Everything begins with measurement

Everything begins withmeasurement01

Sustainable growth in society is establishedthrough technological innovation.
Engineers’ dreams, passions, and persistent efforts areintertwined with the conditions that enable them,including investment opportunities and social demand.
“Measurement Technologies” that resolve unknown materials
and phenomena help accelerate innovation by engineers.
Everything begins with measurement.
HORIBA’s “Measurement Technologies” and analysis
solutions are always at the frontlines of innovation.

HORIBA Report 2017 | 02

Results over the long-term and global expansion

Global growth through M&As
HORIBA has achieved continuous growth since its foundation,by specializing in “Measurement Technologies” and entering new markets.
We intend to continue to grow by globally promoting HORIBA’s corporate culture,
expressed in the corporate motto “Joy and Fun.”

1945

1970

1988

HORIBA RADIO LABORATORY
was established.

1953

2005

ABX S.A. (now HORIBA ABXSAS) was acquired in France.

MCT (Mechatronics) businessof Carl Schenck AG was
acquired in Germany.

2002

HORIBA, Ltd. was established.

1950

1996

HORIBA Korea Ltd. wasestablished in South Korea.

OLSON-HORIBA, INCORPORATED,a joint venture company, wasestablished in the U.S. HORIBA
begins overseas expansion.

HORIBA Instruments (Shanghai)Co., Ltd. was established in
China.

1997

1975
HORIBA pioneers the firstmade-in-Japan glass
electrode pH meters.

Jobin Yvon S.A. (now HORIBAFRANCE SAS) was acquired in
France.

Emission gas analyzers weredelivered to the United States
Environmental Protection Agency(EPA).

Sales outside of Japan

Sales in JapanNet sales exceeded
10 billion yen

Operating income

Results up to 1977 are on a nonconsolidated basis and results from 1978 are on a consolidated.
Sales are divided into overseas sales and domestic sales from 1991.

1945

03

1950

1955

1960

1965

1970

1975

1980

Net sales

195.3

billion yen

Sales outsideof Japan

130.3

billion yen

Net sales exceeded
150 billion yen

Operatingincome26.8

billion yen

Net sales exceeded
100 billion yen

2014

2015

The reagent plant forhematology analysis, the first in
India, began operation.

MIRA, Ltd. (now HORIBA MIRA
Limited) was acquired in the U.K.

2016

Sales inJapan

Net sales
exceeded 50 billion yen

65.0

billion yen

HORIBA India
Technical Center was opened.

1985

1990

1995

2000

2005

2010

2017

HORIBA Report 2017 | 04

HORIBA’s value-creating cycle

HORIBA’svalue-creating cycle

Creation of economic value

Global business making andselling more than 1,000
products of various kinds
Top-level shares in nichemarkets
Profit generated year after year

HORIBA’s value-creating cycle ispresented by a tree

Seeds of fruits
returning to the soil tocreate new value

05(maintaining an operating margin of around 10%)See details, pages 7 and 8.

Rich fruits born throughbusiness activities

Creation ofsocial andeconomic value

FruitsStrong trunk grown by
nutrient received fromsolid roots

Five businesses

Trunk

Strong thick roots grownin rich soil

Invisible values

Roots

Rich soil cultivated bycorporate motto“Joy and Fun”

Corporate
cultureBusiness growth
supported by continuous
investment

Corporate culture
SoilCreation of social value

P37

Out of 17 Global Goals of the Sustainable
Development Goals (SDGs), HORIBA has selected thefollowing items to focus on.
To contribute to building a sustainable
society and the improvement ofP29-30
the global environment

Five businesses

ENVIRONMENT

Automotive Test Systems
Process & Environmental

To realize a safe, pleasant society

P19-22

To empower regions and create jobs

P33-34

SOCIAL

Medical-Diagnostic
Semiconductor

To promote diversity

ScientificP39-40

GOVERNANCE

Invisible values
Customers

Technologies

Talents

HORIBA helps improve the quality of life in asustainable society by providing highquality products and services to customers.
We think it is important to provide solutionsin addition to supplying hardware(instruments). In order to achieve this goal,
we collaborate with suppliers and groupcompanies in Japan and overseas toimprove the quality of our products andservices.

Technological development is one of themost important drivers for value creationand the lifeline of a manufacturer such as
HORIBA. To make an analogy, technicalcapability is a form of basic physical fitness,
which cannot be maintained without
continual training and exercise. We firmly
believe that continuous investment willcontribute to our future growth andprofitability improvement. HORIBA aims to
improve the efficiency of our R&D investments
and realize a higher operating income.

At HORIBA, employees are our mostimportant assets. In order for all
employees to achieve “Joy and Fun,” wework to realize HORIBA’s five “Omoi”
shown below. HORIBA’s organizational
success is due to our highly diversified
employees’ practice of HORIBA’s five“Omoi.”

Organizational structures

Brand

HORIBA operates five business segments
in 27 countries. We believe it is importantthat each business is promoted from thelocal region. With that aim, we areextending our “Joy and Fun” corporatemotto throughout our global operations
while promoting balanced management,
matrix organization, and the HORIBA
Stained Glass Project to build a Super
Dream Team.

HORIBA works on growing “Invisible
Values,” such as talents, technologies, andits corporate culture. “Invisible Values” areessential in generating future earnings andenabling enterprise continuity, whileachieving numerical targets for net sales,
profits, and other indicators.
We believe that our persistent andcontinuous efforts on increasing the otherfour invisible assets, namely “Customers,”“Organizational Structure,” “Talents” and“Technologies” have greatly helped us toestablish our brands, representing trust in
HORIBA placed by our customers.

* See HORIBA’s thoughts on each project andmanagement on pages 39 and 40.

HORIBA’s five “Omoi”
1 To be a part of a collaborative
community, at the forefront of new
ideas and creations.
2 To achieve goals and make life
memorable by fostering the highest
intellectual potential.
3 To reach across the globe to expand
learning that captures key businessdevelopments, wherever they occur.
4 To be proud of sharing what I do andwhat HORIBA delivers.
5 To be helpful to the world and its
people.

HORIBA Report 2017 | 06

HORIBA’s 4 unique points

1

Corporate
cultureCorporate motto “Joy and Fun”
We believe that if we take interest and
pride in the work that occupies so muchof our lives, and for many of us where we
spend a large part of each day, then as aresult our satisfaction with life will increase,
and we will be able to enjoy our lives more.

H O R I B A’s

2

Operating income by business segment (Billions of yen)

Balancedmanagement

The Semiconductor segment grew
sharply thanks to continuous
investment.

26.8

Automotive 7.6

Process &Environmental 1.0

Scientific 0.9

HORIBA is an analytic and measurement
equipment manufacturer with fivebusiness segments: Automotive Test
Systems, Process & Environmental,
Medical-Diagnostic, Semiconductor, andScientific Instruments and Systems. Afterlaunching our first product, the pH meter,
we expanded our business field bydeveloping emission measurement
systems. Even during the global financial
crisis in 2008, we continued investment,
which resulted in the strong growth of the
Semiconductor segment which has
become our largest source of income.

07

2017
billion yen

Sustainable growth withwell-balanced investment in fivebusiness segments

HORIBA’s main Key
Performance Indices(KPIs) for 2017

Scientific 0.4

Semiconductor 15.6

Net sales

MedicalDiagnostic 1.9

Semiconductor 2.2

Growth of the Semiconductor and MedicalDiagnostic segments led to HORIBA’s
business portfolio being well-balanced.

2012
11.7

billion yen

Automotive 4.4

Automotive 1.9
Analytical 0.6

1992

Process &MedicalEnvironmental 1.6
Diagnostic 2.4

2.6

billion yen

195.3
billion yen

From a “pH meter maker” to an“emission measurement systems provider”

Operatingincome26.8
billion yen

Operatingincome tonet sales

13.7
%

3

Main global M&A

Medical-Diagnostic

Scientific

1996

1997

2005

2015

ABX S.A. (now HORIBAABX SAS) was
acquired in France

Jobin Yvon S.A. (now
HORIBA FRANCE SAS)
was acquired in France

MCT (Mechatronics) businessof Carl Schenck AG was
acquired in Germany

MIRA, Ltd. (now
HORIBA MIRA Limited)
was acquired in the U.K.

HORIBA style global
management

Automotive Test Systems

Overseas sales ratio

Spreading the culture of Kyoto
around the world

Number of group companies

HORIBA got its start in Kyoto with aventure spirit. We have achieved businessgrowth based on our corporate culture of
success and we have grown to become
one of Kyoto’s most successful companies.
Since the late 1990’s, HORIBA has expanded
its business scale and geographic scopethrough M&A. At present, over 60% ofsales and employees are based outside ofJapan. As our business in Japan has
continued to grow, much of ourinternational growth has come through
M&A.

48

41%

61%

67%

1992

2012

2017

37

Overseas employee ratio
11

24%

57%

62%

1992

2012

2017

1992

2012

2017

4 points of distinction
Global market shares of major products (Estimated by HORIBA)

Emissionmeasurement systems

35%

pH meters

Mass flow controllers

50%

Launched products in various
niche markets ofanalysis and measurement services
HORIBA does business in many different
markets, providing over 1,000 products infive business segments. Products with a
global leading market share include
HORIBA’s first product, the pH meter;
emission measurement systems, which
are indispensable to automotive
development; gratings developed andmanufactured by HORIBA FRANCE SAS
with a history of 200 years; and mass flow
controllers needed in semiconductor
manufacturing.

60%(Japan)ROE

Development-oriented
company

Gratings

80%

11.5
%

Shareholders’equity ratio

56.5
%

4

R&D
expenditures
to net sales

7.1%

Number of
employees(as of December
31, 2017)

7,399
HORIBA Report 2017 | 08

INDEX

Editorial policy
HORIBA believes in achieving business growth by providing industrial and institutional equipmentsin the private and public sectors with “Measurement Technologies” as the essence of HORIBA’s
Corporate Social Responsibility.
In this integrated “HORIBA Report 2017” we have presented related activities (see the ESG mark)on each business segment page, to help you better understand how HORIBA’s investments in“Invisible Assets” are contributing in actual business growth.
Through editing this report, we have also recognized that HORIBA’s every activity has been
inseparably tied to its corporate growth.

P03

P01

Results over the
long-term and global
expansion

Everything begins
with measurement

P05

HORIBA's valuecreating cycle

P07

P11

HORIBA’s
4 unique points

Message fromthe CEO

P15

Kick-off ofthe new
management team

09

P17

Progress of the MidLong Term Management
Plan [MLMAP2020]

Notation of HORIBA and HORIBA,Ltd.
In this HORIBA Report, the HORIBAGroup of companies is described as“HORIBA” and the parent company as“HORIBA, Ltd.”

Notation of owners (shareholders):
HORIBA fully recognizes the importance of its shareholders and frequently calls
them owners.

Disclaimer Regarding Future
Plans and Forecasts
This HORIBA Report contains certain
statements describing future plans,
strategies, and performance forecastsof HORIBA, Ltd. and its affiliatedcompanies. These statements reflect
forecasts based on management’s
assumptions and beliefs based on theavailable information as of February 13,
2018 when business results wereannounced. Actual performance may
differ due to unforeseen circumstancesin the operating environment.
Change in revenue recognition
standard
HORIBA, Ltd. and its domestic
consolidated subsidiaries had formerly
recognized revenue mainly on ashipping basis. However, starting fromthe fiscal 2016, HORIBA, Ltd. and its
domestic consolidated
subsidiaries changed its revenue
recognition method to recognize
revenue on a completion date of
installation basis or a delivery datebasis under the terms and conditions of
the relevant contracts. The amounts inor before the fiscal 2015 are notretrospectively revised.

P19

Next-generation vehicle
technology and HORIBA's
business potential

P23

Market shares stated in this report are
HORIBA’s estimates for fiscal 2017.

Message fromthe CFO

P25

Business outline

P37

Value creation basedon “Invisible Values”

P49

Financial data

P43

Corporate Governance

P82

Corporate data

P83

Corporate philosophy

HORIBA Report 2017 | 10

Message from the CEO

HORIBA will sprint to its nextstage, keeping up with thechanges in the world with thespirit of “Joy and Fun”
Chairman & Group CEO

Photo taken at the HORIBA BIWAKO E-HARBOR Biwako Factory11

Since its founding 73 years ago,
HORIBA has been working at solvingsocial issues through its core business,“Measurement Technologies.”
We now have a new management team focusedon responding to the requests from our customers
and society and seeking to raise our corporate
value while navigating the rapid changes in every
area of technology.

Operating under a new management team startingin 2018
From January 1, 2018, a new management team tookcharge, with myself as Chairman & Group CEO, Juichi Saito
as Executive Vice Chairman & Group COO, and Masayuki
Adachi as President & COO. Under the new structure, Mr.
Saito and I will lead the overall HORIBA Group, while Dr.
Adachi will lead HORIBA, Ltd. as the headquarters. (Seepages 15 and 16.)
There are two main reasons behind this change inmanagement structure.
First is the expansion of our group. 26 years have passed
since I was appointed as President in 1992. We haveacquired many companies and have grown our businessglobally, making clear the importance of management of theoverall group. Going forward, in addition to management ofgroup companies, which now are the core of HORIBA’s
business, I am shifting my priority to take the reins of theentire group in order to make HORIBA’s corporate culture of“Joy and Fun” well known and embedded in growing regions-- operations that will support our future growth. Executive
Vice Chairman & Group COO Mr. Saito will in effect lead
HORIBA’s operation by planning and implementing
management and business strategies on a global level.
The second reason is to enhance our technologies. HORIBA
has established a business model of globally manufacturing awide variety of products in small quantities by expanding
diverse applications. We will not change this approach.
However, we also need to enhance our basic technologicalcapabilities to flexibly cope with emerging needs. President
Adachi is well suited to lead initiatives to utilize resources
across the boundaries of business divisions and enhance
technology, as he possesses a wide range of technicalknowledge and has accumulated experience in managing
group companies.
We have been posting favorable financial results. That is all
the more reason that I believe we need to be bold in ourdeliberate advance as a company. We are committed tomove ahead to achieve further growth under the new
management team.

Proactively facing the changing trends in theautomotive industry and contributing todevelopment of next-generation technologies
The automotive industry is now facing a so-called once-ina-century paradigm shift. Reflecting the increase in thenumber of electric vehicles and the development ofautonomous driving technology, a broad range ofbusinesses that do not fall into conventional categories are
emerging. They include specialized firms working on vehicle
battery and increasing number of semiconductors, on
more-efficient systems for charging and generating power.
HORIBA MIRA Limited (U.K.), which we acquired in 2015,
has abundant resources and accumulated skills concerning
autonomous driving technology and development ofbatteries for electric vehicles, as well as provision of diverse
verification and testing services. We also offer a full line-upof measurement equipment and devices of all kinds forhybrid or plug-in hybrid vehicles that combine an engine
and a battery, and we have a firm experiences in this regard.
Moreover, we can fulfill needs for analysis and evaluation inwork on developing batteries, by using products in our
Scientific Instruments & Systems segment. We willcontribute to the development of next-generation
automotive technologies from all directions by use oftechnologies beyond the boundaries of business segments.
(See our detailed discussions on this initiative, from page 19
to page 22.)

Accelerating business with “Timing, Speed, andPerseverance” as keywords“Timing, Speed, and Perseverance” are all indispensable
elements in responding to the ongoing diverse andsignificant changes in society.
Let me start the discussing with “Timing.” The HORIBABIWAKO E-HARBOR celebrated its first anniversary in May
2017. As the factory has been operating at high levels, we
may not have been able to fulfill the needs of our customers
if there were even a slight delay in our decision making or
the start-up. In hindsight, the acquisition of HORIBA MIRA,
which has strong capabilities in next-generation automotive
technology, may not have taken place if we had not heeded
the dramatic change in the automotive industry. I therefore
feel strongly that timing in making investment decisions is
so important.
Next is “Speed.” Even golfers with small bodies can hit aball for a long distance not only due to power and speed,
but also to the contribution from the accelerating speed of
the head of a golf club. I think there is similarity withcorporate management. In October 2017, shortly after theannouncement of a new product launch, HORIBA ABX SAS(France) entered into a long-term agreement with Siemens
Healthcare Diagnostics Inc. (U.S.) that created a dynamic
HORIBA Report 2017 | 12

Message from the CEO

Atsushi Horiba

Juichi Saito

Chairman & Group CEO

Executive Vice Chairman& Group COO

Masao Okawa
Masayuki Adachi

Managing Director
General Manager of General
Administration Division(Dr. Engineering)President & COO
Chairman of supervisory board of
HORIBA FRANCE SAS

Jai Hakhu(Dr. Engineering)Takashi Nagano
Director (Board Leader of
GLOBAL ATS BOARD)
Chairman of HORIBA Korea Ltd.
(South Korea)change in the aspects of sales and marketing. I believe thatsuch speedy business development inspires the entire
HORIBA Group. (See details on the agreement with Siemens
Healthcare Diagnostics Inc., pages 31 and 32.)
Last is “Perseverance.” Our BlackJack Project, having theobjective of improving operational efficiency by encouraging
improvements at the workplace, celebrated its 20th
anniversary in 2017. The project is embedded in our
corporate culture and I would even say that it has supported
our present strong operating results. In 2014, we launchedthe HORIBA Stained Glass Project. Its mission is to make
HORIBA stronger by the continual creation of new value
through diverse talents and skills. We are promoting morediversity in our workforce including work style renovation asa basis for management. I am expecting that continuance of
these projects will also lead us to sustainable growth. (Seedetails on the BlackJack Project and the HORIBA Stained
Glass Project, pages 39 and 40.)

Working on the expansion of product supply
At the end of December 2017, the HORIBA STEC Aso
Factory in the Semiconductor Instruments & Systems
segment completed construction for its largest expansion to
13

Executive Corporate Officer
Chairman & CEO of HORIBA
Instruments Incorporated (U.S.)
President of HORIBA ABX SAS(France)date. In the midst of accelerating technology innovation, I
believe delivery of “what customers need, time-wise,quantity-wise, and quality-wise” products shall make adecisive influence on competitiveness of companies. In
addition to our production capability, a long-accumulated
relationship of trust with subcontractors and distributors is
becoming increasingly valuable. Indeed, we may now enter
into a period when the value of a “manufacturing
companies” can be appreciated. We will continue to invest
proactively to enhance our supply capacity, and automation.

Record-high earnings targeted in 2018
In 2017 (ended December 31, 2017), HORIBA recorded
consolidated net sales of 195.3 billion yen (up 15% year-onyear) and operating income of 26.8 billion yen (up 45%
year-on-year). This was driven by strong results of the
Semiconductor Instruments & Systems segment and theAutomotive Test Systems segment.
In 2018, we are targeting another year of record-highs bothin sales, at 210.0 billion yen (up 7% year-on-year), and inoperating income, at 29.0 billion yen (up 8% year-on-year,)*mainly driven by the Semiconductor Instruments & Systems
segment and the Automotive Test Systems segment, butthree other segments in Process & Environmental
Instruments & Systems, Medical-Diagnostic Instruments &Systems, and Scientific Instruments & Systems are also
expected to increase both sales and operating income
compared to the previous year.
* Forecasts announced on February 13, 2018

Enhancing our “Invisible Values” to accelerate
growthHORIBA has been investing in the hiring and developmentof talented people, in R&D, and in facilities and equipment
during economic ups and downs. It is increasingly importantto keep investing in order to respond to the rapid
technological changes we are now experiencing in manyindustries. HORIBA can afford to keep investing from along-term perspective, as we adhere to a balanced
management and matrix organization (see pages 39 and 40)
in different regions and business areas with different
economic cycles. This has led to increased trust from ourbusiness partners around the world and will ensure growing
prominence of the HORIBA brand globally.
In 2011 we signed the United Nations Global Compact. We
ensure that when we conduct business we are well rooted ineach country and region, are working closely together withlocal employees, and understand the relevant diverse
cultures, customs and values.
In keeping with the corporate philosophy of “Open and Fair,”
HORIBA has three outside directors, who have diverse

experience and unique insights, and who actively participate in
the board meetings and contribute to enhance HORIBA’s
corporate value. (See details on corporate governance and amessage from an outside director, from page 43 to page 48.)
By refining our “Invisible Values” of diverse kinds, we will
create economic values and the same time contribute toachieving some of the Sustainable Development Goals (SDGs)
advocated by the United Nations, which are relevant to
HORIBA. (See details on value creation on pages 5 and 6.)
On a personal note, I hurt an ankle at the end of 2016 andhad to spend an inconvenient time confined to a wheelchairor with crutches for over a half year. I felt pain in areas otherthan the injured ankle and experienced physical disorders. I
am fortunate enough to have completely recovered by now
but I learned an important lesson that a slight problem, if
you let it slip by, could end up as a major setback. I believe
this could apply to HORIBA’s management. Now, even with
our recent and current strong business performance, it stillis the time we have to do our work with utmost caution
every day, at the same time we take up big challenges.
We are committed to contributing to society by providing
our “Measurement Technologies” for the benefit of ourglobal customers while working with a sense of challengeand “Joy and Fun” spirit. I sincerely hope that you willcontinue to support HORIBA for many years to come, as weare aiming at steadily raising sustainable corporate value ona road toward a prosperous future.

Chairman & Group CEO

Atsushi Horiba

Hideyuki Koishi
Senior Corporate Officer
President of HORIBA STEC Co., Ltd.
(Japan)George Gillespie(Dr. Engineering)

Yuichi Muroga

Senior Corporate Officer
Executive Chairman of
HORIBA MIRA Limited (U.K.)

Senior Corporate Officer
President of HORIBA Techno Service Co.,
Ltd. (Japan)

HORIBA Report 2017 | 14

Kick-off of the new management team

Topic

Aiming for further growth

Kick-off of the new management teamOn January 1, 2018, HORIBA’s new management team wasput in place. During the 26 years since 1992, Atsushi Horiba,
as president, led HORIBA to use M&A opportunities andexpand globally. As our business has grown, overall groupmanagement has become increasingly important. Against
such a background, the new management team will work onenhancing management capability to respond to challenges,
with the aim of achieving further growth.

Objectives of the new management teamEnhancing group management effectiveness
Clarifying group management structure
Strengthening technology and development capabilities of
HORIBA, Ltd. as the group headquarters
Press conference on the announcement of a new management structure (October 24, 2017)

From January 1, 2018

Previous title

Role of a new position

Atsushi Horiba

Chairman & Group CEO

Chairman, President & CEO

Control the entire group through enhancement of governance andfirmly establishing corporate culture throughout the group

Juichi Saito

Executive Vice Chairman &Group COO

Executive Vice President

Control the entire group and lead specific strategies

Masayuki Adachi

President & COO

Senior Managing Director

Focus on management of HORIBA, Ltd. and enhance its function as
headquarters

Policy statements of the new management team

Decisively implementing
aggressive managementand developing nextgeneration managers

Taking up a challenge to establish
a “true technology-oriented
company” by enhancing
technological capabilities

Juichi Saito

Masayuki Adachi (Dr. Engineering)

Executive Vice Chairman & Group COO

President & COO

HORIBA has expanded its scale by continuously investing in humantalent, technology, and manufacturing for many years and by boldly
pursuing M&As with excellent foresight. Undoubtedly each and every
one of these decisions has contributed to the favorable operating
performance today. In order to now achieve further growth, continual
aggressive investment is a must-do. I am committed to making bolddecisions and promoting the HORIBA Group’s strategy, so that we canprevail globally, including attaining success in rapidly-growing China,
India, and other emerging markets.
In the meantime, human talent for next-generation management is also
critically important. In my view, experience is the key to refine potential
talent for managerial roles. I will seek to create a scheme for “personallyvisible investment” in which each responsible manager thinks
throughout a range, from reasons for investment up to how to garner
returns, make proposals, and execute them, adhering in all this to the
HORIBA Premium Value policy adopted this year. (See details, pages 17,
18, 23, and 24.) This is how I will tackle the challenge of developing
human talent or managers for the future of HORIBA.

15

Upon assuming position as president, I understand my vital
mission is to lead HORIBA, Ltd. as the headquarters of the
HORIBA Group and to strengthen its technical value. While theenvironment surrounding us is changing rapidly, it also presents
growth opportunities for us. Having whatever the changes to come,such as the paradigm shift in energy and environment, HORIBA
can continue providing comprehensive solutions applying its wide
range of technologies from five business segments.
Refining core technologies are required to enhance application
capabilities. Sophisticated basic technology should allow us togenerate cycles wherein we flexibly respond to changes in themarket by creating new applications. I am confident that this will
ultimately make us a “true technology-oriented company.”
Keeping my pride and passion as an engineer, I will dedicate mystrength and heart to my mission of further accelerating HORIBA’s
growth, which was established under the previous management.

Masahiro Sugita, Outside Director’s views on the new management team
How the new president was appointed

My hope for the new management teamSince being appointed as a director in 2014, Dr. Adachi has beenproactive in making proposals about the future of HORIBA at theBoard of Directors meetings. He demonstrated his outstanding ability
and capacity as a manager from early on. In addition to leading
development as an engineer with profound insight and knowledge, he
has also delivered results in managing group companies. I thus
believe that he has an excellent sense of balance.
Since joining HORIBA, Ltd., Dr. Adachi has consistently been
engaged in technical areas. He was involved in development of somemajor products, which are supporting HORIBA today, and at thesame time he managed to balance work with academic study andearned a doctorate, with an unwavering attitude of constantly
advancing himself. While he was managing group companies in the
U.S. and France, he did not impose his way of thinking or working on
local employees. Rather, based on his insights and skills, which aresupported by ample experience, he convinced them of what is best todo, and boosted operating results.
Indeed, the DNA of HORIBA, that treasures technology in developing
its global business, has been inherited by Dr. Adachi. I am convincedthat he is fully qualified and appropriate to represent HORIBA. Whenhis name was raised as a candidate for president, the Board of
Directors unanimously approved him.

I look forward to Mr. Horiba and Mr. Saito representing and managing
the HORIBA Group, which will continue to expand its scale, andpromote its corporate culture and overall strategy to employees in
the group. Similarly, I expect Dr. Adachi to strengthen HORIBA, Ltd.
from a technology and organizational standpoint and to raise thelevel of the group.
In addition to these three leaders, HORIBA has plenty of potential
next-generation leaders with a diversity of talent. In order for suchtalented managers to make open, active discussions and create astronger HORIBA, I am determined to use the best of my ability byactively participating in the Board meetings and through other means.

Masahiro Sugita
Director (Outside)
Masahiro Sugita joined the Bank ofJapan in 1967 and held positions
such as Branch Manager, DirectorGeneral of the International
Department, and Auditor. He also has
ample management experiences.
He has been a director of HORIBA,
Ltd. since 2006.

Human talent for management of the future HORIBA
Invisible assets that support HORIBA’s business growth have been established by each and every employee, our most importantresource. At the same time, talent on the management side is indispensable in managing employees and leading them in theright direction. Looking forward for growth in the next generation, we are working hard to develop candidates for management.

HORIBA’s thoughts on promoting and developing candidates for management
the “Joy and Fun” spirit.
1 Embody= Always take up challenges and stay passionate.
Have business management experience anddeliver results.

2 = Have a good sense of balance as a manager

Highly evaluate people who raise their hands and

1 indicate what they want to do.

= Give equal opportunities to challengers, young or veteran.

Promotion:
Features tolook forDevelopment:
Things to
keep in mind

2

Have confronted top-level customers globally

management capability at HORIBA which
3 = Exert
operates business in 27 countries.

Let people experience failures.
= Challenging experiences are good for developing
human resources. Failures make people sharper as
managers.

Leaders of each business segment, driving HORIBA’s business

Automotive Test Systems

Process & Environmental

Medical-Diagnostic

Semiconductor

Scientific

HORIBA Report 2017 | 16

Progress of the Mid-Long Term Management Plan [MLMAP2020]

Progress of the Mid-Long Term Management Plan

MLMAP2020
M i d - Lo n g Te r m M a n a g e m e n t Pl a n

During 2017, the second year of the Mid-Long Term Management Plan, MLMAP2020, HORIBA made a great step towardachieving the plan targets, thanks to a significant growth in the Semiconductor Instruments & Systems segment.
Challenges remain in achieving progress in net sales and operating income of other segments toward their targets. We recognize
a need to speed up the improvement of those businesses.
Applying HORIBA Technology in new business fields and new markets to move

“ONE STEP AHEAD”

Measures

Priority measures

1

2

3

Applying HORIBA technology innew business fields and markets
and becoming a true partner inanalysis and measurement

Accelerating corporate growth throughforming Super Dream Team in balanced
management, matrix organization and the
HORIBA Stained Glass ProjectRaising capital efficiency tomaximize corporate value

Numerical target
Net sales

Operating income

250 billion yen
Automotive

10% or more

Results in 2017: 26.8 billion yen

Process & Environmental
100.0

R O E

30 billion yen

Results in 2017: 195.3 billion yen(Billions of yen)
Net sales
Operating income* Assumed exchange rates for 2020: 115 yen per U.S. dollar;
125 yen per euro

(Billions of yen)
Net sales
Operating income

Medical-Diagnostic(Billions of yen)
Net sales
Operating income

Results in 2017: 11.5%

Semiconductor(Billions of yen)
Net sales
Operating income

Scientific(Billions of yen)
Net sales
Operating income

15.6

73.3
64.2 62.2

7.6

10.0

4.4
3.5
2015 2016 2017

40.0

2020

(Plan)

25.0

27.4 26.5 25.1

16.7 16.7 17.4
1.7 1.5
1.0

2.5

2.4

2015 2016 20172020

(Plan)

Automotive

2.8

9.4 9.6
38.8
35.3

53.3

50.0 10.0
35.0
27.0 25.7 26.1

4.0

1.9

2015 2016 2017

1.3
2020

(Plan)

2015 2016 20172020

(Plan)

0.9

3.5

0.4

2015 2016 20172020

(Plan)HORIBA MIRA’s investment in next-generation automotive development; Improvement of production
efficiency at the HORIBA BIWAKO E-HARBOR; Opening of a technical center in India

Newdevelopments
in 2017

17

Process & Environmental

Opening of a new base for the process measurement equipment business in North America;
Organizational restructuring of water-related business

Medical-Diagnostic

New product launches in Japan and France; Signing of a long-term large-scale partnership agreement

Semiconductor

Aso Factory expansion; Expansion of global sales and service network

Scientific

New product development for a new market (bio-life science)1
Accelerating global growth of water measurement business
HORIBA aims to expand the water measurementbusiness by utilizing the water-related analysis andmeasurement technology and sales networks of threebusiness segments (the Process & Environmental,
Semiconductor, and Scientific Instruments & Systems
segments).
Resources in Japan has been integrated in HORIBA
Advanced Techno Co., Ltd. in January 2017 so as toenhance water measurement technology and service
and support networks. In January 2018, Dan Horiba,
who led HORIBA’s business in the U.S. as President of
HORIBA Instruments Incorporated (U.S.), wasappointed as President of HORIBA Advanced TechnoCo., Ltd. with the intention of his leading it in its global
business expansion.

Net sales in water-related business(Billions of yen)

20.0
Process& Environmental
Semiconductor
Scientific

14.1
11.5

Beyond Water with You
A slogan of HORIBA’s water
related business

10.0

12.0

6.0

4.0
2015

2016

2017

Dan Horiba
President of HORIBA Advanced
Techno Co., Ltd.

2020
(Plan)

2
Realizing a Super Dream Team ~HORIBA Stained Glass Project~
HORIBA is engaged in global business in niche markets
of analysis and measurement and has a wide range oftechnology and applications. Our Super Dream Teams,
comprising of combinations of diverse talents, will
enable sustainable growth while maintaining a highshare in each area. HORIBA Stained Glass Project was
launched in 2014 with the aim of realizing Super Dream

Team. A dedicated unit of our organization was establishedin January 2017 specifically to promote the project. Duringthat year, various activities, including the start of Kaeru
Meetings (“Kaeru” is a Japanese word meaning to return
home, to change and FROG), kicked off. (See details, pages
39 and 40.)

3
Start using HORIBA Premium Value, a unique benchmark to measure asset efficiency
We decided to adopt HORIBA Premium Value, a custommade benchmark to measure asset efficiency, in February
2017, we introduced it to domestic and overseas groupcompanies as well as to each segment, and officiallystarted to implement it in the operation from 2018.
(See details, pages 23 and 24.)

HORIBA Premium Value
Fo r m u l a

Operating incomeー

Cost of capital(Invested capital In-house rateof cost of capital)

HORIBA Report 2017 | 18

Next-generation vehicle technology and HORIBA's business potential

Topic

Next-generation vehicle technology and
HORIBA’s business potential
Comprehensive coverage from the improvement of engines to development of electricand connected autonomous vehicles, by combining complementary technologies
On the back of growth in population, the number of passenger cars
used around the world is projected to keep increasing in the future.
Conventional vehicles fueled by internal-combustion engines, including
gasoline and diesel vehicles, are also expected to increase, while
accelerated growth in the number of hybrid or plug-in hybrid vehicles is
projected. Regulations on fuel efficiency tend to be tightened year after
year and to augment needs for internal-combustion engines.
Many companies and institutions are working on next-generation
vehicle technology development toward building a sustainable vehicleoriented society. In particular, development of electric vehicles has
been advancing rapidly, with promising potential contribution to theglobal environment as zero emission, and of autonomous vehicles havethe potential to allow anyone to operate a vehicle in a safe pleasantway. Such diversification in vehicle development is forcing automakers

to change their approach from conventional internal development topartial outsourcing. This presents opportunities for HORIBA, which hasa high market share in the emission measurement business and has
expanded its automotive measurement equipment business with its
MCT (Mechatronics) business. Then in 2015, HORIBA entered into theengineering business of automotive development, by acquiring what isnow HORIBA MIRA Limited (U.K.). Moreover, by applying technology
accumulated in the Process & Environmental, Semiconductor,
Scientific Instruments & Systems segments, HORIBA intends to workon areas such as power generation, automotive semiconductors, andbattery development. Combining a variety of such technologies andtimely responding to demand from more diverse areas are the waysthat we plan to contribute to a transformation into the next chapter intransportation.

Global moves in the development of electric vehicles

Global moves in the development of autonomous vehicles

Governments in France, the U.K., China and other countries
announced a policy to shift into greater diffusion of andhybrid vehicles.

Many automakers are working on developing ofautonomous vehicles

Many automakers plan large-scale investments forelectric vehicles.

Many companies, in diverse industries, have entered into
this area.

Next-generation batteries that enable shorter charging
time and longer driving distance are increasingly
receiving attention.

The Japanese government announced a plan tocommercially use autonomous vehicles during the Tokyo
2020 Olympic and Paralympic Games.

Growth forecasts of vehicles, by powertrain method (prepared by HORIBA based on the IEA Energy Technology Perspectives 2017*)
Market for vehicles (million units)
180

Battery electric vehicles (BEV) are expected torepresent 10% of vehicle sales in 2030

120

Global vehicle sales

BEV sales

118 million units

10 million units

Increase in vehicles withnew power sources

HORIBA’s exposure by business domain
MCT

ECT

Increase in the ratioof vehicles withelectric powertrain(BEV/PHEV/HEV)

Fuel Cell (FCV)
Battery Electric (BEV)

Process &Environmental
Semiconductor
Scientific

Plug-in Hybrid Electric (PHEV)
Hybrid Electric (HEV)
CNG/LPG

EMS

DieselGasoline

Increase in
vehicles withengines

Ratio of vehicles
with engines:

60

over 80%Tighter fuelefficiency
regulations(2040)

Already in 2017 a decline is evident
in the ratio of vehicles which has
only internal combustion engines

Increase in need to
improve engines

Need formeasurement whenengines, electricmotors andbatteries are
combined(PHEV/HEV)New demand formeasurement (BEV)

3 businesssegments

Diffusion of BEV
and autonomousvehiclesDiversification in
vehicledevelopment
Increase indemand for testing

Progress in
next-generation
vehicle technology
development
Increase indemand for power
generation,
automotive
semiconductors,
and batteries

Increase in demand
for measurement
equipment

0
2000

2010

2020

2030

2040

2050

2060

HORIBA’s estimated market size of its Automotive Test Systems segment:
2 trillion yen or more (Estimates by HORIBA)* Modified by HORIBA based on IEA data from Energy Technology Perspectives 2017 © OECD/IEA 2017. License: www.iea.org/t&c. It provides a long-term global scenario to limit the rise in global
temperature to well below two degrees Celsius (2°C), as set out in the Paris Agreement.

19Interview
Here is an interview to Dr. George Gillespie OBE.,
Executive Chairman of HORIBA MIRA Limited, asking
about his views on how the company is working on
the next-generation vehicle technology development.
HORIBA MIRA is engaged in vehicle development engineering, test engineering,and the development and operation of a UK-based automotive Technology Park.
Our three strengths are:
1. A wide range of test facilities, technology and product development
knowledge that we have invested in and developed for more than 70
years since MIRA Ltd. was formed in 1946;
2. A large team of talented people who are qualified, knowledgeable,
and experienced in a wide range of automotive engineering skills; and3. An independent position of not belonging to any particular OEM or
supplier group.
Leveraging these strengths, HORIBA MIRA has built up strong relationships
based on trust and delivering a high quality engineering and testing for theworld’s leading automakers.
Before being appointed as CEO of MIRA in 2009, I belonged to HORIBA’s
Automotive Test Systems business. Given this background knowledge I firmly
believed that there would be great compatibility and substantial synergies between
HORIBA and MIRA. I strongly advocated MIRA to join the HORIBA Group in 2015.
Despite short-term headwinds such as Brexit, a program of continuous aggressive
investment since MIRA was acquired, has enabled HORIBA MIRA to maintain its
capability to engage in leading-edge development and testing for ourcustomers, and this has added strength to the motivation of our employees.
The rapidly accelerating technology development for next-generation vehicles,
such as electric and autonomous vehicles, represents a great opportunity for us.
We are building on our long history of providing leading-edge engineering
services related to vehicle development, to automobile makers across the world.
Supporting this, we operate MIRA Technology Park, the most important
automotive R&D cluster in Europe, where we nurture and inspire innovation inthese emerging technologies. About 40 vehicle manufacturers, suppliers andtechnology startups are engaged in research, development, and testing in the Park.
Concerning electric vehicles, there is a real need to improve the performance ofthe battery systems to increase the available driving range, reduce costs andminimize weight. This is the key for electric vehicles to become widely accepted
and adopted across a range of applications from city cars to buses and highperformance sports cars. In developing autonomous vehicles, it is important to
combine cost effective and capable “hardware” that creates advances in thefunctions and safety of vehicles, with “software,” including Functional Safety,
Artificial Intelligence and cybersecurity measures.
HORIBA’s strengths lie in skilled manufacturing while HORIBA MIRA’s lie in
vehicle development and testing services. We are now actively combining
HORIBA MIRA’s engineering strengths with HORIBA’s measurement technology
in areas such as automotive, scientific, semiconductor, and environmental
sectors and applying these unique combinations to expand our global businessin fields related to next-generation vehicle technology development. That is now
my mission within HORIBA and HORIBA MIRA.
George Gillespie OBE., Executive Chairman of HORIBA MIRA Limited(Dr. Engineering)
Previously held senior roles with Ricardo plc (U.K.) and Schenck AG (Germany), he worked asVice President in Strategic Product Development at HORIBA Europe GmbH (Germany) andbecame CEO of MIRA Ltd. (now HORIBA MIRA Limited) in the U.K. in January 2009.

HORIBA Report 2017 | 20

Next-generation vehicle technology and HORIBA's business potential

Transition to next-generation mobility means changes inenergy generation and where it is consumed.
HORIBA’s analytical and measurement technologies
contribute to the entire processes.
Flow of energy consumption
Process & Environmental
Scientific

Scientific

エ ン ジ
ン 車
EnginevehiclesAir pollution
monitoring

Oil analysis

Contributes to analysis of sulfur and othercomponents in oil at production sites

Process & Environmental

Used in constantmonitoring and analysis
of component of theaerial environment

Process & Environmental

Monitoring of petroleum
refining process

HORIBA’s process measurement equipment
business is used at oil refineries and other places.

Process & Environmental

Semiconductor
Scientific

Water quality
measurement
Thermal power generation

Contributes to efficient power generation throughusing devices for emission gas regulations andmonitoring of power generation processes

Semiconductor

Used for measurementof various types of waterfrom the naturalenvironment to factories’
wastewater discharge

21

Scientific

Solar power generation

Contributes to development of power
generation modules

電 気 自vehicles
動 車
Electric

A well-to-wheel analysis (also known as life cycle analysis) is an important concept for thinking about energy
efficiency on a global scale.
In the case of a gasoline-powered vehicles, for example, this concept refers to the exploring of oil, construction andoperation of an oil well, refining crude oil into gasoline, to powering the operation of the drive mechanism of a vehicle.
For an electric vehicle, energy consumption for the whole process, such as the power source used for charging
batteries and operating vehicles, is aggregated.
In order to use energy efficiently, we must consider not only consumption but also improvement in efficiency for allprocesses including generation.
HORIBA’s analytical and measurement technologies contribute to analysis and improvement as well as developmentof new technology for the entire process of energy use and consumption.

Automotive

Scientific

Automotive

Emission measurement; engine
development
Contributes to engine development and meeting
emission regulations

Field in which
HORIBA
exhibits strength

Evaluation and material analysis
for automotive catalysts
Contributes to development of emission gas
purification systems, etc.

Cloud
servers

Automotive

Support to transportmanagement

Contributes to efficient transport withvehicle transport management andvideo/audio recording

Automotive

HORIBA’s analytical and measurement technologies contribute todevelopment of engines, electric vehicles and autonomous driving

Automotive

Automotive engineering

Provision of a testing environment for vehicle
development, and provision of vehicle
development consulting

Evaluation of motors and batteries

Contributes to drivetrain development for electric vehicles

ScientificEvaluation of battery materials

Contributes to development and evaluation of secondary batteries

Automotive

Potential growth
areas

Semiconductor

IoT and AI

Significant increase in demand of automotive semiconductors andservices due to an increase in autonomous vehicles

HORIBA Report 2017 | 22

Message from the CFO

Masao Okawa
Managing Director and General Manager of General Administration Division
Masao Okawa joined HORIBA, Ltd. in 2017. He had worked for the Bank of Japan since 1988. At the Bank of Japan, He had been at various positions including Chief
Representative of Representative Office in Frankfurt(2003-2006), Branch Manager of Takamatsu Branch (2013-2015) and Branch Manager of Kyoto Branch(2015-2016).
Taking advantage of insights on finance, governance and global experience at the Bank of Japan, he is currently engaged in forming a global financial strategy andenhancing compliance and corporate governance as HORIBA’s General Manager of General Administration Division and concurrently Tokyo Branch Manager.

HORIBA is maximizing corporate value over the
long-term by balancing investment growth andasset efficiency improvement
Managing Director and General Manager of General Administration Division

Masao Okawa
I am in charge of executing HORIBA’s global financial strategy
as General Manager of General Administration Division of
HORIBA, Ltd.. While working at the Bank of Japan previously, I
had been engaged in organization management as branchmanager and in governance as manager of legal services
division. I also had experience in international finance as Chief
Representative of the Frankfurt Office and through being
seconded to the Bank of International Settlements in Basel in
Switzerland. This is my first time working in the manufacturingindustry. I am committed to utilizing my insights and engaging
in dialogues with stakeholders with the aim of maximizing
HORIBA’s corporate value.

Aggressive investments with a long-term vision
HORIBA has invested in production facilities, R&D activities,
and human resources from a long-term perspective. In thepast five years, HORIBA’s operating cash flow amounted toabout 85 billion yen, demonstrating the outcome from more
23

than 10 years of continuous investment made even during
economic downturns. In recent years, our level ofinvestments has been high as we invested in building
HORIBA BIWAKO E-HARBOR and acquired HORIBA MIRA
Limited (U.K.) in 2015, and aggressive capital spending at
HORIBA MIRA in 2016-2017 followed by expansion of the
HORIBA STEC Aso Factory in the Semiconductor
Instruments & Systems segment. We are confident thatthese investments will be a driving force to generate cash
flow over the next 10 years.

Shareholder return of approximately 30% ofconsolidated net income
Since 1974 when HORIBA was listed in the Second Sectionof the Tokyo Stock Exchange, HORIBA has continued to
pay shareholder dividends based on a predeterminedpayout ratio. Since 2013 we have changed our shareholder
return policy from setting 30% of nonconsolidated net

Dividend payments and total return ratio

Approach for the enhancement of
capital efficiency

Free cash flows

Dividend per share (right)

Operating cash flow

Total return ratio (left)[including commemorative
dividends and share buybacks]

Investing cash flow%

Change in dividend policy

120

Operating income

Cost of capital(Invested capital Internalrate of cost of capital)

Free cash flow

Value Driver
Yen

120

Billions of yen

100

Fiscal 2013 and after

85.4
Net sales

90

90

53.5

50

39.0

Target 30% in total return ratio

60

60

Cost of
Sales

Selling,
general andadministrative
expensesWorking
capitalFixed assets(Equipment
capital)

32.9

0

1.3

Examples of activity
targets by segment

13.2
-20.5

30

30

-50

New sales channels
development-37.7

Lead time reduction

-72.2
0

0
2007

2009

2011

2013

2015

New products launch-100
11-15 years ago 6-10 years ago
April 2003 toJanuary 2008 to
December 2007
December 20122017

Inventory optimization

1-5 years ago
January 2013 to
December 2017

Early collection of
accounts receivable

Basic capital policy

1

Achieve higher ROE
As stated in our MLMAP2020
HORIBA aims to achieve ROE of
10% or more by 2020. ROE is oneof our most importantmanagement metrics.

2

Link shareholder return toearnings growth
We set total returns (the combination of dividend
payments and share buybacks) to shareholders
as approximately 30% of consolidated net income.
This payout ratio reflects due consideration given
to ensuring a stable management and retaining
earnings as a capital for aggressive businessdevelopment.

income to setting total returns (the combined amount ofdividend payments and share buybacks) at approximately
30% of consolidated net income, so that shareholder
returns are more directly linked to consolidated
performance. Based on this policy, we increased thedividend per share by 31 yen from the previous year to 116
yen in fiscal 2017 and are projecting an increase of 4 yen to
pay a dividend per share of 120 yen in fiscal 2018. We
intend to continually reward owners (shareholders) in linewith growth in corporate value, driven by business growth.

Initiatives to improve asset efficiency:
Adopting “HORIBA Premium Value” as benchmark
HORIBA has identified the ROE target and operating income
margin target of each business segment but has not had
any common yardstick to evaluate returns on invested
capital. As shown by our large investments, including theconstruction of HORIBA BIWAKO E-HARBOR and the3

Improve capital efficiency tomaximize corporate value
Each group company and each business segment
are to set their own capital efficiency target andmanage efficiently in order to maximize HORIBA’s
corporate value. However, we will proactively makeinvestment which is expected to result in creating
future corporate value.

acquisition of HORIBA MIRA Limited, we are increasingly
focused on the importance of improving asset efficiency.
There are many ways to measure corporate asset efficiency.
To be conscious of the capital cost, we introduced a uniquebenchmark “HORIBA Premium Value” in 2017. This is a common
benchmark for the HORIBA Group to gauge how efficiently weinvest, control working capital, and generate profit. This is to be
used to evaluate performance of each company and eachbusiness segment in light of the asset efficiency.
From 2018 the HORIBA Premium Value target will be set foreach group company and each business segment. Our
objective is to be conscious of the fact that capital isneeded for investment and raise the consciousness
regarding collection of returns from investment. However,
figures for a single year are not everything. As necessary, we
will make forward-looking investment even if HORIBA
Premium Value may temporarily deteriorate, aiming for
greater future return. HORIBA is thus determined to keep
investing proactively in the future.
HORIBA Report 2017 | 24

Business outline

Businesssegments to
expand globally
Automotive Test Systems
Process & Environmental
Medical-Diagnostic
Semiconductor
Scientific

Automotive Test Systems

Process & Environmental
Instruments & Systems

Principal products

Principal products

Emission measurement systems
Automotive emission analyzers
Onboard emission measurement
systems
Driveline test systems
Engine test systems
Brake test systems
Transport Management System
Vehicle development engineering
Testing engineering
Lease and management of R&D
facilities

Stack gas analyzers
Water quality analysis andexamination systems
Environmental radiation meters
Process measurement equipment

Major customers

Major customers

Automotive manufacturers,
automotive component
manufacturers, government
regulatory agencies

Electric power companies
Government agencies
Manufacturers

Product applications

Product applications

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

Measurement of gaseousemissions, wastewater and watersupplies, environmental pollution
monitoring, environmental radiation
measurement equipment

Major risk factors

Major risk factors

Changes in emission gas regulations
The automotive industry’s capitalspending and R&D investments

Changes in environmental
regulations by government agencies

Sales by businesssegment

Automotive

38%(Fiscal 2017)33%

Sales by region

Japan

Main transaction currency(Fiscal 2017)

25

Yen

Medical-Diagnostic
Instruments & Systems

Semiconductor
Instruments & Systems

Scientific
Instruments & Systems

Principal products

Principal products

Principal products

Hematology analyzers
Immunology analyzers
Clinical chemistry analyzers
Blood glucose analyzers

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

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

Major customers

Major customers

Major customers

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

Semiconductor production
equipment manufacturers,
semiconductor device makers

Manufacturers/research institutions
Universities/government agencies
Electric power companies

Product applications

Product applications

Product applications

Health and diagnostic testing,disease diagnosis

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

R&D, product quality testing,criminal forensics

Major risk factors

Major risk factors

Major risk factors

Changes in total healthcare
expenditures caused by changes in
populations and other factors
Changes in medical insurance
systems in different countries

Changes in semiconductor makers’
capital spending and semiconductor
manufacturing equipment makers’
production, caused by significant
fluctuation in semiconductor demand

Changes in R&D budgets ofgovernment agencies
Changes in the private sector’s R&D
spending and capital spending for
production

Process &Environmental

Medical-Diagnostic

Semiconductor

Scientific

9%

13%

27%

13%

29%
Asia

U.S. dollars

17%

21%

Americas

EuropeEuro
HORIBA Report 2017 | 26

Business outline

Automotive Test Systems
Providing powerful support to the automotive development industry
HORIBA’s automotive Emission Measurement Systems (EMS) are used by national certification bodies throughout the world andhold a global market share of 80%*. HORIBA provides complete test and measurement solutions to the world’s leading automotive
manufacturers, including test systems for engines, chassis, powertrains, brakes and catalysts. In July 2015 HORIBA acquired
HORIBA MIRA Limited, a U.K. registered vehicle engineering consultancy and testing services provider. With the addition of HORIBAMIRA Limited, the company has expanded beyond analysis and measurement to include the Engineering Consultancy & Testing(ECT) business. It is now well positioned to respond to diverse customer demands as future mobility requirements expand fromproviding advanced vehicle performance testing and R&D know-how to development of electric vehicles and autonomous vehicles .

* Estimate by HORIBA

Net sales and operating income (Billions of yen)120

2017 results:
15

Net sales (left)
Operating income (right)
Operating income plan for 2020 (right)

100.0
10.0

80

10

73.3
64.2 62.2 7.6

7.2
54.2
40

49.5
37.1 35.7 38.6

55.0

43.2
5.8

2.8 4.4 4.2
1.6

5

4.4
3.5

1.8

0

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Major products and market shares

2020(Plan)

Note: Market shares quoted
are estimates by HORIBA

Emission measurement systems
These systems continuously and simultaneously measure a wide range ofgaseous and particle components in emission gases over a broad range ofconcentrations. They are widely used in R&D and engine/vehicle certificationin the automotive industry. The systems include large-scale systems installedinside a laboratory, in which HORIBA holds an 80% global share, andon-board configurations for road tests.
World market share

Segment sales share

80%

43%

Driveline test systems
The driveline is an extremely important part of the overall powertrain thattransmits energy from engines or motors to the vehicles’ tires. HORIBA’s
driveline test systems use the latest simulation technology for a wide range ofpowertrain and driveline testing applications.
HORIBA’s strength is demonstrated by providing flexible systems based on
custom and open solutions.

27

World market share

Segment sales share

15%

5%

Record-high segment
sales, boosted by strong
emission gas business
Turnaround in the
Mechatronics (MCT)
business

2018 forecasts:

Continued demand
related to emission gas
regulations
Expansion of the ECT
business

In 2017, in response to rising demand driven by more stringent global
emission regulations, we increased sales of emission measurement
systems by raising production efficiency of HORIBA BIWAKO
E-HARBOR. We also invested aggressively in the ECT business,aiming for its expansion in areas of development in autonomous
driving and other next-generation automotive technology. Sales
growth in the MCT business also contributed to a year-on-yearincrease in segment sales and operating income.
In 2018, sales and operating income are expected to increase yearon-year. Sales of emission measurement systems are likely to be firm
due to tighter emission gas regulations. Furthermore, sales in the
ECT business are also projected to increase in the next-generation
mobility development field.
Mid-long term strategy:

To have a larger role as a development partner withengineering capability, and a smaller role as just a productprovider for automotive developers.
HORIBA will expand its business competencies by capitalizing on
cross-over technologies in its new ECT business and the existing
automotive testing operations in the EMS, MCT, and Intelligent
Transport Systems (ITS) businesses. In Europe, the Real Driving
Emissions (RDE) regulation, on-road emissions testing of light-duty
vehicles with mandatory limits, have started in September 2017 anda similar regulation will be enforced in Japan in 2022. HORIBA willleverage its strong branding position and 80% global share inemission measurement systems for laboratory testing to achieve ahigh market share in the RDE regulation business. Further, HORIBA
will provide product and service as R&D partner to meet
expectations for next-generation mobility incorporating vehicle
electrification and autonomous driving technology.

Major risks and opportunities
Many countries are enhancing emission gas regulations. In addition,
development of electric vehicles and autonomous vehicles isgaining attention.
In such an environment, automotive and component manufacturers
are aggressively making development investment. Not only existing
automotive manufacturers but also new players are entering theautomotive industry.
HORIBA believes that these changes in development technology
and industry structure will create business opportunities for us.

Automotive Test Systems
Sales breakdown

Sales by region

ITS business 2%

ECT business
11%

Europe 30%

Japan 34%

Americas 14%

Asia 22%2017 Net sales

73.3
billion yen

MCT business25%

EMS business 62%

Trend of automobile-related regulations
Development of the Worldwide

1 harmonized Light duty vehicle Test

Procedure (WLTP) and the Real
Driving Emissions (RDE) regulation

In 2014, the United Nations Economic
Commission for Europe (UNECE) introduced
the WLTP to provide a common technicalregulation for measurement of exhaustemissions and fuel consumption for light-duty
vehicles. This has been adopted in Euro 6d(September 2017) and will be introduced into
Japan (October 2018), and potentially othercountries or regions.
Moreover, the decision to adopt the Real
Driving Emissions (RDE), which uses on-board
gas measurement systems for emissions
testing of light vehicles in Europe and Japan,
has required automotive manufactures toprepare for the change.

2 Progression of emission standards by region/country

Region/country standard

Testing method

Begin the Real Driving
Emissions (RDE) regulation
Adopt the WLTP

Euro 5

EuropeEuro 6b
RDE regulation

Euro 6d
Adopt theWLTP

Post new long-term regulations

Japan

Next regulation
Tier 2

U.S.

FederalCalifornia

Tier 3

CFR1066

LEV III

China IV

China

China V
China VI
Bharat Stage IV

India
Bharat Stage VI
2011

2012

2013

2014

2015

2016

2017

2018
Present

2019

2020

2021

2022

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

Automotive Test Systems: Market size and growth areas
HORIBAbusiness
divisions

EMS
business

MCT
business

ITS business

ECT
business

Gasoline & diesel

HybridMarket size
Electric and fuel(Billions of yen)cells
HORIBA’s estimate

Emissions measurement

55~65

Engine performance testing100~120

Vehicle body, wind tunnel balance,
brake testing

15~20

Driveline testing

30~40

Safety and ITS

10~15

Vehicle design development,
vehicle performance testing
Lease of R&D facilities

2,000~

Advanced Emissions Test Centre (AETC) opened
In July 2017, the Advanced Emissions Test Centre (AETC) opened on HORIBAMIRA Limited (U.K.). The AETC facilities, the state-of-the-art HORIBA emission
measurement systems, will provide testing capabilities for global compliance,
including Euro 6d, as well as incorporating Real Driving Emissions (RDE) testing
capabilities. And the AETC will allow the determination of exhaust pollutants over arange of climatic condition from temperatures of -20°C to 35°C and at simulated
altitude up to 5,000m. The Centre is contributing to accelerate the development
speed of automotive manufacturers.

HORIBA Report 2017 | 28

Business outline

Process & Environmental Instruments & Systems
HORIBA helps develop measurement technology for global environmental preservationand production and quality management processes
We supply a broad range of analysis and measurement instruments for analyzing air pollution, water quality, and soil quality. We play animportant role in gas measurement and monitoring of industrial wastewater in the energy and heavy industries; electric power, steel, chemicalindustries, purified water management for medical and semiconductor use; and water quality monitoring and control for food, andcosmetics fields.
In essence, HORIBA’s analytical and measurement technology contributes to leading technological innovation, which supports public
safety, security, and health in addition to global environmental preservation. This also means that we help achieve sustainable
development, as advocated by Sustainable Development Goals (SDGs).

Net sales and operating income (Billions of yen)30

2017 results:
3

Net sales (left)
Operating income (right)
Operating income plan for 2020 (right)
25.0

2.5

2.5
20
1.6
14.5

13.7
10

2

2.0

1.0

12.0 11.7

13.7

16.4

14.7

16.7

16.7

1.7
1.5

1

1.2
1.0

0.8

0

17.4

0

0.2
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Robust sales of stack gas
analyzers in Japan and
China
Sluggish process
measurement systems
business in the Americas

2018 forecasts:

Continuing robust sales ofstack gas analyzers
Recovery in the process
measurement equipment
business in the Americas

In 2017, sales of stack gas analyzers for thermal power plants andfactories were robust in Japan and China. While the process
measurement equipment business in the Americas was sluggish,
we relocated and expanded the Houston factory, to acceleratebusiness expansion in the oil refining market. As a result, segment
operating income decreased year-on-year despite a sales gain.
In 2018, we expect robust sales of stack gas analyzers to continue.
We also anticipate a recovery in demand in the process
measurement equipment business in the Americas and, as a result,an increase in its sales is projected to contribute to increases insegment sales and operating income.

2020(Plan)

Mid-long term strategy:

Major products and market shares

Note: Market shares quoted
are estimates by HORIBA

Stack gas analyzers
These analyzers provide highly sensitive and precise measurements of NOx, SO2,
CO, CO2, and O2 constituents in gases emitted by boilers and furnaces in thermal
power stations and refuse incineration facilities. A single unit can simultaneously
and continuously measure all five gases. HORIBA has the
top market share in this competitive market in Japan andseeks sales growth in the global market.
Japan market share

Segment sales share

50%

37%

H-1 series of industrial water quality analyzers
These industrial water quality analyzers perform in a wide range of applications
from pure water for semiconductor and food to water treatment to sewage andindustrial wastewater. They confirm progress in wastewater treatment processes
and control water treatment equipment. Moreover, we have developed pH
electrodes that resist damage in harsh environment by strengthening their
toughness, thereby reducing the frequency of electrode replacement andmaintenance operations. By responding to expanding worldwide needs forremote monitoring services in water and sewage quality management andprocess monitoring, HORIBA pursues sales growth in the global market.
Japan market share

Segment sales share

20%

34%

(Total of water
quality analyzers)

29(Total of water
quality analyzers)

Value creation in the context of environmental regulations andprocess measurement equipment
In the environmental and analytical instrument markets in emerging
nations, HORIBA will develop business by utilizing its accumulated
know-how and experience in Japan, Europe, and the Americas. We
also aim to increase market share in the global water quality
measurement business, by collaborating with the water-related
business of our other business segments. As to our process
measurement equipment business, we aim to expand business inthe petroleum refining and petrochemical industries, and intend toincrease the recognition given to the HORIBA brand in Japan andoverseas.

Major risks and opportunities
Along with economic development, emerging countries in generaltend to tighten environmental regulations. In developed countries
which already have such environmental regulations, focus isshifting to environmental improvement of factories and power
generation plants and to improvement in energy efficiency.
HORIBA considers these changes in regulations and production
processes as business opportunities.

Process & Environmental
Sales breakdown
Air pollution
analysis 15%

Sales by region

Process
measurement 14%

Europe 12%

Japan 54%

Americas12%2017 Net sales

17.4

billion yen

Water quality
analysis 34%

Stack gasanalysis
37%

Asia 22%

Major products and targeted markets
Business model of environmental and process instruments

Air pollution analyzers

Market size of environmental andprocess instruments

Industry
processes

4

Many emerging countries

1

HORIBA’s air pollution analyzers have won high acclaimin the field as highly reliable analyzers that demonstrate
excellent precision and long-term stability at ppb*
concentrations. They are used in over 50 countries tomonitor air quality by municipal governments and private
industries. Demand has been expanding for PM2.5related monitoring.
* ppb: parts per billion. One part per billion denotes one
part per 1,000,000,000 parts. This notation is mainly
used for describing low concentration measurements.

Environmental improvement

3

Environmental regulations

2

Stack gas analyzers

Environmental pollution

1

HORIBA is the leading market share* in Japan for continuous emission monitoring
systems used in plants and other facilities that generate gaseous emissions andsoot. Our instruments have established a widely recognized credibility for robust
and reliable sampling systems, which areessential in continuous measurement of avariety of gases. The analyzers are used
in applications for power generation,
petrochemicals, steel, paper, foods, andpharmaceuticals.

Industry development andmarket maturity
Developed countries

Expanding opportunities forbusiness, due to tighter regulations
accompanying economic
development

Major target market

Mature regulation but stablereplacement demand
Growth potential in the processarea aimed at improving
productivity

Analysis and monitoring of air pollutants,
contributing to environmental preservation andimprovement
Continuous particulate monitor with X-ray
fluorescence PX-375
This device constantly monitors Particulate
Matter (PM2.5) in the air for 24 hours a day andhelps determine source of PM concentration. It
has been adopted by the Ministry of theEnvironment in Japan to search for points ofgeneration of air pollutions and implement
effective measures.

Tunable laser gas analyzer TX-100
This device enables laser measurement ofhydrogen chloride generated within waste
incineration plants and other industrial settings.
Demand for the device is increasing as thehydrogen chloride is causing a central
environmental problem mainly for emerging
countries, as this emits strong irritating odor
and affects the human body.

2* HORIBA’s estimate

Water quality analyzers
ENVIRONMENT

Major target market

Major target market

3

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

Process measurement system

Major target market

4

We have established a structure that enables us to integrate various equipment anddevices of petrochemical refining, dissolution, and processing into a system andprovide it collectively. Based in Texas, the heart of the U.S. oil industry, we contributeto efficient production management in the process measurement field of the oil
industry. In 2017, we relocated to a
new expanded office in the suburbsof Houston, to accelerate businessexpansion.

HORIBA Report 2017 | 30

Business outline

Medical-Diagnostic Instruments & Systems
Contributing to a healthy life through in-vitro diagnostic systems
In the global market of in-vitro diagnostic; HORIBA provides instruments and reagents for blood sample testing throughout the world. The
segment’s business model is based on recurring revenues generated from sales of reagents. We aim to ensure stable earnings by
expanding our installed base of medical diagnostic instruments. In particular, HORIBA’s strength is in small and medium-sized hematology
analyzers for Point of Care Testing (POCT) in the clinics and satellites in the hospitals such as operating room, as well as small to mediumsized hospitals and commercial laboratories.

Net sales and operating income (Billions of yen)
40

30

40.0
Net sales (left)
Operating income (right)
Operating income plan for 2020 (right)
26.8 27.0 27.4 26.5

24.7
22.3

22.5 23.4

25.1

22.4

4.0

3.1
2.4

2.4
1.9

10

2
1.7

1.9

0.6

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Major products and market shares
Hematology analyzers
Blood tests are essential for diagnosis andhealth assessment of people and animals.
These analyzers check red and white blood
cell counts as well as hemoglobin andplatelet counts.
World market share

Segment sales share

7%

76%

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

31

4

2.8

2.4

2.3

8

6

20

0

2017 results:

Japan market share

Segment sales share

100%

12%

2020
(Plan)

Note: Market shares quoted
are estimates by HORIBA

Sluggish sales in theAmericasLaunch of new products
and business alliance asa launch pad for businessexpansion

2018 forecasts:

Expect solid sales thanks
to the launch of new
products

In 2017, sales were sluggish in the Americas but new products,
developed in France and Japan in the hematology area, werelaunched. We entered into a long-term business alliance as ameans of entering into a new market, and we accelerated
implementation of our business expansion strategy. These were
forward-looking moves; the segment could not immediately benefit
from them and posted a year-on-year decline in segment sales andoperating income.
In 2018, we will continue to enhance the business alliance anddevelopment capacity in order to broaden the product lineup.
Stronger sales with a contribution from new products and stronger
operating income are expected.

Mid-long term strategy:

Expanding into new areas and increase sales by launching
new products.
At present, HORIBA’s strengths reside in having development
bases in Japan and France and a local production infrastructure ofreagents in China, India, and Brazil etc, with their high expecteddemand for reagents. We aim to globally introduce small andmedium-size hematology and CRP analyzers, which are highly
regarded in Japan, and to expand sales of at an early date new
medium- to large-sized products, which are sourced from France.
Moreover, we are interested in cooperating with other companies
through M&A and OEM arrangements, so as to expand into newareas in the in-vitro diagnostic market.

Major risks and opportunities
Global population is rising mainly in emerging countries andhealthcare costs are generally on a rise. In developed countries,
there is an increasing demand for high-precision, efficient medical
devices, so as to realize more efficient medical services. Medical
insurance systems that support these medical services areundergoing major changes in many countries.
HORIBA considers these changes in demand for medical devices
and in healthcare systems as business opportunities.

Medical-Diagnostic
Sales breakdown

Sales by region

Other 1%

Europe 36%

Japan 23%

Hematology 76%

Americas 22%

Asia 19%

Immunology 6%2017 Net sales

25.1
billion yen

Clinical chemistry,
Blood glucose 17%

Business development by test category
HORIBA aims to be acknowledged as a clinical solution partner by strengthening
the data management and automation areas and expanding productdevelopment either by ourselves or through collaboration with other companies.
Test category

Clinical chemistry

Hematology

Immunology

Coagulation

Market size

2 trillion yen

0.35 trillion yen

2 trillion yen

0.2 trillion yen

CRP analysis

Coagulation
reagents2
Hospitals

2

Hematology analyzer
systems

Large hospitals
Testing centers
Small and mediumsized hospitals

Clinicalchemistry
analyzers

1
Small andmedium-sized
hematology
analyzers

Private practitioners

Hospital units andsurgery rooms (POCT)1

SOCIALOur bases of development and production, both at HORIBA ABX SAS (France) and
HORIBA, Ltd. (Japan), are routinely exchanging technology. In 2017, the HORIBA
Evolutive Laboratory Organization (HELO) Solution, a testing system equipped with anautomated conveyance system having a variable number of analytical modules andadjustable modular configurations, depending on the customer’s work flow needs, waslaunched in France. It provides comprehensive optimal solutions for improvement oflaboratory work flow. Further, HELO Solution provides valuable statistical data forenhancing efficiency of the laboratory. In Japan, new small-sized combined
hematology and C-Reactive Protein (CRP) analyzer was launched.
HORIBA has a global sales network, established by HORIBA ABX, as well as
production bases for stable supply of reagents (consumables) in the volumeconsumption regions. We plan to accelerate new product development and make useof our global networks for further business expansion.
FranceHORIBA has long accumulated hematology testing
technology and developed global operations, centeredin Europe. Siemens Healthcare Diagnostics, on theother hand, has a global sales network and contributes
to comprehensive healthcare by supplying not only
in-vitro diagnostic systems but also imaging devices
and therapeutic systems. The combination of innovativetechnologies of both companies will allow us torespond to diverse medical needs in the in-vitro
diagnostics market.

Field in which HORIBA
exhibits strength

Blood glucose
measurement systems

Global R&D and sales/production networks

Medium and large-sized
hematology
analyzers

Entered into a long-term agreement with
Siemens Healthcare Diagnostics Inc. (U.S.)

FranceJapan

Product development andproduction baseProduct development andproduction baseDevelopment technology of
medium and large-sized products

Development technology ofsmall-sized products(instruments and reagents)(instruments and reagents)

Contribution of HORIBA’s products in Newborn
Intensive Care Units (NICU)HORIBA’s hematology and CRP *1 analyzers are used in
NICUs. There are many low birth weight infants in NICU. It
is necessary to test using small amount of blood sample.
Premature infants are usually immunocompromised andhigh risk of infection. HORIBA’s analyzer enables
measuring with blood sampled of 30μL, the size of a ricegrain, and to measure both complete blood cells countand CRP at the same time, allowing neonatologists todetect infection at an early stage. In addition, it spends
only 4 minutes*2 to get the results by use of HORIBA’s
analyzer, in contrast to 60 minutes for the test result tobe obtained when analysis is done at a central lab
within a hospital.
HORIBA is committed to contributing to early detection of
infection of infants by providing in-vitro testing devices.
*1 C-reactive protein (CRP) is a
protein that increases in the bloodin response to inflammation. It is
used as a marker of infection.
*2 The amount and the measurement
time is depended on the type ofdevice and conditions of use.

Masahiro Hayakawa

Japan
Hematology and
CRP analyzers

India

China

Brazil

Production baseProduction base (instruments

Production base

(Reagents)

and reagents)(Reagents)

Clinical Professor
Division of Neonatology,
Center for Maternal-Neonatal Care
Nagoya University Hospital(Adopted HORIBA’s products in the NICU)HORIBA Report 2017 | 32

Business outline

Semiconductor Instruments & Systems
Contributing to yield enhancement and technology innovation in semiconductor
manufacturing processes with HORIBA’s flow control and measurement technologies
HORIBA’s main products are mass flow controllers, which are devices that control gas and liquid flows in the semiconductor manufacturing
process (front-end). We have a leading global market share*, largely on the strength of our flow control technology that enables yieldenhancement and miniaturization in the semiconductor manufacturing process. We also have chemical concentration monitors and aim tocontribute to the semiconductor industry by providing customers with high-level solutions that support technical advances inmanufacturing processes.
* Estimate by HORIBA

Net sales and operating income (Billions of yen)60

2017 results:
20

Net sales (left)
Operating income (right)
Operating income plan for 2020 (right)

53.3
15.6

45

50.0
15

38.8
35.3
30

15

27.6

24.6

6.3

16.7

4.9

12.4
1.2

0

10.0

28.9 9.4
9.6

24.1
17.8

4.8

10

5

6.4

2.2

-0.09

0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Major products and market shares

2020(Plan)

Note: Market shares quoted
are estimates by HORIBA

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

Segment sales share

60%

87%

Application of mass flow controllers(Semiconductor manufacturing process; solar battery manufacturing process)
http://www.horiba.com/us/en/semiconductor/applications/semiconductor/

Chemical concentration monitors
These compact units are used in semiconductor manufacturing to monitor
concentrations of chemical cleaning agents. They ensure cleaning fluids are
precisely delivered and properly used, thereby optimizing the cleaning process
and boosting production yields.

33

World market share

Segment sales share

80%

11%

Robust investment
demand by semiconductor
manufacturers

2018 forecasts:

Maintaining market
shares in the favorable
semiconductor market

In 2017, on the back of high-level capital expenditures bysemiconductor manufacturers, sales of mass flow controllers tosemiconductor production equipment (SPE) manufacturers
increased significantly. Responding to an increase in demand, we
completed expansion of the HORIBA STEC Aso Factory andincreased production capacity of mass flow controllers. We also
relocated and expanded our bases in South Korea and Taiwan tostrengthen our local infrastructure to service and support
customers. As a result, segment sales and operating income
increased year-on-year.
In 2018, as capital spending by the semiconductor industry is
expected to remain at a high level, we project a sales gain and theresultant year-on-year increase in segment sales and operating
income.
Mid-long term strategy:

Expand market share of main products
We will further enhance our flow control technology, which has
been accumulated primarily in mass flow controllers. We also aim
to grow sales of chemical concentration monitors, used insemiconductor wafer cleaning processes. In addition, we will
combine our flow control technology and analysis andmeasurement technology so as to enhance development of new
products that satisfy customer needs.
Meanwhile, we intend to apply our flow control technology to otherindustries by promoting product development for energy,
petrochemical, pharmaceutical, food and other markets.

Major risks and opportunities
An increase in processing volume at data centers and penetrationof Artificial Intelligence (AI) and the Internet of Things (IoT) havesignificantly boosted demand for semiconductors.
In addition, advances in technology and production process, suchas miniaturization and more multi-layer semiconductor production
processes, have significantly impacted demand for semiconductor
production equipment.
HORIBA considers these changes in demand for semiconductors
and technology advances as business opportunities.

Semiconductor
Sales breakdown
Gas analyzers
1%

Sales by region
Europe 5%

Other 1%

Japan 36%2017 Net sales

53.3
billion yen

Chemical concentration Mass flow
Americas 13%
monitors 11%
controllers 87%

Asia 46%

Reasons behind HORIBA’s global share expansion in mass flow controllers

1
2
3

Increase in demand for etching devices, due to an increase
in memory and more multi-layer semiconductor production
processes. HORIBA’s differential pressure type mass flow
controllers are being widely relied upon in the next-generation
manufacturing process
Stable product supply capability, realized by making continual
investment for development and production even during an
economic downturn
A global sales and service infrastructure
and a strong support capability

HORIBA’s share2009
Approx.

40 %2017
Approx.

60%

Opened new bases in South Korea and Taiwan
In 2017 we opened new facilities equipped with a clean room to enable
operations from application development to production, in South Korea
and Taiwan.
Since we opened the semiconductor business service bases in South
Korea and Taiwan in 1991 and 1996 respectively, these bases, mainly forsales and maintenance, have contributed to building close relationships
with local customers and raising
recognition of the Semiconductor
Instruments & Systems segment.
Looking ahead, we will continue
to demonstrate a high level of
response to local customers andprovide cutting-edge technology,
in order to expand our business.

An increase in data centers and use of IoT and AI has boosted
semiconductor demand, while technological advances, such as theincrease in multi-layered processes, has raised demand for etching
devices. HORIBA’s differential pressure type mass flow controllers, arerecognized for enabling these new processes and are widely adopted for
cutting-edge semiconductor manufacturing, thereby contributing tohigher market share. This success is attributable to both our continued
investment in, and launch of new products even during a previous
downturn in demand, and to our elevated technical capability andproduction capacity which better satisfies demand from semiconductor
manufacturers. In our view, our balanced management, which enabled us
to carry excess funding capacity and maintain production facilities tomatch anticipated demand, was a key contributor to our success.

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

60

Trillions of yen

8

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

Worldwide sales of semiconductor manufacturing equipment (right)(Estimates by HORIBA)

50

6.3

40
30
20

3.5

3.1

A new facility of HORIBA STEC KOREA, Ltd. (South Korea)

4.0
3.1

3.0

4.4

4

4.8

1.5

10
0

3.5

16.7 12.4 27.6 24.6 17.8 24.1 28.9 35.3 38.8 53.3
2008

2009

2010

2011

2012

2013

2014

2015

2016

0

2017

SOCIAL

Continued investment to realize a growth ingrained in the community
The HORIBA STEC Aso Factory, which manufactures mass flow controllers in Nishihara Village,
Kumamoto Prefecture, has been supported by the people in the prefecture since the factory
started up in 1988. Although the factory was struck by the Kumamoto Earthquakes of April
2016, it resumed operation in two weeks, with water supply and electricity recovery facilitatedby local people including local employees. This led to our decision in July 2016, only threemonths after the Earthquakes, to break ground on the biggest-ever expansion of the Aso
Factory, utilizing its strength together with the community and contributing to segment growth.
The construction was completed in December 2017 and the factory’s floor space was
expanded by about 1.5 times. We seek to further enhance its stable supply capacity and makeit a driving force in the growth of the HORIBA brand in the semiconductor market.

The Aso Factory’s history
1988

Completed construction of
the Aso Factory

2012

4th stage expansion

1992

2nd stage expansion

2016

Damaged by the Kumamoto
Earthquakes

2005

3rd stage expansion

2017

5th stage expansion

HORIBA Report 2017 | 34

Business outline

Scientific Instruments & Systems
Generating HORIBA’s core technology and supporting the leading edge of scientifictechnology
HORIBA began its history from the R&D function leading to Japan’s first glass electrode pH meter. HORIBA’s analyzers use gas analysis byinfrared rays, X-ray solid analysis, and dispersion technologies such as Raman or fluorescence spectroscopy. HORIBA’s analyzers provide
solutions for data acquisition and analysis in niche markets to support advanced research in pursuit of innovative products and processes
that will enhance our lives and the world that surrounds us. HORIBA’s analyzers are widely used in basic research, foreign-object
examination and defect analysis for pharmaceuticals, food and electronic components, forensic science, archaeological surveys, andothers. Additionally, the Scientific Instruments & Systems segment develops basic analytical methods and core measurement technologies,
which play key roles in providing new technologies to the four other business segments of HORIBA.

Net sales and operating income (Billions of yen)2017 results:

40

4
Net sales (left)
Operating income (right)
Operating income plan for 2020 (right)

35.0
3.5

30
25.6

24.8
20.5 20.8

20

1.2
10

22.0

27.0

3

25.7 26.1

22.9
20.4

1.4

2

1.2

1.1

1.3
1

0.9
0.9 0.9

0.8

0.4
0

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Major products and market shares

2020(Plan)

Note: Market shares quoted
are estimates by HORIBA

Raman spectrometers
Raman spectroscopy is a spectroscopic technique that provides information about themolecular structure of molecules by measuring their vibrational modes. These vibrationalmodes act as a molecular fingerprint offering quantitative measurements which can beused 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 lightscattering mechanism, so a highly-sensitive and optimal optical design is necessary.
HORIBA’s outstanding know-how in optics-related technology, largely from its acquisition
of Jobin Yvon, has been successfully applied in the core development of our extremely highperformance Raman spectrometers.
World market share

Segment sales share

30%

19%

pH meters
HORIBA is recognized as one of the top pH meter brands beginning with our developmentof Japan’s first glass electrode pH meter in the 1950’s. HORIBA
offers a full pH product line to satisfy diverse customer needs
ranging from desktop models to support laboratory research,
to rugged and portable instruments for field applications
measuring river water, groundwater, and wastewater.

35

Japan market share

Segment sales share

50%

9%

Robust sales ofspectrometers for R&D
applications by universities
in China
Increase in development
investment associated witha new product launch2018 forecasts:

Recovery in demandmainly in Japan

In 2017, sales were sluggish in Japan and Europe, but sales in China
and the Americas were firm. Particularly in China, we enhanced oursales organization for marketing of Raman spectrometers and otherproducts to universities and academic institutions and applied
existing technologies to product development for expanding
business into new markets. We also collaboratively utilized
technology resources and our customer network with HORIBA’s fourother business segments and focused on expansion of our customer
base. The segment recorded a decline in operating income on asales gain, mainly due to an increase in R&D expenses.
In 2018, sales are expected to increase due to a recovery in demand
stemming from growth in capital spending and R&D expenditures ofthe private sector, mainly in Japan. Consequently, we forecast ayear-on-year increase in segment sales and operating income.

Mid-long term strategy:

Incorporate customers’ views in product development andhence market creation
It is our challenge to create new value in the analysis andmeasurement business, including energy, automobile,
biotechnology, and drug discovery areas. In addition to continuing
to actively increase sales in niche markets, we will work to expand
applications of our products. In order to increase the understandingof the issues our customers face, we will endeavor to undertake
joint projects with them.
Each of our three bases, in Japan, France, and the U.S., leverages
its distinctive strength in product development, leading to a wide
range of use of our products in R&D in companies and academic
institutions, including research universities. We believe new growth
opportunities may arise from sales channels and applications
developed by HORIBA’s four other business segments.

Major risks and opportunities
Development of cutting-edge technology is undertaken by
governments of various countries, using their national budgets, aswell as by manufacturers, research institutions, and other entities
in the private sector.
HORIBA considers changes in cutting-edge technologies asbusiness opportunities.

Scientific
Sales by region

Sales breakdown
Water quality
analysis 9% Other 4%
Particlecharacterization
11%

Europe 19%

Japan 25%

Americas 28%

Asia 28%

Molecular &microanalysis 34%

2017 Net sales

26.1
billion yen

Elemental
analysis 17%

Opticalcomponents 25%

Three Global Bases: R&D, manufactured products and strategies

FranceRaman spectrometers

Japan

Gratings

U.S.

Particle-size distribution
analyzers

Water quality measurement
equipment

X-ray fluorescenceanalyzers

Elemental analyzers

Fluorescence analyzers

Spectrometers

SOCIALNew start as HORIBA FRANCE
Jobin Yvon S.A.S. (now HORIBA FRANCESAS), established in 1819, celebrated its
20th anniversary since being acquired by
HORIBA in 1997. Its headquarters is
located in the suburbs of Paris, in a site
adjacent to the leading science andtechnology French institute École
Polytechnique. HORIBA France haspromoted industry-academy cooperationin hiring and in product development, andhas achieved business growth that wasclosely associated with its local
community. The company plans toaccelerate global development of its
optical analytical technology.

HORIBA Europe Research Center of HORIBA FRANCE SAS

Accelerate customized
products development,satisfying customers’ needs
HORIBA, Ltd. has many basic
technologies and is engaged indevelopment of customized products thatare tailored to needs of companies,
universities, and laboratories. For example,
we developed a customized device for a
precious metal manufacturer and anotherspecial device for a university laboratory
doing advanced research, in response to
their specific needs. Through such productdevelopment, we refine our technology
and play a role in sharing analytical andmeasurement technology to our four otherbusiness segments, and at the same time
seek to improve profitability.

X-ray fluorescenceanalyzers that are
customized fora precious metal
manufacturer

Launch of DUETTA™ fluorescenceand absorbance spectrometer
HORIBA launched a new fluorescence andabsorbance spectrometer for analyticalmolecular spectroscopy, for use in thematerials, earth, and life science areas.
The product was developed by combining
technologies of Photon Technology
International (U.S.) acquired in 2014 and
HORIBA Jobin Yvon (U.S.)
Features
1. Two-in-one fluorescence and absorbance
spectrometer, reduces cost and time formeasurement
2. Wide wavelength detection range, enabling
accurate analysis
3. New easy-to-use software, contributing tomore efficiency

New product DUETTA™

HORIBA Report 2017 | 36

Value creation based on “Invisible Values”

HORIBA’s thoughts on CSR

Achieve CSR by growing business
HORIBA’s materiality
Since its foundation in 1945, HORIBA has worked to grow with the mission of contributing to the progress of science andtechnology, through the provision of analysis and measurement technologies.
In anticipation of risks and opportunities presented by the social impact of rapid globalization and accelerating AI and IoT
expansion, HORIBA is identifying key topics in the area of science and technology and areas for the company to contribute toachieving the mid-long term management plan MLMAP2020 and best serve the company’s interests from a long-term perspective.
See details on HORIBA’s CSR activities on the website:
https://www.horiba.com/en_en/company/social-responsibility/home/

Process ofidentifying
material
topicsThe ESG Workshop, which is comprised of the Junior Corporate Officer in charge of CSR at HORIBA, Ltd. and core
members of each segment, was launched.
HORIBA’s various activities were screened by using guidelines on SDGs*1and ESG investments for reference (around 100) .

2016

HORIBA’s corporate philosophy and strength were confirmed and areas and frameworks (Design Sugoroku) where
HORIBA can or should contribute in solving social issues or do so in relation to stakeholders were studied.
The current initiatives were categorized in a framework and were approved by the HORIBA CSR Promotion Committee(pages 43 and 44.).
25 ESG Workshops were held in 2017.
HORIBA participated in CDP*2

2017

The ESG Subcommittee was established within the HORIBA Group CSR Promotion Committee.
CSR activities by HORIBA’s overseas group companies were surveyed.

Four subcommittees, one each on the environment, social affairs, governance, and public relations, will be establishedand missions and action plans for each for 2018 will be set.

2018

HORIBA’s CSR Policy will be clarified in the next mid-long term management plan and will be announced to the public.
HORIBA’s CSR website will be renewed and disseminated broadly outside the group.

1

2

Super Dream Team

“Balanced Management” and “Matrix Organization” toenhance the operational baseP39-40The mission of the “HORIBA Stained Glass Project” is toregardless of the employees’ gender, nationality, age,disability*1, or other differences, and to promoteorganizational growth.

P39-403

Unique products and services

Expansion of applications by sharing technologies between
business segments and through product development;
integration and growth of the water related business

Efficiency enhancement at HORIBA BIWAKO E-HARBOR
via production process reform

P41-42

Promotion of global projects in cooperation with
universities and research institutions

Obtaining ISO22301 accreditation in the Semiconductor
and Medical-Diagnostic Instruments & Systems
segments deploying lessons learned from the responseto the 2016 Kumamoto Earthquake

Enhancement of corporate value by seizing global M&A
opportunities

Corruption prevention; rejection of forced laborand child labor

Internal education system that promotes quality

Appointment of the heads of overseas group companies
as executive officers of HORIBA, Ltd.
Objectives: sharing of Japan’s management style andraising motivation of overseas group companies

Sustainable supply chain*1 SDGs: The Sustainable Development Goals (SDGs), officially known as “Transforming our world: the 2030 Agenda for Sustainable Development,” is a set of 17 “Global Goals” with 169 targets between
them. The United Nations General Assembly adopted the agenda in September 2015. See https://sustainabledevelopment.un.org/?menu=1300 *2 The CDP (formerly the “Carbon Disclosure Project”),
a non-profit organization based in London, works with institutional shareholders to disclose the environmental strategy and greenhouse gas (GHG) emissions of major selected corporations in the FTSE
Index. The CDP sends questionnaire to major companies across the world, analyzes and evaluates the companies’ self-reported data, and discloses the results to investors.
See https://www.cdp.net/en

37

HORIBA’s framework for thecreation of corporate value

1

Expressed through Design Sugoroku

Super DreamTeam

6

Participation insociety andgrowth ofindividuals

52Unique products
and services

Contribution
to realize a happy
future society,by using
cutting-edge“Measurement
Technologies”

Communication
with internal/
external
stakeholders

3
Sustainablesupply chain

4

Ownership andChallenging Spirit

Governancestructure, slim
and solid internal
controlOpen and Fair
Applying Design Sugoroku!
Design Sugoroku is a modification of a very old
Japanese board game that relates all major items to beconsidered in making a design. This is a frameworkthat enables all related things that need to beconsidered to be obvious at a glance. For example, if
you change the size of your business card, you have toconsider its impact on your card case or a pocket of abusiness suit. HORIBA is using this to summarize therelationship among all activities that form invisible
values, in addition to business activities, as these
activities influence each other.

4

Governance structure, slim
and solid internal control

HORIBA’s various activities are summarized, with its
framework being determined by its three backbone values

the Corporate motto : “Joy and Fun,”“Open and Fair,”and “Ownership and Challenging Spirit.”

5

Communication withinternal/external stakeholders

6

Participation in society andgrowth of individuals

Identification of important information;
investor relations (IR) activities and proactive disclosure
based on Open and Fair
Signatory to the UNGC*5 ; dialogue with outside
institutions, such as CDP

Use of the BlackJack Project and HORIBA COLLEGE*6 forgrowth of individuals and the organization

Global adoption of the ERP (Enterprise Resource
Planning) system
Enhancement of stability of the business base, assistedby the IMS*4

Promotion of global dialogue with business partners andcustomers; continual meetings with sales companies andsubcontractors; Technical Olympics, technology seminars
for customers, etc.

Work style renovation to support designing “Decent Work”
and a prosperous lifestyle

Adoption of HORIBA Premium Value, an indicator fortargeting and monitoring the improvement of
capital efficiency

Internal communication with employees and executives
at product launch meetings, etc.

Living in good harmony with nature and revitalizing
communities through use of HORIBA Blueberry Farm,“Joy & Fun”*7 and others

Appointment of outside officers since our foundation

P39-40

P39-40*3 HORIBA is a member of general incorporated association Accessibility Consortium of Enterprises (ACE) and promotes employment of people with disabilities.
See details on HORIBA’s website: http://www.horiba.com/about-horiba/diversity/human-resources/ *4 IMS (Integrated Management System) is an integrated management system of more than one ISO
and OHSAS. *5 UNGC: the United Nations Global Compact https://www.unglobalcompact.org/ *6 HORIBA COLLEGE was started in 2009 as a place for employees to learn from each other as student
and or lecturer *7 HORIBA Blueberry Farm “Joy & Fun” opened in April 2012 by our renting fallow fields in Takashima City, Shiga Prefecture. Our new employees get a taste of agriculture and their family
members also participate in the harvesting of blueberries and vegetables.

HORIBA Report 2017 | 38

Value creation based on “Invisible Values”

Organizing a Super Dream Team

Balanced management attained througha matrix model of organization

Under the slogan “HORIBA Group is One Company.” since2004, HORIBA has promoted “Balanced Management”
through adoption of a matrix model of organization to
manage the group companies as a single integrated entity.
With the aim of further developing this system, “HORIBA
Stained Glass Project” promotes diversity through realizing
diverse abilities and characteristics as a Super Dream Team.
We are accelerating the reinvention of our existing businesses
and the creation of new businesses in keeping with the
Mid-Long Term Management Plan, MLMAP2020.

HORIBA uses matrix management across its five businesssegments and three operating regions. This is a globalorganizational framework for executive decisions on
strategies and plans, by business segment, that removes
barriers such as separation of countries, regions, or groupcompanies. Even if one segment is in a slow businessenvironment, we have continued investment in each segment
by flexibly using management resources; this has helped us
to achieve sustained growth. This framework has enabled our
globally-integrated business operation. We will continue toexploit the benefits of the multiplier effect from successful
examples and strengths in one segment or one region toothers, and improve HORIBA’s corporate values.

BlackJack Project
The BlackJack Project is HORIBA’s unique operational
improvement initiative which began in 1997 with the objective ofchanging the awareness and activities of employees. From theoutset, a dedicated internal team worked to promote thisinitiative. The project was expanded to include overseas groupcompanies in 2006. From 2007, we held an internal World Cup
competition of candidate proposals from each country where we
operate. This annual competition provides an opportunity todemonstrate to management and employees how we make ourbelief a reality. The BlackJack Project has the important functionof sharing corporate culture, experience and knowledge and is
one of our most important initiatives to realize a Super Dream
Team. In 2017 we celebrated the 20th anniversary of the project
and the cumulative number of submitted suggestions andproposals exceeded 8,000. The BlackJack Project is now anessential aspect of HORIBA’s corporate culture in which
employees take an initiative in reforming themselves. It is also an
excellent way for the management to understand the realities of
our workplaces. It is thus an important initiative supporting
HORIBA’s current strong operating results.
Number of proposals
Japan
Outside of Japan
1,000
819
themes800
600

Proposals submitted in 2017 e.g. HORIBA, Ltd.
Other 6 %Safety, hygiene andenvironmental

10 %

35%

Sales promotion andmarketing

400

10 %

200
Quality0
2013 2014 2015 2016 201739

Time saving,
efficiency, cost
reduction

14 %

Human
resources andorganizational

25%

Adoption of the LAQUA to unify testing method at
HORIBA’s reagents factories(Theme of the Gold Award in BlackJack Award World Cup 2017)

In HORIBA’s Medical-Diagnostic Instruments & Systems segment,
reagents are produced in five countries worldwide. In order tominimize variability in component measurement such as pH data, Mr.
Toshiyuki Tsujimoto has unified the measurement devices and themethod of measurement, using HORIBA’s own pH Meter “LAQUA.”As a result, dispersion among the plants in values measured in thereagent production process has
been lowered. Moreover, based on
the experiences earned during
standardizing the process, theproject team submitted proposals
to customers on the method ofeffective reagent testing, which
resulted in improvements both atAward winner, Toshiyuki Tsujimoto (right)
Production Division, HORIBA, Ltd.
factories and in products.
Unifying the testing method in five reagent
factories in five countries

Organizational structure and talents

Three pillars of the Stained Glass Project

HORIBA Stained Glass Project
In January 2014, we launched the Stained Glass Project. Its
mission is to make HORIBA stronger by the continual creationof new value through diverse talents and skillsets, regardlessof their gender, age, nationality, disability, or other
differences.
We have promoted activities aimed at more diversity in our
workforce and at work style renovation, and in 2017 theStained Glass Project Office was launched to further promote
the activities.

1

2

3

Advance HORIBA’s
strength so as topromote diversity

Make more flexible
choices in work
style

Improveproductivity

Progress of the Stained Glass Project

STEP 1

Start activities
Initial focus on engagement of women at workplace

STEP 2Start“work style renovation” workshop
Theme: Change in individual behavior

2014~

2015~

STEP 3
2017~

Organize a dedicated team to connect the
management, HR team and workplaces
Activities to make the best use of characteristics ofeach workplace and each organization

Major initiatives in 2017
“Kaeru” Meetings“Kaeru” Meetings, teams practice thethree “Kaeru” (a Japanese term). At
the meetings, participants work
together from identifying issues they
feel important personally or work as ateam to draw up an action plan for asolution. These discussions wererooted in their workplaces, andthereby are effective to improve
productivity and realize a better way
to work.

Initiatives to realize a flexible work style
The three “Kaeru”“Kaeru”= change
yourself“Kaeru”= change
the way
to work“Kaeru”= shorten
workinghours

In order to make the Stained Glass Project identify and incorporate
opinions of employees in each workplaces, the working group is
continuing to concentrate on self-driven action.
In 2017, under the theme of “balancing work and care giving,” weproactively disclosed information on Japan’s long-term care support
systems for the elderly and held seminars. The Stained Glass Project
Office and the HR department jointly established diverse programs, inorder to understand the present work conditions of employees andhelp them to be closer to their ideal work style, based on the results ofa questionnaire on diversity and work style at HORIBA Group in Japan.

“Kaeru” meetings held for IR/PR team

Submission of 300 action plans per year
Become more motivatedWork more efficiently

10 %

55%

Raise skills of individuals

10 %Standardization

25%

By theme

Held 34 “Kaeru” Meetings(340 participants)“Making more efficientmeetings” turned out to be acommon issue.

Examples of action plans
Share their “to do list” when starting work in the morning and prioritize work to do.
Share progress reports at the noon assembly and share more work
assignments.
Prepare a work manual and then prepare a skill map.
Make two persons in charge of one assignment to break away the assignment
to be personalized.

Members of a working group

Initiatives in 2018
・Putting together an approach to make meetings efficient andimplement it across the company
・Studying the introduction of a scheme to make more
flexible choices in work style that matches each workplace
・Enhancing the human resource system and the training
system for promoting diversity in human talent

HORIBA Report 2017 | 40

Value creation based on “Invisible Values”

Continuous investment in core technologies

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

%

15

15

R&D expenditure (left)
Ratio of R&D expenditure to net sales (right)
11.9

10

10.6

8

9.8

9

9.4

10.0

8

8

10.0

9

12.3

12.9

13.9

10.7

8

10

8

7

5

8

7

0

5

0
2008 2009

2010

2011

2012

2013

2014

2015

2016

2017

The development of analytical technology and engineering
technology is vital to HORIBA as an analytical andmeasurement equipment manufacturer. We have maintained
R&D investment at the level of 7-8% of sales, even during
economic downturns when our competitors reduced theirinvestments. This strategy has helped to boost our market
share during subsequent upturn phases. In 2009, during the
global economic
recession triggered by
the financial crisis, theSemiconductor
Instruments & Systems
segment recorded
losses. However,supported by stableearnings of theMedical-Diagnostic and Scientific Instruments &Systems segments, we were able to maintain the same levelof overall R&D investment in the Semiconductor segment,
which has resulted in the segment’s favorable operating
performance today.
We firmly believe that this investment policy will contribute to
our future growth and profitability improvement. HORIBA
aims to improve the efficiency of our R&D investments andrealize a higher operating income.

Application of core technologies to products
HORIBA focuses its R&D resources on developing specifictechnologies in analysis and measurement and implements
effective product development in the five business segments ofdifferent markets by applying the obtained core technologies.
HORIBA’s major technologies(by scale of sales)

Infraredmeasurement

Technology to analyze components in
gas in real time

Gas flow
controlTechnology to measure and control theflow of fluids instantly

Particleanalysis

Technology to measure particles(diameter, number, weight, andcomponents)
Technology to analyze materials by

Spectroscopic using ultraviolet light, visible light, andanalysisnear-infrared light
Technology to measure components

Liquid analysis or characteristics in liquid, such as pH,
sodium, acids, alkalies, and glucose.

41

Automotive
Test Systems

In product development, we strives to provide flexible
applications and to meet demands from customers andsociety crossing over the boundaries of the businesssegments.
Process &Environmental

Medical-Diagnostic

Semiconductor

ScientificTechnologies

External recognition of HORIBA's technologies
HORIBA’s technologies, in particular its performance andoriginality, have been highly recognized and evaluated by many
external institutions, as we have long pursued advanced
technologies by making continuous investment. Being proud of
its origin as a start-up in Kyoto, we will continue to refine unique
technologies and launch competitive products.

HORIBA, Ltd. received the 2017 Invention
Award of the National Commendation forInvention from the Japan Institute of Invention
and Innovation
HORIBA received the award for the EGR(Exhaust Gas
Recirculation) rate measuring device that enables the
rapid and accurate measurement. The National
Commendation for Invention was established in 1919 inorder to contribute to technological advancement andindustrial development in Japan, and has awarded toinventors for their actual outstanding achievement orcreators for inventions with strong future potential. This
innovation also won the GOLD AWARD in the 2012

HORIBA STEC, Co., Ltd. has obtained theaccreditation to ISO/IEC 17025 for gas mass
flow calibration
HORIBA STEC, Co., Ltd. has obtained the ISO/IEC 17025
accreditation for calibration of gas mass flow at the Kyoto
Fukuchiyama Technology Center. This accreditation
allows us to hold and use an accredited top-level gas
mass flow standard in the company. With the world-widegrowing demand for credibility of products or services, weare increasingly asked for a certificate of testing or
calibration issued by a laboratory accredited under thisinternational standard. We will take advantage of thisaccreditation for our manufacturing process to improve
performance and reproducibility of mass flow controllers,
indispensable in the semiconductor industry.
HORIBA STEC, Co., Ltd. Kyoto Fukuchiyama Technology Center

HORIBA Group IP (Intellectual
Property) World Cup, contested
globally by the excellent
inventions of the HORIBA Group.

Award winner: Tomoshi Yoshimura(HORIBA, Ltd. Research & Development Division)

SOCIALHORIBA MIRA Limited participated in establishing
ISO 26262, an international standard, for functionalsafety of vehicles

For handing down “genuine” HORIBA's
technologies (Sengu)
Project H -Create a new standard-

HORIBA MIRA Limited in U.K. participated in establishing aninternational standard, ISO 26262, to contribute to ensuring automotive
safety. This standard, published in November 2011, defines functionalsafety for electrical and/or electronic systems in vehicles. Functionalsafety is a concept to minimize risks through safety measures such asa fail-safe. For example, afail-safe vehicle responds ina way that will cause no or
minimal harm to traffic
participants such as
including drivers,
passengers. Functionalsafety is increasingly
important in ensuring safetyof electric vehicles andautonomous vehicles.

We advance the cultivation of high-potential engineers who can work
insightfully on product development and be the next generation of
HORIBA leaders. For example, some engineers go through the entire
process of upgrading core technology from setting a theme toapplying their achievements to manufacturing in practice, withmentoring from senior
engineers. Through“Handing down oftechnologies (Sengu inJapanese)” including
approach to principles,
young engineers in HORIBA
are taking on challenges
inquisitively and eagerly toadvance HORIBA's coretechnologies.

HORIBA Report 2017 | 42

Corporate GovernanceCorporate Governance System

Basic Policy on
Corporate
Governance
Based on the corporate philosophy of “Openand Fair,” HORIBA has pledged to (1) establish
an organizational structure that promptly
responds to changes in the businessenvironment, (2) improve its managerial
monitoring of performance and (3)enhancecompliance-related arrangements. These
objectives have the aim of establishing a worldclass governance structure. At the same time,
we are committed to establishing good
relationships with all stakeholders, including
owners (shareholders), customers, employees,
and local communities.
In addition to proper information disclosure, we
seek to promote constructive dialogue with ourowners (shareholders), contributing to oursustainable growth and mid-long term
improvement in corporate value.

431

http://www.horiba.com/jp/investor-relations/ir-policy/(Japanese)2

http://www.horiba.com/jp/investor-relations/ir-news/article/40961/(Japanese)

HORIBA has adopted the type of organization defined as a“Corporation with Board of Corporate Auditors,” in the
Companies Act.
As of May 2018, the Board of Directors is comprised of eight
members, including three independent outside directors,
including one woman. In 2017, the Board met 12 times inorder to make decisions more promptly than in the past andto augment managerial capability. To avoid managing with an
introverted approach, HORIBA has, since the company’s
origin in 1953, always appointed at least one
director and one corporate auditor from outside the company.
In addition, HORIBA introduced a corporate officer system in1998 to make smooth and agile execution of operations
under the supervision and guidance of directors.
At present (May 2018), 24 corporate officers, including one
woman and six non-Japanese, play an active role in Japanand overseas.
As of May 2018, the Board of Corporate Auditors iscomprised of three corporate auditors, including one
independent outside auditor. The Board of Corporate
Auditors held 13 meetings in 2017. It performs objective andappropriate auditing and monitoring of the work of the Boardof Directors, in cooperation with independent auditors andinternal auditing (Group Internal Audit Office, which is
positioned directly under Executive Vice Chairman & GroupCOO). (See the list of directors, corporate auditors andcorporate officers on page 45).

2015

2018

5
6

1
6

5
8

3
8

Internal

OutsideInternal

OutsideDirectors: 6(including one outside director)

Corporate Officers: 17(including one non-Japanese and one woman)

Directors: 8(including three outside directors and one woman)

Corporate Officers: 24(including six non-Japanese and one woman)

Evaluation of the Board of Directors’ Effectiveness
During November and December of 2017, we distributed to allseven directors a questionnaire concerning the Board of
Directors’ effectiveness and received response from all of them.
The main questions were: 1) three roles and responsibilities of
the Board, as per the Corporate Governance Code Basic Rule4; 2) structure of the Board (number of members, diversity,
knowledge, experience, ability, etc.); and 3) number of meetings
held. In addition, talks took up 4) hours of discussion; 5)
issues of discussion; and 6) subjects of discussion.
As a result, the directors judged that the effectiveness of
the Board was confirmed to be satisfactory as it was.

Relationship with owners (shareholders)

Directors’ compensation

Open general meeting of shareholders
Since its initial stock listing in the Second Section of the
Osaka Securities Exchange in 1971, HORIBA has
encouraged all shareholders to attend the annual generalshareholders meeting. This annual meeting is held on a
Saturday to facilitate public attendance. An informal gettogether event is held afterwards to enable shareholders totalk directly with management.

Compensation for directors consists of base compensation(regular fixed-amount salary), earnings-based salary (bonus)
linked to the earnings results of each fiscal year, and stock
options (retirement allowance) linked to medium to longterm earnings performance. Compensation for outside
directors, however, consists strictly of base compensation(fixed-amount salary), excluding compensation linked toearnings performance, given the nature of their assignment.
The limits for compensation for directors and for outside
directors are approved as a separate matter at the annual
general shareholders meeting.
The directors (not including outside directors) compensationof 2017 was 667 million yen in total.

Constructive dialogue with owners (shareholders)
HORIBA abides by the “Basic Policy for Constructive
Dialogue with Shareholders” as announced on our website(see below). We make efforts to explain our corporate policy,
financial condition, and corporate culture to our owners
based on the perspective of “Fair Disclosure”, and ask fortheir understanding and continued support.
1

Breakdown of directors’ compensation (excluding outside directors)
Base compensation

Earnings-based compensation

19%

75%

Stock option

6%(Japanese only)

Anti-takeover measures
HORIBA has not adopted anti-takeover measures. HORIBA
reviewed the “Basic policy on the persons to control
decision making over the financial and business policies of
HORIBA”, which was announced on our website.
2(Japanese only)

Corporate governance structure chart
General Meeting of Shareholders
Appointment,
Dismissal

Supervising, Monitoring

Board of Directors(Directors)

Selection, Dismissal
Business Execution
Instructions

Supervision

Appointment,
Dismissal

Board of Corporate Auditors(Corporate Auditors)

Independent Auditor
Coordination

Supervising, Monitoring

Reporting

Financial Audit

Internal controls
Business Execution

Monitoring

Reporting

Representative director
Supervision
Entrusting
Business
Execution

Appointment,
Dismissal

ReportingDiscussed Items

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

Supervising

Directors and Corporate Officers’ Meeting/Operations Committee/
Management Committee

ReportingInternal Auditing(Group Internal Audit Office)
Coordination

Direction and Orders,
ReportingCorporate Officers/
Division Managers

Committees, etc.*1
Supervising

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

Promotion

HORIBA Risk Control Committee

Advisory,
Proposals

Reporting Principles

Internal Control Promotion Committee
Coordination

HORIBA CSR Promotion Committee
Joy and Fun, Open and Fair

HORIBA, Ltd. Risk Control Committee*2

Coordination

Compliance Committee

HORIBA, Ltd. CSR Promotion Committee
HORIBA Corporate Philosophy, Ethical Guidelines*1 Committees, etc. refer to committees and conferences that are established and registered based on the “Regulations Concerning Conferences and Committees,” such as the Group
Promotion Committee for Management of Public Subsidies and the Safety and Health Committee.
*2 The HORIBA, Ltd. Risk Control Committee discusses and approves issues and measures concerning risk control.

HORIBA Report 2017 | 44

Corporate Governance

Board of directors and corporate auditors (as of May 1, 2018)
Chairman & Group CEO

Executive Vice Chairman & Group COO

President & COO

Atsushi Horiba

Juichi Saito

Masayuki Adachi (Dr. Engineering)1971 Joined Olson Horiba Inc. (U.S.)
1972 Joined HORIBA, Ltd. then held
positions such as General Managerof Overseas Technology
Department and General Managerof Overseas Headquarters
1982 Appointed as HORIBA’s Director
1992 Appointed as President and CEO
2005 Appointed as Chairman, President
and CEO
2018 Appointed as Chairman & GroupCEO up to the present

1982 Joined HORIBA, Ltd. then held
positions such as General Manager
of Engine Measurement Planning &Development Department andPresident of HORIBA Instruments
Incorporated. (U.S.)
2005 Appointed as HORIBA’s Director
2008 Appointed as Vice President of
HORIBA STEC Co., Ltd. (Japan)
2013 Appointed as HORIBA’s Executive
Vice President
2016 Appointed as HORIBA’s Executive
Vice President and Representative
Director
2018 Appointed as Executive Vice
Chairman & Group COO up to thepresent

1985 Joined HORIBA, Ltd. then 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 HORIBAInternational Corporation (U.S.)
2014 Appointed as HORIBA’s Director
Appointed as President of HORIBA Jobin
Yvon S.A.S. (now HORIBA FRANCE SAS)
2016 Appointed as Chairman of supervisoryboard of HORIBA Jobin Yvon S.A.S.
(now HORIBA FRANCE SAS) up to thepresent
Appointed as HORIBA’s Senior Managing
Director
2018 Appointed as President & COO up to thepresent

Managing Director, General Manager of General Administration Division

Director , Board Leader of GLOBAL ATS BOARD

Masao Okawa

Takashi Nagano

1988 Joined the Bank of Japan then held positions suchas Chief Representative in Frankfurt and Kyoto
Branch Manager
2017 Joined HORIBA, Ltd. and was appointed as SeniorCorporate Officer
2018 Appointed as Managing Director up to the present

1985 Joined HORIBA, Ltd. then held positions such as General
Manager of Engine Measurement Planning & Development
Department, General Manager of Engine Measurement System
Management Division and President of HORIBA Europe GmbH
(Germany)
2005 Appointed as HORIBA’s Corporate Officer
2013 Appointed as CEO of HORIBA Europe GmbH (Germany)
2014 Appointed as President of HORIBA KOREA Ltd. (South Korea)
2016 Appointed as HORIBA’s Director up to the present
Appointed as Chairman of HORIBA KOREA Ltd. (South Korea) up to
the present
2018 Appointed as Board Leader of GLOBAL ATS BOARD up to the present

Corporate officers (as of May 1, 2018)
Executive Corporate Officer

Corporate Officer

Jai Hakhu

Ken Mitera

Executive Vice President of HORIBA Instruments
Incorporated (U.S.)

James Thepot

President of HORIBA FRANCE SAS

Christian Dubuc

Executive Vice President of HORIBA ABX SAS(Dr. Engineering)

Chairman & CEO of HORIBA Instruments
Incorporated (U.S.)
President of HORIBA ABX SAS (France)

Senior Corporate Officer

Hideyuki Koishi

President of HORIBA STEC Co., Ltd. (Japan)

Yuichi Muroga

President of HORIBA Techno Service Co., Ltd.
(Japan)Atsushi Nakamine

Deputy General Manager of Global Business
Division

George Gillespie

Executive Chairman of HORIBA MIRA Limited(U.K.)

Hiroshi Kawamura

Chief Director & President Manager of Quality
Management Center

Hiroo Chihara

General Manager of Production Division

Tadao Nakamura

Chief Director & President of HORIBA Instruments(Shanghai) Co., Ltd.
Chief Director & President of HORIBA (China) Trading
Co., Ltd.

(Dr. Engineering)

45(France)Director (Outside), Independent Director

Director (Outside), Independent Director

Director (Outside), Independent Director

Masahiro Sugita

Jiko Higashifushimi

Sawako Takeuchi (Dr. Engineering / Economics)

1967 Joined the Bank of Japan then held
positions such as Matsumoto
Branch Manager and DirectorGeneral of the International
Department
1998 Appointed as Director of Overseas
Investment Research Institute, theExport-Import Bank of Japan
1999 Appointed as Auditor of the Bank ofJapan
2003 Appointed as Outside Auditor (fulltime) of Banyu Pharmaceutical Co.,
Ltd. (now MSD K.K.)
2006 Appointed as HORIBA’s Outside
Director up to the present2013 Appointed as Outside Director of
the 77 Bank, Ltd. up to the present

1988 Appointed as Higashi-Kurume
Branch Manager of Saitama Bank
(now Resona Bank, Limited.)
1993 Entered Shorenin Religious
Corporation then held a position as
its Head Deacon
2003 Appointed as the Representative
Presiding Director and Head Priestof the Shorenin Religious
Corporation up to the present
2016 Appointed as HORIBA’s Director(Outside) up to the present

1988 Appointed as Deputy Director, Master ofInternational Business (MIB)
Graduate Program, Ecole Nationale des Ponts et
Chaussées (France)
1998 Appointed as Associate Professor, School ofEngineering, University of Tokyo Graduate School
2004 Appointed as Urban Development Sector (Economist /Analyst), Asia-Pacific Division, World Bank
2005 Appointed as Special Assistant to the Ministry ofForeign Affairs and as Visiting Professor, Graduate
School of Engineering, Kyoto University
2011 Appointed as President, Japan Cultural Institute inParis (Japan Foundation)2016 Appointed as HORIBA’s Director (Outside) up to thepresent
Appointed as Advisor to the Ministry of Education,
Culture, Sports, Science, and Technology
2017 Appointed as Specially Appointed Professor(currently Invited Professor), Yamagata University
Faculty of Engineering up to the present

Corporate Auditor

Corporate Auditor (Outside)

Corporate Auditor (Outside), Independent Auditor

Toshihiko Uno

Kanji Ishizumi

Keisuke Ishida

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

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

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.
2005 Appointed as HORIBA’s Corporate Auditor (Outside)
up to the present
2016 Appointed as Advisor, SK-Electronics Co., Ltd. up to
the present

Junior Corporate Officer

Toshiya Higashino

President COO of HORIBA Instruments
Incorporated (U.S.)

Narihiro Oku

Deputy General Manager of Research &Development Division (Medical)

Yasuo Yamashita

Deputy General Manager of General Administration
Division

Hitoshi Motokawa

General Manager of Sales Division

Hiroshi Nakamura

President of HORIBA Europe GmbH (Germany)

Hideyuki Nishibun

Deputy General Manager of Global Business
Division

Arnaud Pradel

Executive Vice President of HORIBA ABX SAS

Haruko Nozaki

Principal of HORIBA COLLEGE, CSR

Tsukasa Satake

Deputy General Manager of Research &Development Division, Tokyo based

Kenichi Obori

Research & Development Division, Detector
Technology

Akio Kinoshita(Dr. Engineering)

Deputy General Manager of Global Business
Division, Automotive Technology

Masashi Nishimura

Deputy General Manager of Production Division(Dr. Engineering)(France)Dan Horiba

President of HORIBA Advanced Techno Co., Ltd.

HORIBA Report 2017 | 46

Corporate Governance

Message from an Outside Director,
Dr.Sawako Takeuchi view’s on

HORIBA’s diversity and uniquecorporate governanceFor the past two years since I’ve been appointed as an outside director in March 2016 at the shareholder’s meeting,I have visited several global sites of HORIBA to see sources of strength of this group.
Seen from my experience both in Europe and in Japan, particularly in Kyoto, I am trying to provide my uniqueinsights and knowledge to HORIBA.
As current technologies are being transformed so rapidly, many kinds of business opportunities are emerging. In
such a momentum, it is important to allow HORIBA to develop new ground as a world-leading analytical andmeasurement manufacturer. I am committed in exploring such issues among the management team.

47

HORIBA’s management andoperation of the Board of Directors

Advanced promotion system todevelop global talents

At the Board of Directors meetings,
we discuss quite openly multiple
topics such as future M&As andinvestment, in light of global
strategies, timing. As outside director,
we try to identify investment
opportunities as quickly as possible
to be engaged in in-depth
discussions on risks andopportunities. This is the best way toleverage existing values. While
keeping cautious and prudent
consideration, it is important to takefuture decisions in an appropriate
timing. There is no other way thanaccelerate globalization, therefore, weshould, take innovative approaches todevelop global talents, pursuing
higher corporate value.

In January 2018, HORIBA started a
new management team with Mr.
Horiba and Mr. Saito as Group CEO
and Group COO being in charge ofleading global management
respectively, along with Dr. Adachi as
President of HORIBA, Ltd. to pursue
a further elaboration of coretechnologies to match with global
trends. This change is meant toupright multiple antennas both inJapan and overseas. Under these
multiple heads, we can integrate
highly trained multinational talents in
HORIBA, instead of looking for locallytrained talents from the vantage pointof “Japan’s” HORIBA. Development
and promotion of global talent is thebiggest challenge HORIBA facing
today. I encourage HORIBA’s global
evolution from this perspective.

HORIBA’s management
performing a symphony with
“Joy and Fun” spirits
I admire this motto “Joy and Fun”. It
is a source of HORIBA’s corporate
value and innovation. In this line, we
can push more individual initiatives
and diversity. I currently teach“Development of Music forms in
relation to Western civilization” at musiccollege. If I may simulate HORIBA’s
corporate culture with music, Joy andfun is a “Basso Continuo (continuousbase)” to generate a modern dynamic
symphony at HORIBA. Looking backto the music history, in the medieval
era, there was no harmony and themusic was dominated by the church.
Through Renaissance period, themusic was transformed into a multisound, more harmonized with vibrantdialogues. This created a movement
toward symphony orchestra. An
orchestra cannot be realized withouta dynamic “Basso Continuo” toawaken a melody. I find this model
similar to HORIBA. HORIBA is aunique company to generate a big
value if each individual can perform“Joy and Fun” spirits to build strong
amicability and the management
team leads a strong melody with thatbase.

Governance

Sawako Takeuchi

In 1988, Dr. Takeuchi started working as Deputy Director of Master of International
Business (MIB) Graduate Program, Ecole Nationale des Ponts et Chaussées (France).
After rendering her services in France, she went back to Japan to work as Chief
Researcher of Long-Term Credit Bank of Japan Research Institute. Then, she started to teach at School of Engineering,
University of Tokyo Graduate School. Thereafter, she worked for international urban projects at World Bank. In 2005 she
became Special Assistant to the Ministry of Foreign Affairs of Japan, while working as Visiting Professor of Graduate
School of Engineering, Kyoto University. For five years, she worked in Europe as President of Japan Cultural Institutein Paris (Japan Foundation). In 2016 she became Advisor to the Ministry of Education, Culture, Sports, Science, andTechnology. In the same year, she was appointed as an Outside Director at HORIBA. She is currently an Invited Professorof Yamagata University Faculty of Engineering and a distinguished visiting professor at Tokyo College of Music. She holds
two doctorate degrees in engineering and economics.
(Dr. Engineering / Economics)

Outside Directors’ Activities
in 2017

Sawako Takeuchi

Masahiro Sugita

Jiko Higashifushimi

Takeuchi attended 11 meetings out of a totalof 12 Board meetings held in 2017. She visited
HORIBA FRANCE SAS to understand its
operation. She provided valuable opinions
and viewpoints on HORIBA’s management,
based on her academic background as aholder of a doctor’s degree in engineering,and her international experience both inFrance where HORIBA’s major operations arelocated and in other countries.

Sugita attended 11 meetings out of a total of
12 Board meetings held in 2017. He has vastinternational experience and deep insight andknowledge on finance and economy. He has
also accumulated experience as a director
and auditor of other companies, providing
precious opinions and viewpoints on
HORIBA’s management.

Higashifushimi attended 11 meetings out of a
total of 12 Board meetings held in 2017. Heprovided advice from an ethical perspective,
based on his far-reaching ideas as
Representative Presiding Director and Head
Priest of the Shorenin Religious Corporation,
as well as precious opinions and viewpoints
on HORIBA’s management based on his work
experience at a financial institution.

(Dr. Engineering / Economics)

HORIBA Report 2017 | 48

Financial data

Financial Data
2007.122008.122009.122010.122011.122012.12Net sales

144,283

134,248

104,538

118,556

123,456

117,609

Operating costs and expenses

127,753

123,290

99,394106,256

108,549

105,857

Operating income

16,53010,958

5,144

12,29914,906

11,751

Net income attributable to owners of parent

8,691

6,039

3,161

7,927

8,664

7,396

Capital expenditures

9,336

6,645

4,534

4,033

4,670

7,882

For the Year:

Depreciation and amortization

4,161

4,955

4,573

4,523

4,146

3,743

Research and development expenses

9,474

10,662

9,831

9,480

10,06010,092

Total assets

154,367

133,279

129,580

137,290

144,649

153,836

Cash and cash equivalents

20,56522,66027,59034,45935,76738,858At Year-End:

-

63

6

1

126

4

45,87337,33034,50536,42539,24937,516Inventories

33,73429,802

23,363

24,843

26,28828,101

Property, plant and equipment, net

24,071

23,11523,602

22,51622,92428,179

53

40

52

60

0

-

16,792

11,063

10,515

13,423

13,196

11,829Liabilities with interest

25,177

20,984

18,34817,12818,35818,083

Shareholders’ equity

80,377

76,82979,906

84,01990,232

99,248

Share price at end of fiscal period(¥)

4,100

1,237

2,250

2,303

2,320

2,489

Number of employees (consolidated)

4,976

5,146

5,133

5,202

5,448

5,530

Net income - basic

205.01142.7674.77

187.46204.88174.87

Net income - diluted

204.39142.71

74.68

187.11204.41

174.37

1,892.64

1,816.96

1,889.58

1,986.77

2,133.44

2,346.45

39.00

44.00

13.00

17.00

40.00

50.00

Operating income to net sales (%)

11.5

8.2

4.9

10.4

12.1

10.0

Return on assets (%)

6.1

4.2

2.4

5.9

6.1

5.0

Return on equity (%)

11.4

7.7

4.0

9.7

9.9

7.8

Shareholders' equity ratio (%)

52.1

57.6

61.7

61.2

62.4

64.5

Consolidated dividend payout ratio (%)

19.0

30.8

17.4

9.1

19.5

28.6

Nonconsolidated dividend payout ratio (%)

30.1

30.0

30.0

30.3

30.5

37.5

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 113.00 yen to 1.00 U.S. dollars, the rate prevailing on December 31, 2017 in Tokyo foreign exchange market.
2. HORIBA, Ltd. and its domestic consolidated subsidiaries had formerly recognized revenue mainly on a shipping basis. However, starting from the fiscal 2016, HORIBA, Ltd. and its domestic consolidated subsidiaries changed
its revenue recognition method to recognize revenue on a completion date of installation basis or a delivery date basis under the terms and conditions of the relevant contracts. The amounts in or before thefiscal 2015 are not retrospectively revised.

49

HORIBA, Ltd. and Consolidated Subsidiaries

2013.122014.122015.122017.122016.122017.12
Millions of yen

Thousands of U.S. dollars

138,136

153,065

170,898

170,093

195,399$ 1,729,194

124,402135,851

151,526

151,593

168,565

1,491,725

13,733

17,214

19,372

18,49926,834

237,469

8,999

10,58912,882

12,962

16,281

144,079

7,680

11,001

16,30913,796

11,639103,000

4,279

4,905

6,110

6,816

7,534

66,672

10,774

11,986

12,341

12,933

13,911

123,106

Millions of yen

Thousands of U.S. dollars

189,269

207,335

231,032

239,657

265,920$ 2,353,274

49,246

51,10947,85951,94058,333516,221

25

149

2

7

12

106

47,38652,09754,76953,71760,140532,21233,08534,83835,71740,28945,573403,300

33,32639,441

56,97861,977

68,701

607,973

-

20

-

77

91

805

16,40915,385

17,63819,93523,180205,132

24,57728,41245,22747,15342,496

376,070

114,209

123,924

129,581

132,654150,282

1,329,929

3,590

4,015

4,695

5,410

6,790

5,787

5,965

6,831

7,149

7,399

U.S. dollars

Yen

60.08

U.S. dollars

212.76250.28305.73307.74386.30$ 3.41212.01

249.28304.36306.38384.673.40

2,699.88

2,928.82

3,078.40

3,148.70

3,565.00

31.54

60.00

67.00

70.00

85.00

116.00

1.02

9.9

11.2

11.3

10.9

13.7

5.2

5.3

5.9

5.5

6.4

8.4

8.9

10.2

10.0

11.5

60.3

59.8

56.1

55.4

56.5

28.2

26.8

22.9

27.6

30.0

48.9

38.5

35.1

46.7

53.8

Computations:Shareholders’ equity = net assets - subscription rights to shares - non-controlling interests
Net income per share (Yen) = net income attributable to owners of parent / (average number of shares issued and outstanding in the fiscal period, corrected for treasury stock)
Net assets per share (Yen) = shareholders’ equity / (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 attributable to owners of parent / average total assets in prior fiscal period
Return on equity (ROE, %) = 100 x net income attributable to owners of parent / 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 attributable to owners of parent
Nonconsolidated dividend payout ratio (%) = 100 x dividends paid / net income (nonconsolidated)

HORIBA Report 2017 | 50

Financial data

Eleven-Year Summary

Net sales by segment
Millions of yen

200,000

195,399

160,000

170,898 170,093

153,065
144,283
14,290120,000

118,556 123,456 117,609

14,711

104,538

11,787

14,55822,913

12,022

20,82522,04027,676

24,69422,51423,485

13,721
25,74824,81080,000138,136

134,248

26,934

16,762

25,836

24,722

12,483
22,33754,232

2007

2008

20,406

27,05925,73835,38638,82827,447

26,564

Process &Environmental

26,117

Scientific53,300

Semiconductor

25,187

Medical-Diagnostic

28,934

17,861

27,037

26,832

22,40016,75325,62724,15320,50340,00051,475

13,70916,465

16,754

17,433

Automotive
Test Systems

35,751

38,67843,23049,52455,00137,192

2009

2010

2011

2012

2013

2014

64,251

62,20720152016

In 2017 HORIBA achieved asignificant growth in sales, renewing arecord high. This was driven by the
Automotive Test Systems segment
and the Semiconductor Instruments &Systems segment, which benefited
from the tightened vehicle emission
gas regulations, and from growth ininvestment by semiconductor
manufacturers, respectively.

73,3600
2017

Net income attributable to owners of parent and ROE
Millions of yen

Net income attributable to owners of parent (left)%

Return on equity (ROE) (right)

20,00015.0

16,00016,281
11.4
9.7

12,000

10.2

9.9

7.8

7.7
8,691

8,000

12.0

11.5

7,927

8,664

8.4

10.0

12,8828.9

9.0

12,962

10,5898,999

HORIBA posted a year-on-yearincrease in operating income and arecord-high net income attributable toowners of the parent. ROE of 11.5%
means that HORIBA achieved its
MLMAP2020 target of 10% or more
in ROE for the third consecutive year.

6.0

7,396

6,039
4.0

4,000

3.0

3,161

0

0
2007

2008

Cash flow

2009

2010

Operating cash flow

Millions of yen

2011

2012

2013

2014

Investing cash flow

2015

2016

2017

Free cash flow

30,00028,28720,00010,00013,711

13,581
7,521
8,011

0

9,520

13,395
6,954
809

490
-2,863-4,191-10,000-20,000

11,964
9,143

15,076

14,77015,871

15,12011,455
6,965

5,504

5,444

1,580

-2,821-6,145-7,891-8,111-10,427-9,875-13,167-15,872-16,444-30,000-30,642-40,000
2007

51

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

In 2017 HORIBA recorded positive
free cash flow of 15.1 billion yen due
to an increase in operating cash flowthat stemmed mainly from anincrease in earnings of the
Semiconductor Instruments &Systems segment, which more thanoffset continued aggressive
investment such as for capitalspending by HORIBA MIRA Limited(U.K.), for expansion of the Aso
Factory and other projects.

Accounts receivable (AR) and AR turnover (days)
Millions of yen

Trade notes and accounts receivable (left)

Inventories and inventory turnover (days)
Days

AR turnover (right)

140

70,000Millions of yen

Inventories (left)

Days

Inventory turnover (right)

48,000120

45,57360,000

125

120

116
102

50,000

112

116

116

117

52,246120

60,152

115

54,771 53,724

39,37537,39334,511

36,426100

32,00020,00040

10,00020

2012 2013 2014 2015 2016

Millions of yen

R&D expenditures (left)

R&D expenditures to net sales (right)

9.4

8.0

9,474

8.1

7.8
10,774

10,662
9,831

26,28828,101

86

80

81

81

80

75

60
40

8,000

20

0

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 20162017

Capital expenditures and depreciation and amortization%

10.0

Millions of yen

Capital expenditures

Depreciation and amortization

20,00013,911

7.9

6.6

24,843

34,83812,9338.6

12,00076

74
23,36333,08535,717

16,0002017

R&D expenditures and R&D expenditures to net sales
15,00085

86
29,802002007 2008 2009 2010 2011

33,73482

24,00060

100

40,28980

37,52030,0009,000

40,00093

11247,41145,87340,000125

9,480

10,060 10,092

11,986

12,341

8.0
7.6

7.8

7.2

16,30915,00013,7967.1

6.0
10,000

6,000

4.0

7,882

2.0

5,000

4,534 4,523
4,161

0

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

4,573

4,033

4,670
4,146
3,743

4,279

2011

2013

6,110

6,816

4,905

0

2017

Cash dividends per share

4,955

7,534
7,680

6,645

3,000

11,63911,001

9,336

2007 2008 2009 2010

2012

2014

2015

2016

Net income per share and net assets per share
Yen

Yen

125

Net income per share (left)

Net assets per share (right)

400

100

386
3,565

320

3,078 3,149
2,929
2,700

85

75
67

240

70

60

160

39

44

1,893

1,817

1,890

1,987
187

308

2,400

175

1,600

143

40

25

80
13

17

800
75

0

0
2007

2008

2009

2010

3,200

213

2,133
205

306

250

2,346
205

50

Yen

4,000

116

50

2017

2011

2012

2013

2014

2015

2016

2017

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

HORIBA Report 2017 | 52

Financial data

Consolidated Financial Review
HORIBA, Ltd. and Consolidated Subsidiaries | Consolidated Financial Review
HORIBA, Ltd. And Consolidated Subsidiaries | Consolidated Financial Review
With regard to the global economy in the fiscal year ended

million yen (up 25.6%).

December 31, 2017, the United States continued its economic
recovery, on the back of an improvement in the employment

Financial Position

environment. In Europe, a modest economic recovery was

As of December 31, 2017, total consolidated assets were

sustained despite some impacts from geopolitical risks and¥265,920 million, up ¥26,262 million from December 31, 2016. The

uncertainties over policies. Among emerging countries, China’s

main factors contributing to the increase were an increase ineconomy is improved with support by various government

property, plant and equipment due to new investments, and anpolicies, and India’s economy is improved as well by domestic

increase in trade notes and accounts receivable driven by higher

demand.

operating result in the Automotive Test Systems segment andIn Japan, a corporate earnings upswing combined with a betterthe Semiconductor Instruments & Systems segment.

employment environment and healthier consumer spending
status contributed to a moderate economic recovery trend.

Total consolidated liabilities increased by ¥8,588 million from the

The annual average exchange rates for 2017 were 112.16 yen

previous year to ¥115,054 million.

against the U.S. dollar and 126.70 yen against the euro,
representing year-on-year depreciation of 3.0% against the U.S.

Total consolidated net assets amounted to ¥150,866 million, up

dollar and depreciation of 5.1% against the euro.

¥17,674 million from December 31, 2016, due mainly to an

In the analytical and measurement equipment industry,increase of retained earnings.

investment by semiconductor manufactures remained at a highlevel throughout the year, following the trend in fiscal 2016, andCash Flows

demand for semiconductor production equipment expanded, on(Cash Flow from Operating Activities)

the back of an increase in demand for semiconductors such as

Net cash provided by operating activities amounted to \28,287

memory stemming from the increasing data processed in data

million, compared to \15,871 million provided in the previous year.

center and the spread of AI and IoT.

Factors contributing to this amount included posting of income

In the automotive industry, against the backdrop of the

before income taxes and depreciation and amortization expense.

introduction of new emission gas regulations in Europe and theplanned introduction of new regulations in Japan in 2018, demand(Cash Flow from Investing Activities)

for emission measurement systems has expanded. In addition,

Net cash used in investing activities amounted to ¥13,167 million,

there were rising expectations for next-generation mobility

compared to ¥10,427 million used in the previous year, due

incorporating vehicle electrification, as exemplified by hybrid andmainly to payments for purchases of property, plant andelectric vehicles, and automatic driving technology. This has led

equipment in Japan, Europe and Americas.

automakers and related institutions to be more aggressive intheir capital expenditure and R&D investment.

(Cash Flow from Financing Activities)

In the scientific analysis equipment industry, demand in general

Net cash used in financing activities amounted to ¥9,044 million,

was sluggish but demand for leading-edge scientific analysis

compared to ¥451 million used in the previous year. This was

equipment was at a high level in China. At the same time, demandmainly attributable to partial repayments of bank loans as a result

improved somewhat in the second half of 2017, mainly in Europeof group financing.

and the United States.
Under

such

business

environment,

HORIBA,

Ltd.

(“the

Company”) and its consolidated subsidiaries (together “theAs a result, there was a net increase of \6,393 million in cash andcash equivalents to \58,333 million as of December 31, 2017.

HORIBA Group” or “HORIBA” as a consolidated group),

53

implemented various measures to strengthen each segment in

Major Risks

the current fiscal year.

1. Business Risks

As a result, HORIBA increased net sales of 195,399 million yen(1) Risks Associated with International Business Activities(up 14.9% y-o-y), operating income of 26,834 million yen (upHORIBA conducts business activities in many countries around45.1%), and net income attributable to owners of parent of 16,281

the world, including Americas, Europe and Asia. Major risks

associated with the entry into these overseas markets andbased on these contracts. Nevertheless, there is a possibility of

conducting business there include sudden shifts in economic

claims for damages arising from different views of performance or

conditions or in product supply and demand, sudden changes indifferent understandings of business terms between parties. It isretail prices due to competition, changes in laws, regulations andpossible that such circumstances could result in HORIBA facing

tax systems and social disruptions such as terrorism and war.

a claim for compensation.

These risks could affect HORIBA’s financial position andbusiness results.

(5) Other Business Risks

To protect against fluctuations in foreign currency exchange

In addition to the above-mentioned risks, other risks include a

rates, HORIBA promotes local production and supply. HORIBA

risk of breakdown or malfunction of information systems, threats

also employs foreign exchange forward contracts within the limits

related to information security and risks associated with laws andof its transaction amounts of foreign currency denominatedregulations imposed on businesses. HORIBA is taking preventive

receivables and payables to import and export transactions tomeasures against these risks but they could affect HORIBA’s

minimize foreign exchange risks. However, fluctuations in foreign

financial position and business results.

exchange rates could still have an impact when financial
statements prepared in local currencies are translated into

2. Risks Associated with Development and Production

Japanese yen for the consolidated financial statements, and a(1) Compensation for Product Liability

major change in foreign exchange rates beyond our estimates

HORIBA conducts optimum quality control for its products andcould affect our financial condition and business performance.

services and strives to maintain the highest standards ofreliability. Nevertheless, there is always the possibility of recalls(2) Changes in Performance or Financial Position Associatedor litigation arising from unforeseen defects. HORIBA carries

with Acquisitions and Alliances

insurance for product liability, but there can be no guarantee that

HORIBA has actively promoted corporate acquisitions andthis insurance would cover the full amount of any unforeseen

alliances to enhance the efficiency and effectiveness of its

damages. Such circumstances could have an affect on

business operations. HORIBA conducts complete and diligent

HORIBA’s financial condition and business performance.

investigations when making acquisitions and forming alliances inorder to avoid any negative impact on earnings and cash flows.

(2) Delays in Development of New Products

However, it is possible that HORIBA’s financial condition and

The measuring instruments business in which HORIBA operates

business performance could be affected if an acquisition oris extremely specialized and requires high levels of technicalalliance did not proceed in accordance with initial plans.

capability. HORIBA, therefore, invests large sums in productdevelopment. However, it is possible that expected returns of(3) Repair of Facilities Following Natural Disasters andthis investment will not be realized due to unforeseen

Associated Delays in Delivery, etc.

circumstances.

The HORIBA Group's manufacturing bases are located in diverse
areas, including Japan (Kyoto, Shiga and Kumamoto Prefectures),(3) Risks Concerning Intellectual Property Rights

Europe (France, Germany and the Czech Republic), Americas

HORIBA possesses a wide range of intellectual property rights（the U.S. and Brazil） and Asia (China, South Korea and India).

related to the products it manufactures, including patents,

However, it is possible that HORIBA’s financial condition andtrademarks and expertise, which give it superiority in terms ofbusiness performance could be affected in the case of a major

competitiveness.

earthquake

HORIBA’s

regarding the management and protection of these intellectual

manufacturing facilities could be damaged and require expensive

property rights. However, in the case of infringement by a third

repairs or an interruption to HORIBA’s supply chain could affectparty, it is possible that HORIBA will be unable to attain its

HORIBA’s production and/or distribution.

expected earnings. There is also a possibility of disputes over

or

other

naturaldisasters,as

HORIBA

exercisesallpossible

intellectual property rights with other companies.

cautionSuch(4) Risks Associated with Contracts and Transactions

disputes could significantly affect HORIBA’s financial condition

HORIBA enters into various contracts with customers, suppliers

and business performance.

and other stakeholders and conducts its business activities

HORIBA Report 2017 | 54

Financial data

(4) Risks Associated with Fluctuations in Raw Material Prices
HORIBA takes into account the risk of fluctuations in purchasing
prices and makes arrangements such as advance purchasing tomanage this risk when it is deemed necessary. However, it may
require some time for an increase in purchasing prices to bepassed on and reflected in selling prices. Such circumstances
could significantly affect HORIBA’s financial condition andbusiness performance.
3. Financial Risks(1) Impairment Loss on Securities
Based on an overall consideration of business strategy,enhancementofrelationswithbusiness

partners,andmaintenance of good relationship with communities, HORIBA
holds securities in order to raise its medium- to long-term
corporate value. Each year, HORIBA’s Board of Directors
reviews and evaluates its investments by comprehensively taking
into account the investment amount, potential gains associatedwith the holding of securities, and other factors. If the market
value of securities held by HORIBA declines, there is a possibility
that an impairment loss on the relevant securities will berecorded and that HORIBA’s financial condition and businessperformance will be negatively affected.
(2) Impairment Loss on Fixed Assets
If the market value of land, buildings, or other assets held by
HORIBA declines significantly or segment losses were generated
for two consecutive fiscal years in the future, there is apossibility that an impairment loss will be recorded and that
HORIBA’s financial condition and business performance will be
negatively affected.
(3) Reversal of Deferred Tax Assets Resulting From Changes in
Systems or Accounting Policies
It is possible that changes in systems or accounting policies (e.g.,
reductions in tax rates) could require HORIBA to reverse its
deferred tax assets at the end of the fiscal year.

55

Consolidated Balance Sheets

Consolidated Balance Sheets
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2016 and December 31, 2017

ASSETS
Current assets:
Cash and cash equivalents.....................................................................................................................................
Trade notes and accounts receivable (Note 4)
Affiliated companies....................................................................................................................................
Other.................................................................................................................................................................
Allowance for doubtful receivables.....................................................................................................................
Marketable securities (Note 4,5)..........................................................................................................................
Inventories (Note 6)..................................................................................................................................................
Deferred tax assets (Note 14)..............................................................................................................................
Other current assets................................................................................................................................................
Total current assets...................................................................................................................................
Property, plant and equipment (Note 17):
Land (Note 7)...............................................................................................................................................................
Buildings and structures..........................................................................................................................................
Machinery, equipment and vehicles (Note 7)..................................................................................................
Construction in progress.........................................................................................................................................
Other property, plant and equipment.................................................................................................................
Total...................................................................................................................................................................
Accumulated depreciation......................................................................................................................................
Net property, plant and equipment.......................................................................................................
Investments and other noncurrent assets:
Investment securities (Note 4,5).........................................................................................................................
Investments in nonconsolidated subsidiaries and affiliates......................................................................
Deferred tax assets (Note 14)..............................................................................................................................
Allowance for doubtful accounts.........................................................................................................................
Other investments and other assets.................................................................................................................
Total investments and other noncurrent assets:............................................................................
Intangibles:
Goodwill (Note 17).....................................................................................................................................................
Software.........................................................................................................................................................................
Other intangibles........................................................................................................................................................
Total intangibles............................................................................................................................................
Total assets..............................................................................................................................................................................

Millions of yen
12/2016
12/2017

Thousands of
U.S. dollars(Note 1)
12/2017¥51,940¥58,333$516,2217
53,717(842)
200
40,2894,160
7,339
156,812

12
60,140(788)
1,400
45,573
4,331
8,485
177,487106532,212(6,973)
12,389403,300
38,32775,088
1,570,681

13,06548,85020,307
3,453
15,768
101,445(39,468)
61,977

13,73654,52824,166
3,468
16,208112,109(43,408)
68,701

121,557
482,548
213,858
30,690143,433
992,115(384,141)
607,973

8,472
46
1,726
(66)
2,764
12,943

10,955
45
1,549
(77)
2,861
15,33496,946398
13,707(681)
25,318135,699

387
4,082
3,453
7,923
¥239,657

194
3,298
904
4,397
¥265,920

1,716
29,1858,000
38,911$2,353,274¥11,449
1,158¥7,773718$68,787
6,353

77
19,935
14,041
1,838
10,162
76
914
58
1,672
227
4,462
66,07691
23,18014,8886,277
13,519
61
1,464
63
1,932
49
4,357
74,378805
205,132
131,752
55,548
119,637539
12,955557
17,097433
38,557658,21234,545
931
2,191
1,247
1,474
40,389106,466

34,005
2,036
2,145
640
1,848
40,675
115,054

300,929
18,017
18,982
5,663
16,353359,955
1,018,176

12,011

12,011

106,292

18,717103,104(1,588)132,244

18,717
115,345(1,488)144,585

165,637
1,020,752(13,168)
1,279,513

2,928(2,297)
(221)
409
466
71
133,191¥239,657

4,636
1,151
(90)
5,697
492
90
150,866¥265,920

41,026
10,185(796)
50,415
4,353
796
1,335,097$2,353,274

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans (Note 4,7)..................................................................................................................................
Current portion of long-term debt (Note 4,7)................................................................................................
Trade notes and accounts payable (Note 4)
Affiliated companies....................................................................................................................................
Other.................................................................................................................................................................
Accounts payable - other (Note 4)....................................................................................................................
Accrued income taxes (Note 4)...........................................................................................................................
Advances received....................................................................................................................................................
Deferred tax liabilities (Note 14)..........................................................................................................................
Accrued bonuses to employees...........................................................................................................................
Accrued bonuses to directors and corporate auditors..............................................................................
Reserve for product warranty...............................................................................................................................
Provision for loss on disaster ..............................................................................................................................
Other current liabilities............................................................................................................................................
Total current liabilities...............................................................................................................................
Long-term liabilities:
Long-term debt (Note 4,7) ....................................................................................................................................
Deferred tax liabilities (Note 14)..........................................................................................................................
Net defined benefit liability (Note 8)..................................................................................................................
Provision for loss on dissolution of the employees’pension fund (Note 8)......................................
Other noncurrent liabilities.....................................................................................................................................
Total long-term liabilities..........................................................................................................................
Total liabilities................................................................................................................................................
Contingent liabilities (Note 12)
Net assets (Note 9):
Shareholders' equity:
Common stock.............................................................................................................................................................
Authorized - 100,000,000 shares
Issued and outstanding - 42,129,766 shares (excluding treasury stock) at 12/2016
Issued and outstanding - 42,155,029 shares (excluding treasury stock) at 12/2017
Capital surplus.............................................................................................................................................................
Retained earnings.......................................................................................................................................................
Treasury stock - 402,986 shares at 12/2016. and 377,723 shares at 12/2017............................
Total shareholders' equity........................................................................................................................
Accumulated other comprehensive income:Unrealized gains (losses) on available-for-sale securities.......................................................................
Foreign currency translation adjustments.......................................................................................................
Remeasurements of defined benefit plans (Note 8)....................................................................................
Total accumulated other comprehensive income...........................................................................
Subscription rights to shares (Note 10)........................................................................................................................
Non-controlling interests....................................................................................................................................................
Total net assets............................................................................................................................................
Total liabilities and net assets...........................................................................................................................................
See the notes to the consolidated financial statements.

HORIBA Report 2017 | 56

Financial data

Consolidated Statements of Income

Consolidated Statements of Income
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2016 and December 31, 2017

Millions of yen
12/2016
12/2017

Thousands of
U.S. dollars(Note 1)
12/2017

Net sales (Note 17).......................................................................................................................................................................

¥170,093¥195,399$1,729,194

Operating costs and expenses (Note 17):
Cost of sales........................................................................................................................................................................
Selling, general and administrative expenses.........................................................................................................
Total operating costs and expenses............................................................................................................

100,339
51,254
151,593

112,10756,457
168,565

992,097499,619
1,491,725

Operating income (Note 17).......................................................................................................................................................

18,49926,834

237,469

Other income (expenses):
Interest and dividend income........................................................................................................................................
Interest expense.................................................................................................................................................................
Foreign exchange gains (losses), net.........................................................................................................................
Gain on sales of property, plant and equipment...................................................................................................
Loss on sales of property, plant and equipment...................................................................................................
Loss on disposal of property, plant and equipment.............................................................................................
Impairment loss (Note 15,17)........................................................................................................................................
Gain on sales of investment securities (Note 5)..................................................................................................
Loss on valuation of investment securities (Note 5)..........................................................................................
Gain on sales of subsidiaries' and affiliates' stocks............................................................................................
Subsidy income...................................................................................................................................................................
Provision for loss on dissolution of the employees’pension fund................................................................
Reversal of provision for loss on dissolution of the employees' pension fund........................................
Insurance income...............................................................................................................................................................
Loss on disaster.................................................................................................................................................................
Reversal of foreign currency translation adjustments.......................................................................................
Other, net..............................................................................................................................................................................
Total other expenses, net................................................................................................................................

294
(574)
(206)
33
(0)
(219)
0
(68)
240
149
(177)
139
(1,098)113
116(1,256)

280
(428)
(296)
58
(2)
(199)
(2,526)
0
(9)
81
455
138
(2,448)2,477(3,787)(2,619)513(17)(1,761)(22,353)
0
(79)
716
4,026
1,221
(21,663)

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

17,24324,385

215,796

Income taxes (Note 14):
Current...................................................................................................................................................................................
Deferred.................................................................................................................................................................................
Total income taxes..............................................................................................................................................

3,372
906
4,278

7,647
439
8,086

67,672
3,884
71,557

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

12,964

16,298144,230

Profit attributable to non-controlling interests.................................................................................................................

1

16

141

Net income attributable to owners of parent.....................................................................................................................

¥12,962¥16,281$144,079

Yen
12/2016
Per share information:
Net income - basic...........................................................................................................................................................
Net income - diluted........................................................................................................................................................
Cash dividends....................................................................................................................................................................

¥307.74306.3885.00

12/2017

U.S. dollars(Note 1)
12/2017¥386.30
384.67116.00

$3.41
3.40
1.02

Millions of yen
12/2016
12/2017¥12,964¥16,298

Thousands of
U.S. dollars(Note 1)
12/2017$144,230

Consolidated Statements of Comprehensive Income
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2016 and December 31, 2017

Net income........................................................................................................................................................................................
Other comprehensive income (Note 16)
Unrealized gains (losses) on available-for-sale securities...............................................................................
Deferred gains or losses on hedges...........................................................................................................................
Foreign currency translation adjustments...............................................................................................................
Remeasurements of defined benefit plans..............................................................................................................
Total other comprehensive income............................................................................................................................
Comprehensive income................................................................................................................................................................
(Breakdown of comprehensive income)Comprehensive income attributable to owners of parent................................................................................
Comprehensive income attributable to non-controlling interests................................................................
See the notes to the consolidated financial statements.

57

304
0
(4,153)(288)(4,137)¥8,826

1,708
3,452
130
5,291
¥21,589

15,11530,5481,150
46,823$191,053¥8,828(1)¥21,570
19$190,884
168

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, 2016 and December 31, 2017
Millions of yen
Shareholders' equity

Balance at the beginning of fiscal 2016..........

Common stock

Capital surplus¥12,011¥18,717

Cash dividends....................................................
Net income attributable toowners of parents.............................................
Purchase of treasury stock..........................
Disposal of treasury stock............................
Net changes in items other thanshareholders’ equity.......................................
Balance at the end of fiscal 2016.....................

¥12,011

Balance at the beginning of fiscal 2017.........

¥12,011¥12,011¥93,232

Treasury stock(¥1,730)

Unrealized gains
Deferred gains(losses) onor losses onavailable-forhedges
sale securities¥2,624(¥0)

Foreigncurrencytranslation
adjustments¥1,852RemeasureSubscription
Non-controllingments ofinterests
defined benefit rights to shares
plans

¥66

¥469

¥0

Net assets,
total¥127,243(3,031)(3,031)

12,962

12,962
(0)

(0)

(58)

142

83
304

0

(4,150)

(288)

(2)

71

(4,066)¥18,717¥103,104(¥1,588)¥2,928-(¥2,297)(¥221)¥466¥71¥133,191¥18,717¥103,104(¥1,588)¥2,928-(¥2,297)(¥221)¥466¥71¥133,191

Cash dividends....................................................
Net income attributable toowners of parents.............................................
Purchase of treasury stock..........................
Disposal of treasury stock............................
Net changes in items other thanshareholders’ equity.......................................
Balance at the end of fiscal 2017....................

Retainedearnings

Accumulated other comprehensive income¥18,717(4,003)(4,003)

16,281

16,281
(0)

(0)

(37)

99

62

¥115,345(¥1,488)

1,708

-

3,449

130

26

19

5,334

¥4,636-¥1,151

(¥90)

¥492

¥90

¥150,866

Remeasurements ofSubscription
Non-controllingdefined benefit rights to sharesinterests
plans

Net assets,
total

Thousands of U.S. dollars (Note 1)
Shareholders' equity

Balance at the beginning of fiscal 2017.........

Common stock

Capital surplus

Retainedearnings$106,292$165,637$912,424

Cash dividends....................................................
Net income attributable toowners of parents.............................................
Purchase of treasury stock..........................
Disposal of treasury stock............................
Net changes in items other thanshareholders’ equity.......................................
Balance at the end of fiscal 2017....................

$106,292$165,637

Accumulated other comprehensive income
Treasury stock($14,053)

Unrealized gains
Deferred gains(losses) onor losses onavailable-forhedges
sale securities$25,911-

Foreigncurrencytranslation
adjustments($20,327)($1,955)$4,123$628 $1,178,681(35,424)(35,424)

144,079

144,079
(0)

(0)

(327)

876

548

$1,020,752($13,168)

15,115-30,5221,150

230$41,026-$10,185($796)$4,353

168

47,203$796 $1,335,097

See the notes to the consolidated financial statements.

HORIBA Report 2017 | 58

Financial data

Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
HORIBA, Ltd. and Consolidated Subsidiaries
For the years ended December 31, 2016 and December 31, 2017

Millions of yen
12/2016
12/2017
Cash flows from operating activities:
Income before income taxes..................................................................................................................................................................................................
Adjustments to reconcile income before income taxes to net cash provided by operating activities:
Depreciation and amortization....................................................................................................................................................................................
Impairment loss.................................................................................................................................................................................................................
Increase (decrease) in allowance for doubtful receivables............................................................................................................................
Increase (decrease) in net defined benefit liability............................................................................................................................................
Increase (decrease) in provision for loss on dissolution of the employees' pension fund................................................................
Interest and dividend income......................................................................................................................................................................................
Interest expense...............................................................................................................................................................................................................
Foreign exchange losses (gains)................................................................................................................................................................................
Loss (gain) on sales of property, plant and equipment....................................................................................................................................
Loss on disposal of property, plant and equipment...........................................................................................................................................
Loss on valuation of investment securities..........................................................................................................................................................
Decrease (increase) in trade notes and accounts receivable.......................................................................................................................
Decrease (increase) in inventories...........................................................................................................................................................................
Increase (decrease) in trade notes and accounts payable............................................................................................................................
Other, net............................................................................................................................................................................................................................
Subtotal.....................................................................................................................................................................................................................
Interest and dividends received.................................................................................................................................................................................
Interest paid.......................................................................................................................................................................................................................
Income taxes (paid) refund..........................................................................................................................................................................................
Net cash provided by (used in) operating activities...............................................................................................................................

¥17,243¥24,385$215,796

6,816
110
349
(19)
(294)
574
42
(32)
219
68
(5,454)(1,461)
3,333
837
22,330298(569)(6,187)
15,871

7,534
2,526
(75)
(190)
(607)
(280)
428
79
(56)
199
9
(4,514)(3,633)2,588
3,601
31,996279(466)(3,521)28,287

66,672
22,353(663)(1,681)(5,371)(2,477)
3,787
699
(495)
1,761
79
(39,946)(32,150)
22,902
31,867283,150
2,469(4,123)(31,159)
250,327

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

(2,857)
3,014
32
(103)
1,414
(13,001)
53
(373)
(48)
4
256
1,180
(10,427)(1,197)1,395
32(1,901)
701(11,664)
266
(354)
(22)
3
(427)
(13,167)(10,592)
12,345283(16,823)6,203(103,221)
2,353(3,132)(194)
26(3,778)(116,522)

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings...........................................................................................................................................
Increase in long-term debt..........................................................................................................................................................................................
Repayments of long-term debt..................................................................................................................................................................................
Repayments on finance lease obligations..............................................................................................................................................................
Proceeds from share issuance to non-controlling shareholders.................................................................................................................
Net decrease (increase) of treasury stock...........................................................................................................................................................
Cash dividends paid........................................................................................................................................................................................................
Net cash provided by (used in) financing activities................................................................................................................................

130
3,690
(1,078)
(195)
60
(0)
(3,058)(451)(3,839)(1,039)(163)(0)(4,002)(9,044)(33,973)(9,194)(1,442)(0)(35,415)(80,035)

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

(911)
4,081
47,859¥51,940

317
6,393
51,940¥58,333

2,805
56,575
459,646$516,221

See the notes to the consolidated financial statements.

59

Thousands of
U.S. dollars(Note 1)
12/2017

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

Corporation (U.S.) was merged into HORIBA Instruments Incorporated

The accompanying consolidated financial statements of HORIBA, Ltd.

(U.S.).

(“the Company”) have been prepared in accordance with the provisions

The accompanying consolidated financial statements include theset forth in the Japanese Financial Instruments and Exchange Law andaccounts of the Company and significant companies over which theits related accounting regulations and in conformity with accounting

Company has control through majority voting rights or certain otherprinciples generally accepted in Japan (“Japanese GAAP”), which areconditions evidencing control by the Company. Significant intercompany

different in certain respects as to application and disclosuretransactions and accounts have been eliminated in consolidation. In therequirements from International Financial Reporting Standards.

elimination of investments in subsidiaries, the assets and liabilities of the

The accounts of the consolidated overseas subsidiaries have been

subsidiaries, including the portions attributable to non-controlling

prepared in accordance with either International Financial Reporting

shareholders, are evaluated using the fair value at the time the Company

Standards (“IFRS”) or U.S. generally accepted accounting principles

acquired control of the respective subsidiary. Acquisition costs that are(“USGAAP”), with adjustments for the four specified items as applicable.

in excess of the net assets of acquired subsidiaries and affiliates and

The accompanying consolidated financial statements have beencannot be assigned to specific individual accounts are amortized on a

restructured and translated into English, with some expanded

straight-line basis over five years.

descriptions, from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with theDecember 31 is the year-end of the consolidated subsidiaries and thatof the consolidated financial statements for fiscal 2016 and fiscal 2017.

appropriate Local Finance Bureau of the Ministry of Finance as required

One of the Company’s subsidiaries is not included in the consolidated

by the Japanese Financial Instruments and Exchange Law. Someaccounts as the effect of its inclusion on total assets, sales, income andsupplementary information included in the statutory Japanese language

retained earnings would have been immaterial.

consolidated financial statements, but not required for fair presentation,
is not presented in the accompanying consolidated financial statements.
Yen amounts are rounded down to the nearest million. Therefore,

The Company has one affiliated company (one in fiscal 2016). For one
affiliated company, the equity method was applied.
(b) Cash and cash equivalents

total or subtotal amounts do not necessarily correspond with theCash and cash equivalents include cash on hand, readily available bankaggregate of the account balances.

deposits and short-term highly liquid investments that are readily

The translation of the Japanese yen amounts into U.S. dollar amounts
is included solely for the convenience of readers outside Japan, using theconvertible into cash, have insignificant risk of change in value and haveoriginal maturities of three months or less from date of purchase.

prevailing exchange rate at December 31, 2017, which was \113.00 to(c) Securities

U.S. $1.00. The translations should not be construed as representations

Available-for-sale securities with available fair market values are statedthat the Japanese yen amounts have been, could have been or could in

at fair market value. Unrealized gains and losses on these securities are

the future be converted into U.S. dollars at this or any other rate ofreported, net of applicable income taxes, as a separate component of net

exchange. The U.S. dollars amounts are then rounded down to theassets. Realized gains and losses on the sale of such securities arenearest thousand.

computed using moving average cost. Available-for-sale securities with

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

no available fair market value are stated mainly at moving average cost.
(d) Inventories
Inventories are stated at the lower of average cost or net realizable value.

2. Summary of significant accounting policies

Cost is determined principally by the weighted average method for(a) Principles of consolidation

merchandise, finished goods and work-in-process and by the moving

The consolidated financial statements include the accounts of theaverage method for raw materials and supplies.

Company and 47 (48 in fiscal 2016) of its subsidiaries (“HORIBA” as a(e) Property, plant and equipment and depreciation (except for leases)

consolidated group). From fiscal 2017, newly established HORIBA

Property, plant and equipment are stated at cost. Depreciation is

Americas Holding Incorporated (U.S.) and HORIBA MIRA SPAIN, S.L.

computed by the straight-line method over the estimated useful life of(Spain) have been included in the scope of consolidation. On January

the asset. The estimated useful lives of buildings and structures range

2017, HORIBA Holding S.A.R.L. (France) and HORIBA France E.U.R.L.

from 3 to 60 years and those of machinery, equipment and vehicles from(France) were merged into HORIBA Jobin Yvon SAS (France), and2 to 20 years.

HORIBA Jobin Yvon SAS (France) changed its name to HORIBA(f) Goodwill

FRANCE SAS (France). On December 2017, HORIBA International

Goodwill, which represents the excess of the purchase price over the fair

HORIBA Report 2017 | 60

Financial data

value of the net assets acquired, is amortized on a straight-line basis

In calculating projected benefit obligations, the method to attribute theover a period of five years.

estimated amount of retirement benefits to the period up to the end of(g) Intangibles

the current fiscal year is based on the benefit formula method.

Amortization of intangibles is computed by the straight-line method.

ⅱ) Recording of expenses for actuarial differences and prior service

Computer software used by HORIBA is amortized over the estimatedcosts

useful life of 3 to 10 years.

Actuarial differences are recognized in expenses from the respectively(h) Leases

occurring subsequent fiscal year, using the straight-line method over aWith regard to leased assets under finance leases other than those that

fixed term of years (5 to 8 years), which is within the average of theare deemed to transfer ownership of the leased property to the lessee,

estimated remaining service years of employees, at the time of

the lease term is deemed to be the useful life, and depreciation is

occurrence of each fiscal year.

computed by the straight-line method over the lease term with zero
residual value.

method over a fixed term of years (10 years), which is within the average(i) Allowance for doubtful receivablesof the estimated remaining service years of employees, commencing in

The Company and its domestic subsidiaries provide for doubtful

the period they arise.

accounts principally at an amount computed based on the actual ratio of(p) Sales and costs of completed construction

bad debts in the past plus the estimated uncollectible amounts of certain

Sales and costs of completed construction were recorded using theindividual receivables. The overseas subsidiaries provide for doubtful

percentage of completion method when the progress of the construction

accounts based on estimates made by management.

up to the end of the year was deemed to be certain (estimates of the(j) Accrued bonuses to employees

ratio of completion of construction work are based on the cost-to-cost

Accrued bonuses to employees are provided for the expected payment

method). In the case of other construction, sales and costs wereof employee bonuses to those employees employed at the end of therecorded using the completed contract method.

fiscal year.

(q) Foreign currency translation(k) Accrued bonuses to directors and corporate auditors

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

Some consolidated subsidiaries provide for accrued bonuses to directors

are translated into Japanese yen based on exchange rates at theand corporate auditors for the expected payment of director andbalance sheet date.

corporate auditor bonuses to those directors and corporate auditors

61

Prior service costs are recognized in expenses using the straight-line

Balance sheet accounts of consolidated foreign subsidiaries areserving at the end of the fiscal year.

translated into Japanese yen at the balance sheet date, except for(l) Reserve for product warranty

shareholders’ equity accounts, which are translated at historical rates.

The reserve for product warranty is provided for accrued warranty

Revenue and expense accounts of consolidated foreign subsidiaries are

expenses for products of the Company and certain subsidiaries. The

translated into Japanese yen at average annual exchange rates.

provision is based on estimates made from actual past experience andDifferences arising from the application of the processes stated above

product warranty records and takes into account individual cases.

are presented separately in the consolidated financial statements in(m) Provision for loss on dissolution of the employees’ pension fund“Foreign currency translation adjustments” and “Non-controlling

As it was resolved to adopt Japanese government policy to carry out

interests” in net assets.

special dissolution of the employees’ local pension fund (general type) in(r) Derivatives

which the Company and a domestic consolidated subsidiary are

Derivative financial instruments are stated at fair value, and changes inmembers, HORIBA posted an estimated loss that will arise in relation to

the fair value are recognized as gains or losses, unless the derivative

the dissolution.

financial instruments are used for hedging purposes. HORIBA uses(n) Provision for loss on disaster

foreign currency exchange contracts to manage risk related to its

Out of the expenditures needed for restoration and other arrangement ofimporting and exporting activities. Regarding derivative transactions, indamaged assets from the earthquakes occurred in Kumamoto

addition to conducting exchange agreement transactions within the limit

Prefecture, the estimated loss concerning the planned implementation inof the balance of foreign currency-denominated receivables andthe next fiscal year and beyond is accounted for as provision for loss onpayables, HORIBA conducts forward exchange agreement transactions

disaster.

for the expected foreign currency-denominated receivables and(o) Accounting methods associated with retirement benefits

payables, which would be generated with certainty by scheduled exportⅰ) Period-based method for estimated amount of retirement benefits

or import trading. HORIBA uses derivative financial instruments, such asinterest rate swap contracts, and interest rate and currency swap

The Company and its some consolidated subsidiaries have adopted

contracts to avoid risks of fluctuations in interest rates and foreign

the consolidated taxation system.

exchange rates. Contracts are entered into and controlled by the finance(v) Per share information

department, which reports results to the director. Transactions involving

The computations of net income per share are based on the weighted

derivative contracts are limited to highly rated banking institutions, andaverage number of shares of common stock outstanding during each

HORIBA considers that there are no material credit risks associated withperiod. The weighted average number of shares of common stock used

them.

in the computation for fiscal 2016 and fiscal 2017 was 42,121 thousand(s) Hedge accounting

and 42,149 thousand, respectively. Diluted net income per share ofⅰ) Hedge accounting methodcommon stock assumes full conversion of dilutive convertible bonds atDeferred hedge accounting is applied. However, exceptional accounting

the beginning of the year or at the later date of issuance, with antreatment is applied to certain interest rate and currency swap contracts

applicable adjustment for related interest expense, net of tax and dilutive

which conform to the requirements of integral accounting rules.

stock option plans. The weighted average number of shares used in theⅱ) Hedging instruments and hedged items

computation for fiscal 2016 and fiscal 2017 was 42,308 thousand andHedging instruments: Forward foreign exchange contracts, etc., and42,327 thousand, respectively.

interest rate and currency swap contracts

Cash dividends per share shown in the consolidated statements ofHedged items: Foreign currency-denominated forecast transactions andincome represent actual amounts applicable to earnings in the respective

foreign currency-denominated loans payable

fiscal year, including dividends to be paid after the end of the period.

ⅲ) Hedging policy
Forward foreign exchange transactions are used to avoid foreign

3. Accounting standards issued but not yet effective

currency risks, and interest rate and currency swaps are used to avoid

Not Applicable

the risk of rising interest rates and foreign currency risks, based on the
Company’s Administrative Rules.
ⅳ) Assessment of hedge effectivenessThe effectiveness of hedges is assessed by comparing the cumulativechanges in fair values of both hedging instruments and corresponding
hedged items. However, an assessment of effectiveness is notconducted when the significant conditions of both hedging instruments
and corresponding hedged items are the same.
(t) Research and development expenses
Research and development expenses are charged to income whenincurred. Research and development expenses charged to income forfiscal 2016 and fiscal 2017 were \12,933 million and \13,911 million($123,106 thousand), respectively.
(u) Income taxes
Income taxes comprise corporate tax, enterprise tax and prefectural andmunicipal inhabitant taxes.
HORIBA recognizes the tax effects of loss carryforwards and thetemporary differences between the carrying amounts of assets andliabilities for tax and financial reporting. The provision for current income
tax is computed based on the pretax income included in the consolidated
statements of income.
The asset/liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax
purposes.

HORIBA Report 2017 | 62

Financial data

4. Financial instruments(1) Overview of financial instruments
Management policy
HORIBA carries out fund management with an emphasis on security and procures funds mainly through bank borrowings and bondissuances. Derivatives are used to manage foreign exchange fluctuation risk and interest rate fluctuation risk, and it is HORIBA's
policy not to engage in speculative transactions.
Financial instruments, risks and risk management
Trade notes and accounts receivable, which are operating receivables, are exposed to the credit risk of customers. HORIBA
endeavors to reduce this risk by conducting due date control and balance control and by attempting to promptly recognize
collection concerns stemming from such factors as a deterioration in the financial condition of a customer.
Most trade notes and accounts payable, which are operating payables, have payment due dates within one year.
Some operating receivables and payables are denominated in foreign currencies and are exposed to foreign exchange fluctuation
risk. However, HORIBA endeavors to reduce this risk by offsetting foreign currency denominated operating receivables andpayables and by using forward exchange contracts, etc.
Marketable securities are mainly short-term investments with high liquidity such as negotiable deposits. Investment securities
are mainly shares of companies that have a business relationships with HORIBA and are exposed to market value fluctuation risk.
However, when acquiring or selling shares of a certain value, the Board of Directors considers the details of the transactions and
HORIBA endeavors to reduce any risk by ensuring that the market value information regarding the shares is reported to the
management team in a timely manner.
Short-term loans are mainly for financing related to operating transactions, while long-term loans and corporate bonds aremainly for financing related to plant and equipment and working capital.
Trade liabilities and loans are exposed to liquidity risk, but HORIBA endeavors to reduce this risk by using methods such as the
preparation of cash flow plans.
Regarding derivative transactions, in addition to conducting exchange agreement transactions within the limit of the balance of
foreign currency-denominated receivables and payables, HORIBA conducts forward exchange agreement transactions for the
expected foreign currency-denominated receivables and payables, which would be generated with certainty by scheduled export orimport trading. HORIBA uses derivative financial instruments, such as interest rate swap contracts and, interest rate and currency
swap contracts to avoid risks of fluctuations in interest rates and foreign exchange rates, within the outstanding amount ofborrowings. HORIBA's policy is not to engage in speculative transactions.
Supplementary explanation of the estimated fair value of financial instruments
The market value of financial instruments includes values based on market prices and amounts rationally calculated when there
are no market prices available. As HORIBA incorporates variable factors when making these calculations, the amounts may change
due to the adoption of different assumptions. With regard to contract amounts related to derivative transactions in the Notes toConsolidated Financial Statements item "Derivative transactions," the amounts do not indicate the market risk associated with
derivative transactions themselves.
(2) Fair value of financial instruments
The book value and fair value of financial instruments and any difference between the two as of December 31, 2016 and December
31, 2017 are set forth in the table below. Financial instruments whose fair value was extremely difficult to estimate are not included(See Note 2). Cash and cash equivalents of \977 million and \502 million ($4,442 thousand) for the fiscal years ended December 31,
2016 and December 31, 2017 are included in (3) Marketable securities and investment securities.
Millions of yen
12/2016
Book value Fair value
Assets:(1) Cash and time deposits....................................................... ¥52,272(2) Trade notes and accounts receivable...........................
53,724(3) Marketable securities and investment securities
Available-for-sale securities.....................................
9,438
Total............................................................................................ ¥115,436

63

Millions of yen
12/2017DifferenceBook value Fair value

Difference¥52,272
53,724-¥58,995
60,152¥58,995
60,152-

9,438¥115,436-

12,662¥131,810

12,662¥131,810-

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

¥20,013¥20,013-¥23,272¥23,272-

12,463
14,041
1,838
15,00019,255¥82,612

12,463
14,041
1,838
15,214
19,419¥82,991

¥214
163
¥378

8,352
14,8886,277
15,00018,704¥86,496

8,352
14,8886,277
15,15818,844¥86,794

¥158
139
¥297

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

(¥14)
(¥14)

(¥14)
(¥14)

-

(¥48)
(¥48)

(¥48)
(¥48)

-

Thousands of U.S. dollars
12/2017
Book value
Assets:(1) Cash and time deposits..................................................................................................................................
$522,079(2) Trade notes and accounts receivable......................................................................................................
532,318(3) Marketable securities and investment securities
112,053
Available-for-sale securities.............................................................................................................
Total.................................................................................................................................................................... $1,166,460

Fair value

Difference$522,079
532,318-

112,053$1,166,460-

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

$205,946
73,911
131,752
55,548132,743
165,522$765,451$205,946
73,911
131,752
55,548134,141
166,761$768,088$1,3981,230$2,628Derivative transactions(1) Hedge accounting not applied......................................................................................................................
(2) Hedge accounting applied..............................................................................................................................
Total....................................................................................................................................................................

($424)($424)($424)($424)-

Note 1. Method for calculating the fair value of financial instruments and notes regarding securities and derivative transactions.
Assets(1) Cash and time deposits and (2) Trade notes and accounts receivable
As these are settled in the short term, market value approximates book value and is, therefore, based on the applicable bookvalue.
(3) Marketable securities and investment securities
Market value for these is based on prices on securities exchanges in the case of shares, etc. For bonds, market value is basedon prices on securities exchanges or prices indicated by corresponding financial institutions. For marketable securities
classified by the purpose for which they are held, see Note 5.
Liabilities(1) Trade notes and accounts payable, (2) Short-term loans and current portion of long-term loans, (3) Accounts payable - otherand (4) Accrued income taxes
As these are settled in the short term, market value approximates book value and is, therefore, based on the applicable bookvalue.
(5) Bonds
Market value for bonds issued by HORIBA is calculated based on market prices.
(6) Long-term loans
Borrowings based on variable interest rates reflect market interest rates, and as the creditworthiness of HORIBA has notchanged significantly since execution, market value is considered to be approximate book value and is, therefore, based on
applicable book value. The value of borrowings with fixed interest rates is based on the total amount of principal and interest
discounted at an interest rate of a similar new loan.
Derivative transactions
See Note 13 for derivative transactions.
Net receivables (payables) derived from derivative transactions are displayed in the table above. Total net payables are shownin parenthesis.
Note 2. The following table summarizes financial instruments whose fair value was extremely difficult to estimate.

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

Millions of yen
12/2016
12/2017
¥212
¥194
46
45

Thousands of
U.S. dollars
12/2017$1,716398

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 2017 | 64

Financial data

Note 3. Repayment schedule of monetary claims, available-for-sale securities with maturities and bonds held to maturity.
Millions of yen
12/2016
Over one year Over five years
Within one
but within five
but within ten Over ten years
year
years
years
Cash and time deposits.........................................................................
¥52,272
Trade notes and accounts receivable..............................................
53,724Marketable securities and investment securities
Available-for-sale securities with maturities(1) Governmental/municipal bonds............................................
200(2) Corporate bonds.........................................................................
(3) Other bonds..................................................................................
(4) Other...............................................................................................
620¥20
Total...............................................................................................................
¥106,818¥20-

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

Millions of yen
12/2017
Over one year Over five years
Within one
but within ten Over ten years
but within five
year
years
years
¥58,995
60,152
-

300
500
1,101
¥121,049

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

$522,079
532,318

2,654
4,424
9,743
$1,071,230

Note 4. Repayment schedule of short-term loans, bonds and long-term debt
See Note 7 for short-term loans and long-term debt.

65

¥21
¥21

-

-

Thousands of U.S. dollars
12/2017
Over one year Over five years
but within five
but within ten Over ten years
years
years
-

$185
$185

-

-

5. Securities
The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities as ofDecember 31, 2016 and December 31, 2017.
Millions of yen
12/2016
Acquisition
Book value
Difference
costMillions of yen
12/2017
Acquisition
Book value
Difference
cost

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

¥8,237100
8,337¥4,091
100
4,191¥4,1450
4,145¥10,723
1,100
11,823¥4,121
1,099
5,221¥6,6020
6,602

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

36
100
964
1,101

41
100
964
1,106

(4)
(0)
(0)
(4)

31
300
499
7
839

34
300
500
7
842

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

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

¥9,438¥5,298¥4,140¥12,662¥6,063¥6,599Thousands of U.S. dollars
12/2017
Acquisition
Book value
Difference
cost
Securities with book values
exceeding acquisition costs:
Equity securities..................................................................................................................
Governmental/municipal bonds.....................................................................................
Corporate bonds..................................................................................................................
Other bonds...........................................................................................................................
Other........................................................................................................................................
Subtotal...................................................................................................................................

$94,893
9,734
104,628$36,469
9,725
46,203$58,424
0
58,424

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

274
2,654
4,415
61
7,424

300
2,654
4,424
61
7,451

(17)
(0)
(0)
(0)
(17)

Total...................................................................................................................................................... $112,053$53,654$58,398

Note. Non-listed equity securities, etc., of \212 million and \194 million ($1,716 thousand) for the fiscal years ended
December 31, 2016 and December 31, 2017, 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, 2016 andDecember 31, 2017.
Thousands of
U.S. dollars
Millions of yen
12/2016
12/2017
12/2017¥2¥3$26
Total sales of available-for-sale securities..........................................................................
Related gains.....................................................................................................................................
00
0
Impairment loss on securities
HORIBA recognized an impairment loss of \68 million and \9 million ($79 thousand) in fiscal 2016 and fiscal 2017 on
non-listed equity securities categorized as available-for-sale securities. When applying impairment accounting, if themarket value at the end of the term has fallen by more than 50% from the acquisition price, an impairment loss isapplied to the entire amount. If the market value has fallen by approximately 30% to 50%, an impairment loss is applied
to the amount recognized as necessary after considering the possibility of recovery, etc.
HORIBA Report 2017 | 66

Financial data

6. Inventories
Inventories at December 31, 2016 and December 31, 2017 consisted of the following:

Merchandise and finished goods.....................................................................................................................
Work-in-process............................................................................................................................................................
Raw materials and supplies.................................................................................................................................
Total..........................................................................................................................................................................

Millions of yen
12/2016
12/2017¥15,118¥16,512
14,543
16,396
10,626
12,665¥40,289¥45,573

Thousands of
U.S. dollars
12/2017$146,123
145,097
112,079$403,300

7. Short-term loans and long-term debt
Short-term loans are generally represented by bank notes with annual interest rates ranging from 0.45% to 15.77% and 0.57% to 8.25% at December 31,
2016 and December 31, 2017, respectively.
Long-term debt at December 31, 2016 and December 31, 2017 consisted of the following:

0.609% unsecured bonds due in 2020...........................................................................................................
Loans from banks due serially from 2018 to 2026
at rates from 0.09% to 12.25% per annum.................................................................................
Lease obligations maturing serially through 2022...........................................................................
Total..........................................................................................................................................................................
Current portion.................................................................................................................................................................
Long-term debt, less current portion...........................................................................................................

Millions of yen
12/2016
12/2017¥15,000¥15,000

Thousands of
U.S. dollars
12/2017$132,743

20,269434
35,703

19,283439
34,723

170,646
3,884
307,283(1,158)¥34,545( 718)¥34,005( 6,353)$300,929

Millions of yen

Thousands of
U.S. dollars

The aggregate annual maturities of long-term debt outstanding at December 31, 2017 were as follows:Year ending December 31

2018.............................................................................................................................................................................................................
2019.............................................................................................................................................................................................................
2020.............................................................................................................................................................................................................
2021.............................................................................................................................................................................................................
2022.............................................................................................................................................................................................................
Thereafter...............................................................................................................................................................................................
Total..............................................................................................................................................................................................

¥718
1,743
15,556439
15,506759¥34,723$6,353
15,424
137,6633,884
137,2216,716$307,283

As of December 31, 2017, assets were pledged as collateral for short-term loans and current portion of long-term debt of \18 million ($159 thousand)and long-term debt of \36 million ($318 thousand) as follows:
Thousands ofMillions of yen
U.S. dollars
Land..............................................................................................................................................................................................................................
¥116$1,026
Machinery, equipment and vehicles.................................................................................................................................................
413
3,654
Total.............................................................................................................................................................................................................................
¥529$4,68167

8. Employees' severance and pension benefits(1) Outline of adopted retirement pension fund
The Company and domestic consolidated subsidiaries have adopted a funded defined benefit pension plan (cash balance plan) and a defined contribution
pension plan. Certain overseas consolidated subsidiaries have adopted funded and unfunded defined benefit plans and a defined contribution plan.
The Company and a domestic consolidated subsidiary have been members of the Kyoto Machinery and Metal Employees' Pension Fund (general type).
As it is not possible to reasonably calculate the amount of pension assets corresponding to the company's own contributions, accounting procedures
are the same as for defined contribution plans.
(2) Defined benefits plan(a) The changes in projected benefit obligation for the years ended December 31, 2016 and December 31, 2017 were as follows:

Balance at beginning of year.....................................................................................................................................................................................
Service cost.........................................................................................................................................................................................................................
Interest expense on projected benefit obligation...............................................................................................................................
Actuarial differences...................................................................................................................................................................................................
Benefits paid.......................................................................................................................................................................................................................
Other...........................................................................................................................................................................................................................................
Balance at end of year....................................................................................................................................................................................................

Thousands of
U.S. dollars
12/2017$85,061
5,911
1,000
53
( 2,318)
1,566$91,274

Millions of yen
12/2016
12/2017¥8,868¥9,612
614
668
132
113
518
6
(294)
( 262)(227)
177¥9,612¥10,314(b) The changes in pension assets for the years ended December 31, 2016 and December 31, 2017 were as follows:

Balance at beginning of year.....................................................................................................................................................................................
Expected return on pension assets................................................................................................................................................................
Actuarial differences...................................................................................................................................................................................................
Contributions from the employer......................................................................................................................................................................
Benefits paid.......................................................................................................................................................................................................................
Other...........................................................................................................................................................................................................................................
Balance at end of year....................................................................................................................................................................................................

Thousands of
U.S. dollars
12/2017$65,663
1,743
699
5,575
( 1,628)238$72,292

Millions of yen
12/2016
12/2017¥6,920¥7,420
197
197
(91)
79
709
630
(238)
( 184)(75)
27¥7,420¥8,169(c) Reconciliation between the net defined benefit liability and the net defined benefit asset posted in the consolidated balance sheets, and the balancesof projected benefit obligation and pension assets for the years ended December 31, 2016 and December 31, 2017 were as follows:

Funded projected benefit obligation.....................................................................................................................................................................
Pension assets........................................................................................................................................................................................................................
Unfunded projected benefit obligation...............................................................................................................................................................
Net liability for retirement benefits in the consolidated balance sheets...........................................................................
Net defined benefit liability.........................................................................................................................................................................................
Net liability for retirement benefits in the consolidated balance sheets...........................................................................

Thousands of
U.S. dollars
12/2017$77,707( 72,292)
5,407
13,56618,982Millions of yen
12/2016
12/2017¥8,286¥8,781(7,420)( 8,169)
865
611
1,326
1,533
2,191
2,145
2,191
¥2,1912,145¥2,14518,982$18,982(d) The components of retirement benefits expense for the years ended December 31, 2016 and December 31, 2017 were as follows:

Service cost...............................................................................................................................................................................................................................
Interest expense on projected benefit obligation.....................................................................................................................................
Expected return on pension assets......................................................................................................................................................................
Amortization of actuarial differences.................................................................................................................................................................
Retirement benefits expense.....................................................................................................................................................................................

Millions of yen
12/2016
12/2017
¥614
¥668
132
113
(197)
( 197)
102
74
¥652
¥658

Thousands of
U.S. dollars
12/2017$5,9111,000( 1,743)654$5,823

HORIBA Report 2017 | 68

Financial data(e) The components of remeasurements of defined benefit plans (before tax effect) in the consolidated statements of comprehensive income for theyears ended December 31, 2016 and December 31, 2017 were as follows:

Actuarial differences.........................................................................................................................................................................................................
Total..................................................................................................................................................................................................................................................

Millions of yen
12/2016
12/2017(¥450)¥156(¥450)¥156

Thousands of
U.S. dollars
12/2017$1,380$1,380(f) The components of remeasurements of defined benefit plans (before tax effect) in the consolidated balance sheets as of December 31, 2016 andDecember 31, 2017 were as follows:

Unrecognized actuarial differences......................................................................................................................................................................
Total..................................................................................................................................................................................................................................................

Millions of yen
12/2016
12/2017(¥316)( ¥160)(¥316)( ¥160)Thousands of
U.S. dollars
12/2017( $1,415)( $1,415)(g) Pension assetsⅰ) The pension assets by major category as a percentage of total pension assets as of December 31, 2016 and December 31, 2017 were as follows:
Debt investments..................................................................................................................................................................................................................
Equity investments..............................................................................................................................................................................................................
Mutual funds (Note)............................................................................................................................................................................................................
Other.................................................................................................................................................................................................................................................
Total..................................................................................................................................................................................................................................................

12/2016
43.1%
23.8
17.2
15.9
100.0%

12/2017
44.3%
23.7
15.9
16.1
100.0%

Note. Mutual funds primarily invest in debt investments.
ⅱ) Method of determining the expected rate of return on pension assets
The expected rate of return on pension assets is determined considering the current and anticipated future portfolio of pension assets and, thelong-term rates of return which are expected currently and in the future from the various components of the pension assets.
(h) Assumptions used for the years ended December 31, 2016 and December 31, 2017 were as follows:
Discount rate (mainly)......................................................................................................................................................................................................
Expected rate of return on pension assets (mainly)............................................................................................................................
Expected rate of salary raises (mainly)...........................................................................................................................................................

12/2016
0.6-0.8%
2.5%
3.5-4.0%

12/2017
0.6-0.8%
2.5%
3.6-4.1%

Note. A point system is used as the basis for the calculation of expected rates of salary raises.
(3) Defined contribution plan
Benefits expense for the defined contribution plan for the years ended December 31, 2016 and December 31, 2017 was \1,082 million and \1,121 million($9,920 thousand), respectively.
(4) Multi-employer pension plan
Since it was resolved to adopt the Japanese government policy to carry out a special dissolution of the Multi-employer pension plan (the “Fund”) at the
representative assembly that took place on February 20, 2014, procedures to apply for dissolution were prepared. Upon the adoption of a resolution for
special dissolution at the representative assembly taken place on June 22, 2017, the Fund received approval for dissolution from the Minister of Health,Labour and Welfare as of September 20, 2017.
Concerning (a) Funded status of pension plans and (b) Ratio of HORIBA's contribution to the multi-employer plans relative to the contributions to theoverall retirement benefit plans, information as of December 31, 2017 is omitted as the Fund has been under the process of completing liquidation
following the approval for dissolution.
Benefits expense for the multi-employer pension plan, for which accounting procedures were the same as for defined contribution plans, for the years
ended December 31, 2016 and December 31, 2017 was \403 million and \299 million ($2,646 thousand), respectively.

69

(a) Funded status of pension plans (available information as of March 31, 2016)
Millions of yen
12/2016¥53,199
Fair value of plan assets...............................................................................................................................................................................................
71,070Total of actuarial obligation and minimum actuarial reserve........................................................................................................
Net balance................................................................................................................................................................................................................................
(¥17,871)(b) Ratio of HORIBA's contribution to the multi-employer plans relative to the contributions to the overall retirement benefit plans
From March 1, 2016 to March 31, 2016 the ratio was 17.03%.
Note 1. Net balance resulted from the prior service cost of \18,531 million and the general reserve for plan assets of \659 million for the year ended
December 31, 2016.
Note 2. Prior service cost is amortized over 20 years.
Note 3.The percentage of HORIBA's contribution to the multi-employer pension plan described above in (4)(b) should not be construed as thepercentage of HORIBA's actual obligation..
Note 4. HORIBA posted an estimated loss that will arise in relation to the dissolution. Consequently, we posted a provision for loss on dissolution of theemployees’ pension fund of \1,247 million and \640 million ($5,663 thousand) under long-term liabilities in the consolidated balance sheets forthe years ended December 31, 2016 and December 31, 2017, respectively
9. 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 as additional paid-in capital, whichis 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 asadditional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying 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 all legal
earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. Both ofthese appropriations generally require a resolution of the shareholder's meeting.
The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company
in accordance with Japanese laws and regulations.
At the Board of Directors' meeting held on February 13, 2018, the Board of Directors approved cash dividends in the amount of \3,203 million($28,345 thousand). The appropriation had not been accrued in the consolidated financial statements as of December 31, 2017. Such appropriations arerecognized in the period in which they are approved by the Board of Directors.
10. Stock options(1) Expenses and items related to stock options

Selling, general and administrative expenses...............................................................................................

Millions of yen
12/2016
12/2017¥80¥88

Thousands of
U.S. dollars
12/2017$778

HORIBA Report 2017 | 70

Financial data

(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
Persons granted options

Number of sharesby type of stock(Note 1)

Date of grantVesting conditions

Service period

Exercise period

No 1 Stock-based
Compensation Type
Stock Option

4 directors and
13 corporate officersof the Company

Common stock
54,200 shares

April 16, 2009

(Note 2)

(Note 3)

April 17, 2009
toApril 16, 2039

No 2 Stock-based
Compensation Type
Stock Option

Common stock
26,400 shares

April 23, 2010

(Note 2)

(Note 3)

April 24, 2010
toApril 23, 2040

No 3 Stock-based
Compensation Type
Stock Option

4 directors and
14 corporate officersof the Company
4 directors and
16 corporate officersof the Company

Common stock
31,000 shares

April 21, 2011

(Note 2)

(Note 3)

No 4 Stock-based
Compensation Type
Stock Option

4 directors and
16 corporate officersof the Company

Common stock
28,200 shares

April 24, 2012

(Note 2)

(Note 3)

4 directors andNo 5 Stock-based
14 corporate officers ofCompensation Type the Company, 2 directors
Stock Option
and 3 corporate officersof the subsidiaries

Common stock
33,200 shares

May 8, 2013

(Note 2)

(Note 3)

May 9, 2013
toMay 8, 2043

5 directors andNo 6 Stock-based
12 corporate officers ofCompensation Type the Company, 3 directors
Stock Option
and 6 corporate officersof the subsidiaries

Common stock
27,500 shares

April 24, 2014

(Note 2)

(Note 3)

April 24, 2014
toApril 23, 2044

5 directors andNo 7 Stock-based
13 corporate officers ofCompensation Type the Company, 3 directors
Stock Option
and 8 corporate officersof the subsidiaries

Common stock
22,100 shares

May 8, 2015

(Note 2)

(Note 3)

May 9, 2015
toMay 8, 2045

5 directors andNo 8 Stock-based
14 corporate officers ofCompensation Type the Company, 4 directors
Stock Option
and 9 corporate officersof the subsidiaries

Common stock
25,900 shares

May 10, 2016

(Note 2)

(Note 3)

May 11, 2016
toMay 10, 2046

4 directors andNo 9 Stock-based
16 corporate officers ofCompensation Type the Company, 4 directors
Stock Option
and 8 corporate officersof the subsidiaries

Common stock
15,300 shares

May 9 , 2017

(Note 2)

(Note 3)

May 10, 2017
toMay 9, 2047

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.

71

April 22, 2011
toApril 21, 2041
April 25, 2012
toApril 24, 2042

(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, 2016
No. 1 Stock-based
Compensation Type
Stock Option
No. 2 Stock-based
Compensation Type
Stock Option
No. 3 Stock-based
Compensation Type
Stock Option
No. 4 Stock-based
Compensation Type
Stock Option
No. 5 Stock-based
Compensation Type
Stock Option
No. 6 Stock-based
Compensation Type
Stock Option
No. 7 Stock-based
Compensation Type
Stock Option
No. 8 Stock-based
Compensation Type
Stock Option
No. 9 Stock-based
Compensation Type
Stock Option

GrantedOptions after vesting(number of shares)

Forfeited

Balance atBalance at
December 31, 2017 December 31, 2016

VestedVestedBalance at
December 31, 2017

Forfeited

Exercised

－

－

－

－

－

34,000

－

4,800

－

29,200

－

－

－

－

－

17,800

－

2,300

－

15,500

－

－

－

－

－

22,300

－

3,300

－

19,000

－

－

－

－

－

20,500

－

2,900

－

17,600

－

－

－

－

－

26,000

－

3,400

－

22,600

－

－

－

－

－

22,700

－

3,400

－

19,300

－

－

－

－

－

18,500

－

2,600

－

15,900

－

－

－

－

－

25,900

－

2,600

－

23,300－15,300－15,300－－15,300－－15,300(ⅱ) Price per share
Option price (yen)Weighted average stock price(yen)

Fair value at grant date (yen)Option price (yen)Weighted average stock price(yen)

Fair value at grant date (yen)No 1 Stock-based
Compensation Type
Stock Option

1

6,251

1,091

No 6 Stock-based
Compensation Type
Stock Option

1

6,251

2,739

No 2 Stock-based
Compensation Type
Stock Option

1

6,251

2,628

No 7 Stock-based
Compensation Type
Stock Option

1

6,251

3,598

1

6,251

3,116

1

－

5,795

No 3 Stock-based
Compensation Type
Stock Option

1

6,251

2,208

No 8 Stock-based
Compensation Type
Stock Option

No 4 Stock-based
Compensation Type
Stock Option

1

6,251

2,245

No 9 Stock-based
Compensation Type
Stock Option

No 5 Stock-based
Compensation Type
Stock Option

1

6,251

2,988

(3) Method to estimate fair unit value of stock options
The grant date fair value of No. 9 Stock-based Compensation Type Stock Option in the year ended December 31, 2017 was estimated using theBlack-Scholes option pricing model as follows:
No. 9 Stock-based
Compensation Type
Stock Option
Stock price volatility (Note 1)

35.6%

Expected remaining period (Note 2)

15 Years

Expected dividend (Note 3)
Risk free interest rate (Note 4)\85/share
0.321%

Note 1. Stock price volatility was calculated based on actual weekly stock prices over 15 years (from the week of May 6, 2002 to the week of May 1,2017).
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-pointof the exercise period.
Note 3. Expected dividend was calculated by using the actual dividend paid for the year ended December 31, 2016.
Note 4. Risk free interest rate represents the comparable compound interest rate of strip government bonds whose remaining period corresponds tothe 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.
HORIBA Report 2017 | 72

Financial data

11. Leases
Finance leases which do not transfer ownership at December 31, 2016 and December 31, 2017 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."
Payments remaining under operating leases at December 31, 2016 and December 31, 2017 were as follows:
Thousands ofMillions of yen
U.S. dollars
Payments remaining:
12/2016
12/2017
12/2017$7,345
Payments due within 1 year....................................................................................................
¥736
¥830
Payments due after 1 year.......................................................................................................
1,453
1,454
12,867
Total..............................................................................................................................................................
¥2,189¥2,284$20,212

12. Contingent liabilities
Not applicable.
13. Derivative transactions
Derivative transactions for which hedge accounting was not applied at December 31, 2016 and December 31, 2017 were as follows:
Currency related:

Contract
amountMillions of yen
12/2016
Amount ofFair
principal due
value
over 1 year

Forwards
Selling
US dollar¥4,083Euro
1,032
British pound
450
¥280
Other
349
BuyingUS dollar
405
Euro
89
British pound
7
Other
116
Currency swaps
Receiving in US dollar andpaying in Brazilian real
28
13
Total
¥6,563¥293
Note. Fair value is determined by banking institutions.

Gain(loss)

Contract
amount

(¥12)
(32)
8
(1)

(¥12)
(32)
8
(1)

¥4,772
1,248
696
536

1
3
(0)
(1)

1
3
(0)
(1)

206
40
90
174

19
(¥14)

19
(¥14)

13
¥7,779Contract
amountForwards
Selling
US dollar
Euro
British pound
Other
BuyingUS dollar
Euro
British pound
Other
Currency swaps
Receiving in US dollar andpaying in Brazilian real
Total

73

Millions of yen
12/2017
Amount ofFair
principal due
value
over 1 year-

Gain(loss)-( ¥11)
( 16)
( 21)
( 7)

( ¥11)
( 16)
( 21)
( 7)

-

0
( 0)
0
1

0
( 0)
0
1

-

6
( ¥48)

6( ¥48)¥280¥280

Thousands of U.S. dollars
12/2017
Amount ofFair
principal due
value
over 1 year

Gain(loss)$42,230
11,0446,159
4,743$2,477-( $97)( 141)( 185)( 61)( $97)( 141)( 185)
( 61)

1,823
353
796
1,539

-

0
( 0)
0
8

0
( 0)
0
8

115
$68,840$2,47753( $424)53( $424)

Derivative transactions for which hedge accounting was applied at December 31, 2016 and December 31, 2017 were as follows:
Interest rate currency related:
Millions of yen
12/2016
Amount ofHedgedContractprincipal due
items
amountover 1 year
Exceptional accounting for interest rate and currency swaps
Interest rate and currency
swap contracts
Fixed rate payments andvariable rate receipts
Receiving in US dollar and Long-termpaying in Japanese yen
loans¥15,120¥15,120

Fair
value

Hedgeditems

NoteLong-term
loans

Hedgeditems
Exceptional accounting for interest rate and currency swaps
Interest rate and currency
swap contracts
Fixed rate payments andvariable rate receipts
Receiving in US dollar andpaying in Japanese yen

Long-termloansMillions of yen
12/2017
Amount ofContractprincipal due
amountover 1 year

¥15,120¥15,120

Thousands of U.S. dollars
12/2017
Amount ofContractprincipal due
amountover 1 year

$133,805$133,805

Fair
value

N ote

Fair
value

N ote

Note. Interest rate and currency swap contracts subject to exceptional accounting treatment (special treatment and allocation treatment) areaccounted for together with long-term loans as hedged items. Accordingly, their fair values are included in the fair values of long-term loans.
14. 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
33.0% and 30.8% for the years ended December 31, 2016 and December 31, 2017, respectively.
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, 2016 and December 31, 2017.
Statutory tax rate.........................................................................................................................................................................................................
Expenses not qualifying for permanent deduction,e.g. entertainment expenses.................................................................................................................................................
Nontaxable dividend income...............................................................................................................................................................
Per capita inhabitants tax....................................................................................................................................................................
Increase/decrease in valuation allowance for deferred tax assets...............................................................
Differences in tax rate between
foreign subsidiaries and the Company.......................................................................................................................
Tax credits.........................................................................................................................................................................................................
Reduction in deferred tax assets by the changes of tax rate............................................................................
Other........................................................................................................................................................................................................................
Effective tax rate..........................................................................................................................................................................................................

12/201633.0%

12/2017
30.8%

0.6
(0.2)
0.3
(4.5)

0.5
( 0.6)
0.2
1.9

(0.3)
(4.9)
0.8
0.0
24.8%

2.5
( 5.7)
2.4
1.2
33.2%

HORIBA Report 2017 | 74

Financial dataSignificant components of HORIBA's deferred tax assets and liabilities at December 31, 2016 and December 31, 2017 were as follows:
Millions of yen
12/2016
12/2017

Thousands of
U.S. dollars
12/2017

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

¥43
1,221
126
214
1,293
1,466
564
398
91
100
381
366
2,946
9,214
(1,268)
7,945

¥282
816
62
270
1,070
1,926
404
369
119
370
195
242
2,896
9,026
( 1,814)7,211$2,495
7,221
548
2,389
9,469
17,044
3,575
3,265
1,053
3,274
1,725
2,141
25,62879,876( 16,053)
63,814

Deferred tax liabilities
Unrealized losses.........................................................................................................................................................................................
Unrealized gains (losses) on available-for-sale securities...................................................................................
Effects of changes in accounting policies............................................................................................................................
Other........................................................................................................................................................................................................................
Total deferred tax liabilities................................................................................................................................................................................

(390)(1,211)(272)(1,191)(3,066)( 390)( 1,962)( 189)( 886)( 3,428)( 3,451)( 17,362)( 1,672)( 7,840)( 30,336)

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

¥4,879¥3,783$33,477

Millions of yen
12/2016
12/2017¥4,160¥4,331
1,726
1,549
(76)
( 61)
(931)
( 2,036)¥4,879¥3,783Thousands of
U.S. dollars
12/2017$38,327
13,707( 539)( 18,017)$33,477

Net deferred tax assets are included in the consolidated balance sheets as follows:

Current assets................................................................................................................................................................................................
Investments and other noncurrent assets.............................................................................................................................
Current liabilities..........................................................................................................................................................................................
Long-term liabilities...................................................................................................................................................................................
Net deferred tax assets..........................................................................................................................................................................................

(Impacts of the Enactment of the U.S. Tax Cuts and Jobs Act)The Tax Cuts and Jobs Act was enacted in the U.S. on December 22, 2017 (“U.S. tax reform”). Due to “U.S. tax reform,” the federal corporate income
tax rate in the U.S. applicable to HORIBA’s U.S. business was reduced from the fiscal year beginning on January 1, 2018.
As a result of the “U.S. tax reform,” the amount of deferred tax assets (netted with deferred tax liabilities) decreased by \419 million ($3,707 thousand),while income taxes (deferred) increased by \415 million ($3,672 thousand).

75

15. Impairment loss
HORIBA reviewed its long-lived assets for impairment, and, as a result, impairment losses were recognized by HORIBA for the following asset groups asother expenses for the year ended December 31, 2017.
Location

Use

U.K.

Business assets and otherFranceOther

Type
Other intangibles
Goodwill
Goodwill

Millions of yen\2,32993
103

Thousands of
U.S. dollars$20,610823
911

In connection with the use of impairment accounting, business assets are grouped on a reporting segment basis. Idle assets, etc., are grouped on aproperty-by-property basis.
As HORIBA MIRA Ltd. (“HORIBA MIRA”), a consolidated subsidiary in the U.K., is unlikely to record a profit as initially planned, the book value of
goodwill and other intangibles attributable to HORIBA MIRA have been reduced to their respective recoverable amounts and a loss on impairment wasrecognized in the consolidated statement of income. The recoverable amount was measured at the value in use based on estimated future cash flows
discounted at rate of 10.4%.
As HORIBA FRANCE SAS, a consolidated subsidiary in France, is unlikely to record a profit as initially planned, the entire amount of its unamortized
goodwill balance was reduced to zero and a loss on impairment was recognized in the consolidated statement of income. The recoverable amount wasmeasured at the value in use, which was zero, as future cash flow was not expected.
16. Consolidated statement of comprehensive income
Components of other comprehensive income for the years ended December 31, 2016 and December 31 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen
Unrealized gains (losses) on available-for-sale securities:
Increase (decrease) during the year.........................................................................................................................................................................................
Reclassification adjustment............................................................................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................................................................................
Tax (expense) or benefit.....................................................................................................................................................................................................................
Subtotal, net tax..........................................................................................................................................................................................................................................
Deferred gains or losses on hedges
Increase (decrease) during the year.........................................................................................................................................................................................
Reclassification adjustment............................................................................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................................................................................
Tax (expense) or benefit.....................................................................................................................................................................................................................
Subtotal, net tax..........................................................................................................................................................................................................................................
Foreign currency translation adjustments
Increase (decrease) during the year.........................................................................................................................................................................................
Reclassification adjustment............................................................................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................................................................................
Tax (expense) or benefit.....................................................................................................................................................................................................................
Subtotal, net tax..........................................................................................................................................................................................................................................
Remeasurements of defined benefit plans
Increase (decrease) during the year.........................................................................................................................................................................................
Reclassification adjustment............................................................................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................................................................................
Tax (expense) or benefit.....................................................................................................................................................................................................................
Subtotal, net tax..........................................................................................................................................................................................................................................
Total other comprehensive income...................................................................................................................................................................

12/2016
¥351
351
(47)
304

12/2017¥2,458( 0)2,458( 750)
1,708

12/2017$21,752( 0)
21,752( 6,637)
15,115

(29)
30
0
(0)
0

1
( 1)
-

8
( 8)
-

(4,040)(113)(4,153)(4,153)

3,452
3,452
3,452

30,54830,54830,548

(553)
102
(450)
161
(288)
(¥4,137)

82
74
156
( 25)
130
¥5,291

725
654
1,380
( 221)
1,150$46,823

HORIBA Report 2017 | 76

Financial data

17. 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 forJapan 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 and services 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, Intelligent Transport System, Engineering Consultancy, Test Services & Consultancy, Leasing of R&D Facility(b) Process & Environmental Instruments & Systems
Stack Gas Analyzers, Water Quality Analysis and Examination Systems, Air Pollution Analyzers, Environmental Radiation Monitors, Process
Measurement Equipment(c) Medical-Diagnostic Instruments & Systems
Hematology Analyzers, Equipment for Measuring Immunological Responses, Clinical Chemistry Analyzers, Blood Sugar Measurement Systems(d) Semiconductor Instruments & Systems
Mass Flow Controllers, Chemical Concentration Monitors, Reticle/Mask Particle Detection Systems, Residual Gas Analyzers(e) Scientific Instruments & Systems
pH Meters, Particle-Size Distribution Analyzers, X-Ray Fluorescence Analyzers, Metal Analyzers, Raman, Fluorescence Spectroscopy Systems,
Spectrophotometers, Gratings(2) Method of measurement regarding income (loss), assets and other material items by reportable segment
The accounting methods applied for reportable segments are identical with those stated in Note 2, "Summary of significant accounting policies."
Income for each reportable segment is the amount based on operating income.

77

(3) Information regarding income (loss), assets and other material items by reportable segment

Millions of yen
12/2016
Automotive
Sales
Sales to outside customers.................................
Intersegment sales and transfers..................
Total..........................................................................................
Segment income (loss)........................................................
Segment assets.........................................................................
Other items:
Depreciation.......................................................................
Amortization of goodwill.........................................
Increase in tangible and intangible
fixed assets.................................................................

Process &Environmental

MedicalDiagnostic

Semiconductor

Scientific

Adjustment

Consolidated¥62,20762,207¥3,529¥71,081¥16,753
16,753¥1,540¥16,075¥26,564
26,564¥2,806¥24,611¥38,828
38,828¥9,678¥38,506¥25,738
25,738¥944¥23,946¥65,436¥170,093
170,093¥18,499¥239,657

2,767
63

528
-

1,337
-

1,294
-

748
75

-

6,676
139

7,227

1,336

1,308

2,029

1,894

-

13,796

Millions of yen
12/2017
Automotive
Sales
Sales to outside customers.................................
Intersegment sales and transfers..................
Total..................................................................................
Segment income (loss)........................................................
Segment assets.........................................................................
Other items:
Depreciation.......................................................................
Amortization of goodwill.........................................
Increase in tangible and intangible
fixed assets.................................................................

MedicalDiagnostic

Semiconductor

Scientific

Adjustment

Consolidated¥73,360
73,360¥7,680¥77,203¥17,433
17,433¥1,094¥16,954¥25,187
25,187¥1,918¥23,582¥53,300
53,300¥15,642¥52,162¥26,117
26,117¥498¥24,135¥71,881¥195,399
195,399¥26,834¥265,920

3,260
65

547
-

1,250
-

1,575
-

753
80

-

7,387
146

4,068

684

1,082

4,475

1,328

-

11,639Automotive
Sales
Sales to outside customers.................................
Intersegment sales and transfers..................
Total..................................................................................
Segment income (loss)........................................................
Segment assets.........................................................................
Other items:
Depreciation.......................................................................
Amortization of goodwill.........................................
Increase in tangible and intangible
fixed assets................................................................

Process &Environmental

Process &Environmental

Thousands of U.S. dollars
12/2017
MedicalSemiconductor
Scientific
Diagnostic

Adjustment

Consolidated$649,203
649,203$67,964$683,212$154,274
154,274$9,681$150,035$222,893
222,893$16,973$208,690$471,681
471,681$138,424$461,610$231,123
231,123$4,407$213,584$636,115$1,729,194
1,729,194$237,469$2,353,274

28,849
575

4,840
-

11,061-

13,938
-

6,663
707

-

65,371
1,292

36,000

6,053

9,575

39,601

11,752-103,000

Note 1. Details of adjustment amounts are as follows:(1) Unallocated amounts to be included in the adjustment amount of segment income were not generated.
(2) The adjustment amounts of \65,436 million and \71,881 million ($636,115 thousand) of segment assets for the years ended December 31,
2016 and December 31, 2017, respectively, represent corporate assets that were not allocated to any business segment. They included
cash and cash equivalents, short-term investments, investment securities, idle land, etc.
Note 2. Depreciation and increase in tangible and intangible fixed assets include long-term prepaid expenses and the amount of amortization associatedwith the expenses.

HORIBA Report 2017 | 78

Financial data

<Related Information>
1. Information regarding geographic areas(1) Net sales

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

Millions of yen
12/2016
12/2017¥56,522¥6 5 ,0 7 5
24,521
2 7 ,4 6 1
19,6922 3 ,6 8 838,337
4 1 ,1 8 7
25,2703 3 ,3 0 4
5,748
4 ,6 8 1¥170,093¥1 9 5 ,3 9 9Thousands of
U.S. dollars
12/2017$ 5 7 5 ,8 8 4
2 4 3 ,0 1 7
2 0 9 ,6 2 8
3 6 4 ,4 8 6
2 9 4 ,7 2 5
4 1 ,4 2 4$ 1 ,7 2 9 ,1 9 4Note 1. Net sales are categorized by country or geographic area based on the location of the customer.
Note 2. The "Asia" amount is that of the Asian region other than China.
(2) Property, plant and equipment

Japan............................................................................................................................................................................................
France.........................................................................................................................................................................................
United Kingdom.....................................................................................................................................................................
Others.........................................................................................................................................................................................
Total...................................................................................................................................................................................

Millions of yen
12/2016
12/2017¥29,359¥3 1 ,0 4 5
6,534
6 ,6 4 4
11,273
1 3 ,2 1 1
14,809
1 7 ,7 9 9¥61,977¥6 8 ,7 0 1

Thousands of
U.S. dollars
12/2017$ 2 7 4 ,7 3 4
5 8 ,7 9 6
1 1 6 ,9 1 1
1 5 7 ,5 1 3$ 6 0 7 ,9 7 3

Millions of yen
12/2016
12/2017¥2 ,4 2 3103
¥2 ,5 2 6

Thousands of
U.S. dollars
12/2017$ 2 1 ,4 4 2911$ 2 2 ,3 5 3

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

Automotive Test Systems.............................................................................................................................................
Scientific Instruments & Systems...........................................................................................................................
Total...................................................................................................................................................................................

4. Information regarding the amortized amount and unamortized balance of goodwill by reporting segment

Automotive Test Systems.............................................................................................................................................
Scientific Instruments & Systems...........................................................................................................................
Total...................................................................................................................................................................................

Millions of yen
12/2016
12/2017
¥173
¥1 4
214
179
¥387
¥1 9 4

Thousands of
U.S. dollars
12/2017$123
1 ,5 8 4$ 1 ,7 1 6Note. 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
Not applicable.

7918. Related party transactions
Not applicable.
19. Subsequent events
Not applicable.
20. Business combination(Transactions under common control and others)
HORIBA Advanced Techno, a wholly owned subsidiary of the Company, took over the water quality and liquid analysis instruments and systems
business of the Company (hereinafter, the “water measurement business”), through an absorption-type company split approach on January 1, 2017.
The absorption-type company split was summarized as follows.
(1) Purpose of the company split
The HORIBA Group’s water measurement business, represented by pH meters, the Group’s mainstay product since the foundation of the Company,
had been promoted jointly by the Company and HORIBA Advanced Techno. With the aim of business expansion in the water measurement area, as oneof the priority initiatives in the HORIBA Mid-Long Term Management Plan, the Company split its water measurement business and integrated it withHORIBA Advanced Techno in order to develop more market-oriented products, improve customer satisfaction, and enhance market competitivenessand earnings power.
(2) Legal method of business combination
This company split was an absorption-type company split in which HORIBA Advanced Techno was the succeeding company.
(3) Date of business combination
January 1, 2017(4) Details of allotments relating to the company split
The Company owned all shares of HORIBA Advanced Techno and there was no consideration such as allotment of shares or payment of cash due tothis company split.
(5) Calculation of allotments relating to the company split
There were no allotments of shares or other assets due to this company split.
(6) Rights and obligations to be succeeded by the successor company
In accordance with the absorption-type company split agreement, HORIBA Advanced Techno took over the assets, liabilities, other rights andobligations and contractual status that were considered necessary to carry out the business.
(7) Outline of the successor company
Capital:\250 million
Business: Development, manufacturing, sales and services of measurement equipment(8) Outline of accounting treatment to be applied
Based on the "Accounting Standard for Business Combinations" and the "Guidelines on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures," this transfer had been treated as a transaction under common control.

HORIBA Report 2017 | 80

Financial data81

Corporate data

Corporate Information
Head Office

2 Miyanohigashi, Kisshoin, Minami-ku Kyoto 601-8510 JapanFounded

October 17, 1945

Incorporated

January 26, 1953

Net sales

195,399 million yen (Consolidated)

Paid in Capital

12,011 million yen (Consolidated)

As of December 31, 2017

Number of Employees

7,399(Consolidated)

As of December 31, 2017

Fiscal Closing Date

December 31, annually

Annual Meeting of Shareholders

Held in March

Transfer Agent

Sumitomo Mitsui Trust Bank, Limited

Independent Auditor

KPMG AZSA LLC

Stock Listings

Tokyo Stock Exchange, First Section

Fiscal 2017

Securities Code: 6856

Major Shareholders

As of December 31, 2017

Name of Shareholders

Shares (Thousands)

Percentage (%)

Japan Trustee Services Bank, Ltd.

2,685

6.31

The Master Trust Bank of Japan, Ltd.

2,291

5.39

PICTET AND CIE (EUROPE) SA, LUXEMBOURG REF: UCITS

1,649

3.88

National Mutual Insurance Federation of Agricultural Cooperatives

1,287

3.03

Atsushi Horiba

879

2.07

THE KYOTO CHUO SHINKIN BANK

830

1.95

The Bank of Kyoto, Ltd.

828

1.95

Japan Trustee Services Bank, Ltd. (trust account 9)

808

1.90

HORIBA Raku-Raku Kai

769

1.81

Japan Trustee Services Bank, Ltd. (trust account 5)

755

1.78

Stock Price Trend

Foreign investors
4.5%

Yen

Yen

25,00010,00020,000

Nikkei Stock Average (Nikkei 225) (left, yen)Japanese companies
2.5%

Financial institutions,
Securities companies
1.7%
Breakdown ofTypes of
Shareholders(6,887 in total)

8,000

Individual investors
91.3%
15,0006,000

Japanese companies 7.6%
Individual investors

10,000

17.9%

4,000

HORIBA (right)

5,000

0

0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Breakdown ofOwnership among
Shareholders

2,000

2018

(42,532,752
shares in total)

Foreign investors
36.0%

Financial institutions,
Securities companies
38.5%

HORIBA Report 2017 | 82

Corporate philosophy

corporate value is one of the priority objectives ofBusiness Operations
management. Our basic policy is to target total
At HORIBA, our mission is to contribute to thereturns (the combination of dividend payments andprogress of science and technology, and the presshare buybacks) to shareholders to be at a certain
ervation of the global environment and resources
ratio of HORIBA’s consolidated net income, andthrough the provision of highly original products,
consistently deliver them. In addition, we are comanalytical and measurement solutions, and engimitted to create opportunities for constructive
neering services that utilize our world renowned
dialogues with investors and stakeholders, regularly
measurement and analytical technologies. We arereporting our operating performance, fairly andengaged in the fields of engine emissions, scientificpromptly disclosing information whenever an imanalysis, industrial and process measurement,
portant business or managerial issue arises, andenvironment monitoring, semiconductor process
maintaining transparency in our management.
control, medical and health-care, and biotechnoloHORIBA Group companies, having adopted agy. The new businesses and new products we may
unified accounting standard and system and a
initiate shall also satisfy our aim to develop scientificcommon information base, shall maintain a timely
technology, improve the life of the community, andand responsive management control system. The
minimize the impact on the environment. We put
managements of group companies alsopriority on ensuring a safe business envishare responsibility in generating profit,
ronment and strictly abide by applicadelivering dividend payments,
ble laws, regulations, and our artiestablishing and managing thecles of incorporation. We haveinternal control system, andestablished and adopted a
HORIBA’s corporate mottodeveloping human resources.
quality management systemand environmental preservation system. We strive to
Employees
deliver high value-added
We are proud of the
products and services inentrepreneurial spirit thatthe shortest possible
has led to the creation oftime to customers all
HORIBA Group compaOriginates from the belief that if we take interest andover the world whilenies. Each group empride in the work that occupies most of the active
combining the uniqueployee is made aware oftime in our lives, in the place where we spend thedevelopment, production,
this heritage and welarge part of each day, then as a result oursales, and service funcactively encourage ideas
satisfaction with life will increase, and we will betions of all HORIBA Groupand innovations from indiable to enjoy our lives even more.
companies throughout thevidual employees. HORIBATaking interest and pride in our work leads us toworld. We aim to be a leader
promotes an open and fair
“Joy and Fun.”in the global market in the fields
business environment, within which we operate by consistentattention to safety and health, whichly satisfying our customers’ needs
allows all group employees to achieveand effectively maximizing our resources
their individual goals and maximize theirthrough investments in the carefully selected
talents and potential. We strive to foster anfields.
environment of mutual respect so that diverse“Joy and Fun”

Customer ResponsivenessWe maintain a philosophy of pursuing cutting edge
technology in order to supply products and services
that consistently satisfy customers’ requirements.
We are committed to offering top-quality, highly
reliable products and services with a consistentlevel of excellence throughout the world. Meanwhile,
we strive to understand the true needs of customers
and proactively propose solutions.
Responsibility to Shareholders and Investors
We recognize that maximizing the returns to shareholders by consistently raising HORIBA’s long-term
83

talents and viewpoints can flourish. At the sametime, to further everyone’s personal and professional growth, we encourage intercultural understanding
and thinking from a global perspective. We create awork environment for employees to achieve their
growth potential and exert their talents to the maximum by accelerating diversity management andexpanding our international core human resources
development and exchange program. The basis of
our performance evaluation is the merit countprinciple, (not the demerit mark principle), as wevalue each and every employee who makes efforts
to improve his or her performance with a challenging spirit.

HORIBA Report
BookletThis booklet summarizes primarily
HORIBA’s business activities andfinancial information, along with
“Invisible Values” such as talents
and technologies.

“To Our Stakeholders”
WebsiteHORIBA Report 2017

This website provides the detailed
information including the HORIBA
Report web data collection, whichfeatures HORIBA’s safety andenvironmental activities,
contribution to the society, andother information.

https://www.horiba.com/en_en/company/social-responsibility/home/

HORIBA Report 2017 | 84