis on ROE
HORIBA has been chosen as one of 400
companies which constitute the JPX-Nikkei
Index 400, a new stock price benchmarkof the Tokyo Stock Exchange. This Index
uses ROE as its most important Key
Performance Indicators.
HORIBA emphasizes consistent
management style rather than short-term

profit-oriented style. The company finds
it important to maintain a high level of
ROE or raise it continually. How to ensuresatisfactory ROE and at the same time toposition the company for long-term growthis one of HORIBA’s major managerial
issues.

Masahiro Sugita Director (Outside)
Masahiro Sugita joined the Bank of Japan in 1967 and held positions such
as Matsumoto Branch Manager and Director-General of the International
Department. In 1998 he was renamed Director of Overseas Investment
Research Institute, 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 2013 | 36

Corporate social responsibility

Striving to be a valuable company to everyone
Under the corporate motto of “Joy and Fun,” HORIBA intends to make its business grow by building good partnerships with all
stakeholders. By this, HORIBA means it aspires to become a valuable company to everyone.

HORIBA Group CSR Policy

Promoting CSR through operations

Based on its commitments to energy, human health, the environment and safety, HORIBA will pursue corporate
initiatives to contribute to the realization of “a life of content for all.”We formed the HORIBA Group CSR Promotion Committee in April 2005 in order to promote group-wide CSR activities.
The committee, which is chaired by Dr. Kozo Ishida, Executive Vice Chairman of HORIBA, Ltd. and participated in byfour directors in charge of CSR at the four group companies in Japan, decides on CSR policy and priority measures.
Each of the group companies has its own CSR Promotion Committee where the policy and measures decided by the
HORIBA Group CSR Promotion Committee are implemented, and our social contributions concerning education, theenvironment, local communities, and other areas are compiled and reported.

Signed the United Nations Global Compact
In agreement with the ten principles in the areas of human rights, labor, the environment,
and anti-corruption, which the Global Compact (GC) of the United Nations sets forth forcompanies within their sphere of influence, HORIBA declared its concurrence to the UN’s
policy initiative in April 2011.
Actions taken to date in connection with the policy initiative are shown on the following
page. In addition, we have joined the Global Compact Japan Network and is actively
involved in committee work in the organization.
This is one more way whereby we are engaged in activities needed and useful to society.

Integrated Management System (IMS)
To provide customers with high-quality reliable products, HORIBA has adopted
the IMS*, which is a combination of the Quality Management Systems ISO9001,
Environmental Management Systems ISO14001, and Occupational Health &Safety Management System OHSAS18001. With this, we became the firstJapanese company in the analysis and measurement industry to acquire the JQAIntegrated Management System Certifications (JQA-IG0001-08) as Group IMS
from the Japan Quality Assurance Organization, or JQA.
In February 2014, we also acquired certification for ISO22301, the international
standard for Business Continuity Management Systems, in the medical area,
which is directly related to human life, and established a system that can supply
stable number of products even in the wake of an earthquake, accident, or various
diverse risk events.
We will continue to embrace the IMS activities as we aim to enhance quality, theenvironment, occupational health & safety, and product supply systems, and strive
to raise corporate value.

Group
IMS

Quality
Management
Systems for
Medical Devices(ISO 13485)
Quality
Management
Systems (ISO9001)

Business
Continuity
Management
Systems(ISO22301)
Occupational
Health & Safety
Environmental
Management
Management Systems
Systems(ISO14001)(OHSAS18001)* IMS (Integrated Management System) is the integration of ISO, OHSAS, and other management systems as a single management system.
* HORIBA, Ltd. and HORIBA STEC Co., Ltd. have obtained Quality Management Systems for Medical Devices (ISO 13485) certification.
* Please visit HORIBA Report [WEB: G] for more details.

37

HORIBA’s initiatives
For a company to achieve sustained business growth, it must be valuable to all stakeholders, which encompass not
only those in business fields but also those in local communities, those concerned with the global environment, andsuppliers. Further details of HORIBA’s activities, which do not appear in the financial statements, are in the HORIBA
Report Web Data Book.
HORIBA Report Web Data Book

http://www.horiba.com/horibareport/data/

Stakeholders

ThemesMajor activities

Contributing to Analysis and Measurement
Industry, and Local Communities

Masao Horiba Awards; leadership in associations and groups; support forrecovery from to the Great East Japan Earthquake

NEXT PAGE

Employees’ contribution to society

Publishing a technical report, Readout; participating community events;
hosting interns; environmental preservation activities; environmental
classes at schools

NEXT PAGE

Unique corporate messages

Corporate advertisements in newspapers and magazines; “Gaiapress” (aninformation website on the environment, nature, space, and science)

Prevention and alleviation of environmental
problems (GC Principles 7 & 8)

Popularize instruments for working with new material, new energy, nextgeneration vehicles R&D and of environmental monitoring systems;
conserving resources and energy in production activities: waste water
monitoring; chemical substance management; reduction in waste

Establishments of partnerships withproduction partner companies(GC Principle 10)

Conference with production partner companies; workshops on products
and quality; plant tours; quality study group; World Skills International; QC
workshops; Kaizen activity presentations; technical study groups

Improvement in customer satisfaction

Quality initiatives; customer support center; services by HORIBA Techno
Service Co., Ltd.; organizing in-house technical exhibitions, Craftsmanshipcompetition; initiatives to enhance efficiency

Develop Eco-design friendly products(GC Principle 9)

Evaluation of design for environment; response to various regulations;customer usability enhancement

Responsibility to owners and investors

General Shareholder Meetings; informal get-together events withshareholders; IR briefings for institutional investors; IR visits (Europe,
Americas, Asia); tours for investors at exhibitions; briefings for individual
investors; timely information disclosure

Respect rights, personality, and individualityof employees (GC Principles 1-6)

Promote diversity through the HORIBA Stained Glass Project; HORIBA COLLEGE;
various work systems; job posting system; sending trainees overseas;use of various hiring routes; office visits by employees’ family members;
communication with executives at employees’ birthday parties

Ensure safe, healthy, pleasant workplaces
for employees

Executives’ workplace safety patrol; installation of the Health Management
Office; seminars by obstericians; promote health and near-mile diet by anutritionist at cafeteria; safety and crime-prevention workshop; self-defense
firefighters’ training

Society[WEB: A]

Environment[WEB: B]

Suppliers[WEB: C]

Customers

NEXT PAGE[WEB: D]

Owners*[WEB: E]

Employees[WEB: F]

NEXT PAGE* HORIBA considers shareholders as important stakeholders and frequently calls them “owners”.

HORIBA Report 2013 | 38

Corporate social responsibility

Working together with society
Contributing to analysis and measurement industry and local communities

Masao Horiba Awards
The Masao Horiba Award, named after the founder of HORIBA Ltd., wasestablished to promote research in the field of analysis and measurement
technology by researchers working at universities or public research
institutes in Japan and overseas. HORIBA has made awards to 37 promisingresearchers and engineers from 2004 to 2013 and has supported theiractivities. We hope the award will continue to serve as a source of motivationand encouragement for those winners.

Specific themes
2004: pH measurement
2005: Infrared related analysis and measurement technologies
2006: X-ray analysis
2007: Measurement technologies for cells or biologicalparticles
2008: Measurement and analytical technologies related tointernal combustion engines
2009: The analysis of the surface of material for the 		
semiconductor and related industries
2010: In situ and continuous measurement of harmful airborne
substances affecting human health, safety, and security
2011: Ultra high-sensitive or ultra high-speed analytical method
and technology using electromagnetic radiation from the
NIR to the X-ray
2012: Radiation measurement
2013: Measurement of water property
2014: Gas measurement

Ties to local community and employees’ families
Based on HORIBA’s wish to show children how interesting and importantthe science of “measuring” is, in 1994 the company started a program ofenlisting employees to give talks at school or at events. HORIBA employees
demonstrate scientific matters by using ordinary objects and materials
from daily life and show pupils how plants and animals use their sensory
capabilities, with the thought that some of these pupils may go on later in life
to work with analytic technology.
So that the families of employees can better know what HORIBA does,
HORIBA has held Open House events every year since 2003 and invited
employees’ families to visit the company offices or work sites. Up to 2013,
951 family members have accepted
HORIBA’s invitation. In this way
HORIBA is working to assure thefamilies that HORIBA is a great place
to work.

The number of pupils who havebeen present at our classes, andthe number of such events
41

30

2,327

42
2,480

2,200

1,443
10

278

2009

39

44

■Persons−Events

2010

2011

2012

2013

Working alongside customers
Considerate attention to products

Development of long-life, low-energy “Eco-design” products
HORIBA has adopted an internal standard to determine “Eco-design” products in order to provide products thatreflect responsible product life cycles, such as, longer operating life and energy savings. This standard is used
when developing new products. With social and economic matters suchas the rise in energy costs, we use quantitative measurement to determine
how products represent a reduction in energy requirements or a reduction
in materials used. HORIBA’s “Eco-design” products target a 25% reduction
compared to conventional models.

Reduction in annual number ofbatteries replaced

Reduction in annual number ofelectrodes replaced

The number of batteries when using
5 hours/day X 240 days

Calculation of electrode life when a 1% solution ofhydrofluoric acid is used 2 hours/day for 240 days

6 times

96
Improvement in usable
duration ofhydrofluoric acid

Design of low energy
consumption circuits

2 times28“Eco-design” productPortable pH/water quality meters
Former model:

D-51

New model:

D-71

Former model:#9615-10D

New model:#9631-10D

Working together with suppliers
Establishment of partnerships with production partner companies

Increasing market shares together with suppliers during downturns
HORIBA considers the relationships we have built and maintained with ourregular production partner companies as “Invisible Values.” Over the long term
we have developed strong ties with these suppliers, which has enabled us toprovide customers with high-quality products and reliable delivery scheduling.
We are now increasing procurement on a global basis through our networkof overseas companies. In Japan, in order to ensure continuation of our
Win-Win relationships, we provide opportunities to share our thoughts andexperience in business matters with the suppliers, and help them to develop
the next generation of managers. The regular suppliers that have been doing
business with HORIBA for 6 years or longer since 2008 is 777 (74% of a totalof 1,055 suppliers). They have been able to prosper in good times and survive
tough times, together with us. One reason we have been able to keep up withdemand and increase our market shares, even during a period of a strong surge
in demand, is that our relationships with these suppliers has enabled us torespond very quickly to customer demand.

Total number of production
partner companies

1,055

companies

Of which have been with us for
6 years or longer

777

companies(74%)

HORIBA Report 2013 | 40

One Company SongOne Company SongHORIBA beyond borders
When HORIBA celebrated its 60th anniversary in 2013,
one of our activities was to adopt a company song,which was named“Joy & Fun”by employees. It conveys
the message that HORIBA is“One Company”while
incorporating a number of nationalities and cultures.
Based on words from employees worldwide, incorporating
their Omoi (meaning an emotional feeling, passion,commitment, mission and objective) on the One Company
message, lyrics and music were commissioned to
Hiroaki Hayama, a well-known songwriter in Japan.

Looking to the future in your innocent eyes
I am trying for the best for your life
Not afraid of going against the wind
Cause’ everything’s going to be alright
We were born in a different place
There is surely a different sky

Joy & Fun

Let us cry together as one

lyrics & music by Hiroaki Hayama

Hand in hand, why not speak out

Just as long as you see the light

HORIBA on YouTube

And in no time you’ll be fine
Joy & Fun, tomorrow’s a new day
I’ll be there by your side
In search of brighter days
We are one, oh cannot be replaced
And facing each other
So we’re there for the world

41

One Company SongThe “Joy & Fun” song is on YouTube and isaccessible to all interested in HORIBA.
Please watch our employees singing thesong in various locations worldwide.

検索Financial data

FINANCIAL DATAYear Ended December 31, 2013

HORIBA Report 2013 | 42

Financial data

Eleven-Year Summary
2004.32005.32006.32006.122007.12For the Year:Net sales¥85,073¥92,492¥105,665¥116,099¥144,283

Operating costs and expenses

78,223

83,11994,390104,392

127,753

Operating income

6,850

9,373

11,275

11,707

16,530Net income

2,074

3,524

6,473

6,510

8,691

Capital expenditures

3,501

3,956

5,664

5,059

9,336

Depreciation and amortization

3,037

2,944

3,173

3,246

4,161

Research and development expenses

5,129

5,636

6,553

6,136

9,474

¥92,657¥99,913¥119,976¥129,236¥154,367

13,603

16,10814,884

15,673

20,565

-

-

-

-

-

29,14330,59537,40842,48545,873Inventories

19,40222,012

27,27330,94733,734

Property, plant and equipment, net

18,841

18,481

20,22321,70024,071

58

26

45

44

53

8,700

11,26413,017

14,917

16,792

Liabilities with interest

21,46016,042

13,866

16,22425,177

Shareholders’ equity

43,34852,26365,446

72,37180,377

Share price at end of fiscal period (¥)

1,380

1,950

3,690

4,400

4,100

Number of employees (consolidated)

3,808

3,984

4,461

4,697

4,976

Net income - basic¥62.90¥98.33¥154.27¥154.23¥205.01

Net income - diluted

50.10

83.81

146.97

153.70204.391,350.31

1,415.75

1,548.08

1,710.75

1,892.64

10.00

16.00

28.00

26.00

39.00

Operating income to net sales (%)

8.1

10.1

10.7

10.1

11.5

Return on assets (%)

2.2

3.7

5.9

5.2

6.1

Return on equity (%)

5.0

7.4

11.0

9.4

11.4

Shareholders' equity ratio (%)

46.8

52.3

54.6

56.0

52.1

Consolidated dividend payout ratio (%)

15.3

16.5

18.1

16.9

19.0

Nonconsolidated dividend payout ratio (%)

30.3

41.8

33.8

30.0

30.1

At Year-End:Total assets
Cash and cash equivalents
Trade notes andaccounts receivable

Trade notes andaccounts payable

Affiliated companies
Other

Affiliated companies
Other

Per Share Information:

Net assets
Cash dividends
Financial Ratios:

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 ¥105.39 to US$1.00, the rate prevailing on December 31, 2013.
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, 2004 - 2006 and the years ended December 31, 2006 - 2013.

2008.122009.122010.122011.122013.122012.122013.12

Millions of yen

Thousands of U.S. dollars¥134,248¥104,538¥118,556¥123,456¥117,609¥138,136$1,310,712

123,290

99,394106,256

108,549

105,857

124,4021,180,396

10,958

5,144

12,29914,906

11,751

13,733130,306

6,039

3,161

7,927

8,664

7,396

8,999

85,387

6,645

4,534

4,033

4,670

7,882

7,680

72,872

4,955

4,573

4,523

4,146

3,743

4,279

40,601

10,662

9,831

9,480

10,06010,092

10,774102,229

Millions of yen

Thousands of U.S. dollars¥133,279¥129,580¥137,290¥144,649¥153,836¥189,269$1,795,891

22,66027,59034,45935,76738,85849,246467,273

63

6

1

126

4

25

237

37,33034,50536,42539,24937,51647,386449,625

29,802

23,363

24,843

26,28828,101

33,085313,929

23,11523,602

22,51622,92428,17933,326316,215

40

52

60

0

-

-

-

11,063

10,515

13,423

13,196

11,82916,409155,697

20,984

18,34817,12818,35818,083

24,577233,200

76,82979,906

84,01990,232

99,248114,209

1,083,679
U.S. dollars 34.06

1,237

2,250

2,303

2,320

2,489

3,590

5,146

5,133

5,202

5,448

5,530

5,787
Yen

U.S. dollars¥142.76¥74.77¥187.46¥204.88¥174.87

142.71

74.68

187.11204.41

174.37¥212.76
212.01$2.01
2.01

1,816.96

1,889.58

1,986.77

2,133.44

2,346.45

2,699.88

25.61

44.00

13.00

17.00

40.00

50.00

60.00

0.56

8.2

4.9

10.4

12.1

10.0

4.2

2.4

5.9

6.1

5.0

9.9
5.2

7.7

4.0

9.7

9.9

7.8

8.4

57.6

61.7

61.2

62.4

64.5

60.3

30.8

17.4

9.1

19.5

28.6

28.2

30.0

30.0

30.3

30.5

37.5

48.9

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)
Nonconsolidated dividend payout ratio (%) = 100 x dividends paid / net income (nonconsolidated)*Directors' and corporate auditors' bonuses from the year ended December 31, 2006 are recognized in selling, general and administrative expenses.

HORIBA Report 2013 | 44

Financial data

Eleven-Year Summary

Net Sales by Segment
Millions of yen

150,000

14,290120,000

85,073
10,46560,00008,999

13,721

17,301

25,74824,810118,556
104,538

11,787

12,022

20,825

10,31925,30022,351

19,51018,96014,76430,00092,492

9,753

138,136

134,248

116,099
105,665

90,000In fiscal 2013, ended December 31,

144,283

18,03918,18320,508

20,111

26,93425,836

16,762

24,722

22,989123,456
14,55822,040

Process & Environmental

22,913

Scientific117,60913,70920,40624,15320,50327,676

24,6942013, HORIBA’s net sales increased

14,711

segments, as the weaker yen

Semiconductor

17,861

12,483
22,33722,51437,19235,751

23,485

Medical-Diagnostic

18,777

23,582

27,022

2004.32005.334,446

2006.337,94551,47554,232
38,67843,23049,524boosted the value of overseas sales
when converted into yen and26,832
22,400from the previous year in allinvestments by semiconductor
manufacturers and automakers also

Automotive
Test Systems

grew. The net sales amount was the2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

second highest following that of
fiscal 2007.

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

Millions of yen

12,000%

12.0

operating income, an

11.4

11.0

10,000

10.0

9.9
9.7
9.4

8,000

7.8

7.4

8.4

8.0

7.7

6.0
5.0

4,000

extraordinary gain associatedwith the sale of a building in the
U.S. contributed to record-high

6,000

4.0

4.0

2,000
0

In addition to an increase in

2.0
2,074

3,524

6,473

6,510

8,691

6,039

3,161

7,927

8,664

7,396

8,999

2004.32005.32006.32006.122007.122008.122009.122010.122011.122012.122013.12

net income.
This resulted in ROE rising by 0.6
percentage points to 8.4%.

0.0

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

Yen

300

2,700

250
2,133

205

200
1,711
1,548

150
100

Yen

1,350

1,416

154

1,893

154

1,987
1,817

1,890

2,346

213

3,000

reached a record high of ¥2,700,

2,500

while net income per share also

2,000

205
187

175

75

1,000

was approximately 1.3 times.

500

0

0
2004.345

2005.32006.32006.122007.122008.122009.122010.122011.122012.122013.12¥213, up ¥38 from the previous
year. The price to book value ratio

143

63

e n d e d u p a t a re c o rd h i g h o f

1,500

98

50

Fiscal 2013 net assets per share

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

9.9

10.1

10.0

10.0

81

85

82

82

86

85

6.0
4.9

6,000

100

81

76

8.0

9,000

Days

93

30,000

8.2

8.1

Inventories
Days

Millions of yen

40,000

92

10.4

10.1

12,000

%

12.0

12.1

10.7

15,000Inventories and Inventory Turnover (Days)

75

74

20,00050

10,000

25

4.0

3,000

2.0

0

6,850

9,373

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

5,144

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

00Total Assets
Return on Assets (ROA)

Millions of yen%

10

180,000

9

160,000

8

140,000

7

120,000
5.9

5.9

5.2

5.2

80,000

5

5.0

4.2

4

3.7

60,0003
2.4

40,000 2.2

220,000
0

R&D Expeditures
R&D Expeditures to Net Sales

Millions of yen

12,000%12.0

10,000

10.0
9.4
8.6

8,000
8.0

7.9

6

6.1

6.1

100,000

0

R&D Expenditures andR&D Expenditures to Net Sales

Total Assets and Return on Assets (ROA)
200,000

19,402 22,012 27,273 30,947 33,734 29,802 23,363 24,843 26,288 28,101 33,085
2004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

2004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

6,000

6.0

6.1

8.0

8.1

7.8

6.6

6.2

6.0

5.3

4,000

4.0

2,000

2.0

1
92,657 99,913 119,976 129,236 154,367 133,279 129,580 137,290 144,649 153,836 189.296
189.26900

2004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

5,129

5,636

6,553

6,136

9,474

9,480 10,060 10,092 10,774

02004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

Cash Dividends per Share

Capital Expenditures andDepreciations and Amortization

Yen

Millions of yen

70

10,662 9,831

Capital Expenditures
Depreciations and Amortization

10,000

9,336

60

60

8,000

50

7,882

50
44

40

40

39

7,680
6,645

6,000
5,664

4,955

30

28
26

10

17
13

2,000

4,534 4,523

4,670

4,279

4,573
3,501

20
16

5,059

4,000
3,037

3,956
2,944

4,161
3,173

4,033

4,146

3,743

3,246

10

0

0
2004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

2004.3 2005.3 2006.3 2006.12 2007.12 2008.12 2009.12 2010.12 2011.12 2012.12 2013.12

HORIBA Report 2013 | 46

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review

47

During the fiscal year ended December 31, 2013, the U.S.

acquired from Carl Schenck AG (Germany) in 2005 continued

economy saw a moderate recovery mainly due to a mild

to realize profits thanks to the successful transfer ofincrease in consumer spending and some recovery inproduction bases and cost reduction. Also, the segment

housing starts and capital spending. The European economy

promoted sales of its new engine emission measurement

remained sluggish, partly due to the impact of fiscal

systems which began the sales from 2013, a mainstay

tightening in several countries, but showed signs of

HORIBA product.

bottoming out toward the latter half of the year. With regard

In the Process & Environmental Instruments & Systems

to Asia, China’s economy continued to expand but at a

Segment, the acquisition of the U.S. company Cameron’sslower rate of growth, while the economy in other areas inprocess analysis product line resulted in the business growth

Asia slowed down. In Japan, the economy recoveredin the oil refining market including shale oil and gas.

gradually on the back of some recovery in consumer

In the Medical-Diagnostic Instruments & Systems Segment,

spending and steady public spending, and despite lacklusterwith the aim of responding to growing demand for testing

growth in exports. The annual average exchange rates forreagents in various countries, HORIBA completed building its

2013 were 97.73 yen against the U.S. dollar and 129.78 yen

first reagent plant in India and expanded a reagent plant inagainst the euro, marking respective depreciation of 18%

Brazil.

against the U.S. dollar and 21% against the euro, comparedIn the Semiconductor Instruments & Systems Segment,

to the previous year.

HORIBA STEC Co., Ltd. completed construction of aIn the analytical and measurement equipment market, atechnology center in Fukuchiyama, Kyoto, while the company

recovery in capital spending by semiconductor manufacturers

started to build an advanced technology center in Kyoto city,

led to an increase in demand from the first half of 2013 andKyoto. These efforts are intended to accelerate thehelped the semiconductor-related market sustain its strength.

development speed of semiconductor-related products andIn the automobile-related market, capital spending and R&D

promote efficiency in manufacturing.

investment by Japanese and overseas automakers sustained

The Scientific Instruments & Systems Segment acquired

firm trends from the previous year. With regard to theelectron beam technologies of Topcon Corp, which willscientific and environmental-related markets, however,accelerate product development by using microscopic

private companies were cautious in capital spending andimaging technologies.

R&D investments in analytical and measurement equipment,

Furthermore, HORIBA opened an office in Turkey with theresulting in a sustained weakness in demand.

aim of expanding sales channel in the automotive business.

In the face of these economic conditions, HORIBA, Ltd.

Moreover in Europe, HORIBA Jobin Yvon S.A.S. in France(“the Company”) and its consolidated subsidiaries (together

implemented the HORIBA Group’s Enterprise Resource“the HORIBA Group” or “HORIBA” as a consolidated group)

Planning System (GEO System), with the aim of speeding up

implemented measures to enhance our businesses in 2013.

its decision making and promoting common operational

The HORIBA Group promoted business restructuring throughprocesses, and began to use the system in January 2014. On

the Corporate & Segment Strategy Division, which was

the financial side, HORIBA issued 15 billion yen of straightestablished in fiscal year 2011 to design and promote overall

corporate bonds (7 years to maturity; coupon rate, 0.609%

business strategy, and accelerated the launch of products

per annum) to gain funds for future capital investment,that met market needs.

working capital, and repaying HORIBA, Ltd. No.3 Unsecured

By business segment, in the Automotive Test System

Straight Bonds.

Segment, the MCT (Mechatronics) business which had been

On the background of the yen’s depreciation, as a result ofsuch measures and sales efforts, both of consolidated net

points from 10.0% for the previous year.

sales and profits increased from a year ago.
Business Segments
Net Sales

The operating results of each business segment are

In the fiscal year ended December 31, 2013, consolidated net

summarized as follows.

sales increased by ¥20,526 million, or 17.5%, year-on-year to¥138,136 million. The average foreign exchange rate applied(Automotive Test Systems)

in book closings was ¥97.73 to the U.S. dollar, compared

In addition to a recovery in capital spending and R&D

with ¥79.81 for the previous year, and ¥129.78 to the euro,

spending by automakers in Japan, Europe, and North

compared with ¥102.55 for the previous year. Using theAmerica, the yen weakness was attributable to an increase in

exchange rates for the previous year, consolidated sales forsales. However, the profitability of the driving managementfiscal 2013 would have been ¥122,486 million. Thus, ¥15,649

systems and drive recorders business deteriorated mainly

million in increased sales can be attributed to thedue to an increase in development cost of new products anddepreciation of the yen.

a drop in orders. Consequently, sales in the segment
increased by 14.6% year-on-year to 49,524 million yen, but

Cost of Sales, SG&A Expenses, and Operating Income

operating income decreased by 2.8% to 4,287 million yen.

Consolidated cost of sales increased by ¥12,405 million to¥80,625 million. The cost of sales ratio increased by 0.4(Process & Environmental Instruments & Systems)

percentage points from a year ago to 58.4%, due mainly to

The segment sales showed underlying strength on the backthe decline in sales of environmental radiation monitors,of steady sales of stack gas analyzers for thermal power

which had seen increased demand after the Great East Japan

plants and an increase in sales of process analysis product

Earthquake. Excluding ¥7,176 million from fluctuations inlines which were acquired in February 2013. However, salesforeign exchange rates, however, the actual increase in costof environmental radiation monitors, which had seenwas ¥5,228 million rather than the nominal increase ofincreased demand after the Great East Japan Earthquake,¥12,405 million.

declined.

Selling, general and administrative (SG&A) expenses

As a result, although sales in the segment rose by 7.3%

increased by ¥6,139 million from the previous year to ¥43,777

year-on-year to 14,711 million yen, operating income

million. The ratio to net sales improved by 0.3 percentage

declined by 23.1% to 1,263 million yen.

points to 31.7%, due mainly to the depreciation of the yen,
and a significant increase in sales of mass flow controllers,(Medical-Diagnostic Instruments & Systems)

which owes to an increased production at semiconductor

The segment increased sales, due to steady sales of blood

production equipment manufacturers, supported by a rise incell testing instruments in some Asian countries, and thecapital investment by semiconductor makers. Excluding

weaker yen. However, expenses for developing sales¥4,520 million from fluctuations in foreign exchange rates,

channels in North America increased, which was mainly

however, the actual increase in SG&A expenses was ¥1,618

because of an increase in selling, general and administrative

million rather than the nominal increase of ¥6,139 million.

expenses. Consequently, sales in the segment increased by

As a result, consolidated operating income increased by

19.8% year-on-year to 26,832 million yen, but operating¥1,981 million, or 16.9%, year-on-year to ¥13,733 million.

income decreased by 2.0% to 2,429 million yen.

The operating income ratio was 9.9%, down 0.1 percentage
HORIBA Report 2013 | 48

Financial data

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

Bonds were assigned under a debt assumption agreement

Owing to increased production at semiconductor production

with financial institutions, to which a transitional measure for

equipment manufacturers supported by a rise in capital

the accounting standard for financial instruments wasinvestment by semiconductor makers, sales of mass flow

applied. Thus, it is treated as having been redeemed.

controllers, the segment’s major product, increased

Total consolidated net assets amounted to ¥114,545 million,

significantly. As a result, segment sales rose by 35.2%

up ¥15,009 million from a year ago, due mainly to an increaseyear-on-year to 24,153 million yen and operating incomeof ¥6,752 million in retained earnings and ¥6,882 million insoared by 111.7% to 4,815 million yen.

foreign currency translation adjustments.

(Scientific Instruments & Systems)

Cash Flows

Although sales were higher after yen conversion due to the(Cash Flow from Operating Activities)

weaker yen, sales to universities and government laboratories

Net cash provided by operating activities amounted todecreased due to a reduction in government budgets in¥15,076 million, compared to ¥13,395 million provided in theEurope. Consequently, although sales in the segment

previous year. Factors contributing to this amount included

increased by 12.3% year-on-year to 22,913 million yen,posting of income before tax and depreciation andoperating income declined by 0.6% to 937 million yen.

amortization expense.

Net Income(Cash Flow from Investing Activities)

Consolidated operating income increased from a year ago. In

Net cash used in investment activities amounted to ¥8,111

addition, other income (expenses) improved by ¥380 million

million, compared to ¥7,891 million used in the previous year,

from fiscal 2012 to a loss of ¥201 million, mainly due to thedue mainly to payments for purchases of property, plant andgain on sales of the fixed assets by the transfer of theequipment.

headquarter of the subsidiary in the U.S. As a result, pretax
income increased by ¥2,361 million, or 21.1%, to ¥13,532(Cash Flow from Financing Activities)

million, and net income increased by ¥1,603 million, orNet cash provided by financing activities amounted to ¥2,324

21.7%, to ¥8,999 million.

million, compared to ¥3,304 million used in the previous year.
This was mainly attributable to proceeds from issuance ofFinancial Position

corporate bonds, despite payments for redemption of

As of December 31, 2013, total consolidated assets were

corporate bonds and payments for dividends.

¥189,269 million, up ¥35,432 million from December 31,
2012. The main factors contributing to the increase of total

As a result, there was a net increase of ¥10,388 million in

assets were an increase in cash and cash equivalents ofcash and cash equivalents to ¥49,246 million as of December¥10,388 million and an increase in trade notes and accounts

31, 2013.

receivable of ¥9,890 million.

49

Total consolidated liabilities increased by ¥20,423 million

Dividend Policy

from the previous year to ¥74,723 million. The increase in

The Company believes that the distribution of profits tototal liabilities was due mainly to an increase of ¥4,580 million

shareholders is one of its priority issues while giving due

in trade notes and accounts payable, and ¥5,420 million inconsideration to ensuring a stable management base andlong-term debt. HORIBA, Ltd. No.3 Unsecured Straightinternal reserves for business expansion. Its basic policy

regarding dividends is to maintain a total shareholder return

alliances to enhance the efficiency and effectiveness of its

ratio of around 30% of consolidated net income of thebusiness operations. HORIBA conducts complete andCompany, 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 thatand Asia. Major risks associated with the entry into these

HORIBA’s financial condition and business performanceoverseas markets and conducting business there include

could be affected in the case of a major earthquake or othersudden shifts in economic conditions or in product supply

natural disasters, as HORIBA’s manufacturing facilities could

and demand, sudden changes in retail prices due tobe damaged and require expensive repairs or an interruptioncompetition, changes in laws, regulations and tax systems

to 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 businesswithin the limits of its transaction amounts of foreign currency

activities based on these contracts. Nevertheless, there is adenominated receivables and payables to import and export

possibility of claims for damages arising from different views

transactions to minimize foreign exchange risks. However,of performance or different understandings of business terms

fluctuations in foreign exchange rates could still have an

between parties. It is possible that such circumstances could

impact when financial statements prepared in local currencies

result in HORIBA facing a claim for compensation.

are translated into Japanese yen for the consolidated
financial statements, and a major change in foreign exchange(5) Litigation Risks

rates beyond our estimates could affect our financial

Arising from HORIBA’s violation of the Antimonopoly Law incondition and business performance.

past bidding, HORIBA has received claims for damages from
13 municipal government agencies as of December 31, 2013.

(2) Changes in Performance or Financial Position

HORIBA found that certain parts of the claims regarding the

Associated with Acquisitions and Alliances

scope of the transaction and calculation of the damages

HORIBA has actively promoted corporate acquisitions andamounts were unacceptable and has decided to ask for
HORIBA Report 2013 | 50

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review
judicial relief. Nevertheless, HORIBA has set aside provisions

caution regarding the management and protection of thesefor possible losses from litigation, and it is possible that the

intellectual property rights. However, in the case of

HORIBA Group’s financial condition and business

infringement by a third party, it is possible that HORIBA will

performance could be affected depending on the progress of

be unable to attain its expected earnings. There is also a

the litigation.

possibility of disputes over intellectual property rights withother companies. Such disputes could significantly affect(6) Other Business Risks

HORIBA’s financial condition and business performance.

In addition to the above-mentioned risks, other risks include
a risk of breakdown or malfunction of information systems,(4) Risks Associated with Fluctuations in Raw Material

threats related to information security and risks associatedPriceswith laws and regulations imposed on businesses. HORIBA is

HORIBA takes into account the risk of fluctuations intaking preventive measures against these risks but they could

purchasing prices and makes arrangements such as advanceaffect HORIBA’s financial position and business results.

purchasing to manage this risk when it is deemed necessary.
However, it may require some time for an increase in

2. Risks Associated with Development and Production

purchasing prices to be passed on and reflected in selling(1) Compensation for Product Liability

prices. Such circumstances could significantly affect

HORIBA conducts optimum quality control for its products

HORIBA’s financial condition and business performance.

and services and strives to maintain the highest standards ofreliability. Nevertheless, there is always the possibility of

3. Financial Risks

recalls or litigation arising from unforeseen defects. HORIBA(1) Shifts in the Market Price of Securities and Other

carries insurance for product liability, but there can be no

Assetsguarantee that this insurance would cover the full amount of

HORIBA holds shares in its major alliance partners and otherany unforeseen damages. Such circumstances could have an

companies as part of its technology and business strategies

affect on HORIBA’s financial condition and businessfor the future. HORIBA’s acquisitions and sales of investment

performance.

securities are carefully inspected by the Board of Directors.
Market prices of the shares are reported to top management(2) Delays in Development of New Products

on a timely basis, and the purpose for holding the investment

The measuring instruments business in which HORIBA

securities is properly reviewed. If declines in the market priceoperates is extremely specialized and requires high levels ofor profitability of land, buildings or other assets occurred intechnical capability. HORIBA, therefore, invests large sums in

the future, there could be a negative impact on the financial

product development. However, it is possible that expectedcondition and business performance of HORIBA reflected byreturns of this investment will not be realized due tothe application of impairment accounting.

unforeseen circumstances.
(2) Reversal of Deferred Tax Assets Resulting From
(3) Risks Concerning Intellectual Property Rights

Changes in Systems or Accounting Policies

HORIBA possesses a wide range of intellectual property

It is possible that changes in systems or accounting policies

rights related to the products it manufactures, including(e.g., reductions in tax rates) could require HORIBA to reverse

patents, trademarks and expertise, which give it superiority inits deferred tax assets at the end of the fiscal year.

terms of competitiveness. HORIBA exercises all possible51

(3) Dissolution of Employees’ Pension Fund

(2) Process & Environmental Instruments & Systems

The Kyoto Machinery and Metal Employees’ Pension Fund

Demand for environmental-related products such as(general type), of which the Company and a domestic

analyzers for air pollution and water quality may be affectedconsolidated subsidiary are members, resolved to adopt aby changes in environmental regulations. Changes in thepolicy to carry out a special dissolution at the representative

demand for these products could have a significant impact

assembly.

on HORIBA Group’s financial condition and businessAccordingly, HORIBA plans to post an estimated loss inperformance.

association with the dissolution as “Provision for loss on
dissolution of the employees’ pension fund” for fiscal 2014.

(3) Medical-Diagnostic Instruments & Systems

However, it expects to be approved for dissolution in early

The main products in the Medical-Diagnostic Instruments &2018. It is possible that an estimated loss will change, due toSystems segment are hematology analyzers, which are small-changes in the operating environment for the Fund, and inand medium-sized equipment used by small- and medium-case of such as voluntary withdrawals, closures andsized hospitals and medical practitioners, the target market.

bankruptcies of the Fund members other than HORIBA.

Price competition for these products that is beyond our
expectations could have a significant impact on HORIBA’s

4. Risks by Business Segment

financial condition and business performance.

HORIBA operates in five business segments: Automotive Test
Systems, Process & Environmental Instruments & Systems,(4) Semiconductor Instruments & Systems

Medical-Diagnostic Instruments & Systems, Semiconductor

The main products in this segment are fluid control products

Instruments & Systems and Scientific Instruments & Systems.

for semiconductor manufacturing processes and products

HORIBA can achieve balanced growth by overcoming eachthat support R&D and quality testing by semiconductor

segment’s weakness with complementary strengths among

manufacturers. To minimize fluctuations in the semiconductor

all the business segments. Nevertheless, each businessmarket, HORIBA makes efforts to shorten the lead time forsegment carries risks associated with fluctuations in its

these products and quickly respond to customers’ needs.

respective operations.

Nevertheless, sharp fluctuations in the demand forsemiconductors and the investment of semiconductor(1) Automotive Test Systems

manufacturers could affect the financial condition andEmission measurement systems, the main products of thebusiness performance of HORIBA.

Automotive Test Systems segment, are used by automobile
manufacturers, automotive component manufacturers and(5) Scientific Instruments & Systems

government agencies. The setting of legal limits on exhaust

Scientific analysis instruments are the main products of theemissions affects the demand for these measurement

Scientific Instruments & Systems segment and are used forsystems. It is possible, therefore, that the financial condition

R&D and product quality testing. There is a risk that theand business performance of HORIBA will be significantly

demand for these products could be affected by the R&D

affected by future regulations. Furthermore, capitalbudgets of government agencies and the R&D investment

expenditures related to shifts in the automation of automotive

and production of private enterprises and have a significant

test systems could have a significant impact on HORIBA’s

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

performance.

HORIBA Report 2013 | 52

Financial data

Consolidated Balance Sheets
Consolidated Balance Sheets
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2012 and December 31, 2013ASSETS

Millions of yen
12/2012
12/2013

Thousands of
U.S. dollars(Note 1)
12/2013

Current assets:
Cash and cash equivalents......................................................................................................................................................................................................................................
¥38,858¥49,246$467,273
Trade notes and accounts receivable (Note 7)
Affiliated companies...........................................................................................................................................................................................................................................
425
237
Other......................................................................................................................................................................................................................................................
37,51647,386449,625
Allowance for doubtful receivables.............................................................................................................................................................................................................................
(856)
(914)
(8,672)Marketable securities (Note 5).................................................................................................................................................................................................................................
1,501
1,800
17,079Inventories (Note 6)...........................................................................................................................................................................................................................................
28,101
33,085313,929
Deferred tax assets (Note 15)..................................................................................................................................................................................................................................
2,881
3,186
30,230
Other current assets...........................................................................................................................................................................................................................................
3,980
6,419
60,907
Total current assets...........................................................................................................................................................................................................................................
111,988
140,235
1,330,629
Property, plant and equipment:
Land......................................................................................................................................................................................................................................................
8,172
9,504
90,179Buildings and structures.......................................................................................................................................................................................................................................
24,21027,688262,719
Machinery, equipment and vehicles..............................................................................................................................................................................................................................
12,807
16,175
153,477
Construction in progress.......................................................................................................................................................................................................................................
1,851
1,763
16,728Other property, plant and equipment............................................................................................................................................................................................................................
13,386
14,952
141,873
Total......................................................................................................................................................................................................................................................
60,42870,085665,006
Accumulated depreciation.......................................................................................................................................................................................................................................
(32,249)(36,758)(348,780)
Net property, plant and equipment..............................................................................................................................................................................................................................
28,17933,326316,215
Investments and other noncurrent assets:
Investment securities (Note 5).................................................................................................................................................................................................................................
3,977
5,984
56,779Investments in nonconsolidated subsidiaries and affiliates.....................................................................................................................................................................................................
67
105
996
Deferred tax assets (Note 15)..................................................................................................................................................................................................................................
2,030
1,750
16,604
Allowance for doubtful accounts................................................................................................................................................................................................................................
(74)
(45)
(426)
Other investments and other assets.............................................................................................................................................................................................................................
3,176
2,801
26,577
Total......................................................................................................................................................................................................................................................
9,178
10,597
100,550
Intangibles:
Goodwill (Note 20)......................................................................................................................................................................................................................................................
319
314
2,979
Software......................................................................................................................................................................................................................................................
3,488
3,054
28,978Other intangibles..............................................................................................................................................................................................................................................
681
1,741
16,519Total......................................................................................................................................................................................................................................................
4,490
5,110
48,486
Total assets...................................................................................................................................................................................................................................................
¥153,836¥189,269$1,795,891

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans (Note 8)......................................................................................................................................................................................................................................
¥4,300¥5,534$52,509
Current portion of long-term debt (Note 8).....................................................................................................................................................................................................................
1,388
1,229
11,661
Trade notes and accounts payable:
Affiliated companies...........................................................................................................................................................................................................................................
Other......................................................................................................................................................................................................................................................
11,82916,409155,697
Accounts payable - other.......................................................................................................................................................................................................................................
9,195
12,112
114,925
Accrued income taxes...........................................................................................................................................................................................................................................
1,317
3,523
33,428Deferred tax liabilities (Note 15).............................................................................................................................................................................................................................
687825
Accrued bonuses to employees...................................................................................................................................................................................................................................
902
905
8,587
Accrued bonuses to directors and corporate auditors.................................................................................................................................
38
56
531
Reserve for product warranty...................................................................................................................................................................................................................................
1,176
1,492
14,156
Other current liabilities......................................................................................................................................................................................................................................
7,504
10,786102,343
Total current liabilities......................................................................................................................................................................................................................................
37,662
52,138494,714Long-term liabilities:
Long-term debt (Note 8) .......................................................................................................................................................................................................................................
12,394
17,814
169,029
Deferred tax liabilities (Note 15).............................................................................................................................................................................................................................
153
659
6,252
Employees' retirement benefits (Note 9)........................................................................................................................................................................................................................
2,066
2,406
22,829Directors' and corporate auditors' retirement benefits......................................................................................................................................
195
Provision for compensation losses..............................................................................................................................................................................................................................
457
158
1,499
Other noncurrent liabilities...................................................................................................................................................................................................................................
1,370
1,546
14,669Total long-term liabilities......................................................................................................................................................................................................................................
16,637
22,585214,299
Total liabilities..............................................................................................................................................................................................................................................
54,29974,723709,014
Contingent liabilities (Note 13)
Net assets (Note 10):
Shareholders' equity:
Common stock...................................................................................................................................................................................................................................................
12,011
12,011
113,967
Authorized - 100,000,000 shares
Issued and outstanding - 42,297,169 shares (excluding treasury stock) at 12/2012
Issued and outstanding - 42,301,569 shares (excluding treasury stock) at 12/2013
Capital surplus................................................................................................................................................................................................................................................
18,717
18,717
177,597
Retained earnings..............................................................................................................................................................................................................................................
71,72578,477
744,634
Treasury stock - 235,583 shares at 12/2012 and 231,183 shares at 12/2013.................................................................................................................................................................................................................................................
(780)
(765)
(7,258)
Total shareholders' equity.........................................................................................................................................................................................................................................
101,674
108,441
1,028,949
Accumulated other comprehensive income:Unrealized gains (losses) on available-for-sale securities.....................................................................................................................................................................................................................
987
2,296
21,785
Deferred gains or losses on hedges (Note 14)...................................................................................................................................................................................................................
328
Foreign currency translation adjustments.......................................................................................................................................................................................................................
(3,413)
3,468
32,906
Total accumulated other comprehensive income....................................................................................................................................................................................................................
(2,426)
5,768
54,730
Subscription rights to shares (Note 11)..................................................................................................................................................................................................................................
245
335
3,178
Minority interests in consolidated subsidiaries...................................................................................................................................
4200Total net assets.....................................................................................................................................................................................................................................................
99,536
114,545
1,086,867
Total liabilities and net assets...............................................................................................................................................................................................................................
¥153,836¥189,269$1,795,891
See the notes to the consolidated financial statements.

53

Consolidated Statements of Income
Consolidated Statements of Income
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2012 and December 31, 2013

Millions of yen
12/2012
12/2013

Thousands of
U.S. dollars(Note 1)
12/2013

Net sales (Note 20)............................................................................................................................................................................................................................................
¥117,609¥138,136$1,310,712
Operating costs and expenses (Note 20):
Cost of sales..................................................................................................................................................................................................................................................
68,22080,625765,015
Selling, general and administrative expenses...................................................................................................................................................................................................................
37,637
43,777415,380
Total operating costs and expenses.............................................................................................................................................................................................................................
105,857
124,4021,180,396
Operating income (Note 20).....................................................................................................................................................................................................................................
11,751
13,733130,306
Other income (expenses):
Interest and dividend income...................................................................................................................................................................................................................................
312
294
2,789
Interest expense...............................................................................................................................................................................................................................................
(478)
(560)
(5,313)Foreign exchange gains (losses), net...........................................................................................................................................................................................................................
(206)
(274)
(2,599)Gain on sales of property, plant and equipment..................................................................................................................................................................................................................
31
431
4,089
Loss on sales of property, plant and equipment..................................................................................................................................................................................................................
(0)
(7)
(66)
Loss on disposal of property, plant and equipment..............................................................................................................................................................................................................
(143)
(65)
(616)
Impairment loss (Note 16)................................................................................................................................................................................................................
(135)
(190)
(1,802)Gain on sales of investment securities (Note 5).........................................................................................................................................................................................................................
17
161
Loss on valuation of investment securities (Note 5)....................................................................................................................................................................................................................
(2)
(15)
(142)
Gain on sales of subsidiaries and affiliates' stocks................................................................................................................................................................................................................
67
635
Subsidy income...................................................................................................................................................................................................................
55
70
664
Reversal of provision for compensation losses..............................................................................................................................................................................
67
173
1,641
Gain on bargain purchase (Note 20)............................................................................................................................................................................
64
607
Other, net.....................................................................................................................................................................................................................................................
(81)
(206)
(1,954)
Total other expenses, net......................................................................................................................................................................................................................................
(581)
(201)
(1,907)
Income before income taxes and minority interests.....................................................................................................................................................................................................................................
11,17013,532
128,399
Income taxes (Note 15):
Current......................................................................................................................................................................................................................................................
3,236
4,280
40,611
Deferred......................................................................................................................................................................................................................................................
538
299
2,837
Total income taxes.............................................................................................................................................................................................................................................
3,774
4,580
43,457
Income before minority interests...........................................................................................................................................................................................
7,395
8,951

84,932

Minority interests in earnings (losses) of consolidated subsidiaries...........................................................................................................................................................................................
(0)
(47)
(445)
Net income ..............................................................................................................................................................................................................................................
¥7,396¥8,999Yen
12/2012

12/2013

Per share information:
Net income - basic............................................................................................................................................................................................................................
¥174.87¥212.76
Net income - diluted............................................................................................................................................................................................................................
174.37212.01
Cash dividends............................................................................................................................................................................................................................
50.00
60.00

$85,387

U.S. dollars(Note 1)
12/2013

$2.01
2.01
0.56

Consolidated Statements of Comprehensive Income
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2012 and December 31, 2013

Millions of yen
12/2012
12/2013¥7,395¥8,951Thousands of
U.S. dollars(Note 1)
12/2013$84,932

Income before minority interests
Other comprehensive income (Note 19)
Unrealized gains (losses) on available-for-sale securities.................................................................................................................................................................
270
1,308
12,411
Deferred gains or losses on hedges.................................................................................................................................................................
328
Foreign currency translation adjustments..........................................................................................................................................................
3,297
6,896
65,433
Share of other comprehensive income of affiliates accounted for using equity method....................................... (2)(8)(75)
Total other comprehensive income..................................................................................................................................................................
3,565
8,199
77,796Comprehensive income¥10,960¥17,151$162,738
Total comprehensive income attributable to
Owners of the parent.............................................................................................................................................................................................................................
10,956¥17,193$163,136
Minority interests...............................................................................................................................................................................................................................
4
(42)
(398)
See the notes to the consolidated financial statements.

HORIBA Report 2013 | 54

Financial data

Consolidated Statements of Changes in Net Assets
Consolidated Statements of Changes in Net Assets
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2012 and December 31, 2013

Millions of yen
12/2012
12/2013

Thousands of
U.S. dollars(Note 1)
12/2013

Shareholders' equity
Common stock
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥12,011¥12,011$113,967
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥12,011¥12,011$113,967
Capital surplus
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥18,717¥18,717$177,597
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥18,717¥18,717$177,597
Retained earnings
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥66,278¥71,725$680,567
Changes in items during the period:
Cash dividends.................................................................................................................................................................................................................................................
(1,945)(2,241)(21,263)
Net income.....................................................................................................................................................................................................................................................
7,396
8,999
85,387
Disposal of treasury stock.....................................................................................................................................................................................................................................
(3)
(5)
(47)
Total...................................................................................................................................................................................................................................
5,446
6,752
64,066
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥71,725¥78,477$744,634
Treasury stock
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
(¥788)(¥780)($7,401)
Changes in items during the period:
Disposal of treasury stock.....................................................................................................................................................................................................................................
8
14
132
Total...................................................................................................................................................................................................................................
814
132
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
(¥780)(¥765)($7,258)
Shareholders' equity, total
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥96,219 ¥101,674$964,740
Changes in items during the period:
Cash dividends.................................................................................................................................................................................................................................................
(1,945)(2,241)(21,263)
Net income.....................................................................................................................................................................................................................................................
7,396
8,999
85,387
Disposal of treasury stock.....................................................................................................................................................................................................................................
4985
Total...................................................................................................................................................................................................................................
5,455
6,766
64,199Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥101,674 ¥108,441$1,028,949
Accumulated other comprehensive income
Unrealized gains (losses) on available-for-sale securities
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥717
¥987
$9,365
Changes in items during the period:
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
270
1,308
12,411
Total...................................................................................................................................................................................................................................
270
1,308
12,411
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥987¥2,296$21,785
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..............................................................................................................................................................................................
3
28
Total...................................................................................................................................................................................................................................
3
28
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥3$28
Foreign currency translation adjustments
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
(¥6,703)(¥3,413)($32,384)
Changes in items during the period:
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
3,289
6,882
65,300Total...................................................................................................................................................................................................................................
3,289
6,882
65,300
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
(¥3,413)¥3,468$32,906
Accumulated other comprehensive income, total
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
(¥5,986)(¥2,426)($23,019)
Changes in items during the period:
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
3,560
8,194
77,749Total...................................................................................................................................................................................................................................
3,560
8,194
77,749Balance at end of current fiscal year.......................................................................................................................................................................................................................................
(¥2,426)¥5,768$54,730
Subscription rights to shares
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥186
¥245
$2,324
Changes in items during the period:
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
58
90
853
Total...................................................................................................................................................................................................................................
58
90
853
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥245
¥335
$3,178
Minority interests in consolidated subsidiaries
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥40
¥42
$398
Changes in items during the period:
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
2
(42)
(398)
Total...................................................................................................................................................................................................................................
2
(42)
(398)
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥42
¥0
$0
Net assets, total
Balance at beginning of current fiscal year.................................................................................................................................................................................................................................
¥90,460¥99,536$944,453
Changes in items during the period:
Cash dividends.................................................................................................................................................................................................................................................
(1,945)(2,241)(21,263)
Net income.....................................................................................................................................................................................................................................................
7,396
8,999
85,387
Disposal of treasury stock.....................................................................................................................................................................................................................................
4985
Net changes in items other than shareholders' equity..............................................................................................................................................................................................
3,621
8,242
78,204
Total...................................................................................................................................................................................................................................
¥9,076¥15,009$142,413
Balance at end of current fiscal year.......................................................................................................................................................................................................................................
¥99,536 ¥114,545$1,086,867
See the notes to the consolidated financial statements.

55

Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2012 and December 31, 2013

Millions of yen
12/2012
12/2013

Thousands of
U.S. dollars(Note 1)
12/2013

Cash flows from operating activities:
Income before income taxes and minority interests.....................................................................................................................................................................................................................................
¥11,170¥13,532$128,399
Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities:
Depreciation and amortization..................................................................................................................................................................................................................................
3,743
4,279
40,601
Impairment loss.............................................................................................................................................................................................................................
135
190
1,802
Increase (decrease) in allowance for doubtful receivables......................................................................................................................................................................................................
55(160)(1,518)
Increase (decrease) in provision for business structure improvement...........................................................................................................................................................................................
(177)
Increase (decrease) in employees' retirement benefits..........................................................................................................................................................................................................
186
104
986
Increase (decrease) in directors' and corporate auditors' retirement benefits ................................................................................................................................................................................
(26)
(195)
(1,850)
Increase (decrease) in provision for compensation losses.......................................................................................................................................................................................................
(159)
(299)
(2,837)
Interest and dividend income...................................................................................................................................................................................................................................
(312)
(294)
(2,789)Interest expense...............................................................................................................................................................................................................................................478
560
5,313
Foreign exchange losses (gains)................................................................................................................................................................................................................................
13
(17)
(161)
Loss (gain) on sales of property, plant and equipment...........................................................................................................................................................................................................................
(30)
(424)
(4,023)
Loss on disposal of property, plant and equipment...............................................................................................................................................................................................................................
143
65
616
Loss (gain) on valuation of investment securities..............................................................................................................................................................................................................
2
15
142
Loss (gain) on sales of investment securities..................................................................................................................................................................................................................
(17)
(161)
Decrease (increase) in trade notes and accounts receivable.....................................................................................................................................................................................................
4,133(4,222)(40,060)
Decrease (increase) in inventories.............................................................................................................................................................................................................................
40(630)(5,977)
Increase (decrease) in trade notes and accounts payable........................................................................................................................................................................................................
(2,345)
1,989
18,872Other, net..................................................................................................................................................................................................................................................... 1,417
3,209
30,448Subtotal......................................................................................................................................................................................................................................................
18,468
17,684
167,795
Interest and dividends received................................................................................................................................................................................................................................
305
289
2,742
Interest paid.................................................................................................................................................................................................................................................. (499)(591)(5,607)
Income taxes (paid) refund..............................................................................................................................................................................................................................................
(4,879)(2,307)(21,890)
Net cash provided by (used in) operating activities............................................................................................................................................................................................................
13,395
15,076
143,049
Cash flows from investing activities:
Increase in time deposits......................................................................................................................................................................................................................................
(2,410)(2,363)(22,421)
Decrease in time deposits......................................................................................................................................................................................................................................
2,410
1,505
14,280Decrease in time deposits restricted for use...................................................................................................................................................................................................................
32
32
303
Payments for purchase of marketable securities.................................................................................................................................................................................................................
(2,904)(2,404)(22,810)Proceeds from sales or redemption of marketable securities...................................................................................................................................................................................................................
2,509
2,103
19,954
Payments for purchase of property, plant and equipment.........................................................................................................................................................................................................
(6,741)(6,040)(57,310)Proceeds from sales of property, plant and equipment...........................................................................................................................................................................................................
79
870
8,255
Payments for purchase of intangibles..........................................................................................................................................................................................................................
(712)(1,535)(14,564)
Payments for purchase of investment securities.................................................................................................................................................................................................................
(147)
(23)
(218)
Proceeds from sales or redemption of investment securities.....................................................................................................................................................................................................
7
32
303
Payments for purchase of stocks of subsidiaries and affiliates...............................................................................................................................................................................................
(18)
Proceeds from sales of stocks of subsidiaries and affiliates...............................................................................................................................................................................................
77
730
Payments for transfer of business.....................................................................................................................................................................................................................................................
(322)(3,055)
Other, net.....................................................................................................................................................................................................................................................
3
(45)
(426)
Net cash provided by (used in) investing activities............................................................................................................................................................................................................
(7,891)(8,111)(76,961)
Cash flows from financing activities:
Proceeds from issuance of corporate bonds................................................................................................................................................................................................................................
14,919Payments for redemption of corporate bonds......................................................................................................................................................................................................................
(10,106)
Net increase (decrease) in short-term borrowings...............................................................................................................................................................................................................
(2,395)
185
Increase in long-term debt.....................................................................................................................................................................................................................................
1,827
1,285
Repayments of long-term debt...................................................................................................................................................................................................................................
(635)(1,534)
Repayments on finance lease obligations.................................................................................................................................................................................. (156)(183)
Net decrease (increase) of treasury stock......................................................................................................................................................................................................................
00Cash dividends paid............................................................................................................................................................................................................................................
(1,943)(2,242)
Net cash provided by (used in) financing activities............................................................................................................................................................................................................
(3,304)
2,324

141,559(95,891)
1,755
12,192(14,555)(1,736)0(21,273)
22,051

Effect of exchange rate changes on cash and cash equivalents...................................................................................................................................................................................................
891
1,098
Net increase (decrease) in cash and cash equivalents...........................................................................................................................................................................................................
3,090
10,388Cash and cash equivalents at beginning of year.................................................................................................................................................................................................................
35,76738,858Cash and cash equivalents at end of year.......................................................................................................................................................................................................................
¥38,858¥49,246

10,41898,567368,706$467,273

See the notes to the consolidated financial statements.

HORIBA Report 2013 | 56

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements

Yen amounts are rounded down to the nearest million.

The accompanying consolidated financial statements ofTherefore, total or subtotal amounts do not necessarily

HORIBA, Ltd. (“the Company”) have been prepared incorrespond with the aggregate of such account balances.

accordance with the provisions set forth in the Japanese

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

Financial Instruments and Exchange Law and its related

dollar amounts is included solely for the convenience ofaccounting regulations and in conformity with accounting

readers outside Japan, using the prevailing exchange rate

principles generally accepted in Japan (“Japanese GAAP”),

at December 31, 2013, which was ¥105.39 to U.S. $1.00.

which are different in certain respects as to application and

The translations should not be construed as

disclosure requirements from International Financial

representations that the Japanese yen amounts have been,

Reporting Standards.

could have been or could in the future be converted into

The accounts of the consolidated overseas subsidiaries

U.S. dollars at this or any other rate of exchange. The U.S.

have been prepared in accordance with either International

dollars amounts are then rounded down to the nearest

Financial Reporting Standards or U.S. generally accepted

thousand.

accounting principles, with adjustments for the five

Certain prior year amounts have been reclassified to

specified items as applicable. The accompanying

conform to the current year's presentation.

consolidated financial statements have been restructured

57

and translated into English, with some expanded

2. Summary of significant accounting policies

descriptions, from the consolidated financial statements of(a) Principles of consolidation

the Company prepared in accordance with Japanese GAAP

The consolidated financial statements include the accounts

and filed with the appropriate Local Finance Bureau of theof the Company and 37 (36 in fiscal 2012) of its subsidiaries

Ministry of Finance as required by the Japanese Financial(“HORIBA” as a consolidated group). In fiscal 2013, one

Instruments and Exchange Law. Some supplementarycompany was newly incorporated.

information included in the statutory Japanese language

The accompanying consolidated financial statements

consolidated financial statements, but not required for fairinclude the accounts of the Company and significant

presentation, is not presented in the accompanying

companies over which the Company has control throughconsolidated financial statements.

majority voting rights or certain other conditions evidencing

At the shareholders’ meetings of the Company’s domestic

control by the Company. Significant intercompany

consolidated subsidiaries, held in March 2013, a resolution

transactions and accounts have been eliminated in

was made to abolish a program of retirement benefits forconsolidation. In the elimination of investments indirectors and corporate auditors. As it has been decided tosubsidiaries, the assets and liabilities of the subsidiaries,

pay directors and corporate auditors the equivalent amountincluding the portions attributable to minority shareholders,of their retirement benefits of 201 million yen when each ofare evaluated using the fair value at the time the Company

them would retire from his position, the retirement benefits

acquired control of the respective subsidiary. Acquisition

for directors and corporate auditors were drawn down andcosts that are in excess of the net assets of acquired

included in “Other noncurrent liabilities.”

subsidiaries and affiliates and cannot be assigned toFollowing a review of the risk management policy,

specific individual accounts are amortized on a straight-line

HORIBA applies the hedge accounting method to a portion

basis over five years.

of scheduled foreign currency-denominated transactions

December 31 is the year-end of the consolidated

from fiscal 2013.

subsidiaries and that of the consolidated financial

statements for fiscal 2012 and fiscal 2013.

lives of buildings and structures range from 3 to 60 years

Two of the Company’s subsidiaries are not included in theand those of machinery, equipment and vehicles from 2 toconsolidated accounts as the effect of their inclusion on

18 years.

total assets, sales, income and retained earnings would(f) Goodwill

have been immaterial.

Goodwill, which represents the excess of the purchase

For one of the two nonconsolidated subsidiaries, theprice over the fair value of the net assets acquired, isequity method was applied.

amortized on a straight-line basis over a period of five

The Company has two affiliated companies (four in fiscal

years.

2012). Investments in the affiliates (generally 20%-50%(g) Softwareownership) and in one nonconsolidated subsidiary were

Amortization of computer software used by HORIBA is

accounted for on a cost basis, not by the equity method,computed by the straight-line method over the estimatedas the effect on income and retained earnings was

useful life of 3 to 10 years.

immaterial.

(h) Leases(b) Cash and cash equivalents

With regard to leased assets under finance leases otherCash and cash equivalents include cash on hand, readily

than those that are deemed to transfer ownership of theavailable bank deposits and short-term highly liquid

leased property to the lessee, the lease term is deemed toinvestments that are readily convertible into cash, havebe the useful life, and depreciation is computed by theinsignificant risk of change in value and have original

straight-line method over the lease term with zero residual

maturities of three months or less from date of purchase.

value. Finance leases other than those that are deemed to(c) Securities

transfer ownership of the leased property to the lessee andAvailable-for-sale securities with available fair market

which commenced in fiscal years beginning prior tovalues are stated at fair market value. Unrealized gains andJanuary 1, 2009 continue to be accounted for in a way thatlosses on these securities are reported, net of applicableis similar to the method used for operating leases.

income taxes, as a separate component of net assets.

(i) Allowance for doubtful receivables

Realized gains and losses on the sale of such securities are

The Company and its domestic subsidiaries provide forcomputed using moving average cost. Available-for-saledoubtful accounts principally at an amount computed

securities with no available fair market value are statedbased on the actual ratio of bad debts in the past plus the

mainly at moving average cost.

estimated uncollectible amounts of certain individual(d) Inventories

receivables. The overseas subsidiaries provide for doubtful

Inventories are stated at the lower of average cost or net

accounts based on estimates made by management.

realizable value. Cost is determined principally by the(j) Accrued bonuses to employees

weighted average method for merchandise, finished goods

Accrued bonuses to employees are provided for theand work-in-process and by the moving average method

expected payment of employee bonuses for fiscal 2013 tofor raw materials and supplies.

those employees employed at the end of the fiscal year.

(e) Property, plant and equipment and depreciation(k) Accrued bonuses to directors and corporate auditors(except for leases)

Some consolidated subsidiaries provide for accrued

Property, plant and equipment are stated at cost.

bonuses to directors and corporate auditors for the

Depreciation is computed by the straight-line method over

expected payment of director and corporate auditor

the estimated useful life of the asset. The estimated usefulbonuses for fiscal 2013 to those directors and corporate
HORIBA Report 2013 | 58

Financial data

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

59

auditors serving at the end of the fiscal year.

foreign currencies are translated into Japanese yen based(l) Reserve for product warranty

on exchange rates at the balance sheet date.

The reserve for product warranty is provided for accrued

Balance sheet accounts of consolidated foreign

warranty expenses for products of the Company andsubsidiaries are translated into Japanese yen at thecertain subsidiaries. The provision is based on estimatesbalance sheet date, except for shareholders’ equity

made from actual past experience and product warranty

accounts, which are translated at historical rates. Revenue

records and takes into account individual cases.

and expense accounts of consolidated foreign subsidiaries(m) Retirement benefits and pension plans

are translated into Japanese yen at average annual

The Company and some consolidated subsidiaries provide

exchange rates. Differences arising from the application offor employees’ severance and retirement benefits based on

the process stated above are presented separately in theestimated amounts of projected benefit obligation and theconsolidated financial statements in “Foreign currency

fair value of plan assets.

translation adjustments” and “Minority interests in

Actuarial gains and losses are recognized in expenses

consolidated subsidiaries” in net assets.

using the straight-line method over a fixed term of years (5(q) Derivatives

to 8 years), which is within the average of the estimatedDerivative financial instruments are stated at fair value, andremaining service years of employees, commencing withchanges in the fair value are recognized as gains or losses,

the following period. In the Company and some domestic

unless the derivative financial instruments are used forconsolidated subsidiaries, prior service costs are

hedging purposes. HORIBA uses foreign currency

recognized in expenses using the straight-line method overexchange contracts to manage risk related to its importinga fixed term of years (10 years), which is within the average

and exporting activities. Regarding derivative transactions,of the estimated remaining service years of employees,

in addition to conducting exchange agreement transactionscommencing in the period they arise. In some consolidated

within the limit of the balance of foreign currency-

subsidiaries, they are expensed as incurred.

denominated receivables and payables, HORIBA conducts(n) Provision for compensation losses

forward exchange agreement transactions for the expected

Provision is made for potential losses arising from paying

foreign currency-denominated receivables and payables,

compensation for damages. It is provided for potential

which would be generated with certainty by scheduled

compensation for damages to local public agencies andexport or import trading. HORIBA also uses interest rate

litigation expenses that can be associated with answap contracts to avoid the risk of rising interest rates.

infringement of the Antimonopoly Law.

Contracts are entered into and controlled by the finance(o) Sales and costs of completed construction

department, which reports results to the director.

Sales and costs of completed construction were recorded

Transactions involving derivative contracts are limited tousing the percentage of completion method when thehighly rated banking institutions, and HORIBA considers

progress of the construction up to the end of fiscal 2013that there are no material credit risks associated with them.

was deemed to be certain (estimates of the ratio of(r) Hedge accounting

completion of construction work are based on the cost-to-ⅰi) Hedge accounting method

cost method). In the case of other construction, sales andDeferred hedge accounting is applied.

costs were recorded using the completed contract method.

ⅱii) Hedging instruments and hedged items(p) Foreign currency translation

Hedging instruments: Forward foreign exchange contracts,

Short-term and long-term receivables and payables inetc.

Hedged items: Foreign currency-denominated forecast

the weighted average number of shares of common stocktransactions

outstanding during each period. The weighted averageiii) Hedging policy

number of shares of common stock used in the

Forward foreign exchange transactions are used to avoid

computation for fiscal 2012 and fiscal 2013 was 42,297

foreign currency risks, based on the Company’s

thousand and 42,299 thousand, respectively. Diluted net

Administrative Rules.

income per share of common stock assumes full conversionⅳiv) Assessment of hedge effectivenessof dilutive convertible bonds at the beginning of the year or

The effectiveness of hedges is assessed by comparing theat the later date of issuance, with an applicable adjustment

cumulative change of cash flows of both hedging

for related interest expense, net of tax and dilutive stock

instruments and corresponding hedged items. However,

option plans. The weighted average number of shares used

the assessment of effectiveness is not conducted forin the computation for fiscal 2012 and fiscal 2013 was

forward foreign exchange contracts as the significant

42,418 thousand and 42,448 thousand, respectively.

conditions of both hedging instruments and corresponding

Cash dividends per share shown in the consolidated

hedged items are the same.

statements of income represent actual amounts applicable(s) Research and development expenses

to earnings in the respective fiscal year, including dividends

Research and development expenses are charged toto be paid after the end of the period.

income when incurred. Research and development
expenses charged to income for fiscal 2012 and fiscal 2013

3. Accounting standards issued but not yet effective

were ¥10,092 million and ¥10,774 million ($102,229“Accounting Standard for Retirement Benefits” (ASBJ

thousand), respectively.

Statement No. 26, issued on May 17, 2012) and “Guidance(t) Income taxes

on Accounting Standard for Retirement Benefits” (ASBJ

Income taxes comprise corporate tax, enterprise tax andGuidance No. 25, issued on May 17, 2012)prefectural and municipal inhabitant taxes.

(a) Overview

HORIBA recognizes the tax effects of loss carryforwards

With a viewpoint of improving financial reporting and inand the temporary differences between the carrying

consideration of international trends, application of theseamounts of assets and liabilities for tax and financial

accounting standards is intended to improve thereporting. The provision for current income tax is computed

accounting method for actuarial gains and losses and past

based on the pretax income included in the consolidated

service costs that are yet to be recognized and the method

statements of income.

of calculation for retirement benefit obligations and service

The asset/liability approach is used to recognize deferredcost and to expand disclosure.

tax assets and liabilities for the expected future tax(b) Date of applicationconsequences of temporary differences between the

HORIBA will apply this accounting standard effective fromcarrying amounts of assets and liabilities for financial

the end of fiscal year beginning on or after January 1, 2014.

reporting purposes and the amounts used for income tax(c) Effect of applying these accounting standards

purposes.

HORIBA is currently evaluating the effect of applying these

The Company and its consolidated domestic subsidiaries

accounting standards on its consolidated financial

have adopted the consolidated taxation system.

statements.

(u) Per share information
The computations of net income per share are based on
HORIBA Report 2013 | 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 andbond issuances. 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
Notes receivable 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 notes payable 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 operatingreceivables and payables 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 thetransactions and HORIBA endeavors to reduce any risk by ensuring that the market value information regarding the shares isreported 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 balanceof 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
or import trading. HORIBA conducts interest rate swap transactions aimed at avoiding interest rate fluctuation risk within thelimit 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 maychange due to the adoption of different assumptions. With regard to contract amounts related to derivative transactions in theNotes to Consolidated 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, 2012 and December
31, 2013 are set forth in the table below. Financial instruments whose fair value was extremely difficult to estimate are not included(See Note 2).
Millions of yen
Millions of yen
12/2012
12/2013
Book value Fair value

61

DifferenceBook value Fair value

Difference

Assets:(1) Cash and time deposits..................................................................................
¥34,685¥34,685(2) Trade notes and accounts receivable..................................................................................
37,521
37,521(3) Marketable securities and investment securities
Available-for-sale securities..................................................................................
9,931
9,931
Total................................................................................................................................................
¥82,138¥82,138-¥42,228
47,412¥42,228
47,412--

16,127¥105,767

16,127¥105,767-

Liabilities:(1) Trade notes and accounts payable..................................................................................
¥11,829¥11,829(2) Short-term loans..................................................................................................................
5,523
5,523
(3) Accounts payable - other.................................................................................................
9,195
9,195
(4) Accrued income taxes......................................................................................................
1,317
1,317
(5) Bonds................................................................................................................................
10,000
10,239(6) Long-term loans..................................................................................................................
2,113
2,145
Total.....................................................................................................................................................
¥39,979¥40,251

239
32
¥272

¥16,409
6,606
12,112
3,523
15,0002,576¥56,229¥16,409
6,606
12,112
3,523
14,891
2,477¥56,021(108)(99)(¥207)

Derivative transactions(1) Hedge accounting not applied..................................................................................
(¥190)(¥190)(2) Hedge accounting applied.........................................................
Total.....................................................................................................................................................
(¥190)(¥190)-(¥188)
5(¥182)(¥188)
5(¥182)-

Thousands of U.S. dollars
12/2013
Book value

Fair value

Difference

Assets:(1) Cash and time deposits.......................................................................................................................................................................................................................................................................................
$400,683$400,683(2) Trade notes and accounts receivable..........................................................................................................................................................................................................................................................
449,871449,871(3) Marketable securities and investment securities
Available-for-sale securities..........................................................................................................................................................................................................................................................
153,022
153,022
Total...........................................................................................................................................................................................................................................................................................................................
$1,003,577$1,003,577-

Liabilities:(1) Trade notes and accounts payable...............................................................................................................................................................................................................................................................
$155,697$155,697(2) Short-term loans....................................................................................................................................................................................................................................................................................................
62,681
62,681(3) Accounts payable - other..........................................................................................................................................................................................................................................................
114,925
114,925(4) Accrued income taxes..................................................................................................................................................................................................
33,42833,428(5) Bonds............................................................................................................................................................................................................................................................................
142,328
141,294(1,024)(6) Long-term loans..............................................................................................................................................................................................
24,442
23,503(939)
Total.................................................................................................................................................................................................................................................................
$533,532$531,558($1,964)
Derivative transactions(1) Hedge accounting not applied..............................................................................................................................................
($1,783)(2) Hedge accounting applied........................................................................................................................................................
47
Total.........................................................................................................................................................................................................
($1,726)($1,783)47($1,726)-

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 isbased on 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, (3) Accounts payable - other and (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 areshown in parenthesis.
Note 2. The following table summarizes financial instruments whose fair value was extremely difficult to estimate.
Thousands ofMillions of yen
U.S. dollars
12/2012
12/2013
12/2013
Non-listed equity securities...................................................................................................................................................
¥146
¥129
$1,224
Investments in nonconsolidated subsidiaries and affiliates.............................................................................................................
67
105
996
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 2013 | 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
12/2012Over one year Over five years
Within one
but within five
but within ten Over ten years
year
years
years
Cash and time deposits.........................................................................................................................................................
¥34,685
Trade notes and accounts receivable..................................................................................
37,521Marketable securities and investment securities
Available-for-sale securities with maturities(1) Corporate bonds.............................................................................................................................................
1,498
200
(2) Other.............................................................................................................................................
1,000
18
7
Total....................................................................................................................................................................
¥74,706¥219¥7Millions 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(1) Governmental/municipal bonds...........................................................................................................................................
10(2) Corporate bonds............................................................................................................................................
401
200(3) Other bonds............................................................................................................................................
1,099(4) Other.............................................................................................................................................
799
27
14
Total....................................................................................................................................................................
¥91,941¥238¥14
Thousands of U.S. dollars
12/2013Over one year Over five years
Within one
but within ten Over ten years
but within five
year
years
years
Cash and time deposits........................................................................................................................................
$400,683
Trade notes and accounts receivable..................................................................................
449,871
Marketable securities and investment securities
Available-for-sale securities with maturities(1) Governmental/municipal bonds...........................................................................................................................................
94(2) Corporate bonds............................................................................................................................................
3,804
1,897
(3) Other bonds............................................................................................................................................
10,427(4) Other.............................................................................................................................................
7,581
256
132
Total....................................................................................................................................................................
$872,388$2,258$132
Note 4. Repayment schedule of bonds and long-term debt
See Note 8 for short-term loans and long-term debt.

63

5. Securities
The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities as ofDecember 31, 2012 and December 31, 2013.
Millions of yen
12/2012Acquisition
Book value
Difference
costMillions of yen
12/2013
Acquisition
DifferenceBook value
cost

Securities with book values
exceeding acquisition costs:
Equity securities..................................................................................
¥2,470¥860¥1,609Governmental/municipal bonds..................................................................................
Corporate bonds..................................................................................
600
599
1
Other..................................................................................
1,010
1,010
0
Subtotal..................................................................................
4,081
2,470
1,611

¥5,636
10
100
500
6,247

¥2,178
10
100
500
2,788

¥3,4570003,459

Securities with book values notexceeding acquisition costs:
Equity securities..................................................................................
1,151
1,310
Corporate bonds..................................................................................
498
499
Other bonds..................................................................................
599
600
Other..................................................................................
3,598
3,598
Subtotal..................................................................................
5,849
6,008

(158)
(0)
(0)
(159)

301
1,299
8,278
9,879

301
1,300
8,278
9,880

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

Total.....................................................................................................................
¥9,931¥8,479¥1,451¥16,127¥12,668¥3,458

Thousands of U.S. dollars
12/2013
Acquisition
DifferenceBook value
cost

Securities with book values
exceeding acquisition costs:
Equity securities......................................................................................................................................................................................................................................................................................................................................
$53,477$20,666$32,801
Governmental/municipal bonds...................................................................................................... 94
94
0
Corporate bonds....................................................................................................................................................
948
948
0
Other..........................................................................................................................................................................
4,744
4,744
0
Subtotal................................................................................................................................................................................................
59,27526,45432,820
Securities with book values notexceeding acquisition costs:
Corporate bonds..........................................................................................................................................................................
2,856
2,856
Other bonds..........................................................................................................................................................................
12,325
12,335
Other..........................................................................................................................................................................
78,54678,546
Subtotal..........................................................................................................................................................................
93,73793,747

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

Total...................................................................................................................................................................................................................................
$153,022$120,201$32,811Note. Non-listed equity securities, etc, of \146 million and \129 million ($1,224 thousand) for the fiscal year ended
December 31, 2012 and December 31, 2013, 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, 2012 andDecember 31, 2013.
Thousands ofMillions of yen
U.S. dollars
12/2012
12/2013
12/2013
Total sales of available-for-sale securities............................................................................................
¥30$284
Related gains..........................................................................................................................................................................................................
17
161
Impairment loss on marketable securities
The Company recognized an impairment loss of \2 million and \15 million ($142 thousand） in fiscal 2012 and fiscal
2013, respectively, on available-for-sales securities. When applying impairment accounting, if the market value at theend of the term has fallen by more than 50% from the acquisition 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 amountrecognized as necessary after considering the possibility of recovery, etc.

HORIBA Report 2013 | 64

Financial data

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

6. Inventories
Inventories at December 31, 2012 and December 31, 2013 consisted of the following:Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Merchandise and finished goods...........................................................................................................................................................................................................................................
¥10,099¥11,111$105,427
Work-in-process......................................................................................................................................................................................................................................................
10,05312,755
121,026
Raw materials and supplies.....................................................................................................................................................................................................................................................
7,947
9,218
87,465
Total......................................................................................................................................................................................................................................................
¥28,101¥33,085$313,929

7. Notes receivable maturing on December 31, 2012 and December 31, 2013, which were bankholidays
December 31, 2012 and December 31, 2013, the end of the period, were bank holidays. Notes receivable maturing on
those dates were settled on the following business day. Therefore, notes in the amount of \318 million were includedin the ending balance at December 31, 2012 and notes in the amount of \290 million ($2,751 thousand) were included in
the ending balance at December 31, 2013.

8. Short-term loans and long-term debt
Short-term loans are generally represented by bank notes with annual interest rates ranging from 0.49% to 12.24% and0.48% to 15.93% at December 31, 2012 and December 31, 2013, respectively.
Long-term debt at December 31, 2012 and December 31, 2013 consisted of the following:
Millions of yen
12/2012
12/2013

Thousands of
U.S. dollars
12/2013

Unsecured:
1.98% bonds due in 2014....................................................................................................................................................................
¥10,000
0.609% bonds due in 2020....................................................................................................................................................................
15,000142,328
Loans from banks due serially from 2014 to 2022
at rates from 2.00% to 17.65% per annum....................................................................................................................................................................
3,335
3,648
34,614
Lease obligations at 6.77% maturing serially through 2018
447
394
3,738
Total......................................................................................................................................................................................................................................................
13,78319,043
180,690
Current portion....................................................................................................................................................................
(1,388)(1,229)(11,661)Long-term debt, less current portion....................................................................................................................................................................
¥12,394¥17,814$169,029
The aggregate annual maturities of long-term debt outstanding at December 31, 2013 were as follows:
Thousands ofYear ending December 31
Millions of yen
U.S. dollars
2014......................................................................................................................................................................................................................................................
¥1,229$11,661
2015......................................................................................................................................................................................................................................................
837
7,941
2016......................................................................................................................................................................................................................................................
543
5,152
2017......................................................................................................................................................................................................................................................
342
3,245
2018......................................................................................................................................................................................................................................................
284
2,694
Thereafter......................................................................................................................................................................................................................................................
15,807
149,985
Total......................................................................................................................................................................................................................................................
¥19,043$180,690
As of December 31, 2013, the Company and its 9 subsidiaries had entered into agreements for bank overdrafts orloan commitments with 11 banks as follows:
Thousands ofMillions of yen
U.S. dollars
The maximum aggregate principal....................................................................................................................................................................
¥17,376$164,873
Amount utilized......................................................................................................................................................................................................................................................
1,077
10,219Balance available......................................................................................................................................................................................................................................................
¥16,299$154,654

659. Employees' severance and pension benefits
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 Machineryand Metal Employees ’ Pension Fund (general type). The Company and some domestic consolidated subsidiaries use both defined
contribution and defined benefits plans.
(1) The funded status of the multi-employer pension plan at December 31, 2012 and December 31, 2013 (available information as ofMarch 31, 2012 and 2013), to which contributions were recorded as net periodic retirement benefit costs, was as follows:(a) Funded status of pension plans

Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Fair value of plan assets................................................................................................................................................................
¥46,533¥49,891$473,394
Pension benefits obligation recorded by pension fund................................................................................................................................................................
77,13871,774
681,032
Net balance....................................................................................................................................................................................................
(¥30,604) (¥21,883)($207,638)(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% (15.55% from March 1, 2012 to March 31, 2012).
Note 1. Net balance resulted from the prior service cost of \20,604 million and \20,390 million ($193,471 thousand), and the shortage ofreserve for plan assets of \10,000 million and \1,493 million ($14,166 thousand) for the years ended December 31, 2012 andDecember 31, 2013, respectively.
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 a policy to carry out a special dissolution at the representative assembly that took place on
February 20, 2014. Accordingly, HORIBA plans to post an approximately 2 billion yen estimated loss in association with thedissolution as “Provision for loss on dissolution of the employees’ pension fund” (Other expenses) for fiscal 2014.
(2) Liabilities for employees' retirement benefits at December 31, 2012 and December 31, 2013 consisted of the following:Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Projected benefit obligation....................................................................................................................................................................
(¥6,432)(¥7,782)($73,840)
Pension assets......................................................................................................................................................................................................................................................
4,240
5,406
51,295
Unfunded projected benefit obligation....................................................................................................................................................................
(2,191)(2,375)(22,535)
Unrecognized actuarial differences....................................................................................................................................................................
1
(41)
(389)
Unrecognized prior service costs....................................................................................................................................................................
123
985
Employees' retirement benefits....................................................................................................................................................................
(¥2,066)(¥2,406)($22,829)
Employees' retirement benefits expense for the years ended December 31, 2012 and December 31, 2013 comprised the following:Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013Service cost......................................................................................................................................................................................................................................................
¥845
¥908
$8,615Interest expense on projected benefit obligation....................................................................................................................................................................
145
159
1,508
Expected return on plan assets......................................................................................................................................................................................................................................................
(71)
(118)
(1,119)Amortization of actuarial differences....................................................................................................................................................................
209
82
778
Amortization of prior service costs....................................................................................................................................................................
117
114
1,081
Other................................................................................................................................................................................................................
438
539
5,114
Retirement benefits expense......................................................................................................................................................................................................................................................
¥1,684¥1,684$15,978
Note 1. Premiums on the contributory funded retirement plan in the amount of \447 million and \478 million ($4,535 thousand)expensed for the year ended December 31, 2012 and December 31, 2013, respectively, were also included in service cost.
Note 2. "Other" is plan participants' contribution to the defined contribution pension plan.
Assumptions used were as follows:
12/2012
12/2013
Discount rate (mainly)......................................................................................................................................................................................................................................................
2.00% 1.20-1.50%
Expected rate of return on plan assets (mainly)....................................................................................................................................................................
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 2013 | 66

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 statementsof the Company in accordance with Japanese laws and regulations.
At the Board of Directors' meeting held on February 13, 2014, the Board of Directors approved cash dividends in the amount of\1,776 million ($16,851 thousand). The appropriation had not been accrued in the consolidated financial statements as of December 31,
2013. 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
Thousands ofMillions of yen
U.S.dollars
12/2012
12/2013
12/2013$939
Selling, general and administrative expenses....................................................................................................................................................................
¥63¥99(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. 1 Stock-based
No. 2 Stock-based
No. 3 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
13 corporate officers
14 corporate officers 16 corporate officers 16 corporate officersof the Companyof the Companyof the Companyof the Company
Persons granted options
Common stock
Common stock
Common stock
Number of shares by type of stock
Common stock
54,200 shares
26,400 shares
31,000 shares(Note 1)
28,200 shares
April 16, 2009
April 23, 2010
April 21, 2011
April 24, 2012
Date of grant(Note 2)
(Note 2)
Vesting conditions(Note 2)
(Note 2)Service period(Note 3)(Note 3)(Note 3)(Note 3)
April 17, 2009
April 22, 2011
April 24, 2010
April 25, 2012
to
to
to
to
April 16, 2039
April 21, 2041
April 23, 2040
April 24, 2042
Exercise period
No. 5 Stock-based
Compensation Type
Stock Option
4 directors and
14 corporate officersof the Company,
2 directors and3 corporate officers
Persons granted optionsof the subsidiaries
Common stock
Number of shares by type of stock(Note 1)
33,200 shares
Date of grantMay 8, 2013
Vesting conditions(Note 2)Service period(Note 3)
May 9, 2013
toMay 8, 2043
Exercise period
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.

67

(b) Number, movement and price of stock options
Stock options are convertible into an equal number of shares.
(i) Number of shares

Options before vesting(number of shares)
Balance at December 31, 2012
GrantedForfeited
VestedBalance at December 31, 2013
Options after vesting(number of shares)
Balance at December 31, 2012
VestedExercised
Forfeited
Balance at December 31, 2013

No. 4 Stock-based
Compensation Type
Stock Option

No. 3 Stock-based
Compensation Type
Stock Option

No. 2 Stock-based
Compensation Type
Stock Option

No. 1 Stock-based
Compensation Type
Stock Option

-

-

-

-

47,4001,300
46,10024,200600
23,60030,400700
29,70028,200
1,100
27,100No. 1 Stock-based
Compensation Type
Stock Option

No. 2 Stock-based
Compensation Type
Stock Option

No. 3 Stock-based
Compensation Type
Stock Option

1
3,073
1,091

1
3,073
2,628

No. 5 Stock-based
Compensation Type
Stock Option
Options before vesting(number of shares)
Balance at December 31, 2012
GrantedForfeited
VestedBalance at December 31, 2013
Options after vesting(number of shares)
Balance at December 31, 2012
VestedExercised
Forfeited
Balance at December 31, 201333,20033,200-33,200700
32,500(ii) Price per share

Option price (yen)Weighted average stock price (yen)Fair value at grant date (yen)No. 4 Stock-based
Compensation Type
Stock Option
1
1
3,073
3,073
2,208
2,245

No. 5 Stock-based
Compensation Type
Stock Option
Option price (yen)Weighted average stock price (yen)Fair value at grant date (yen)

1
3,648
2,988

HORIBA Report 2013 | 68

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. 5 Stock-based Compensation Type Stock Option in the year ended December 31, 2013 was estimatedusing the Black-Scholes option pricing model as follows:
No. 5 Stock-based
Compensation Type
Stock Option
Stock price volatility (Note 1)
Expected remaining period (Note 2)
Expected dividend (Note 3)
Risk free interest rate (Note 4)

36.9%
15 Years\50/share
1.14%

Note 1. Stock price volatility was calculated based on actual weekly stock prices over 15 years (from the week of May 4, 1998 to the weekof April 29, 2013).
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, 2012.
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, 2012 and December 31, 2013 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, 2012 and December 31, 2013, assets leased under non-capitalized finance leases were as follows:
Acquisition cost, accumulated depreciation and balance of assets leased
Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Machinery, equipment and vehicles.....................................................................................................................................................................
¥109
¥109
$1,034
Other property, plant and equipment....................................................................................................................................................................
117
45
426
Other intangibles....................................................................................................................................................................
4
Less accumulated depreciation and amortization....................................................................................................................................................................
(181)
(128)
(1,214)
Total......................................................................................................................................................................................................................................................
¥50
¥27
$256
Note.

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 \1 million and \0 million ($0 thousand) and depreciation and amortization of \52 million and\23 million ($218 thousand) would have been recorded for the years ended December 31, 2012 and December 31, 2013,
respectively. Lease payments under non-capitalized finance leases were \56 million and \25 million ($237 thousand) for theyears ended December 31, 2012 and December 31, 2013, respectively. Obligations under finance leases at December 31, 2012 andDecember 31, 2013 were as follows:
Thousands of
U.S. dollars
Millions of yen
Payments remaining:
12/2012
12/2013
12/2013
Payments due within 1 year....................................................................................................................................................................
¥25
¥20
$189
Payments due after 1 year....................................................................................................................................................................
29
8
75
Total....................................................................................................................................................................
¥54
¥29
$275

Payments remaining under operating leases at December 31, 2012 and December 31, 2013 were as follows:
Thousands of
U.S. dollars
Millions of yen
Payments remaining:
12/2012
12/2013
12/2013
Payments due within 1 year....................................................................................................................................................................
¥626
¥805
$7,638
Payments due after 1 year....................................................................................................................................................................
1,846
1,603
15,210Total....................................................................................................................................................................
¥2,472¥2,409$22,857

13. Contingent liabilities
The Company and certain consolidated subsidiaries were contingently liable as guarantors of loans to affiliated companies andnonconsolidated subsidiaries in the amounts of \116 million at December 31, 2012.
The outstanding amount for which the Company was contingently liable under a debt assumption agreement was \10,000 million ($94,885
thousand) of the HORIBA, Ltd. No. 3 Unsecured Straight Bonds at December 31, 2013.

69

14. Derivative transactions
Derivative transactions for which hedge accounting was not applied at December 31, 2012 and December 31, 2013 were as follows:
Currency related:
Millions of yen
Millions of yen
12/2012
12/2013
Amount ofAmount ofMarketGainContract
Contract
Marketprincipal due
principal due
value(loss)
amountamountvalue
over 1 year
over 1 year
Forwards
Selling
US dollar¥1,797(¥32)(¥32)¥3,575
(¥84)
Euro
1,018
193
(98)
(98)
1,861
(141)
Pound
95
(6)
(6)
225
(9)
Hong Kong dollar
8(0)
BuyingUS dollar
52
2
Euro
597
41
Pound
25
0
Yen
160
(6)
Currency swap
Receiving in US dollar
and paying in Real
147
121
9
Total
¥2,911¥193(¥136)(¥136)¥6,656¥121(¥188)
Note. Market value is determined by banking institutions.
Thousands of U.S. dollars
12/2013
Amount ofMarketprincipal due
value
over 1 year

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

Gain
(loss)

(¥84)
(141)
(9)
(0)
2
41
0
(6)

9
(¥188)

Gain(loss)$33,921
17,6582,134
75-($797)(1,337)(85)(0)($797)(1,337)
(85)
(0)

493
5,664
237
1,518

-

18
389
0
(56)

18
389
0
(56)

1,394
$63,155

1,148$1,14885($1,783)85($1,783)

Interest rate related:

Contract
amountMillions of yen
12/2012Amount ofMarketprincipal due
value
over 1 year

Interest rate swap contracts
Receiving floating rates¥1,957and paying fixed rates
Total¥1,957Note. Market value is determined by banking institutions.

(¥53)
(¥53)

Gain
(loss)

Millions of yen
12/2013
Amount ofMarketprincipal due
value
over 1 year

Contract
amount

(¥53)
(¥53)

-

-

Gain
(loss)-

Derivative transactions for which hedge accounting was applied at December 31, 2012 and December 31, 2013 were as follows:
Currency related:
Millions of yen
Millions of yen
12/2012
12/2013
Amount ofAmount ofHedgedContract
MarketHedgedContractprincipal due
principal due
items
amountvalue
items
amountover 1 year
over 1 year
Forwards
Selling
AccountsEuro¥8
receivable
BuyingAccounts
Euro54
payableTotal¥63
Note. Market value is determined by banking institutions.

Hedgeditems
Forwards
SellingEuro
BuyingEuro
Total

Accounts
receivable
Accounts
payableThousands of U.S. dollars
12/2013
Amount ofContractprincipal due
amountover 1 year-

Market
value

(¥0)
6
¥5

Market
value

$75

-

($0)

512
$597

-

56
$47

HORIBA Report 2013 | 70

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 Japan of approximately 40.6% for the year ended December 31, 2012 and 37.9% for the year ended December
31, 2013.
The following table summarizes the significant differences between the statutory tax rate and HORIBA's effective tax
rate for financial statement purposes for the years ended December 31, 2012 and December 31, 2013.
12/2012
12/2013
Statutory tax rate.................................................................................................................................................................
40.6%
37.9%
Expenses not qualifying for permanent deduction,e.g. entertainment expenses............................................................................................................................
1.2
1.0
Nontaxable dividend income.................................................................................................................................................................
(0.2)
(0.7)
Per capita inhabitants tax.......................................................................................................................................................
0.4
0.3
Increase/decrease in valuation allowance for deferred tax assets........................ 0.0
0.7
Differences in tax rate between
foreign subsidiaries and the Company..................................................................................................
(3.3)
(2.6)
Tax credits.................................................................................................................................................................................................
(4.3)
(4.2)
Other.........................................................................................................................................................................................................
(0.6)
1.4
Effective tax rate......................................................................................................................................................................................................................................................
33.8%
33.8%

Significant components of HORIBA's deferred tax assets and liabilities at December 31, 2012 and December 31, 2013
were as follows:
Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Deferred tax assets
Accrued enterprise tax....................................................................................................................................................................
¥162
¥243
$2,305
Loss on write-down of inventory....................................................................................................................................................................
829
981
9,308
Allowance for doubtful receivables....................................................................................................................................................................
66
79
749
Accrued bonuses....................................................................................................................................................................
200
220
2,087
Loss carryforwards....................................................................................................................................................................
1,463
2,146
20,362
Unrealized gains....................................................................................................................................................................
999
1,379
13,084
Employees' retirement benefits....................................................................................................................................................................
608
641
6,082
Depreciation....................................................................................................................................................................
644
558
5,294
Loss on valuation of investment securities....................................................................................................................................................................
103
108
1,024
Retirement benefits for directors and corporate auditors.................................................................................................................................................................................
319
Loss on impairment of fixed assets....................................................................................................................................................................
115
117
1,110
Other....................................................................................................................................................................................................
2,033
2,406
22,829Total deferred tax assets....................................................................................................................................................................
7,546
8,885
84,305
Valuation allowance....................................................................................................................................................................
(1,206)(1,807)(17,145)
Net deferred tax assets....................................................................................................................................................................
6,339
7,078
67,160
Deferred tax liabilities
Unrealized losses....................................................................................................................................................................
(390)
(399)
(3,785)Net unrealized holding gains on securities..................................................................................
(463)(1,161)(11,016)
Other......................................................................................................................................................................................................................................................
(733)(1,326)(12,581)
Total deferred tax liabilities....................................................................................................................................................................
(1,587)(2,888)(27,402)
Net deferred tax assets....................................................................................................................................................................
¥4,751¥4,189$39,747

Net deferred tax assets are included in the consolidated balance sheets as follows:
Thousands of
U.S. dollars
Millions of yen
12/2012
12/2013
12/2013
Current assets..................................................................................................................................................................................................
¥2,881¥3,186$30,230
Investments and other noncurrent assets......................................................................................................................................................................................................................
2,030
1,750
16,604Current liabilities.....................................................................................................................................................................................................................
(6)
(87)
(825)
Long-term liabilities......................................................................................................................................................................................................................
(153)
(659)
(6,252)
Net deferred tax assets....................................................................................................................................................................
¥4,751¥4,189$39,74771

16. 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, 2012.
Location

Use

Montpellier, France
Neuhausen, Germany
Kyoto, Japan

Idle
Idle

Type
Millions of yen
Machinery and equipment¥104
Other equipment
Goodwill
21
Land
8(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 value of these assets was lowered to the recoverable value, and the resulting impairment loss was recognized asother expenses.
(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 ordivert machinery and equipment and other equipment elsewhere, the recoverable amount was estimated at zero, while therecoverable amount for land was estimated 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 wasrecognized 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, 2013.
Location
Beijing, China

Use-

Longjumeau, France
Montpellier, France
Kyoto, Japan

Idle
Idle
Idle

Type
Millions of yen
Goodwill¥143
Buildings and structures
32
Land
Machinery and equipment
10
Land
4

U.S. dollars$1,356303
94
37(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 value of these assets was lowered to the recoverable value, and the resulting impairment loss was recognized asother expenses.
(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 ordivert machinery and equipment elsewhere, the recoverable amount was estimated at zero, while the recoverable amountfor land was estimated based on publicly announced market values for land. Furthermore, in regard to goodwill, the unamortizedbalance for which it was acknowledged that income was unlikely to be obtained in the future was recognized as an impairment
loss.

HORIBA Report 2013 | 72

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements
17. Asset retirement obligations
The note for asset retirement obligations has been omitted as there were no significant amount of asset retirement obligations.

18. Investment and rental property
The note for investment and rental property has been omitted as there were no significant amount of investment or rental property.

19. Consolidated statement of comprehensive income
Components of other comprehensive income for the years ended December 31, 2012 and December 31 2013, consisted of the following

Thousands ofMillions of yen
U.S. dollars
Unrealized gains (losses) on available-for-sale securities:
2012
2013
2013
Increase (decrease) during the year...................................................................................................................................................................................................................................................................................................
¥413¥2,024$19,204
Reclassification adjustment............................................................................................................................................................................................................
(17)
(161)
Subtotal, before tax..................................................................................................................................................................................................................................................
413
2,006
19,034Tax (expense) or benefit........................................................................................................................................................................................................................................
(143)
(698)
(6,623)
Subtotal, net tax..........................................................................................................................................................................................................................................................
270
1,308
12,411
Deferred gains or losses on hedges
Increase (decrease) during the year..............................................................................................................................................................................................................
547
Tax (expense) or benefit........................................................................................................................................................................................................................................
(2)(18)
Subtotal, net tax..........................................................................................................................................................................................................................................................
328
Foreign currency translation adjustments
Increase (decrease) during the year..............................................................................................................................................................................................................
3,297
6,896
65,433
Share of other comprehensive income of associates accounted for using the equity method
Increase (decrease) during the year...............................................................................................................................................................................................................
(2)
(8)
(75)
Total other comprehensive income............................................................................................................................................................................................................
¥3,565¥8,199$77,796

20. 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
plan for 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
Environmental Measuring Instruments (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
Scientific Analysis Instruments (pH Meters, Particle-Size Distribution Analyzers, X-Ray Fluorescence Analyzers, Raman, Spectrophotometers,
Diffraction, 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.

73

(3) Information regarding income (loss), assets and other material items by reportable segment
Millions of yen
12/2012
Automotive

Process &Environmental

MedicalDiagnostic

Sales
Sales to outside customers..................................................................................
¥43,230¥13,709¥22,400
Intersegment sales and transfers..................................................................................
Total..........................................................................................
43,23013,70922,400
Segment income (loss)...................................................................................
¥4,412¥1,642¥2,478Segment assets..................................................................................
¥37,755¥12,313¥18,277
Other items:
Depreciation..................................................................................
1,133
385
1,131
Amortization of goodwill..................................................................................
44
Increase in tangible and intangible
fixed assets................................................
2,031
720
1,486

Semiconductor

Scientific

Adjustment

Consolidated¥17,861
17,861¥2,274¥18,963¥20,406
20,406¥943¥17,661¥48,865¥117,609
117,609¥11,751¥153,836

547
37

447
16

-

3,645
98

1,855

1,788

-

7,882

Millions of yen
12/2013
Automotive

Process &Environmental

MedicalDiagnostic

Sales
Sales to outside customers..................................................................................
¥49,524¥14,711¥26,832
Intersegment sales and transfers..................................................................................
Total..........................................................................................
49,524
14,711
26,832
Segment income (loss)..................................................................................
¥4,287¥1,263¥2,429Segment assets..................................................................................
¥43,148¥13,676¥23,931
Other items:
Depreciation..................................................................................
1,344
440
1,095
Amortization of goodwill..................................................................................
Increase in tangible and intangible
fixed assets................................................
2,231
672
1,751

Automotive

Process &Environmental

Semiconductor

Scientific

Consolidated¥24,153
24,153¥4,815¥25,025¥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

Thousands of U.S. dollars
12/2013
MedicalSemiconductor Scientific
Diagnostic

Sales
Sales to outside customers..................................................................................
$469,911$139,586$254,597Intersegment sales and transfers..................................................................................
Total..........................................................................................
469,911
139,586
254,597
Segment income (loss)..................................................................................
$40,677$11,984$23,047
Segment assets..................................................................................
$409,412$129,765$227,070
Other items:
Depreciation..................................................................................
12,752
4,174
10,389Amortization of goodwill..................................................................................
Increase in tangible and intangible
21,1686,376
16,614fixed assets................................................

Adjustment

Adjustment

Consolidated$229,177
229,177$45,687$237,451$217,411
217,411$8,890$205,996$586,165$1,310,712
1,310,712$130,306$1,795,891

6,129
445

6,215
455

-

39,681910

18,398

10,285-72,872

Note 1. Details of adjustment amounts are as follows:(1)Unallocated amounts to be included in the adjustment amount of segment profits was not generated.
(2)The adjustment amounts of \48,865 million and \61,776 million ($586,165 thousand) of segment assets for the years ended
December 31, 2012 and December 31, 2013 represent corporate assets that are not allocated to each business segment. They include
cash and cash equivalents, short-term investments, investment securities, idle land, etc.
Note 2. Depreciation and increases in tangible and intangible fixed assets include long-term prepaid expenses and the amount of amortization
associated with the expenses.

HORIBA Report 2013 | 74

Financial data

HORIBA, Ltd. and Consolidated Subsidiaries | Note to Consolidated Financial Statements<Related Information>
1. Information regarding geographic areas(1) Net sales
Thousands of
U.S. dollars
Millions of yen
2012
2013
2013
Japan........................................................................................................................................................................................................................................
¥45,777¥48,496$460,157
United States........................................................................................................................................................................................................................................
182,531
14,17019,237
Europe...................................................................................................................................................................................................................................
318,597
27,421
33,577
Asia.........................................................................................................................................................................................................................................
294,003
26,27030,985
Others...................................................................................................................................................................................................................................
3,969
5,839
55,403
Total............................................................................................................................................................................................................................................................
¥117,609¥138,136$1,310,712
Note. Net sales are categorized by country or geographic area based on the location of the customer.
(2) Property, plant and equipment
Millions of yen
2012
2013
Japan..........................................................................................................................................................................................................................................
¥15,649¥16,096
France...................................................................................................................................................................................................................................
5,624
6,387
Others....................................................................................................................................................................................................................................
6,904
10,842
Total..........................................................................................................................................................................................................................
¥28,179¥33,326

Thousands of
U.S. dollars
2013$152,727
60,603102,875$316,215

2. Information regarding major customers
There is no customer who represents more than 10% of the consolidated sales.
3. Information regarding loss on impairment of fixed assets by reporting segment
Millions of yen
2012
2013
Automotive Test Systems..................................................................................................................................................................................
¥21
Medical-Diagnostic Instruments & Systems.................................................................................................................................................
104
10
Semiconductor Instruments & Systems..................................................................................................................................................
143
Scientific Instruments & Systems...............................................................................................................................................................
32
Others.........................................................................................................................................................................................................................................
8
4
Total..........................................................................................................................................................................................................................
¥135
¥190

Thousands of
U.S. dollars
2013
94
1,356
303
37
$1,802Note. The "Others" amount is that of the Company's idle assets.
4. Information regarding the amortized amount and unamortized balance of goodwill
Millions of yen
2012
2013
Semiconductor Instruments & Systems.................................................................................................................................................
¥164
Scientific Instruments & Systems...............................................................................................................................................................
154
314
Total..........................................................................................................................................................................................................................
¥319
¥314

Thousands of
U.S. dollars
2013
2,979
$2,979Note. 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, 2012
Not applicable
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 ($607 thousand).

75

21. Related party transactions(1) Related party transactions with the Company
Directors and major shareholders (individuals only) of the Company
The year ended December 31, 2012
Category
Name
Address
Amount of capital stock(millions of yen)

The year ended December 31, 2013
Director's closefamily member
Masao Horiba-

Category
Name
Address
Amount of capital stock(millions of yen)

Director's closefamily member
Masao Horiba-

Business or occupation

AdvisorBusiness or occupation

Advisor

Percentage of voting rights held
Relationship

3.0% (direct)
Consulting contract

Percentage of voting rights held
Relationship

2.8% (direct)
Consulting contract

Transaction

Transaction
amountConsulting
fee(Note 2)

Transaction

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

Account

Balance at
December 31,
2012

-

-

Account

Balance at
December 31,
2013

-

-

Note 1.
Note 2.

($227
thousand)The above transaction amounts do not include consumption taxes, while the balance at December 31, 2012 andDecember 31, 2013 includes 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, activities
of society-academia collaboration for innovation and participation in economic organizations.
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, 2012
Category
Name
Address
Amount of capital stock(millions of yen)

The year ended December 31, 2013
Director's closefamily member
Masao Horiba-

Category
Name
Address
Amount of capital stock(millions of yen)

Director's closefamily member
Masao Horiba-

Business or occupation

AdvisorBusiness or occupation

Advisor

Percentage of voting rights held
Relationship

3.0% (direct)
Consulting contract

Percentage of voting rights held
Relationship

2.8% (direct)
Consulting contract

Transaction

Transaction
amountConsulting
fee(Note 2)

Transaction

Transaction
amountConsulting
fee(Note 2)\30 million\25 million

Account

Balance at
December 31,
2012

-

-

Account

Balance at
December 31,
2013

-

-

Note 1.
Note 2.

($284
thousand)The above transaction amounts do not include consumption taxes, while the balance at December 31, 2012 andDecember 31, 2013 includes 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, activities
of society-academia collaboration for innovation and participation in economic organizations.
The payment was determined on a negotiated basis.

22. Subsequent events(Special Dissolution of Employees’ Pension Fund)
The Kyoto Machinery and Metal Employees ’ Pension Fund (general type), of which the Company and a domestic consolidated
subsidiary are members, resolved to adopt a policy to carry out a special dissolution at the representative assembly that took
place on February 20, 2014.
Accordingly, HORIBA plans to post an approximately 2 billion yen estimated loss in association with the dissolution as “Provision
for loss on dissolution of the employees’ pension fund” (Other expenses) for fiscal 2014.

HORIBA Report 2013 | 76

Financial data77

Corporate philosophy

HORIBA's corporate motto“Joy and Fun”
Or i g i n a te s fr o m t h e b e lie f t h a t if w e t a k e i n t e r e st a n d p ri d e i n t h e w o r k t h a t o c c u p i e s m o s t o f
th e a c ti v e ti me in o u r liv e s , in t h e p la c e w h e re w e sp e n d t h e l a rg e p a r t o f e a c h d a y , t h e n a s ar e s u l t o u r s a tis f a c t io n w it h lif e w ill in c r e a se , a n d w e w i l l b e a b l e t o e n j o y o u r l i v e s e v e n m o re .
T a k in g in t e r e s t a n d p r id e i n o u r w o r k l e a d s u s t o“ Jo y a n d F u n . ”| Business Operations | We, at the HORIBA, apply
our most advanced analytical technologies to provide
highly original analytical and measuring products
and equipment in such fields as engine emissions,scientific analysis, industrial and process control,
environment monitoring, semi-conductor processcontrol, medical and health-care, and biotechnology,
thereby contributing to the progress of science andtechnology, improvement in the quality, development
and benefit of human health. We are engaging in the
new businesses for derivative and peripheral products
aim to develop scientific technology and improve
the life of the community, while at the same timeminimizing 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 thatminimize the impact that our business activities haveon 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 locatedpoints throughout the world. Furthermore, we aim tobe the leader in the global market in the fields andproduct segments in which we operate, to meet all
customers’ needs consistently, and to effectively
maximize our limited resources through a policy of
selective investment.
| Customer Responsiveness | We maintain aphilosophy of pursuing technology to the ultimate
degree in both the fundamental and applied
technology fields, supplying products that
continuously satisfy customers’ requirements. We

are committed to offering top-quality, highly reliable
products and services with a consistent level of
excellence throughout the world. We are obliged
to observe the highest standards for establishing,developing, and maintaining quality control systems.
To provide products and services to customers in thefastest delivery time possible, we have adopted theslogan “Ultra-Quick Supplier” for all our activities. Thisslogan encompasses not only production lead times
but also development, marketing and sales, service,
and control functions.
| Responsibility to Shareholders and Investors |Our basic policy is to calculate annual dividends
on an allocated rate of net income. Important
information regarding management and business
operations are fully disclosed on a regular basis
to shareholders and potential investors. A timely
responsive management control system should
be maintained by HORIBA Group companies toensure that company objectives are met, profit
generated and the information 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 creation of HORIBA Group
companies. Each employee is made aware of thisheritage, and we actively encourage ideas andinnovations from individual employees. HORIBA
promotes an open and fair business environmentthat allows all employees to achieve their individual
goals and maximize their potential. To further each
employee’s personal and professional growth, we
encourage thinking from a global perspective andhave established a global personnel development
program and performance evaluation system. We
value employees who challenge their personalabilities and recognize their own accomplishments.
HORIBA Report 2013 | 78

Corporate data

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

October 17, 1945

Incorporated

January 26, 1953

Paid in Capital

12,011 million yen

As of December 31, 2013

Number of Employees

5,787 (Consolidated)

As of December 31, 2013

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
Securities Code: 6856

Major Shareholders

As of December 31, 2013

Name of Shareholders

Shares (Thousands)

Percentage (%)

Japan Trustee Service Bank, Ltd.

2,899

6.82

The Master Trust Bank of Japan, Ltd.

2,173

5.11

Taiyo Fund, L．
P．

2,003

4.71

National Mutual Insurance Federation of Agricultural Cooperatives

1,287

3.03

Masao Horiba

1,200

2.82

NOMURA BANK (LUXEMBOURG) S．
A．S/A NOMURA MULTI CURRENCY JAPAN STOCK LEADERS FUND

917

2.16

The Bank of Kyoto, Ltd.

828

1.95

Atsushi Horiba

809

1.90

HORIBA Raku-Raku Kai

789

1.86

JAPAN RE FIDELITY

708

1.66

Stock Price Trend

Securities companies 0.61%
Foreign investors 3.19%

Japanese companies 2.56%

Financial institutions 0.94%

Yen
6,000

Breakdown ofTypes of
Shareholders

5,000(6,366 in total)

Individual investors
92.70%

4,000

3,000

Japanese companies
8.07%

2,000

Foreign investors
36.87%

1,000

0
2004

79

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Individual investors
19.57%Breakdown ofOwnership among
Shareholders(42,532,752
shares in total)

Securities companies 0.84%

Financial institutions
34.65%

HORIBA Report 2013

HORIBA Report 2013 | 80